Majority Homebuyers Accept Builder's Settlement During CIRP; Supreme Court Allows Withdrawal Of Insolvency Application

The Supreme Court has allowed withdrawal of Corporate Insolvency Resolution Process against a builder in an application filed by three homebuyers in view of a settlement plan agreed upon by the majority of them. In the larger interest of the homebuyers, the Apex Court exercised power under Article 142 to permit withdrawal of the CIRP proceedings and set aside all matters pending between the parties. While allowing the application, a Bench comprising Justices M.R. Shah and B.V. Nagarathna reserved liberty in favour of the homebuyers and Krrish Provence Flat Buyers Association ("Association") to approach it, in case the settlement does not go through as per the proposal. The Court also directed the promoters of the builder to pay Rs.6,00,000/- to the IRP along with litigation costs. Factual Background The builder, Jasmine Buildmart Pvt. Ltd., (corporate debtor), came up with a housing project in Gurgaon, namely, 'Krrish Provence Estate', which it could not complete in eight years. On 06.12.2018, three home buyers (original applicants) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") before the NCLT, Delhi seeking initiation of the CIRP process. The application was admitted on 28.11.2019. A Resolution Professional was appointed and moratorium was declared. The promoters of Jasmine challenged the admission of Section 7 application before NCLAT, which was eventually dismissed and CIRP was directed to be initiated. Accordingly, the Committee of Creditors (CoC) was constituted on 23.11.2020. In the interim, the promoters filed a Special Leave Petition (SLP) before the Apex Court challenging the order passed by the NCLAT. On 03.12.2020, notice was issued in the SLP and the operation of the NCLAT order was stayed. Settlement On 04.02.2022, the Supreme Court was informed that the respective parties including the three original applicants and 79 other home buyers have reached a settlement. According to which, the builder ought to complete the project and handover possession within a year. It had also resolved to refund Rs.3,36,02,000 as demanded by the three original applicants along with interest. The Supreme Court passed an order recording the settlement and permitting the homebuyers to withdraw the CIRP proceedings. Subsequently, an application under Article 142 of the Constitution of India read with Rules 11 and 12 of the NCLT Rules, 2016 was filed by the original applicants before the Apex Court seeking permission to withdraw the CIRP proceedings on being paid Rs. 3,36,02,000 along with interest, out of the amount deposited with the Registry of the Court. Senior Advocates, Mr. K.V. Vishwanathan and Mr. Nakul Diwan appearing for the office bearers of the Association and the Association respectively; Senior Advocate, Mr. Kapil Sibal appearing for the promoters submitted that the parties have settled the dispute and a proposed settlement plan signed by the parties has been filed under which the builder is to complete the project within one year from the date of settlement. The Court was apprised that out of 128 home buyers of 176 units, 82 (including the three original applicants) have accepted the settlement plan. It was submitted that the CIRP process was stayed at the very threshold and therefore there would be no impediment in allowing the original applicants to withdraw the CIRP proceedings. Decision of the Supreme Court The Court observed that under Section 12A, IBC, NCLT may allow withdrawal of the application admitted under Section 7 on an application filed by the applicant with approval of 90% voting share of CoC. It took note of Swiss Ribbons Pvt. Ltd. And Anr. v. Union of India And Ors. (2019) 4 SCC 17, wherein it had permitted the original applicants to withdraw the CIRP proceedings in view of the settlement entered between parties. In the present case, though CoC was constituted on 23.11.2020 there was a stay on its operation from 3.12.2020 and moreover, no meeting of CoC had yet been convened. The Court highlighted that 70% of the 91 members of the CoC were homebuyers and were willing to withdraw the CIRP proceedings. In view of the larger interest of home buyers the Supreme Court decided to permit the application to withdraw CIRP in exercise of Article 142. "Therefore, in the peculiar facts and circumstances of the case, where out of 128 home buyers, 82 home buyers will get the possession within a period of one year, as undertaken by the appellant and respondent No.4 – Corporate Debtor, coupled with the fact that original applicants have also settled the dispute with the appellant/Corporate Debtor, we are of the opinion that this is a fit case to exercise the powers under Article 142 of the Constitution of India read with Rule 11 of the NCLT rules, 2016 and to permit the original applicants to withdraw the CIRP proceedings. We are of the opinion that the same shall be in ...

Majority Homebuyers Accept Builder's Settlement During CIRP; Supreme Court Allows Withdrawal Of Insolvency Application

Sohini Chowdhury

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