Homebuyers Can Be Penalized If Intention Is Malicious In Filing Insolvency Petition Against Builder :NCLAT

New Delhi: In its recent order, The National Company Law Appellate Tribunal (NCLAT) has stated that a real-estate company cannot be said to have committed a ‘Default’ under the Insolvency & Bankruptcy Code, 2016 when the delivery of project or apartment or property is delayed because of reasons beyond its control.

"If the delay is not due to the ‘Corporate Debtor’ but force majeure..it cannot be alleged that the ‘Corporate Debtor’ defaulted in delivering the possession.", the NCLAT said.

The court also said allottees of the property can be penalized under Section 65 the IBC if they are found to have started malicious or fraudulent insolvency proceedings against a real estate company. 

This order was passed recently by a three-member bench of Chairperson, Justice SJ Mukhopadhaya, Member-Technical-Kanthi Narahari  and Member-Judicial-Justice AIS Cheema. They were hearing the case against Raheja Developers. The set aside the corporate insolvency resolution process (CIRP) against the company.

Two homebuyers-Akash jain and Shilpa Jain had filed a case against Raheja Developers in National Company Law Tribunal which had ordered CIRP against the under Section 7 of the IBC.

The two had purchased a flat in ‘Raheja’s Sampada’ project of the bulder. Proper agreement was signed by the buyres and the company in August 2012 and a sum of Rs 86.62 lakh was paid by the buyers to the real estate company in various parts. 

The buyers had said in their plea that even thought the property was to be handed over within 36 months starting from 3 Aug, 2012, the possession was delayed by the company.   

Raheja Developers challenging the NCLT order initiating CIRP and said that it had issued a notice for possession was issued to the allottees on 15 November, 2016 but the allottes did not take possession despite several requests of the builder. 

The company said that the possession of the property was to be handed over to the allotees within a period of 36 months but subject to force majeure conditions. The company also said that it had completed the project in time and had applied for Occupation Certificate (OC) to the concerned authorities by the year 2013 itself. But the OC was obtained from the authorities only in 2019 and hence the possession could be given out only in 2016.

Raheja Developers said that the issuance of the OC was in the hands of local authorities and any delay because of the actions or inactions by the authorities was beyond its control. The real estate company further alleged that instead of taking possession in 2016, the allottees cleverly and conveniently chose to file a petition under Section 7 of the IBC two years later.

The company also said the aloottees were also offered to take their money back in case they did not wish to take the possession of the flat.


After hearing the argeuments by the allottees and the company, the NCLAT referred to the "developments" in the IBC like the IBC Ordinance brought by the government in December 2019 which sattes that many applications under Section 7 were filed fraudulently or with malicious intent for purposes other than for the resolution of insolvency, or liquidation.

The NCLAT said that before admitting such cases against builders, it would be better to find out whether the allottees seek refund of their money or possession of their properties through a resolution.

If the intention of the allottees is only refund of money paid and not possession of the property, then the builder may bring the intention to the notice of the court, the NCLAT said.