Homebuyers With Settled Claims Can't Seek Reconstitution Of Committee Of Creditors: NCLT Kochi
The National Company Law Tribunal (NCLT) at Kochi on Wednesday said that homebuyers whose claims have been settled through the insolvency resolution process lose their stake in the corporate debtor, Samson and Sons Builders and Developers Pvt. Ltd., and therefore cannot seek the reconstitution of the Committee of Creditors (CoC). The dispute arose from a plea filed by the Nova Castle...
The National Company Law Tribunal (NCLT) at Kochi on Wednesday said that homebuyers whose claims have been settled through the insolvency resolution process lose their stake in the corporate debtor, Samson and Sons Builders and Developers Pvt. Ltd., and therefore cannot seek the reconstitution of the Committee of Creditors (CoC).
The dispute arose from a plea filed by the Nova Castle Apartment Owners' Association and the Sanctuary Apartment Owners' Association- homebuyers of two project developed by Samson and Sons Builders. They questioned the Resolution Professional's decision to reconstitute the CoC after some project-wise resolution plans were approved.
A coram of Judicial Member Vinay Goel and Technical Member Madhu Sinha observed that such a action is not available for hombuyers whose claims were settled through project wise insolvency resolution plans and allowing the same would go against the very essence of the Insolvency Code.
“Now coming to the present case, upon approval of the Resolution Plans of some of the projects, the home buyers of the said plans or said project ceased or lost their interest in the Corporate Debtor and resolution process and consequently in the COC. Once they have no interest in the remaining assets or projects, any decision taken by them would not come within the ambit of financial creditors and commercial wisdom as required and expected under the provisions of the Insolvency and Bankruptcy Code, 2016. So, the restoration of the committee of Creditors to its original status, as prayed by the Applicants, if allowed, would go against the basic spirit of the Insolvency and Bankruptcy Code, 2016, and no such restoration of the earlier Committee of Creditors can be allowed as prayed for.”
The case originated from the insolvency proceedings against Samson and Sons Builders, which had several ongoing real estate projects in Kerala. After inviting project-wise resolution plans, six were received. Four plans, for Angel Woods, Orchid Valley, Pearl Crest and Sharon Hills-I, were approved by the Tribunal in 2024.
Following these approvals, the Resolution Professional revised the CoC to remove creditors linked to the completed projects. The Nova Castle and Sanctuary associations objected, claiming they were excluded without notice and that their rights as financial creditors remained intact.
The homebuyers argued that the reconstitution was illegal, arbitrary and against natural justice. They said the Resolution Professional had acted without authority. The Resolution Professional countered that once the resolution plans for some projects were approved, the creditors of those projects no longer had a financial interest in the company. The respondents also said the associations, having taken part in the CoC meeting where the reconstitution was discussed, could not challenge it later.
The tribunal agreed with the Resolution Professional. It noted that the applicants' representatives were present at the CoC meeting on August 31, 2024, where the reconstitution was taken up as an agenda item. The Bench said:
“Now question before us is whether, at this stage, Applicants can file an application for the restoration of the earlier COC, against the decision of the COC taken in a meeting duly represented by the Applicants. In our opinion, the answer would be negative. If the Applicants had any grounds, they should have raised them in the meeting itself once there was an agenda for the reconstitution of the committee.”
The tribunal also stressed that the existence of a financial stake was central to the CoC's composition, as the entire process is creditor-driven, and an actual financial stake in the company is necessary to agitate any such cause.
Holding that restoring the earlier CoC would go against the basic spirit of the Insolvency and Bankruptcy Code, 2016, the court dismissed the application. It also imposed a cost of Rs 1 akh rupees on the applicants, directing them to deposit the amount with the National Defence Fund.
Case Title: Nova Castle Apartment Owner's Association and Anr vs. K Parameshwaran Nair, RP, Samson and Sons Builders and Developers Pvt. Ltd.,
Case Number: CP (IBC)/05/KOB/2021
For Applicants: Advocate Bijoy Pulipra
For Respondent: Advocate Vinod P V