The National Company Law Appellate Tribunal has reaffirmed that insolvency proceedings initiated by homebuyers against realty firms must remain confined to the specific project where default has occurred and cannot extend to other projects of the corporate debtor.
The appellate tribunal highlighted that putting all other projects of the realty firms, which are unrelated to the default, is not in the interest of homebuyers and other stakeholders of other projects.
“The law is well settled that when financial creditors, homebuyers who belong to one project and who file a Section 7 application on account of default committed by the corporate debtor with respect to the project, the CIRP has to confine to the said projects,” said the National Company Law Appellate Tribunal (NCLAT).
A two-member NCLAT bench, while deciding an appeal by Navin M Raheja, said jeopardising unrelated projects would not serve the interests of homebuyers and stakeholders elsewhere, making clear that the corporate insolvency resolution process (CIRP) is to be ring-fenced project-wise.
NCLAT, which last month passed an order related to another project of Raheja Developers and held that the CIRP is confined to only one project, Raheja Shilas, said that the judgment is fully applicable in the facts of the present case and has to be followed.
Applying the same, the NCLAT had confined the ongoing CIRP of Raheja Developers to “Krishna Housing Scheme” only, and not against the entire group.
Passing a final order, the appellate tribunal also held that in the project-wise insolvency proceedings against the realty firm, claims also filed by the creditors and stakeholders should be confined to that specific project.
Source: Economic Times