2023 (10) TMI 949 - SC - IBC

CIRP - Home Buyers - Contention that, Resolution Professional (RP) treated them differently from other home buyers allottees - Financial Creditors or not - scope of Financial Debt - HELD THAT - With the introduction of the explanation home buyers and allottees of real estate projects were included in the class of financial creditors - because financial debt is owed to them. On a plain reading of Section 5 (8)(f) no distinction is per se made out between different classes of financial creditors for the purposes of drawing a resolution plan. Consequently, the reasoning of the Mumbai Bench of NCLT Mr. Natwar Agrawal(HUF) is correct in the opinion of this Court. The Resolution Professional s view appears to be that once an allottee seeks remedies under RERA, and opts for return of money in terms of the order made in her favour, it is not open for her to be treated in the class of home buyer. This Court is unpersuaded by the submission. It is only home buyers that can approach and seek remedies under RERA no others. In such circumstances, to treat a particular segment of that class differently for the purposes of another enactment, on the ground that one or some of them had elected to take back the deposits together with such interest as ordered by the competent authority, would be highly inequitable. As held in MR. NATWAR AGRAWAL (HUF) VERSUS MS. SSAKASH DEVELOPERS BUILDERS PVT. LTD. 2023 (8) TMI 1362 - NATIONAL COMPANY LAW TRIBUNAL MUMBAI by the Mumbai Bench of National Company Law Tribunal the underlying claim of an aggrieved party is crystallized in the form of a Court order or decree. That does not alter or disturb the status of the concerned party, in the present case of allottees as financial creditors. Furthermore, Section 238 of the IBC contains a non obstante clause which gives overriding effect to its provisions. The appellants are declared as financial creditors within the meaning of Section 5(8)(f) (Explanation) and entitled to be treated as such along with other home buyers/financial creditors for the purposes of the resolution plan which is awaiting final decision before the adjudicating authority. Appeal allowed.

Summary

Issues Involved:
The judgment addresses the challenge to a decision of the National Company Law Appellate Tribunal regarding the treatment of home buyers as financial creditors under the Insolvency and Bankruptcy Code, 2016.

Summary:

Issue 1: Treatment of Home Buyers as Financial Creditors
The appellants, home buyers in a real estate project, challenged a decision by the NCLAT which allowed a resolution professional to treat them differently from other home buyers. The resolution plan made a distinction between home buyers who approached authorities under RERA and those who did not. The appellants argued that all home buyers should be treated equally as financial creditors under Section 5(8)(f) of the IBC. The court agreed, citing a previous NCLT decision and the explanation added to Section 5(8)(f) in 2018, which included home buyers as financial creditors without distinction.

Issue 2: Interpretation of Section 18 of RERA
The resolution professional contended that home buyers who sought remedies under RERA and received refunds should not be considered as financial creditors. However, the court disagreed, stating that only home buyers can seek remedies under RERA, and receiving a refund does not change their status as financial creditors. The court emphasized that the IBC provisions take precedence over RERA, and any distinction made by the resolution professional was deemed unfair and against Article 14 of the Constitution.

Conclusion:
The court set aside the NCLAT's decision and declared the appellants as financial creditors under Section 5(8)(f) of the IBC. The appellants are entitled to be treated equally with other home buyers/financial creditors in the pending resolution plan before the adjudicating authority. The appeal was allowed in favor of the appellants.