MUMBAI: The National Company Law Tribunal has directed Mahindra Homes, a subsidiary of Mahindra Group’s real estate and infrastructure development company Mahindra Lifespace Developers, to notify homebuyers regarding its proposed reduction of equity share capital.
The order came on a petition filed by Mahindra Homes, which had sought confirmation of a ‘special resolution’ passed by its equity shareholders. The resolution proposed a reduction in the company’s issued, subscribed and paid-up equity share capital.
This reduction would be achieved by cancelling and extinguishing a portion of series B and series C equity shares, held respectively by global investment major Actis and listed realty developer Mahindra Lifespace Developers.
NCLT‘s order, delivered on Wednesday, assumes significance as it mandates that Mahindra Homes provide notice of the hearing to all creditors, including homebuyers, acknowledging them as creditors in accordance with Section 66 of the Companies Act, 2013.
This recognition aligns with IND AS 115 and the Insolvency and Bankruptcy Code, 2016, which classify advances from homebuyers as financial liabilities until possession is handed over.
The company has received Rs 213.84 crore as advances from homebuyers. This amount is currently shown as a liability, reflecting the non-delivery of possession of the respective flats or properties.
NCLT emphasised that, under current financial reporting standards and bankruptcy laws, homebuyers with pending possession are considered creditors. Thus, their interests must be safeguarded in any capital restructuring plan.
ET’s email query to Mahindra Lifespace Developers remained unanswered.
The tribunal observed that there were no disputes or defaults with the homebuyers regarding the advances made. The company assured that possession would be delivered according to the agreed terms and timelines.
Mahindra Lifespace Developers had incorporated the special purpose vehicle, Mahindra Homes, in June 2010 with an objective to develop residential projects in key markets across India. The joint venture was formed with an economic interest of 50:50 between Mahindra and Actis.
The NCLT Mumbai bench has scheduled the next hearing in this matter for October 30.
Mahindra Homes is required to serve notices to the Real Estate Regulatory Authority (RERA) and all homebuyers, ensuring their representation in the proceedings.
This ruling sets a precedent for future cases involving capital reduction and restructuring, highlighting the critical role of thorough communication with all affected parties, particularly homebuyers, in maintaining trust and compliance within the real estate sector.
