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Executive Summary
In a landmark judgment, the Hon'ble Supreme Court has held that once a homebuyer's claim is verified and admitted in the insolvency process, it cannot be classified as "belated" merely on procedural grounds. The Court held that the Appellants, who had paid almost the entire consideration for their apartment in the IREO Rise project, were entitled to possession under the Resolution Plan. By rejecting the approach of the NCLT and NCLAT, which had confined the Appellants to a partial refund, the Supreme Court has clarified that admitted claims must be implemented in full substance and not diluted through restrictive or residuary clauses.
From a corporate and business perspective, this judgment sends a strong signal to Resolution Applicants, developers, and investors. Resolution Applicants must conduct thorough due diligence, factoring in verified claims as binding obligations, rather than assuming they can be discounted through plan provisions. Developers facing insolvency cannot use the CIRP process to escape their contractual commitments to homebuyers, and the ruling enhances consumer confidence in the real estate sector. For lenders and institutional investors, the decision provides greater predictability and stability in insolvency resolutions, ensuring that verified claims enjoy enforceable protection. Importantly, the judgment also underscores that the IBC is not merely a tool for corporate restructuring but a framework for equitable resolution that balances commercial interests with individual justice.
Background Facts
The Appellants had booked an apartment in the IREO Rise project in 2010 and executed a Buyer's Agreement in 2011, paying a sum of ₹57,56,684 out of the total consideration of ₹60,06,368. The Agreement provided for delivery of possession on or before November 27, 2013. However, possession was never delivered. Aggrieved, the Appellants initially filed a consumer complaint seeking refund, interest, and compensation, but subsequently withdrew it upon initiation of the Corporate Insolvency Resolution Process (CIRP) against the developer.
Thereafter, the Appellants filed their claim before the Resolution Professional, which was duly admitted and included in the list of financial creditors on April 30, 2020. Despite such admission, possession was not handed over. The National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) both held that the Appellants were entitled only to a 50% refund under Clause 18.4(xi) of the Resolution Plan. Aggrieved by these findings, the Appellants filed a Civil Appeal before the Supreme Court.
Issues before the Supreme Court
The first issue before the Supreme Court was whether the Appellants' claims should be treated as belated under Clause 18.4(xi), thereby restricting them to a refund of 50%.
The second issue was whether, having been verified and admitted, the claims entitled the Appellants to possession under Clause 18.4(vi)(a) of the Resolution Plan.
Submissions of the Parties
On behalf of the Appellants, it was argued that they had paid almost the entire consideration for the allotted apartment, thereby acquiring a vested right in the property. Their claim was first submitted in January 2019 and re-submitted in February 2020 at the direction of the Resolution Professional. The claim was duly verified, admitted, and reflected in the list of financial creditors. Once admitted, the claim could not be treated as belated. The Appellants contended that Clause 18.4(xi) was applicable only to cases where claims were either not filed or not verified, and that their claim rightly fell under Clause 18.4(ii) read with Clause 18.4(vi)(a), entitling them to possession. Reliance was placed on the judicial precedent in Puneet Kaur v. K.V. Developers Pvt. Ltd. (2022), where the NCLAT held that disregarding claims reflected in the records of the corporate debtor leads to unfair and inequitable resolution. It was further argued that the NCLAT relegated the Appellants to the status of belated claimants, thereby depriving them of allotment and confining them to a 50% refund.
The Respondents argued that the Appellants failed to file a valid claim within the timelines prescribed under the IBC and the public announcement of October 2018. They disputed the assertion that a claim was filed in January 2019, as claims had to be submitted electronically or at the RP's address. It was submitted that since the Form-CA indicated interest only up to 7 February 2020, it demonstrated that the claim was filed on that date, and any argument of earlier submission was an afterthought. By that time, the Committee of Creditors had already approved the Resolution Plan. Consequently, the case, in their view, fell squarely under Clause 18.4(xi) and 18.4(xix), restricting the Appellants to a 50% refund of the principal amount. It was submitted that the Appellants were aware of the process, but despite such knowledge, they deliberately failed to submit the claim in time and therefore cannot seek parity with timely claimants. The Respondents maintained that the NCLT and NCLAT had rightly applied the relevant clauses and that the appeal deserved to be dismissed.
Findings of the Supreme Court
The Supreme Court undertook a detailed analysis of the facts, the provisions of the Resolution Plan, and the IBC framework. It held that the Appellants were bona fide homebuyers, having paid almost the entire sale consideration, and their claim had been duly verified and incorporated in the published list of financial creditors in April 2020. The Court oberved that the NCLAT had erred in treating the Appellants as belated claimants, despite their claim being admitted and included in the records. The Court held that the publication of the list of creditors is a statutory duty and cannot be reduced to a meaningless formality.
The Court clarified that Clause 18.4(ii) and Clause 18.4(vi)(a) applied to verified and admitted claims, which entitled the homebuyers either to possession or execution of conveyance. Clause 18.4(xi), being a residuary provision, applied only to cases of unfiled or unverified claims and was inapplicable in the present case. Importantly, the Court held that this was not a situation of entertaining a fresh claim post-plan approval, as the Appellants' claim had already been admitted before the plan's approval by the Adjudicating Authority. To ignore such a claim would amount to misapplication of the Resolution Plan and defeat the very object of the IBC.
Our Analysis
This ruling is a significant reaffirmation of the Supreme Court's commitment to protecting homebuyers under the IBC framework. By clearly distinguishing between verified claims and belated claims, the Court has ensured that homebuyers who have paid substantial sums as sale consideration are not unfairly deprived of possession or reduced to partial refunds.
From a business and corporate perspective, this decision has wide-ranging implications. For Resolution Applicants, the ruling underscores that verified claims are binding and must be factored into resolution planning and financial modelling. Developers cannot misuse insolvency proceedings to evade their obligations towards bona fide homebuyers. For investors and lenders, the judgment enhances certainty and predictability in the insolvency process, reducing litigation risks and reinforcing confidence in the Indian real estate market. By strengthening consumer trust, this ruling also contributes to market stability, ensuring that homebuyers remain willing participants in real estate transactions even in cases where developers undergo insolvency.
The Supreme Court has once again emphasized that the IBC is not merely a mechanism for corporate rescue, but also a framework to ensure equitable treatment of stakeholders. This judgment prevents misuse of "belated claim" provisions to dilute admitted rights and strengthens the broader principle of fairness within insolvency resolution.
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