2022 (3) TMI 283 - SC - Insolvency and Bankruptcy

Supreme Court Allows Withdrawal of CIRP, Directs Completion of Housing Project

The Supreme Court allowed the withdrawal of Corporate Insolvency Resolution Process (CIRP) proceedings, quashed lower court orders, and directed the ... Refund sought by home-buyers due to an inordinate delay in the completion of the project and failure to handover possession within the stipulated time - application was filed prior to the amendment to Section 7 of the IBC, which now permits 100 or 10% of the home buyers/allottees to apply under Section 7 of the IBC - it is alleged that during the hearing before the NCLAT/Appellate Authority, the appellant herein tried to settle the matter with the original applicants, however, the settlement did not go through - HELD THAT:- In the present case, although the COC was constituted on 23.11.2020, there has been a stay of CIRP proceedings on 3.12.2020 (within ten days) and no proceedings have taken place before the COC. It is to be noted that the COC comprises 91 members, of which 70% are the members of the Flat Buyers Association who are willing for the CIRP proceedings being set aside, subject to the appellant and the Corporate Debtor – company honouring its undertaking given to this Court as per the settlement plan dated 3.2.2022. In the peculiar facts and circumstances of the case, where out of 128 home buyers, 82 home buyers will get the possession within a period of one year, as undertaken by the appellant and respondent No.4 – Corporate Debtor, coupled with the fact that original applicants have also settled the dispute with the appellant/Corporate Debtor, this is deemed to be a fit case to exercise the powers under Article 142 of the Constitution of India read with Rule 11 of the NCLT rules, 2016 and to permit the original applicants to withdraw the CIRP proceedings. In the present case, as observed, out of the total 128 home buyers of 176 units, 82 homebuyers are against the insolvency proceedings and the original applicants have also settled their dispute with the appellant and corporate debtor. Even the object and purpose of the IBC is not to kill the company and stop/stall the project, but to ensure that the business of the company runs as a going concern - In view of the facts and circumstances, more particularly when the withdrawal of the CIRP proceedings initiated by the original applicants is allowable by the NCLT in exercise of its powers under Rule 11 of the NCLT rules, 2016 and in the peculiar facts and circumstances of the case, instead of relegating the original applicants to approach the NCLT/Adjudicating Authority by moving an application under Section 12A of the IBC, this is a fit case to exercise powers under Article 142 of the Constitution of India as the settlement arrived at between the home buyers and the appellant and corporate debtor – company shall be in the larger interest of the home buyers and under the settlement and as undertaken by the appellant/corporate debtor, out of 128 home buyers, 82 home buyers are likely to get possession within a period of one year, for which they are waiting since last more than eight years after they have invested their hard earned money. This shall be in furtherance of the object and purpose of IBC. Appeal allowed. Issues Involved:1. Impleadment of parties.2. Admission of Section 7 application under the Insolvency and Bankruptcy Code (IBC).3. Constitution of the Committee of Creditors (COC) and appointment of Interim Resolution Professional (IRP).4. Settlement between the appellant and the home buyers.5. Withdrawal of Corporate Insolvency Resolution Process (CIRP) proceedings.6. Application of Article 142 of the Constitution of India.7. Payment of costs incurred by IRP.Issue-wise Detailed Analysis:1. Impleadment of Parties:The court allowed Interlocutory Application No. 105732/2021 for impleadment, ordering the parties to be impleaded as respondents in the appeal.2. Admission of Section 7 Application under the IBC:The National Company Law Tribunal (NCLT) admitted the Section 7 application filed by home buyers due to the corporate debtor's failure to complete a housing project. The NCLT's order was upheld by the National Company Law Appellate Tribunal (NCLAT), leading to the initiation of CIRP against the corporate debtor. The appellant challenged this order.3. Constitution of the Committee of Creditors (COC) and Appointment of IRP:Following the NCLT's order, an IRP was appointed, and a COC was constituted. The IRP issued a public announcement and convened the first meeting of the COC. The Supreme Court stayed the CIRP proceedings, subject to the appellant depositing a specified amount.4. Settlement between the Appellant and the Home Buyers:The appellant and a majority of the home buyers reached a settlement, agreeing that the corporate debtor would complete the housing project within one year and hand over possession to the home buyers. The original applicants agreed to withdraw the CIRP proceedings in light of the settlement.5. Withdrawal of CIRP Proceedings:The Supreme Court considered the withdrawal of CIRP proceedings under Section 12A of the IBC, which allows withdrawal with the approval of 90% of the COC. Given the settlement and the majority of home buyers' agreement, the court permitted the withdrawal of the CIRP proceedings to serve the larger interest of the home buyers.6. Application of Article 142 of the Constitution of India:The court exercised its powers under Article 142 to permit the withdrawal of CIRP proceedings, considering the unique facts and circumstances, including the settlement and the home buyers' interests. The court noted that continuing CIRP would have adverse consequences for home buyers and emphasized the legislative intent to protect their interests.7. Payment of Costs Incurred by IRP:The court directed the appellant to pay Rs. 6,00,000 to the IRP for expenses incurred and litigation costs. This amount was to be paid within two weeks.Conclusion:The Supreme Court allowed the withdrawal of CIRP proceedings, quashed the NCLT and NCLAT orders, and directed the appellant to complete the housing project within one year. The court emphasized the protection of home buyers' interests and the legislative intent behind the IBC amendments. The proceedings were disposed of in terms of the settlement, with directions for the appellant to pay costs to the IRP.