Homebuyers Cannot Use IBC To Reopen RERA-Adjudicated Disputes: NCLT Delhi

The Delhi Bench of the National Company Law Tribunal (NCLT) on 5 October held that homebuyers cannot use insolvency proceedings to reopen contractual disputes already adjudicated by the Haryana Real Estate Regulatory Authority (HRERA). It clarified that Section 60(5) of the Insolvency and Bankruptcy Code (IBC) does not empower the NCLT to re-adjudicate such disputes or sit in appeal over HRERA's findings.

A Bench comprising Judicial Member Mahendra Khandelwal and Technical Member Atul Chaturvedi partly allowed an application filed by 11 homebuyers in the “Privvy The Address” project developed by Spaze Towers Pvt. Ltd., which is undergoing the corporate insolvency resolution process (CIRP). It held:

“The disputes…. Are essentially contractual/regulatory disputes which have already been considered by HRERA and cannot be re-adjudicated by this Adjudicating Authority in exercise of its jurisdiction under Section 60(5) of the Code. Unless any such demand has been set aside, reduced or otherwise modified by a competent forum, the same cannot be directed to be waived or adjusted by this Authority.”

The homebuyers sought directions to the Resolution Professional (RP) to hand over possession of their units and execute conveyance deeds. They also sought the waiver or adjustment of charges demanded by the corporate debtor, including increased super area charges, external development charges (EDC), infrastructure development charges (IDC), external electrification charges, Preferential Location Charges (PLC), club development charges, labour cess, interest and Delayed Possession Compensation (DPC).

The applicants alleged substantial delays in the project despite the timelines promised under their Builder-Buyer Agreements. They contended that possession remained pending for years and that the RP was insisting on payment of charges they considered excessive or unlawful. They also sought adjustment of DPC awarded by HRERA to five of the applicants against the outstanding demands.

The homebuyers had approached HRERA with complaints concerning the disputed charges. After HRERA dismissed the complaints, they appealed before the Haryana Real Estate Appellate Tribunal (HREAT). The appeal was pending when CIRP against the corporate debtor commenced.

The RP opposed the application, contending that the disputed demands arose before the commencement of CIRP and that he was seeking recovery of outstanding dues reflected in the corporate debtor's records. He submitted that HRERA had already adjudicated the issues by an order dated 25 July 2023 and that an appeal against the order had subsequently been withdrawn.

He further argued that his role was confined to managing the corporate debtor's affairs during CIRP and did not authorise him to adjudicate the legality of past demands. The NCLT, he added, could not conduct a detailed civil adjudication of the disputed charges.

The Tribunal observed that the principal relief sought by the homebuyers required it to determine the legality and quantum of charges levied under the Builder-Buyer Agreements. Such an exercise would involve interpreting contractual terms and examining the relevant facts, which fell outside the limited jurisdiction conferred on the NCLT under Section 60(5) of the IBC.

It further noted that the disputed demands predated CIRP and that the RP could not be required to adjudicate their legality. Since HRERA had already considered the homebuyers' grievances concerning super area increases, EDC/IDC, electrification, club charges and other demands, the NCLT could neither sit in appeal over those findings nor undertake a fresh examination of the disputes.

On possession, the Bench held that commencement of CIRP did not extinguish the homebuyers' contractual obligation to pay outstanding dues. The NCLT could not direct the waiver or adjustment of disputed contractual charges unless a competent forum had set aside, reduced or otherwise modified the demands.

However, it distinguished DPC claims that had already been adjudicated. It held that the RP must account for and adjust DPC amounts finally awarded by HRERA or another competent forum against the outstanding dues of the concerned homebuyers. No adjustment could be granted for DPC claims that remained undecided.

Accordingly, the NCLT partly allowed the application by permitting adjustment of finally adjudicated DPC. It rejected the remaining prayers for waiver or adjustment of disputed contractual charges and directed the homebuyers to clear their outstanding dues before seeking possession and execution of conveyance deeds.