Supreme Court: Home Buyers as Creditors under IBC 2016

The Supreme Court classified Home Buyers as Financial Creditors under the IBC, 2016. The Court found the Corporate Debtor in default for failing to provide possession of the property as per the agreement terms. As the Corporate Debtor could not refund the amount or provide possession, the petition was admitted, and the Corporate Insolvency Resolution Process (CIRP) was initiated. An Insolvency Resolution Professional (IRP) proposed by the Financial Creditor was appointed, and necessary orders were issued to relevant parties and authorities.

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Issues:
Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code (IBC, 2016) against a Corporate Debtor by a Financial Creditor who is a Home Buyer.

Detailed Analysis:
The petition was filed by the Financial Creditor, a Home Buyer, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default committed by the latter. The Financial Creditor had booked a flat in a project named "LOTUS CITY" with the Corporate Debtor and had paid an initial amount of &8377; 3,78,000. Despite making subsequent payments totaling &8377; 32,28,784, the possession of the property was not handed over to the Financial Creditor as per the agreement and allotment letter. An e-Mail was sent to the Corporate Debtor demanding the refund of the entire amount along with interest, which was not complied with.

The Corporate Debtor expressed inability to pay the claimed amount, failed to appear before the Tribunal, and did not provide possession of the flat as per the agreement terms. The Financial Creditor's counsel presented documents supporting the claim, including the calculation sheet detailing the principal amount and valid receipts issued by the Corporate Debtor for the payments made. The interest amount of &8377; 17,44,616 was also claimed at 9% per annum.

The Supreme Court's judgment in a related matter clarified that Home Buyers could be classified as Financial Creditors under the IBC, 2016, and failure to hand over possession within the agreed timeframe constituted a default. Given the Corporate Debtor's inability to refund the collected amount or provide possession, the default was established, leading to the admission of the petition. Consequently, the Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor.

The Insolvency Resolution Professional (IRP) proposed by the Financial Creditor was appointed by the Tribunal, and necessary orders were issued to communicate the decision to all relevant parties and authorities, including the IBBI and the Registrar of Companies. The petition/application was disposed of with the aforementioned directions.

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