Unauthorised Residents Association Cannot Trigger CIRP If Individual Homebuyers Miss Debt Threshold: NCLT Delhi

The National Company Law Tribunal (NCLT) at New Delhi has recently held that a Residents Welfare Association that is not authorised by individual homebuyers cannot initiate a corporate insolvency process on their behalf, particularly when those homebuyers do not individually meet the minimum debt threshold under the Insolvency and Bankruptcy Code. A coram of Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi said the Code requires strict compliance with both the statutory debt threshold and the standing of the applicant when invoking Section 9-CIRP. It noted that the application had not been filed by individual operational creditors or an authorised representative acting on their behalf, but by the Association in its own name. “we observe that the present application has been instituted by a Residents' Welfare Association and not by an individual allottees represented through an authorised representative. It is further noted that the individual Applicant, in their personal capacity, does not meet the minimum threshold requirement prescribed under Section 4 of the Insolvency and Bankruptcy Code, 2016, for initiation of proceedings against the Corporate Debtor”, it said. The tribunal added that “the statutory scheme of the Code mandates strict compliance with the threshold criteria, and in the absence of such compliance, the petition cannot be sustained.” Against this backdrop, the tribunal held that the Heritage Max Condominium Association could not maintain the CIRP plea against Dreamhome Infrastructure Private Limited, the developer of the project, for the alleged non-transfer and diversion of the Interest Free Maintenance Security corpus. It found that although the Association sought to pursue a collective claim, the underlying debts belonged to individual homebuyers who did not, on their own, satisfy the statutory minimum. The dispute arose from the Interest Free Maintenance Security collected from homebuyers of the Heritage Max group housing project in Gurugram. The Association alleged that Dreamhome Infrastructure Private Limited had collected Rs 10.81 crore as IFMS, was required to transfer the corpus after handing over common areas and had instead diverted the funds while transferring only a negligible amount. It claimed the amount was recoverable with interest and relied on resolutions authorising it to act on behalf of 188 homebuyers. The Association argued that all homebuyers had executed standard builder buyer agreements and that, after it took over the maintenance of common areas, it became statutorily entitled to the IFMS corpus deposited by its members. It also stated in an affidavit that the petition had been filed with unanimous consent. The developer denied liability, claiming the corpus had been used for maintenance activities, although the Association said no supporting documentation had been produced. Finding that neither the authorization requirements nor the debt threshold had been satisfied, the tribunal dismissed the petition without costs and clarified that the Association may seek remedies before civil courts or other appropriate forumsCase Title: Heritage Max Condominium Association v. Dreamhouse Infrastructure Pvt Ltd.Case Number: CP(IB)465 (ND) of 2025For Applicant: Advocates Shekhar Verma and Yashvir BalharaClick Here To Read/Download Order

Unauthorised Residents Association Cannot Trigger CIRP If Individual Homebuyers Miss Debt Threshold: NCLT Delhi

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