Case Note & Summary
The case involves four appeals filed by two residents' associations (Sharon Hills Residents Association and Angelwoods Apartments Allottees Association) against an order dated 26.04.2023 passed by the National Company Law Tribunal, Kochi Bench, in IA (IBC)/157/KOB/2023 in CP (IB)/5/KOB/2021. The impugned order rejected the applications of the associations to be impleaded in the proceedings initiated by the Resolution Professional (RP) of Samson & Sons Builders & Developers Pvt. Ltd. The RP had filed an application seeking extension of time for completion of the Corporate Insolvency Resolution Process (CIRP) and other reliefs. The associations, representing homebuyers/allottees of the corporate debtor's real estate projects, claimed that they are financial creditors under Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016 (IBC) and have a right to be heard in any proceedings affecting their interests. The NCLAT, after hearing the parties, allowed the appeals, set aside the impugned order, and directed the Adjudicating Authority to implead the associations in the pending IA and hear them before passing any orders. The Tribunal held that allottees are financial creditors under the IBC and have a right to be heard in proceedings that may affect their rights and interests. The decision emphasizes the importance of protecting the interests of homebuyers in insolvency proceedings.
Headnote
A) Insolvency and Bankruptcy Code - Financial Creditor - Allottee as Financial Creditor - Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016 - The issue was whether allottees of a real estate project are financial creditors under the IBC. The Tribunal held that allottees are financial creditors as per Section 5(8)(f) and have a right to be heard in proceedings affecting their interests. (Paras 10-15) B) Insolvency and Bankruptcy Code - Right to be Heard - Impleadment of Allottees Association - Sections 60(5), 61 of the Insolvency and Bankruptcy Code, 2016 - The issue was whether the allottees association could be impleaded in an application filed by the Resolution Professional. The Tribunal held that the allottees association, representing financial creditors, has a right to be heard and should be impleaded to ensure their interests are protected. (Paras 16-20) C) Insolvency and Bankruptcy Code - Appeal against Interlocutory Order - Maintainability - Section 61 of the Insolvency and Bankruptcy Code, 2016 - The issue was whether an appeal lies against an order rejecting an impleadment application. The Tribunal held that such an order is appealable under Section 61 as it affects the rights of the parties. (Paras 21-25)
Issue of Consideration
Whether the allottees associations have the right to be impleaded and heard in the application filed by the Resolution Professional before the Adjudicating Authority seeking extension of time for completion of CIRP and other related reliefs.
Final Decision
The appeals are allowed. The impugned order dated 26.04.2023 passed by the Adjudicating Authority (NCLT, Kochi Bench) in IA (IBC)/157/KOB/2023 is set aside. The Adjudicating Authority is directed to implead the appellants in the said IA and hear them before passing any orders. No order as to costs.
Law Points
- Allottees of real estate projects are financial creditors under Section 5(8)(f) of IBC
- Right of allottees to be heard in CIRP proceedings
- Impleadment of allottees associations in CIRP applications
- Section 61 appeal against interlocutory orders
