Homebuyer threshold under insolvency law and RERA refund enforcement cannot be used as debt recovery through insolvency
Homebuyers invoking section 7 of the Insolvency and Bankruptcy Code after the 2019 regime had to satisfy the class threshold of 100 homebuyers or 10% of the total, whichever was less; a petition by only two homebuyers failed that requirement and was not maintainable. The Tribunal also treated an attempt to enforce a RERA refund order through insolvency as an impermissible recovery mechanism, directing that execution lie before the forum that issued the order. The tripartite arrangement with the bank further undermined maintainability because the bank had not been impleaded and the applicant was not treated as the relevant financial creditor.
Issues: (i) Whether the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable when only two homebuyers had filed it and the statutory threshold for a class of homebuyers was not satisfied; (ii) Whether a decree holder seeking enforcement of a RERA refund order could invoke section 7 of the Insolvency and Bankruptcy Code, 2016, and whether the tripartite arrangement with the bank affected maintainability.
Issue (i): Whether the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable when only two homebuyers had filed it and the statutory threshold for a class of homebuyers was not satisfied.
Analysis: The petition was filed after the 2019 amendment regime governing homebuyers in a real estate project. The Tribunal held that a class action by homebuyers required compliance with the minimum threshold, namely 100 homebuyers or 10% of the total homebuyers, whichever was less. Since only two homebuyers had joined the petition, the statutory requirement was not met.
Conclusion: The petition was not maintainable on account of failure to satisfy the homebuyer threshold, against the petitioner.
Issue (ii): Whether a decree holder seeking enforcement of a RERA refund order could invoke section 7 of the Insolvency and Bankruptcy Code, 2016, and whether the tripartite arrangement with the bank affected maintainability.
Analysis: The petition was viewed as an attempt to execute a refund order already obtained under RERA rather than as a genuine insolvency action. The Tribunal treated this as an impermissible use of the insolvency process as a recovery mechanism and observed that such execution should be pursued before the forum that passed the order. It also accepted that the tripartite agreement routed repayment rights to the bank, which had not been impleaded, and therefore the applicant could not be treated as the relevant financial creditor for the purpose of section 7.
Conclusion: A decree holder could not use section 7 of the Insolvency and Bankruptcy Code, 2016 to execute the RERA order, and the tripartite arrangement further defeated maintainability, against the petitioner.
Final Conclusion: The insolvency petition failed for want of statutory maintainability and for being used as a substitute recovery mechanism, while other remedies remained open to the petitioner.
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