Statutory transfer of project control required hearing flat buyer associations before Section 9 insolvency admission

A later statutory order transferring control of certain project towers to flat buyer associations was material to whether a Section 9 insolvency application could properly be admitted, and the admission order was set aside for fresh consideration. Because the associations had stepped into the shoes of the promoters for those towers and had a direct stake in the project, they were entitled to be impleaded and heard before any further order initiating CIRP. The proceedings were restored to the adjudicating authority, the associations were allowed to file their reply, and the resolution professional was discharged.

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Issues: Whether the admission of the Section 9 application could stand without considering the later order of the Real Estate Regulatory Authority handing over certain towers to the flat buyer associations; and whether those associations were required to be impleaded and heard before initiation of CIRP.

Analysis: The appeal arose from an order admitting the operational creditor's Section 9 application and commencing CIRP. A subsequent order of the Real Estate Regulatory Authority had handed over specific towers to the flat buyer associations and recorded that they had stepped into the shoes of the promoters for those towers, while also stating that past liabilities would remain those of the original promoter. Those statutory directions were material to the question whether the insolvency application, as filed and considered, reflected the true position. The associations, having been put in charge of the project for the concerned towers, had a direct stake in the proceedings and their submissions required consideration before any further order under Section 9.

Conclusion: The admission order could not be sustained and was set aside. The flat buyer associations were impleaded and permitted to file their reply, and the Section 9 application was revived for fresh consideration in accordance with law.

Final Conclusion: The proceedings were restored to the adjudicating authority for a fresh decision after hearing the newly impleaded associations, and the resolution professional stood discharged.

Ratio Decidendi: A subsequent statutory order materially affecting control over the project and liability for the concerned towers must be considered before admitting a Section 9 insolvency application, and affected associations are entitled to be heard when their interests are directly involved.

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