RERA Orders Do Not Prevent CIRP When Builder Repeatedly Defaults: NCLT Kochi in Jacob P P Vs Alka Ventures Pvt Ltd
The National Company Law Tribunal, Kochi Bench, in Jacob P P Vs Alka Ventures Pvt Ltd, has clarified that proceedings and directions under the Real Estate (Regulation and Development) Act, 2016 do not, by themselves, block homebuyers from initiating proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) where there is a genuine insolvency situation and sustained default.
The order deals with a long-delayed real estate project – SKYWINGS Township Project – where homebuyers, after exhausting almost every other available remedy, invoked Section 7 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s. Alka Ventures Private Limited.
Background of the SKYWINGS Township Project
Project structure and initial developer
- The SKYWINGS Township Project was launched in 2007 at Kakkanad, Ernakulam, on about 9.24 acres.
- The plan envisaged:
- Five residential towers
- A commercial complex
- Over 600 apartments with full amenities
- The original promoter, SRK Constructions, committed to a completion date of September 2009.
- Allottees, including the present petitioners, booked apartments mainly in “King East” and “Queen East” towers by:
- Purchasing undivided share in land, and
- Entering into construction agreements and sale deeds with the original entities (including
M/s. Sairung Developers and Promoters Pvt. Ltd.).
SRK Constructions later reconstituted as SRK Shelters Private Limited. While citing the 2008 global financial crisis as a reason for non-completion of SKYWINGS, SRK simultaneously continued other developments and launched fresh projects, leading to growing dissatisfaction among homebuyers.
Transition to Alka Ventures Pvt Ltd
Between 2012 and 2014, several meetings of allottees and stakeholders were held in Dubai (11.11.2012, 30.03.2013), Doha (17.04.2013) and Bahrain (18.04.2013). Following these discussions:
- It was agreed that M/s. Alka Ventures Private Limited (the Corporate Debtor), a company incorporated on 27.08.2003 with:
- Nominal share capital of Rs. 5,00,000/- and
- Paid-up share capital of Rs. 1,00,000/-,
and owned by the construction contractor, would take over the development of the project.
This takeover and restructuring of roles were recorded in a chain of documents:
- Memorandum of Understanding dated 28.02.2013
- Multiple addenda to the MoU
- Several Quadripartite Agreements (QPAs) between:
- SRK,
- Sairung,
- Alka Ventures, and
- Individual allottees
- A final takeover agreement dated 29.11.2014 involving SRK, Sairung and Alka Ventures.
Under these instruments, Alka Ventures Pvt Ltd undertook to:
- Complete King East and Queen East towers by 2015; and
- Complete the entire SKYWINGS Township by 2018.
Despite these clear and time-bound contractual commitments, the Tribunal recorded that no substantial progress was made even after significant payments from allottees.
Escalation of Disputes and Multiple Failed Timelines
Recourse to Non-Resident Keralites Commission
In 2018, faced with continued inaction, the aggrieved allottees approached the Non-Resident Keralites Commission. In these proceedings, the Corporate Debtor again:
- Acknowledged its obligations;
- Undertook to:
- Complete King East and Queen East and obtain occupancy certificate by March 2020, and
- Complete the clubhouse by July 2020; and
- Proposed to raise Rs. 42 crores for funding the completion of the project.
Even after these undertakings, and notwithstanding the period of COVID-19 disruption, the default persisted and the promised works were not completed.
Proceedings before RERA and repeated extensions
The homebuyers formed a collective body, Skywings Members Society, representing 98 allottees, including the petitioners.
- The Society filed Complaint No.131/2021 before Kerala Real Estate Regulatory Authority (RERA) seeking:
- Completion of the project,
- Handover of possession, and
- Execution of sale deeds in their favour.
Key developments:
- RERA issued directions requiring the Corporate Debtor to complete construction by June 2023.
- On an application, RERA later extended the completion deadline to 31.08.2024.
- When the Corporate Debtor still failed to complete the project, RERA further extended the time up to 30.12.2024, which, according to the allottees, was done without giving them an opportunity of hearing.
In parallel, the Corporate Debtor’s challenge to certain RERA orders before the Hon’ble High Court of Kerala failed, and the underlying obligations to complete remained unfulfilled. Despite a decade of assurances, the towers were still incomplete.
Arbitral award and attachment of project property
Complicating matters further, an erstwhile joint venture partner, MJ Properties, obtained an arbitral award of about Rs. 32 crores plus accrued interest, which was made rule of court by the Commercial Court, Ernakulam.
- Execution proceedings (E.P. No. 631/2020, among others) led to:
- Attachment of the very project property in which the homebuyers had already acquired undivided shares; and
- Orders restraining the Corporate Debtor from transferring or encumbering the property.
Homebuyers filed claim petitions objecting to the attachment. While confirmation of sale was held in abeyance for a time, MJ Properties retained liberty to reinitiate steps against the attached asset.
Notably, Alka Ventures itself admitted the fact of attachment in communications, yet took no meaningful remedial steps to protect the project or the interests of allottees.