The Mumbai Bench of the National Company Law Tribunal (NCLT) has ruled that homebuyers as a class, voting through the Authorised Representative, are bound by the collective majority decision, and the Successful Resolution Applicant cannot be compelled to honour pre-CIRP refund obligations under Section 18 of RERA or the original Agreement for Sale.
The NCLT dismissed the homebuyer’s application seeking to stall approval of the Resolution Plan on the ground that it did not incorporate refund or exit rights under Section 18 of RERA, holding that the IBC framework operates on collective resolution and individual remedies outside that framework are not maintainable. The Tribunal drew a clear distinction between the erstwhile promoter/developer and the Successful Resolution Applicant, holding that the SRA does not step into the shoes of the promoter until the Plan is approved, and therefore cannot be compelled to honour pre-CIRP contractual obligations under the Agreement for Sale or treated as a ‘promoter’ under RERA at the plan-approval stage.
The Tribunal reaffirmed that the commercial wisdom of the CoC is paramount and that judicial review under Section 30(2) of the IBC is confined to examining statutory compliance. Essentially, the Tribunal cannot direct modification of commercial terms or compel renegotiation of an approved Plan. Applying Section 25A(3A) of the IBC, the Tribunal held that individual members of the homebuyer class are bound by the collective decision taken through the Authorised Representative.
The Division Bench comprising K.R. Saji Kumar (Judicial Member) and Anil Raj Chellan (Technical Member) observed that the Applicants’ grievance was essentially that the Resolution Plan did not provide a refund mechanism for homebuyers wishing to withdraw from the project, which they argued was inconsistent with Section 18 of RERA and Clause 18 of the Agreement for Sale. The Tribunal noted that the SRA, whose Plan was awaiting approval, had not yet stepped into the shoes of the promoter/developer, and therefore could not be treated as the ‘promoter’ of the project at that stage. The responsibility of the SRA to complete the project would only begin upon approval of the Plan by the Adjudicating Authority.
The Tribunal further observed that the CoC had already considered the Applicants’ request for refund with interest in its 11th meeting on Feb 08, 2024, but concluded that cancellations and refunds would negatively impact the cash flows of the CD. The homebuyers as a class held 22.66% voting share and had voted in favour of the Plan through their Authorised Representative, while the four Applicants collectively held only about 0.22% voting share. The Tribunal also noted that the SRA was not even a party to the present Application.
On the interplay between RERA and the IBC, the Tribunal observed that there is no conflict between the two enactments as they operate in different spheres, as the IBC is a proceeding in rem focused on rehabilitation of the corporate debtor for the benefit of all stakeholders, while RERA protects the individual investor. However, in the event of any clash, RERA must give way to the IBC by virtue of Section 238 of the Code.
Briefly, four homebuyers namely, Vivek Talwar, Aditi Talwar, Vishal Joshi, and Anjana Joshi, have booked flats in the ‘Altavista’ project being developed by Spenta Enclave Private Limited, the Corporate Debtor (CD), and paid approximately Rs. 89.23 lakhs and Rs. 86.71 lakhs respectively between 2017 and 2021. The CD failed to hand over possession by the agreed date of Dec 30, 2020, prompting the Applicants to seek refunds and file consumer complaints in July 2022, before the CIRP commenced on March 24, 2023.
The CIRP was initiated against the CD, and the Applicants’ claims were admitted by the Resolution Professional (RP), Rajesh Jhunjhunwala. The RP later asked the Applicants to pay the balance consideration, which they refused. A Consortium of Successful Resolution Applicants (SRA) submitted a Resolution Plan that was approved by the Committee of Creditors (CoC) with 92.87% voting share. The Plan, in Paragraph 8.6, expressly stated that ‘no cancellation of the Units by the Homebuyers will be entertained by the Resolution Applicant’.
The Applicants challenged the Plan before the NCLT, primarily contending that it violated their refund and exit rights under Section 18 of the Real Estate (Regulation and Development) Act, 2016 (RERA) and Clause 18 of their Agreements for Sale. Notably, two earlier applications by the same Applicants seeking identical refund relief had already been dismissed by the Tribunal, and those orders had attained finality without challenge.
