Supreme Court Upholds Homebuyers' Right to Possession in CIRP, Rejects Treatment as Belated Claims under Insolvency and Bankruptcy Code
- REEDLAW
- 9 hours ago
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REEDLAW Legal News Network reports: In a pivotal ruling, the Supreme Court upheld the substantive rights of genuine homebuyers in a real estate insolvency context, holding that once their claims stand verified and admitted during the CIRP, they cannot be relegated to the status of belated refund-seekers. The Court clarified that such allottees are legally entitled to possession and conveyance of their allotted units in accordance with the approved Resolution Plan, thereby reinforcing the statutory prioritisation of consumer rights within insolvency resolution.
The Bench comprising Justice Sanjay Kumar and Justice Satish Chandra Sharma observed that the allottees had participated in the CIRP within the prescribed framework and their claims were duly verified and admitted by the Resolution Professional. The Court rejected the treatment of such claims as belated refund-seeking demands and held that doing so would undermine both the binding force of Section 31 of the Insolvency and Bankruptcy Code and the commercial wisdom of the Committee of Creditors. It clarified that the homebuyers’ right to possession and conveyance was not merely compensatory but a substantive entitlement flowing directly from the approved Resolution Plan.
A Civil Appeal was filed under Section 62 of the Insolvency and Bankruptcy Code, 2016, against an order of the National Company Law Appellate Tribunal, which had affirmed the decision of the Adjudicating Authority declining the Appellant’s claim for possession of a residential apartment in a real estate project by the Corporate Debtor. The project in question was developed as an integrated residential township, and the Appellant had entered into a Buyer’s Agreement in 2011, making payments of nearly the full sale consideration. The agreement required possession to be delivered by late 2013, which was not accomplished, leading the Appellant to seek relief through consumer proceedings.
During the pendency of those proceedings, the Adjudicating Authority admitted an insolvency application and commenced the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Appellant participated in the CIRP by submitting claims for the apartment, first alleged to be physically at the project office and later by email following the Resolution Professional’s instructions. Ultimately, the Appellant’s claim was reflected and admitted in the published list of financial creditors. Nevertheless, possession was not handed over, prompting applications before the Adjudicating Authority and subsequent appeals.
The Appellant argued that having paid nearly the entire purchase price and having their claim verified and admitted within the CIRP, they were entitled to possession of the apartment or an equivalent unit, pursuant to the relevant clauses of the Resolution Plan. The Appellant submitted the initial claim promptly upon withdrawal of the consumer complaint, and resubmitted it as per instructions. Reliance was placed upon precedents supporting the principle that claims reflected in the records of the Corporate Debtor ought to be dealt with fairly, rather than relegated to refund-only remedies.
The Respondents contended the Appellant’s claim was filed late, that the Resolution Plan had already been approved when the Appellant resubmitted their claim, and so, as per the terms of the Plan, only a partial refund was due. They asserted that no valid physical claim was filed at the proper address, and any later submission was an afterthought.
Both the Adjudicating Authority and the Appellate Tribunal accepted the Respondents’ position, finding the Appellant to be a belated claimant only entitled to a 50% refund and not to possession. It was held that claims needed to have been filed in the specific manner and within prescribed timelines, and that the Appellant’s failure to do so was fatal to their request for possession.
Upon further analysis, the Supreme Court noted that the Appellant was a bona fide homebuyer whose claim had actually been verified and included in the published record of financial creditors, that the statutory duty to recognize such claims must be discharged with fairness, and that the structure of the Resolution Plan itself distinguished between verified and belated or unverified claims. The Court found that this was not a case of a new claim beyond the scope of the Plan, but a situation in which the Appellant’s claim had been properly incorporated prior to its approval.
Accordingly, the Supreme Court set aside the decisions of both the Adjudicating Authority and the Appellate Tribunal, directing the Respondents to execute the conveyance deed and hand over possession of the allotted apartment within two months, and allowed the appeal. No costs were awarded.
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