CoC Remand Nullifies Prior Plan Approval: Homebuyer Claims Must Be Independently Re-evaluated Under IBC
- REEDLAW
- 2 days ago
- 4 min read
REEDLAW Legal News Network reports: In a pivotal ruling affecting homebuyer rights under the Insolvency and Bankruptcy Code, the Appellate Tribunal clarified that once a resolution plan is remanded to the Committee of Creditors for fresh consideration, any earlier approval ceases to operate. It was further emphasised that the Adjudicating Authority must independently evaluate all pending homebuyer claims on their merits, and any rejection based solely on the earlier CoC approval is contrary to the remand directions and legally unsustainable.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member), while adjudicating a batch of miscellaneous Company Appeals and connected Interlocutory Applications, held that once the resolution plan had been remanded to the CoC for fresh decision-making, the earlier approval lost its legal effect. The Tribunal observed that the Adjudicating Authority was required to freshly assess each homebuyer claim on its own merits and could not rely upon the previously approved plan to summarily reject belated or disputed claims, as doing so would defeat the purpose of the remand.
The Appeals had been filed challenging a common order of the Adjudicating Authority, which had dismissed several interlocutory applications seeking admission of belated claims submitted by homebuyer-allottees. The Adjudicating Authority had held that the claims were filed beyond 90 days from the commencement of the CIRP and were therefore not entertainable. The Appellants, who had been allotted residential units between 2011 and 2014 in the housing project developed by the Corporate Debtor, contended that substantial payments had been made and, in several cases, loan arrangements had been executed with banks. CIRP had commenced on 20.08.2019, and a public announcement had been issued calling for claims by 03.09.2019. The Appellants asserted that they learned of the CIRP only in 2023–24 due to residing outside Delhi NCR, being abroad, or facing circumstances attributable to the COVID-19 pandemic, and that their delayed claims had been rejected by the Resolution Professional solely on the ground of delay.
The record indicated that parallel proceedings had been underway concerning approval of the Resolution Plan. While the Resolution Professional had filed an approval application, the statutory authority had raised objections. The Supreme Court, in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni and Another, REEDLAW 2024 SC 02527, held the statutory authority to be a secured creditor and remitted its treatment to the CoC. Relying on this judgment, the Adjudicating Authority had, on 05.03.2024, directed the SRA to place the plan again before the CoC for reconsideration. The Appellants’ interlocutory applications had remained pending. Appeals challenging the remand order and subsequent impleadment directions had been dismissed by the Tribunal, which clarified that no observation on merits had been made and that the pending claims were required to be adjudicated in accordance with law before resubmission of the plan.
Each Appellant had shown substantial delay, ranging from months to years, and provided explanations such as absence from India, non-receipt of communications, constraints caused by the pandemic, military service, health conditions, or family emergencies. Their claims were nonetheless rejected by the Resolution Professional soon after filing. The Adjudicating Authority had concluded that reopening the Resolution Plan approved by the CoC for incorporating delayed claims was impermissible and that the remand directed on 05.03.2024 was confined to proper treatment of the statutory authority as a secured creditor. It held that acceptance of claims filed beyond 90 days of the commencement of CIRP was barred by settled precedent, leading to dismissal of all applications.
Upon examining the impugned order dated 22.01.2025, the Tribunal found that the Adjudicating Authority had misinterpreted the effect of the earlier remand directions. It held that the orders dated 05.03.2024 and 08.05.2024 required the Adjudicating Authority to independently determine the pendency and admissibility of the Appellants’ claims before the Resolution Plan could be resubmitted. The Tribunal emphasised that the earlier approval of the plan by the CoC had ceased to have operative effect once the matter was remanded, and the Appellants’ claims could not be rejected merely on that basis. It noted that the right of the Appellants to adjudication of their applications had been preserved and could not be nullified by treating the CoC’s prior approval as final. Finding that the reasoning adopted by the Adjudicating Authority contradicted the explicit directions issued in the remand orders, the Tribunal held that the rejection of the Appellants’ claims on this ground could not be sustained.
Mr. Bishwajit Dubey, Mr. Nipun Gautam and Ms. Udita Singh, Advocates, represented the Appellants.
Mr. Harish Taneja, Ms. Manvi Jain and Mr. Anuj Maheshwari, Advocates, appeared for the Resolution Professional (RP).
Mr. Sunil Fernandes, Sr. Adv. with Ms. Anuja Pethia, Mr. Noor Shergill, Mr. Rishabh Govilla, Mr. Rishabh Nigam, Ms. Kshirja Agarwal, and Ms. Mansi, Advocates, appeared for the Respondent No. 2.
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