By Sayli Petiwale, Senior Associate, Aureus Law Partners
A recent Delhi High Court order expressed that homebuyers being allottees are entitled to have their claims considered before any settlement is finalized between a company and its creditors.
The Delhi High Court, in Barun Mitra v. AVP Buildtech Pvt. Ltd. & Ors., asked the National Company Law Appellate Tribunal, New Delhi (NCLAT) to consider claims of a homebuyer/allottee before the settlement.
Homebuyer’s/Allottee Plea
The homebuyer’s application seeking to become a part of the insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) was rejected by the NCLAT. Instead, by an order March 13, 2020 a freeze was ordered on claims to be filed before the Insolvency Resolution Professional (IRP) appointed for the company.
Due to this freeze, the IRP neither considered homebuyer’s claims nor had his application in relation to this, been listed for hearing before the NCLAT yet.
The homebuyer’s grievances were that the IRP was proceeding to finalize the settlement terms without taking into account his claims, despite him being an allottee/homebuyer for the company. He further submitted that it was imperative that the application filed before NCLAT be heard urgently as the IRP had intimated certain homebuyers, and settlement terms had already been drawn.
IRP’s submission
It was argued by the IRP that all homebuyers/allottees had been issued notice and 334 allottees had already voted after considering settlement terms placed before the Committee of Creditors or allottees of creditors. It was submitted that as per order dated March 13, 2020, these settlement terms were to be placed before the NCLAT.
High Court’s decision
The High Court, after hearing all the parties, concluded that claims of homebuyer herein have to be heard before finalizing any settlement terms, as the homebuyer was an allottee of the company. The Court directed that settlement terms shall not be implemented by the IRP unless NCLAT hears and addresses grievances of all the interested parties.
Conclusion
The Court opined that no settlement terms could be considered unless all interested parties grievances are addressed. The above decision can be viewed as a reaffirmation of the rights of a ‘homebuyer’ as a financial creditor under IBC. Keeping in view the status of the financial creditor in the priority list, the ‘homebuyers’ rights have been upheld.
Disclaimer: This is not a substitute for legal advice. Certain portions have been edited by our team, and readers are encouraged to obtain appropriate legal advice before acting in pursuance of this article. Views expressed should not be considered as technical legal views of the author, as each situation is facts specific.
