Separate CIRP Cannot Be Initiated For Project When Developer Is Already Undergoing CIRP: NCLT Bengaluru

The National Company Law Tribunal (NCLT) at Bengaluru has held that a separate Corporate Insolvency Resolution Process (CIRP) cannot be initiated for a particular real estate project when the developer as a whole is already undergoing CIRP.

The ruling came while dismissing a homebuyer's insolvency plea against Buoyant Technology Constellations Private Limited, who argued that his claim arose exclusively from the Mantri Manyata Energia project.

A coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada held that all creditors, including homebuyers, must submit their claims before the Resolution Professional in the ongoing CIRP.

“Once CIRP has commenced against the Corporate Debtor as a whole, all creditors, including homebuyers, irrespective of the project to which their claims relate, are required to submit their claims before the Resolution Professional in the ongoing CIRP. Therefore, the petition for initiating a separate CIRP in respect of a particular project cannot be entertained.” it held

Anand Hariharan, a homebuyer, filed an insolvency petition against Buoyant Technology Constellations Private Limited, claiming a default of ₹1.60 crore with interest.

He had booked a flat in the Mantri Manyata Energia project for ₹1.02 crore. Under a tripartite agreement, the Corporate Debtor had agreed to bear the pre-EMI/ interest liability on his housing loan until possession was handed over. Despite repeated extensions, possession was not delivered and the petitioner was compelled to bear the EMI liability.

Hariharan then approached Karnataka Real Estate Regulatory Authority, which directed the Corporate Debtor to refund ₹1.34 crore with interest. The Corporate Debtor failed to comply with the order. The Corporate Debtor failed to comply, following which a demand notice was issued and thereafter filed the insolvency petition.

The Resolution Professional opposed the petition, pointing out that the Corporate Debtor was already undergoing CIRP pursuant to an NCLT order dated August 23, 2024. He submitted that Hariharan could lodge his claim before the already appointed RP.

Hariharan argued that his claim arose exclusively from the Mantri Manyata Energia project and that he was seeking CIRP only against that project, rather than the Corporate Debtor as a whole.

The Tribunal noted that the petition itself did not state that it was confined to a particular project. It also observed that the Corporate Debtor had already informed Hariharan, in its reply to demand notice, that it was undergoing CIRP and that he should approach the appointed RP.

“That should have been sufficient to drive the Petitioner for taking necessary steps given the time bound regime in which the proceedings are continuing in respect of the CD but he has chosen to carve an independent path by separately invoking the identical provision.” it noted

The Tribunal held that when the entire Corporate Debtor is already undergoing CIRP, seeking to carve out a part of it for initiating an overlapping CIRP was impermissible, particularly when the petitioner had failed to produce any document showing that his monetary claim under the RERA order was specifically confined to the particular project.

“In fact the Petitioner has wasted not only the time of this Authority by proposing a solo venture but also his time which could well have been utilised by submitting claim before the RP of the Corporate Debtor.” it remarked

Accordingly, the tribunal dismissed the petition, while permitting Hariharan to lodge his claim before the RP appointed in the ongoing CIRP.

For Petitioner: D Vijay Raj

For RP: Abhishek Sharma