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Amit Katyal vs. Meera Ahuja and Others

Civil Appeal · 2022 INSC 260Decided 3 Mar 2022
Civil Appeal No. 3778 of 2020
M.R. Shah · B.V. Nagarathna

Background

Home buyers of a Gurgaon housing project called Krrish Provence Estate, developed by Jasmine Buildmart Pvt. Ltd., had not received their flats even after eight years, so three of them filed an insolvency application against the builder. The National Company Law Tribunal (NCLT) admitted the case and started the Corporate Insolvency Resolution Process (CIRP), and the National Company Law Appellate Tribunal (NCLAT) upheld this. The builder's promoter appealed to the Supreme Court, which stayed the insolvency process on condition of a deposit, and during the appeal, the builder eventually reached a settlement with the majority of the 128 affected home buyers (82 of them, including the original applicants), under which the builder promised to complete the project and hand over possession within a year.

Decision Breakdown

The Supreme Court held that since a large majority of home buyers had voluntarily settled and wanted the project completed rather than the company pushed into insolvency/liquidation, and since almost no substantive insolvency steps had actually been taken (the process having been stayed early on), this was an appropriate case to use its special constitutional power under Article 142 to allow withdrawal of the insolvency proceedings, even without going through the normal procedural route (Section 12A applications before the NCLT/committee of creditors). The Court reasoned that continuing the insolvency process could actually harm home buyers, since resolution plans in liquidation often force creditors, including home buyers, to accept steep "haircuts," while builders successfully completing a project serves the wider purpose of the insolvency law, which is to keep viable businesses running rather than kill them. The Court accordingly permitted withdrawal of the case, quashed the NCLT/NCLAT orders and the committee of creditors, directed repayment to the original applicants from funds already deposited, and bound the builder to firm undertakings, including completing construction within a year and obtaining an occupancy certificate within six months, with a warning that any breach would be viewed very seriously.

Lesson Learnt

When most affected home buyers agree to a realistic settlement that gets their homes completed, courts can use their special powers to let insolvency proceedings be withdrawn even after admission, rather than forcing a builder into liquidation, because getting a stalled project finished is often better for buyers than a formal insolvency payout.

Official source (sci.gov.in)View Judgment (PDF)

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