2026 Supreme(Online)(NCLT) 3046

NATIONAL COMPANY LAW TRIBUNAL
Sunil Kumar Aggarwal, MEMBER (JUDICIAL), Radhakrishna Sreepada, MEMBER (TECHNICAL)
M/s DreamzGK Investors Welfare Association – Appellant
Versus
Apartment Buyers Consumer Association – Respondent
I.A. (Plan) 03/2024, 543/2024 in C.P. (IB) No.113/BB/2022

IBC proceedings can proceed for a specific real estate project despite a prior attachment under a state protection of investors act, unless there is an explicit stay against the CIRP itself.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7, Section 60(5) - National Company Law Tribunal Rules, 2016 - Rule 11 - Karnataka Protection of Interest of Depositors in Financial Establishments (KPIDFE) Act, 2004 - Application for impleadment and stay of CIRP order - Interplay between IBC and KPIDFE Act - The interim stay granted by the High Court in Writ Appeal was limited to the operation of the Single Judge's order quashing KPID proceedings, and did not bar the admission of a Section 7 petition for a specific project nor the continuation of CIRP - In project-specific real estate CIRP, an investor association from other projects lacking tangible evidence linking their funds to the project in question cannot be impleaded to stall the resolution process, especially at an advanced stage where a resolution plan has been approved by the CoC with a significant majority. (Paras 10, 12, 13, 14, 16, 17)

(B) Impleadment - Locus Standi - An association of depositors from other projects of the corporate debtor has no locus to intervene in a project-specific CIRP, as their rights and interests are not subject matter of that petition. (Paras 9, 14)

Facts of the case:
The corporate debtor, a real estate company, had multiple projects. The 'Samhita Project' was admitted into CIRP on 24.08.2023 based on a Section 7 petition filed by an association of homebuyers of that project. Another association of depositors who had invested in other projects of the same company filed an application seeking to implead themselves as intervenors and to stay the CIRP on the grounds that: (i) the CIRP admission violated an interim stay order dated 07.11.2022 passed by the High Court in a writ appeal relating to KPID Act proceedings; and (ii) properties of the project were already attached under the KPID Act before the CIRP. The Resolution Professional had already obtained approval for a resolution plan from the Committee of Creditors with an 83.05% vote share, which was pending before the Tribunal.

Findings of Court:
The NCLT held that the interim stay order dated 07.11.2022 passed by the High Court in WA No. 1343/2021 (connected with WA No. 207/2022) was only against the operation of the Single Judge's order quashing KPID proceedings, and not a bar against initiation or continuation of CIRP for the Samhita Project. The High Court in another petition had clarified that litigants have the prerogative to choose their forum under different statutes including the IBC. The court found that the applicant association failed to produce any tangible evidence establishing that the funds deposited by its members were utilized for the development of the Samhita Project. Project-wise insolvency resolution for real estate companies is a well-accepted principle. The court also noted that a resolution plan had already been approved by the CoC with a significant majority and was pending approval, emphasizing that any interference at this advanced stage would cause irreparable harm to genuine homebuyers.

Issues: (i) Whether the interim stay order dated 07.11.2022 passed by the High Court in WA No.1343/2021 operated as a bar to the admission and continuation of CIRP for the Samhita Project. (ii) Whether the applicant association, comprising investors from other projects of the corporate debtor, was entitled to be impleaded as an intervenor in the project-specific CIRP.

Ratio Decidendi: The NCLT ruled that the High Court's interim stay was limited to quashing the KPID proceedings and did not prohibit CIRP. The principle of project-wise insolvency resolution in real estate cases is valid. An impleadment application by a stranger to a specific project's CIRP, filed at a mature stage without linking funds to that project and intended to stall the resolution process, is not maintainable.

Result: The application (I.A. No. 543/2024) was dismissed as devoid of merits.