Homebuyers' Statutory Rights Cannot Be Negated By Landowner Or Developer: NCLAT In Developer's CIRP

The National Company Law Appellate Tribunal at Delhi has held that homebuyers' statutory rights in a real estate project cannot be defeated by disputes between the landowner and the developer.

It dismissed landowner Ishaan Singh's challenge to the inclusion of the unsold inventory and project land of the Spaze Arrow commercial project in Gurugram in the insolvency valuation of Spaze Towers Pvt. Ltd.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra upheld the rejection of Singh's plea.

“Allottees acquire certain rights which are statutorily protected and neither the land owner nor the developer can negate the rights of the allottees.”

The dispute arose from a collaboration agreement entered into in 2010 between Singh, the landowner, and Spaze Towers for the development of the Spaze Arrow commercial complex in Gurugram.

Spaze Towers allotted 147 units in the project to buyers. Disputes between the parties led to arbitration, civil litigation, and proceedings before the Haryana Real Estate Regulatory Authority. The regulatory authority directed both the landowner and the developer to complete the project.

Singh argued that an arbitral tribunal comprising three retired Supreme Court judges had held that the collaboration agreement could not be specifically enforced. He said the tribunal had also restrained Spaze Towers from acting on powers of attorney granted by him. Based on this, he argued that the unsold inventory and project land could not be treated as assets of the corporate debtor during the insolvency process.

The resolution professional opposed the plea. It argued that the arbitral tribunal had refused Singh's request for transfer of the project land. It also said the regulatory authority had treated the collaboration arrangement as continuing and required both parties to complete the project. The resolution professional argued that homebuyers' rights could not be defeated in the insolvency process.

The appellate tribunal rejected Singh's argument founded on the arbitral award. It noted that while the arbitral tribunal held the collaboration agreement incapable of specific enforcement, it did not accept Singh's claim that the agreement had been lawfully terminated.

“Thus, present is not a case where termination of Collaboration Agreement was accepted by any of the Authority.”, the tribunal ruled.

The tribunal also noted that the arbitral tribunal had refused Singh's request to transfer the project land to him. It said the regulatory authority had continued to treat both parties as responsible for completing the project.

“The prayer of the Appellant has been to exclude the unsold inventory from the Information Memorandum and from valuation. When the project was carried out and constructed by both the land owner and the Corporate Debtor who are promoters of the project, the assets being part of the project, the prayer of the Appellant to exclude the unsold inventory was rightly rejected.”, the tribunal ruled.

Holding that the project assets formed part of the corporate debtor's assets, the tribunal dismissed the appeal.