2022 (4) TMI 1304 - SC - Insolvency and Bankruptcy

Supreme Court quashes NCLAT order, permits completion of housing project for homebuyers.

The Supreme Court allowed the appeal, quashing the NCLAT's order and permitting the appellant to complete the housing project in the best interest of ... Withdrawal of CIRP application - settlement took place between the parties for completion of the housing project - Section 12A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Taking into consideration the salient features of the undertaking given on affidavit by the Promoter, Shri Kashi Nath Shukla and the fact that there are only seven out of the 452 homebuyers, who opposed the Settlement Plan, it is found that it will rather be in the interest of the homebuyers that the appellant/promoter is permitted to complete the project as undertaken by him. It is pertinent to note that he has agreed that the cost of the flat will not be escalated. He has also given the time line within which the project would be completed. Not only this, but he has also undertaken to refund the amount paid by the seven objectors, if they so desire. He has further agreed that there shall be a team of 5 persons, 2 from the homebuyer’s side and 2 from the management side and that the entire process shall be monitored by the IRP. There is every possibility that if the CIRP is permitted, the cost that the homebuyers will have to pay, would be much higher, inasmuch as the offer made by the resolution applicants could be after taking into consideration the price of escalation, etc. As against this, the Promoter has filed a specific undertaking specifying therein that the cost of the flat would not be escalated and that he would honour the BBA signed by the previous management. Appeal allowed - decided in favor of appellant. Issues Involved:1. Challenge to the NCLAT's Order2. Settlement and Completion of Housing Project3. Interests of Homebuyers4. Role and Directions to IRPDetailed Analysis:1. Challenge to the NCLAT's OrderThe appellant challenged the NCLAT's order dated 22nd November 2021, which rejected the modification application filed by the appellant. The NCLAT had observed that if a settlement for the completion of the housing project occurred, it could be filed under Section 12A of the Insolvency and Bankruptcy Code (IBC) before the Adjudicating Authority. Additionally, the NCLAT directed the Interim Resolution Professional (IRP) to hold a Committee of Creditors (CoC) meeting within ten days to decide the future course of action for the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor.2. Settlement and Completion of Housing ProjectThe appellant, a Suspended Director of the Corporate Debtor, had previously settled with respondent No.2, who had booked and later canceled a flat in the housing project. Despite this settlement, the NCLAT directed the IRP to proceed with the constitution of the CoC and carry forward the CIRP, as the settlement plan did not cover all allottees. The appellant approached the Supreme Court, which allowed him to present a settlement plan covering all allottees. The appellant submitted a Revised Proposed Settlement Plan, and a special meeting was convened on 23rd October 2021, where most concerns of the homebuyers were addressed. The NCLAT, however, rejected the modification application, leading the appellant to approach the Supreme Court again.3. Interests of HomebuyersThe Supreme Court noted that the appellant had arranged funds and was willing to complete the project. The Promoter, Kashi Nath Shukla, filed an affidavit undertaking to complete the project within 6 to 15 months and arranged Rs. 10 crores to start the project immediately. The court found that it was in the homebuyers' interest to allow the appellant to complete the project, as the cost of flats would not be escalated, and the previous management's agreements would be honored. The court emphasized that if the CIRP continued, the cost for homebuyers could increase due to price escalations.4. Role and Directions to IRPThe Supreme Court allowed the appeal, quashing the NCLAT's order and permitting the appellant to complete the housing project as per the minutes of the meeting dated 23rd October 2021 and the affidavit dated 27th December 2021. The IRP was directed to submit quarterly reports to the NCLAT regarding the project's progress, with the first status report due on 22nd August 2022. The court also addressed various applications, allowing the impleadment application, dismissing the application for clarification/directions filed by the IRP, and rejecting the application for vacation of stay/modification of the order dated 4th January 2022.ConclusionThe Supreme Court's decision focused on the timely completion of the housing project in the best interest of the homebuyers, ensuring no cost escalation and honoring previous agreements. The appellant/promoter was given the responsibility to complete the project, with the IRP monitoring and reporting the progress. The appeal was allowed, and the NCLAT's order was set aside.