NCLAT Delhi: Lending Institutions Providing Loans To Homebuyers Don't Qualify As Financial Creditors Under IBC

The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha, and Mr. Indevar Pandey (Technical Members) held that lending institutions providing loans to homebuyers do not qualify as 'Financial Creditors' under Insolvency and Bankruptcy, Code 2016 ('IBC'). Background Facts: Two flat buyers availed a loan from India Infoline Housing Finance Limited (Appellant) for the purchase of flats in the Amadeus Residential Project developed by the Saha Infratech Pvt. Ltd. (Corporate Debtor) in Sector 143, Noida. On 28.02.2020, NCLT Delhi admitted the Corporate Debtor into the Corporate Insolvency Resolution Process under Section 7 of the IBC. Mr. Shiv Nandan Sharma was appointed as the Resolution Professional ('RP'). The Appellant filed a claim of Rs. 2.31 crores on 17.08.2023, which was not admitted despite reminders. Consequently, the Appellant filed an interlocutory application with the Tribunal, seeking a directive for the RP to admit their claim. However, NCLT New Delhi via its Order dated 23.01.2024 dismissed the said application. The Appellant filed the appeal against NCLT New Delhi's Order dated 23.01.2024 seeking acknowledgment and admission of its claim. Contentions of the Appellant: The Appellant argued that the Order dated 23.01.2024 disregarded its lawful rights as a secured creditor since the homebuyers purchased the flats using the loan provided by the Appellant and mortgaged these units as security. Therefore, the Appellant is to be considered a secured creditor concerning the mortgaged flats and the claim must be admitted. NCLAT Verdict: The NCLAT New Delhi dismissed the appeal and held that lending institutions providing loans to homebuyers do not qualify as 'Financial Creditors' under IBC. The Appellate Tribunal placed reference on NCLT Delhi's Order dated 23.01.2024 which further relied upon the Supreme Court's decision in Pioneer Urban Land & Infrastructure Ltd. & Anr. vs. Union of India & Ors. observing that Home Buyers should be considered 'Financial Creditors' of the Corporate Debtor, regardless of whether they self-financed their flat or took a loan. NCLAT relied upon the reasoning of the Supreme Court that the default is relevant only between the Home Allottee and the Bank. It held that Banks or Financial Institutions that loan money to home buyers cannot be considered 'Financial Creditors' included in the CoC, as the liability to repay is on the individual homebuyers. It was also observed that in a tri-partite agreement among the homebuyer, the Bank, and the builder, the Bank in case of default can cancel the agreement, allowing the Bank to pay the sale consideration and register the property. However, presently, there is no evidence of such cancellation. In conclusion, NCLAT Delhi noted that such an interpretation aligns with the objective of IBC to ensure resolving and maximizing the assets of the Corporate Debtor. Case Title: IIFL Home Finance Ltd. vs. Shiv Nandan Sharma, Resolution Professional Saha Infratech Pvt. Ltd. Case No.: Company Appeal (AT) (Insolvency) No. 856 of 2024 Counsel for Appellant: Mr. Aditya Madaan, Aishwarya Adlakha, Natasha, Adv. Counsel for Respondent: Mr. Deep Bisht, Adv. Date of Judgment: 20th May, 2024 Click here to Read/Download Order

NCLAT Delhi: Lending Institutions Providing Loans To Homebuyers Don't Qualify As Financial Creditors Under IBC

Sachika Vij

Tags