Homebuyers' Dominance in CoC Does Not Override Statutory CIRP Framework Under IBC
- REEDLAW
- May 30
- 3 min read
NCLAT held that homebuyers' dominance in the Committee of Creditors does not override the statutory Corporate Insolvency Resolution Process framework under the Insolvency and Bankruptcy Code.
On 28 May 2025, the National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member) and Technical Members Mr. Naresh Salecha and Mr. Indevar Pandey, reviewed an appeal along with connected interlocutory applications and held that once debt and default are established under Section 7 of the IBC, the Adjudicating Authority is justified in admitting CIRP.
The Appellate Tribunal further observed that homebuyer associations, despite their substantial financial stake, cannot override the statutory role of the Resolution Professional or bypass the CIRP framework; the near-completion of a real estate project or a majority in the CoC does not exempt the process from the mandatory provisions of the Code.
The National Company Law Appellate Tribunal (NCLAT), in Comp. App. (AT) (Ins.) No. 1471 of 2022, heard an appeal filed by the Lotus 300 Apartment Owners' Association challenging the admission of Corporate Insolvency Resolution Process (CIRP) against Hacienda Projects Pvt. Ltd., the Corporate Debtor, on a Section 7 application initiated by IndusInd Bank, a Financial Creditor. The Appellant, representing buyers of all 330 apartments in the "Lotus 300" real estate project, contended that the project was nearly complete and that homebuyers had invested over ₹636 Crores, constituting a financial stake exceeding ₹1,000 Crores. The Appellant alleged that the loan claimed by IndusInd Bank was collusive and insignificant in comparison to the homebuyers' contributions.
The Appellant argued that the promoters had abandoned the project and siphoned off substantial funds, and that it had proactively recovered some of the diverted money. It further claimed to have financed additional construction work and requested the Tribunal to stay CIRP, restrain the Resolution Professional (RP) from taking over the project, and permit the association to complete the remaining work. The Appellant relied on Vidarbha Industries Power Limited v. Axis Bank Limited, REEDLAW 2022 SC 07529, to emphasise the discretionary nature of Section 7 admission.
In contrast, IndusInd Bank contested the appeal, asserting that the Appellant lacked locus standi, not having been a party in the original proceedings. It defended the Section 7 admission, arguing that the Corporate Debtor had defaulted on dues exceeding ₹33 Crores, and that the project was far from complete. The Bank refuted allegations of collusion and argued that the ongoing CIRP would not prejudice homebuyers, who held a dominant position in the Committee of Creditors (CoC), once constituted.
The NCLAT observed that although the Appellant had received limited interim relief in a related appeal—Comp. App. (AT) (Ins.) No. 1410 of 2022—including a stay on the constitution of the CoC, there was no legal basis to permit the association to bypass the RP and manage the project unilaterally. The Tribunal emphasised that any action regarding project completion must proceed through the RP under the supervision of the CoC, and that the Appellant, claiming 98% voting share, could influence CoC decisions lawfully. The Tribunal held that the reliefs sought by the Appellant were not supported by the IBC framework or regulations.
Ultimately, the NCLAT dismissed the appeal, affirming that the Adjudicating Authority had rightly initiated CIRP based on established debt and default, and had appropriately applied the law, including Vidarbha Industries. It declined to entertain allegations of collusion or extend reliefs inconsistent with the Code, reiterating that all stakeholders must operate within the IBC’s statutory framework. The appeal was rejected as devoid of merit, and all pending applications were disposed of.
Ms. Purti Gupta, Ms. Henna George and Ms. Sunidhi Sah, Advocates, represented the Appellant.
Mr. Diwakar Maheshwari, Ms. Pratiksha Mishra and Mr. Karan Bhootra, Advocates, appeared for the Respondent No. 1.
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