Homebuyers Acting As Resolution Applicants Cannot Challenge CIRP Framework After Filing Plan: NCLT Kochi

The National Company Law Tribunal (NCLT) at Kochi has recently held that a homebuyers' association cannot challenge the insolvency framework after submitting a resolution plan under it while hearing the insolvency of Samson and Sons Builders and Developers Private Limited.

The order was passed by Judicial Member Vinay Goel. The tribunal said a party cannot accept the decisions of the Committee of Creditors and later question the same decisions after stepping into the role of a resolution applicant.

“By filing the present application, the applicant is in effect questioning and challenging the very decisions taken by the Committee of Creditors, including decisions in which they have participated as members, which is not permissible,” the tribunal said.

The case relates to the stalled “Sanctuary” housing project developed by Samson and Sons Builders. The Sanctuary Apartment Owners' Association represents homebuyers in the project. The Association had been admitted as a financial creditor during the Corporate Insolvency Resolution Process and had actively participated in meetings of the Committee of Creditors.

After the National Company Law Appellate Tribunal set aside an earlier liquidation order and granted more time to complete the insolvency process, the association submitted a project-wise resolution plan for the Sanctuary project.

After submitting the plan, the association moved the NCLT challenging State Bank of India's secured claim of about Rs 14.94 crore. It also asked the tribunal to exclude the project land and apartments from the insolvency estate.

The Association argued that the homes were “assets held in trust” for buyers who had paid substantial amounts under agreements for sale. It contended that the bank's claim should not operate against the Sanctuary project and that the asset pool and valuation required reworking.

The tribunal rejected these arguments. It noted that the Association had submitted its resolution plan with full knowledge of the admitted claims, valuation reports, and asset details. The NCLT said such conduct attracts the doctrine of approbation and reprobation.

“Such conduct clearly attracts the doctrine of approbation and reprobation,” the tribunal held. The NCLT also rejected the “held in trust” argument, clarifying that an agreement for sale does not transfer ownership.

“An Agreement for Sale, by itself, does not create any right, title, or interest in immovable property, nor does it divest ownership from the Corporate Debtor or create any trust or proprietary interest in favour of the allottee in the absence of execution and registration of conveyance deed,” the tribunal observed

It added that until a registered sale deed is executed, the land and buildings continue to belong to the corporate debtor and remain part of the insolvency estate. The application was dismissed with nominal costs of Rs 3,300.

For Applicant: Advocate Bijoy P. Pulipra