After Initiation Of CIRP, There Can Be No Encumbrances On Corporate Debtor's Assets: NCLT Chennai

The National Company Law Tribunal (NCLT), Chennai Bench of Sanjiv Jain (Judicial Member) Shri. Ravichandran Ramasamy (Technical Member) has held that after the initiation of the Corporate Insolvency Resolution Process (CIRP), there can be no encumbrances on the assets of the corporate debtor, and all claims must be dealt with in accordance with Section 53 of the IBC. The present application has been filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking impleadment in the Resolution Plan approval application filed by the Resolution Professional. It is further prayed that the Resolution Plan should be remanded to the Resolution Applicant with directions to treat the Applicants at par with other allottees. The Applicants submitted that the RP treated the claim as a "refund on cancellation" and misclassified the claims in the Information Memorandum (IM) and in plan documents. There was no voluntary cancellation of the flat and their rights arose out of a binding Tamilnadu Real Estate Regulatory Authority (TNRERA) order, which has not been challenged by the Corporate Debtor. It was further submitted that the allottees under the RERA cannot be equated with the operational creditor hence they have filed the present application to place their objection on record and assert their rights over the encumbered flat. Per contra, the Respondent submitted that the present Intervention application has been filed by Navneet Kumar Ranka & Babulal Ranka & Sons (HUF), purporting to be "Allotees" under an unregistered "Agreement of Sale" and an unregistered "Construction Agreement" both dated on 16.11.2017 in relation to Apartment No 1906. The Supreme Court in Vishal Chelani & Others vs. Debashis Nanda held that it is the contention of the Resolution Professional that once the Homebuyers seek reliefs under the RERA and opt for refund, they cannot be treated as homebuyers under the IBC. However, this contention was rejected. It held that only homebuyers can pursue remedies under the RERA therefore treating them differently under the IBC for exercising that right would be inequitable. The Apex Court further held that as it is already held that Natwar Agarwal a court order crystallising a claim does not change the claimant's status as a financial creditor. Section 238 of the IBC gives an overriding effect to the provisions of the IBC over RERA. The court found the RP's classification to be arbitrary and hyperclassified and violative of Article 14 of the Indian Constitution. The Tribunal noted that the facts of the present case are distinguishable from the above cited judgment, here the sale and construction documents are unregistered and the payment was made to the suspended director, not to the corporate debtor. This indicates that there is no privity of contract between the parties. Under sections 10 and 25, a contract without consideration is void. It further observed that the applicants did not obtain a valid title or title to the property before the RERA and only sought refund. Therefore, as per section 53 of the IBC, the claim must be resolved accordingly and the encumbered assets cannot be allocated. Since the apartment was sold to another homebuyer after obtaining a proper NOC, the applicants cannot be considered as financial creditors. Accordingly, their plea to intervene was rejected. Case Title: Navneet Kumar Ranka Vs. Ramakrishnan Sadasivan Case Number: INV.P/(IBC)/5/CHE/2025 In I.A.(IBC)(PLAN) 11(CHE)/2024 IN CP(IB)/124/CHE/2023 Order Date: 24/07/2025 Click Here To Read/Download The Order

After Initiation Of CIRP, There Can Be No Encumbrances On Corporate Debtor's Assets: NCLT Chennai

Mohd Malik Chauhan

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

After Initiation Of CIRP, There Can Be No Encumbrances On Corporate Debtor's Assets: NCLT Chennai

Mohd Malik Chauhan

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

This is a premium content
Available exclusively to
Our subscribers