RERA Recovery Proceedings Not Automatically Illegal During CIRP: Karnataka High Court

The Karnataka High Court on 11 August held that the mere pendency of the Corporate Insolvency Resolution Process (CIRP) against a developer does not automatically render recovery proceedings initiated under another statute illegal.

Justice Suraj Govindaraj dismissed the writ petition filed by M Govind Reddy and M Yashodamma challenging a public auction notice issued to enforce a Recovery Certificate under the Real Estate (Regulation and Development) Act, 2016 (RERA Act). Further, questions concerning the effect of the insolvency proceedings and the moratorium fall within the jurisdiction of the National Company Law Tribunal (NCLT).

The Bench observed that “there can be no quarrel with the proposition that Section 238 of the IBC gives overriding effect to the provisions of the Code wherever there is an inconsistency with any other enactment.” However, it clarified that “those principles do not automatically render every proceeding initiated under another statute illegal”

The petitioners, who claimed ownership of the subject property, had entered into a Joint Development Agreement (JDA) with Venkat Estates Private Limited, the developer. The developer was subsequently admitted into CIRP under the Insolvency and Bankruptcy Code, 2016 (IBC) in June 2025, and the proceedings were pending before the NCLT.

Petitioners then challenged a Public Auction Notice dated 6 June 2026, issued by the Special Tahsildar pursuant to a Recovery Certificate under Section 41 of the RERA Act. They contended that the auction amounted to a parallel recovery process outside the insolvency proceedings and could therefore not continue. They further argued that the IBC would prevail over the RERA Act.

The Court rejected the plea, noting that the auction notice was not an independent proceeding but merely a step towards enforcing the Recovery Certificate. It also found that the Recovery Certificate remained in force, with no material to show that any competent forum had stayed, modified or set it aside. It further noted that the petitioners had challenged only the auction notice and not the RERA order or the Recovery Certificate. Since the auction was an execution step, the authority was bound to proceed as long as the Recovery Certificate remained valid.

Referring to Section 2(zk) of the RERA Act, the Bench observed that a landowner who permits development through a developer under a JDA is also treated as a promoter or co-promoter and assumes statutory responsibilities under RERA. It therefore held that the petitioners could not claim the benefits of the JDA while arguing that the RERA proceedings concerned only the developer.

It also held that questions regarding whether the Recovery Certificate could be executed during CIRP, whether the property formed part of the insolvency estate and whether the moratorium under Section 14 of the IBC applied fell within the jurisdiction of the NCLT. It noted that the petitioners themselves claimed to be stakeholders in the pending insolvency proceedings and therefore had an effective remedy before the NCLT.

Lastly, the Bench held that it could not, while exercising jurisdiction under Article 226 of the Constitution, assume the role assigned by Parliament to the NCLT under the IBC.

Accordingly, the High Court dismissed the writ petition while leaving it open to the petitioners to approach the NCLT for appropriate relief.

For Petitioners: Advocate Adith S Jahgirdar

For Respondents: Advocates Mohammed Jafar Shah and Gouthamdev Ulla