NCLT Allahabad: Homebuyer's Right to Retain Recovery Amount Yields to IBC's Collective Insolvency Framework
Case Overview
Renaissance Realty Vs Resolution Professional of Corporate Debtor Jai Prakash Associates Limited
Forum: National Company Law Tribunal, Allahabad
Provision Invoked: Section 60(5) of the Insolvency and Bankruptcy Code, 2016
This matter arose from an application filed by M/s Renaissance Realty before the NCLT Allahabad, seeking directions against the Resolution Professional of Jai Prakash Associates Limited (the Corporate Debtor) to hand over physical possession of a residential unit and execute a sub-lease deed. The case raised significant questions around the intersection of homebuyer rights, RERA enforcement, and the collective distribution framework under the Insolvency and Bankruptcy Code, 2016.
Background and Facts
Booking and Allotment
M/s Renaissance Realty (the Applicant) booked a residential flat bearing Unit Reference No. KLP0082402 in the housing project "Jaypee Greens Kalypso Court (Phase-II)" (UPRERAPRJ4695), developed by the Corporate Debtor. The Applicant paid a total sum of Rs. 4,84,29,567 (Rupees Four Crores Eighty-Four Lakhs Twenty-Nine Thousand Five Hundred and Sixty-Seven only) as per the payment schedule set out in the provisional allotment letter.
As per the provisional allotment letter dated 18.10.2012, possession of the unit was to be delivered within 36 months, i.e., by 18.12.2015. The Corporate Debtor failed to meet this deadline.
RERA Proceedings and Recovery Certificate
Following non-delivery of possession, the Applicant approached the Uttar Pradesh Real Estate Regulatory Authority (UP RERA), which passed an order on 06.10.2020. The relevant translated extracts of the UP RERA order read as under:
"1. The defendants should provide the physical possession of the unit allotted to the plaintiffs along with OC/CC by September 2021
2. The defendant should pay delayed period interest to plaintiff Rajesh Mehta from 01.09.2011 and to plaintiff M/s Renaissance Realty from 19.10.2015 to 30.04.2016 as per the contract and from 01.05.2016 till the date of receipt of OC by the said plaintiffs or offer of possession, whichever is later, interest at the rate of MCLR+1%. The final amount will be paid to the plaintiffs will be adjusted in the final amount payable and the balance left at the time of handing over the possession shall be paid to complainant……
3. In case the defendant does not give the possession of the unit to the plaintiffs by September 2021, the plaintiffs will be free to submit an application before RERA for refund of the deposited amount along with interest after September 2021."
The Corporate Debtor failed to comply even with this order. Consequently, a Recovery Certificate dated 01.03.2024 was issued by UP RERA against the Corporate Debtor for delay interest amounting to approximately Rs. 2.35 crore for the periods 01.05.2016 to 24.03.2020 and 30.09.2020 to 13.09.2020.
High Court Intervention and Recovery of Rs. 1 Crore
Since the District Magistrate was not expeditiously executing the Recovery Certificate, the Applicant filed Civil Misc. Writ Petition No. 11848 of 2024 before the Hon'ble Allahabad High Court. The High Court, vide order dated 10.04.2024, directed the District Magistrate, Gautam Budh Nagar to:
"…make serious endeavour to execute recovery certificate dated 01.03.2024, as expeditiously as possible preferably within a period of two months, provided there is no legal impediment."
Pursuant to this direction, the Tehsildar, Dadri recovered Rs. 1 crore from the Corporate Debtor, which was subsequently transferred to the Applicant on 30.04.2024.
Commencement of CIRP
The Corporate Debtor was admitted into the Corporate Insolvency Resolution Process (CIRP) vide order dated 03.06.2024. Following the Public Announcement dated 06.06.2024, the Applicant filed its claim as a financial creditor in a class (in Form CA dated 22.06.2024) for a total amount of Rs. 8,57,82,007.10/-, inclusive of interest. However, the Resolution Professional admitted the claim only to the extent of Rs. 68,25,224/–.
On 24.10.2024, the Resolution Professional offered possession and execution of the sub-lease deed, but demanded a further payment of Rs. 46,81,083/- without adjusting the delay interest already awarded under the UP RERA order. The Applicant complied with this demand but alleged that possession and registration still remained incomplete.