By Akash Rathi, Advocate at Lex Maven Law Firm

After 2018 amendment to Section 5(8)(f) of IBC, homebuyer allottee in real estate project also fell within the broad description of financial creditors.  

Section 7(1) of IBC provides threshold limit in relation to homebuyers class i.e. an application for initiation of corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than 10% of the total number of such creditors in the same class, whichever is less.

Recently the Hon’ble national company law tribunal – Mumbai Bench – IV in the matter of Natwar Agrawal (HUF) Vs. Ssakash Developers & Builders Pvt. Ltd. (2024) 242 Comp Cas 256 (NCLT) faced similar issue wherein a single homebuyer filed petition U/s. 7 of Insolvency and Bankruptcy code 2016 as financial creditor against corporate debtor stating that the Applicant had purchase flats in the Real Estate project of corporate debtor and paid total Rs. 2,50,00,000/-. Further decree U/s. 13 of RERA has also been issued in favour of the Applicant.

The NCLT framed a following question of law i.e. “whether an allottee holding a decree from RERA would fall under the class of Home Buyers within category of Financial Creditor or it would cease to be an allottee under the class of Home Buyers, but shall remain a Financial Creditor, to determine whether the threshold limit prescribed under second proviso to section 7(1) of the Code or under section 4 of code would apply”

The Hon’ble NCLT considered the proviso to Section 7(1) of IBC and held that the Applicant does not meet the threshold limit prescribed and held that the Application for initiation of Corporate Insolvency Resolution Process (CIRP) is not maintainable on the premise that the application could not have been maintainable had the applicant filed this application without obtaining decree under RERA. Accordingly, the applicant cannot be allowed to claim eligibility to file application u/s 7 in terms of section 4 of the Code, because if it is made permissible it would tantamount to circumventing the provisions of second proviso to section 7(1) of the Code.  In other words, what is not permissible directly shall become permissible via RERA decree route.   Accordingly, this bench feels that present petition is hit by bar under second proviso to section 7(1) of the Code. 

Hence application for initiation of Corporate Insolvency Resolution Process (CIRP) U/s. 7 of IBC by homebuyers / allottees of real estate project is maintainable only when such  application is filed jointly by not less than one hundred of such homebuyers or not less than 10% of the total number of homebuyers, whichever is less.