To Benefit Home Buyers SC Resorts to Art. 142 to Cut Short IBC Technicalities

Case Details: Amit Katyal v. Meera Ahuja - [2022] 136 taxmann.com 55 (SC)

Judiciary and Counsel Details

• • M.R. Shah and B.V. Nagarathna, JJ.

Facts of the Case

In the instant case, the builder-(corporate debtor) came up with a housing project in Gurgaon which could not be completed in eight years. On 06.12.2018, three home buyers (original applicants) preferred an application under Section 7 of the IBC before the NCLT to initiate the CIRP process against the corporate debtor. The application was admitted and a Resolution Professional was appointed and the moratorium was declared.

The promoters of the corporate debtor challenged the admission of Section 7 application before the NCLAT, during the hearing before the NCLAT, the appellant tried to settle the matter with the original applicants, however, the settlement did not go through, the NCLAT dismissed the appeal and directed commencement of CIRP. The IRP issued a public announcement and constituted the Committee of Creditors (CoC). In the meantime, the promoters preferred the present appeal before the Apex Court challenging the order passed by the NCLAT.

Supreme Court Held

The Apex Court allowed withdrawal of the Corporate Insolvency Resolution Process plea filed against a builder filed by three homebuyers on being paid a settlement amount along with applicable interest as agreed upon by the majority of them. The Apex Court, in the larger interest of the homebuyers, exercised power under Article 142 to permit withdrawal of the CIRP proceedings and set aside all matters pending between the parties. The Court observed that under Section 12A 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.

Taking note of Swiss Ribbons Pvt. Ltd. And Anr. v. Union of India And Ors. (2019) 4 SCC 17, in which the Court had permitted the original applicants to withdraw the CIRP proceedings in view of the settlement entered between parties, the Court noted that the COC comprises 91 members, of which 70% are the members of the Flat Buyers Association who are willing for the CIRP proceedings being set aside subject to the appellant and the Corporate Debtor – company honoring its undertaking given to this Court as per the settlement plan.

The Court also observed that out of the total 128 home buyers of 176 units, 82 homebuyers are against the insolvency proceedings and the original applicants have also settled their dispute with the appellant and corporate debtor. Even the object and purpose of the IBC is not to kill the company and stop/stall the project, but to ensure that the business of the company runs as a going concern.

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