NCLT Kolkata Allows Homebuyer To Seek Alternative Flat Or Full Refund After Invalid Cancellation

The Kolkata bench of the National Company Law Tribunal (NCLT) has held that a homebuyer's flat allotment could not be treated as cancelled after the developer failed to make the refund linked to the proposed cancellation.

Since the flat was subsequently allotted to another person and possession was granted, the tribunal allowed the allottee to either seek an alternative flat with a covered car parking space or opt for a full refund of the amount paid with interest at statutory rates.

The bench of Judicial Member Bidisha Banerjee and Technical Member Rekha Kantilal Shah held that the cancellation was conditional upon payment of the ₹18 lakh refund.

It observed, “the cancellation of the allotment was conditional upon the actual payment of the refund of Rs. 18 Lakh to be made by the Corporate Debtor to the Applicant.”

The tribunal consequently held that any such cancellation recorded by the developer was invalid.

The case concerned Sujay Shankar Mukherjee, an allottee in Riverbank Developers Private Limited's Hiland Greens Phase-I project. Canara Bank had initiated insolvency proceedings against the developer, and the NCLT admitted the insolvency petition on April 3, 2024, commencing the Corporate Insolvency Resolution Process (CIRP).

In 2014, Mukherjee was allotted Flat No. 2A6 in Tower-17 of the project. A covered car parking space was allotted to him separately in May that year. He paid an aggregate ₹20.07 lakh towards the flat and parking space.

The developer purported to hand over physical possession of the flat in February 2021 after payment of the final instalment.

A joint inspection on March 17, 2021 found several deficiencies, including the missing parking space, incomplete bathrooms, balconies and flooring, and no electricity or water connections.

Mukherjee later sought cancellation and a refund. The developer agreed to refund ₹18 lakh but never paid it.

After the developer entered CIRP, the RP admitted ₹18 lakh of his ₹20.07 lakh claim. Mukherjee later learned that his allotment had been cancelled based on his earlier email and sought its restoration.

The NCLT held that no formal cancellation had been issued and that cancellation was conditional on the refund. Since no refund was made, the cancellation was never final.

Since it found the cancellation invalid, it observed that “there is no cancellation left for the RP to reverse.”

The NCLT further noted that Mukherjee had made full or substantial payment towards the flat and parking space. It observed that cancelling the allotment after receiving a significant amount, without refunding the money, would be “inequitable and highly unfair.”

Since the original flat had subsequently been allotted to a third party and possession granted, the tribunal held that Mukherjee deserved adequate compensation.

Under the final directions, Mukherjee can seek an alternative flat in Hiland Greens Phase-I along with a covered car parking space. The alternative allotment is subject to payment of necessary charges and any escalation amount applicable to another similar allottee, as well as approval by the committee of creditors with 66% votes.

Alternatively, he can seek a full refund of the amount paid with interest in accordance with statutory rates, which is to be provided for in the resolution plan.

The application was accordingly allowed and disposed of.