Back
Mere Pendency of CIRP Does Not Bar RERA Recovery Actions:
Justice Suraj Govindaraj of the dismissed a challenging a issued to enforce a under the , holding that the mere pendency of the against the developer does not automatically render the recovery proceedings illegal. The court observed that questions regarding the impact of the CIRP and the applicability of the fall squarely within the jurisdiction of the .
The Dispute: Landowners, a Developer, and Parallel Proceedings
The petitioners, M. Govind Reddy and M. Yashodamma, claimed ownership of a piece of land and had entered into a with for its development. However, Venkat Estates was admitted into CIRP under the in , with proceedings pending before the NCLT. Meanwhile, the had issued a against the developer under . Following directions from the High Court in an earlier , the issued a dated , to recover the amounts.
The petitioners challenged only the auction notice, arguing that since the developer was undergoing CIRP, the auction would amount to parallel recovery proceedings outside the insolvency framework. They contended that the IBC, by virtue of Section 238, would override the RERA Act, and therefore the auction could not proceed.
The Court’s Analysis: IBC Has Limits
While acknowledging the settled principle that gives to the Code over inconsistent provisions in other enactments, the court clarified that “those principles do not automatically render every proceeding initiated under another statute illegal.” The court noted that the auction notice was merely a step in executing a valid that had not been stayed or set aside. The petitioners had not challenged either the RERA authority’s order or the itself.
The court also highlighted an important aspect of the RERA Act: under Section 2(zk), a landowner who permits development through a JDA is deemed to be a “promoter” and assumes joint statutory responsibility. The petitioners, therefore, could not claim the benefits of the JDA while arguing that the RERA proceedings concerned only the developer.
Key Observations: NCLT Is the Proper Forum
The court emphasized that the proper forum for addressing issues relating to the and the effect on the is the NCLT. In paragraph 31, the court observed:
“This Court, while exercising jurisdiction under Article 226 of the Constitution, cannot assume the role assigned by Parliament to the National Company Law Tribunal under the Insolvency and Bankruptcy Code.”
The court further noted that the petitioners themselves claimed to be stakeholders in the ongoing CIRP proceedings before the NCLT, which provides them with an . Any concerns about the auction affecting the insolvency process could be raised before the NCLT.
Decision and Directions
Dismissing the , Justice Govindaraj held that no case for interference under was made out. However, the court reserved liberty to the petitioners to approach the NCLT in the pending CIRP proceedings and seek appropriate reliefs. The court directed that any such application shall be considered on its own merits, uninfluenced by the observations made in the present order.
The judgment serves as a significant clarification on the interplay between RERA recovery proceedings and the IBC, reaffirming that the NCLT remains the primary forum for disputes concerning the . It also underscores that landowners entering into development agreements cannot escape their statutory liabilities under RERA by relying on the developer’s insolvency.
