Separate CIRP For Another Project Of Same Builder Cannot Be Initiated Through Interlocutory Pleas: NCLT Bengaluru

The Bengaluru Bench of the National Company Law Tribunal (NCLT) on 28 April held that a separate Corporate Insolvency Resolution Process (CIRP) for another real estate project cannot be initiated through interlocutory applications in an already admitted insolvency proceeding.

Judicial Member Justice Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada ruled that the Insolvency and Bankruptcy Code, 2016 (IBC) permits initiation of CIRP only through independent applications under Sections 7, 9 or 10, and not through miscellaneous proceedings in a pending case. The Bench observed:

“……The scheme of the Insolvency and Bankruptcy Code, 2016 contemplates initiation of CIRP only upon filing of an appropriate petition under Sections 7, 9 or 10 of the Code, subject to satisfaction of the prescribed conditions for admission. There is no provision under the Code which permits initiation of a distinct CIRP for another project through an interlocutory proceeding within an existing CIRP.”

The Tribunal was hearing multiple interlocutory applications in the CIRP of Canopy Estates Private Limited. The CIRP was originally admitted on 6 June 2022 in relation to defaults linked to the “Signature Block” project of Shalom Canopy Crest.

Subsequently, by order dated 9 June 2023, the Tribunal confined the CIRP to the “Canopy Crest Signature” project and excluded other projects of the company, including “Canopy Classic” and “Canopy Crest IRS”, from the scope of insolvency proceedings.

Homebuyers of the “Canopy Classic” project then filed applications seeking initiation of a separate CIRP for that project. They also sought the constitution of a separate committee of creditors, appointment of an independent interim resolution professional, and a project-specific moratorium. They claimed the project was 70–75% complete and required a separate resolution framework to protect homebuyer interests.

Rejecting the plea, the Tribunal held that once the “Canopy Classic” project had been excluded from the ongoing CIRP, no separate insolvency process for that project could be initiated through interlocutory applications in the existing proceedings. It further held that allowing such relief would bypass the statutory scheme under the IBC governing initiation of insolvency proceedings.

The Bench also dismissed impleadment and recall applications filed by landowners and homebuyers of the excluded projects, holding them to be either not maintainable or infructuous. It reiterated that inherent powers under Rule 11 of the NCLT Rules cannot be used as a substitute for review of its own orders.

Accordingly, the NCLT rejected all applications seeking a separate CIRP for the “Canopy Classic” project and related reliefs.