The National Company Law Tribunal (NCLT) has dismissed an interlocutory application filed by homebuyers to challenge the approved resolution plan of Monarch Brookefields LLP and seek reliefs including the allocation of a specific apartment and resolution of issues affecting homebuyers.
Despite the said homebuyers’ claim being admitted during the Corporate Insolvency Resolution Process (CIRP), the resolution plan approved by the Committee of Creditors (CoC) granted them only 60% of their claim amount, with no entitlement to the apartment in question.
The tribunal’s decision marks a significant legal precedent regarding the rights of individual creditors in insolvency cases. The ruling reaffirms the authority of the CoC in making decisions pertaining to resolution plans and highlights the limitations on individual homebuyers’ ability to contest such decisions.
The crux of the matter lies in the disparity between the expectations of the homebuyers and the terms of the approved resolution plan. While the applicants had hoped for a favorable resolution that would address their concerns and secure their entitlement to the purchased apartment, the approved plan fell short of their expectations.
According to the resolution professional’s response, while the applicants have a registered agreement for sale, it is an admitted position that the developer did not have the permission to construct the 10th floor in the building wing named, ‘Arizona’. The permission to construct any floor beyond the 09th Floor was withdrawn by the concerned municipal authority and this fact is not in dispute.
Himanshu Vidhani, partner at law firm Chandhiok & Mahajan said, the tribunal’s careful consideration of the case reflects the principles set out in the Jaypee Kensington Boulevard Apartments Welfare Association versus NBCC (India) Ltd ruling.
“By following this precedent, the tribunal emphasizes the importance of respecting decisions made collectively by stakeholders,” said Vidhani. “This ensures fairness and consistency in insolvency proceedings, benefiting all parties involved. This alignment not only fortifies legal consistency but also upholds the essence of fairness and equitable treatment within insolvency proceedings.”
The ruling underscores the principle that once a resolution plan has been approved by the requisite majority, individual creditors or homebuyers within the class cannot challenge it on commercial grounds.
In response to the applicants’ challenge, the company, represented by the resolution professional, argued that the approved resolution plan was lawful and within the purview of the Insolvency and Bankruptcy Code.
It was contended that the applicants’ objections were essentially against the commercial terms of the plan, rather than its legality, and that individual creditors could not challenge a resolution plan approved by the majority of the class.
The tribunal found that the challenge to the commercial terms of the resolution plan was not admissible. It emphasized that the resolution plan had been approved by the CoC, which exercised its commercial wisdom in reaching its decision.
