IBC Prevails Over RERA Where Resolution Plan Conflicts With Individual Refund Rights: NCLT Mumbai

The National Company Law Tribunal (NCLT), Mumbai, on 9 September held that a resolution plan cannot be required to incorporate individual homebuyers' refund rights under Section 18 of the Real Estate (Regulation and Development) Act, 2016, where doing so conflicts with the collective insolvency resolution process.

A Bench comprising Judicial Member K.R. Saji Kumar and Technical Member Anil Raj Chellan dismissed an application by homebuyers Vivek Talwar, Aditi Talwar, Vishal Joshi and Anjana Joshi seeking reconsideration of the resolution plan for Spenta Enclave Pvt Ltd. or directions to provide an exit and refund mechanism. The Tribunal observed:

“The contention that the Resolution Plan ought to incorporate refund rights under Section 18 of RERA also cannot be accepted in the manner canvassed by the Applicants. The insolvency resolution process under the Code proceeds on the basis of collective resolution of claims and balancing of stakeholder interests. By virtue of Section 238 of the Code, the provisions of the Code prevail in case of any inconsistency with other enactments.”

Spenta Enclave was admitted into the Corporate Insolvency Resolution Process (CIRP) on 24 March 2023. The applicants had booked flats in its Altavista project and paid approximately Rs. 89.23 lakh and Rs. 86.71 lakh respectively between 2017 and 2021. They sought refunds after possession was not delivered.

Their claims were admitted during the CIRP. However, they challenged the Committee of Creditors (CoC)-approved resolution plan for not providing an exit and refund mechanism based on their contractual and statutory rights.

The Tribunal held that the Successful Resolution Applicant (SRA) could not be strictly bound by all contractual terms entered into between the applicants and Spenta Enclave.

It noted that homebuyers as a class, holding 22.66% voting share, had approved the resolution plan through their Authorised Representative. The four applicants collectively held only 0.22% voting share. It therefore held that their individual consent was not required for varying the contractual terms entered into by the erstwhile promoters. It observed:

“Further, the SRA cannot be strictly bound by all the contractual terms entered into between the Applicants and the CD undergoing CIRP. The majority of the homebuyers have already considered the past contracts of the CD and given their consent to the Plan, by way of 22.66% voting, through the Authorised Representative appointed under the law. The four Applicants herein collectively hold only about 0.22% voting share in the CoC.”

The Bench also noted that the SRA was not a party to the application and that no relief affecting it could be granted without considering its interests. It also noted that substantially similar refund claims had already been rejected in the applicants' earlier applications on 8 August 2024. The applicants had not challenged those orders before the Appellate Authority, and the orders had attained finality.

Accordingly, the NCLT dismissed the application, finding no ground to interfere with or direct reconsideration of the CoC-approved resolution plan.

For Applicants: Adv. Prathamesh Nirkhe i/b Asahi Legal

For Respondents: Rajesh Jhunjhunwala (RP in person)/ Adv. Amir Arsiwala a/w Adv. Manoj Kumar Mishra, Mayank Samuel a/w Adv. Drumi Nishar i/b Sirius Legal