The National Company Law Tribunal (NCLT) Chandigarh Bench has issued a significant directive concerning the insolvency proceedings of SRS Real Estate Ltd., requiring the Resolution Professional (RP) to re-examine the claims of two homebuyers who sought recognition as financial creditors. The ruling, delivered by the bench of Judicial Member Khetrabasi Biswal and Technical Member Kaushalendra Kumar Singh, mandates that the RP must verify whether payments of ₹54 lakh, originally deposited by the applicants into the bank accounts of associate companies, were ultimately accounted for within the books of the corporate debtor. This decision arrives at a critical juncture for the project, as the corporate insolvency resolution process (CIRP) moves toward the potential approval of a resolution plan submitted by Orange Castle Pvt. Ltd.

The dispute arose after the RP rejected the claims filed by Raj Kumar Jindal and Vivek Aggarwal, who asserted their rights as allottees of 54 residential units within the ‘SRS Royal Hills Phase-2’ project. The applicants contended that despite having paid significant sums through real-time gross settlement (RTGS) to NKR Infrastructure Pvt. Ltd. and Topline Traders Ltd.—entities described as business associates of the developer—these payments were intended for their flat allotments. They argued that because their allotments were acknowledged by the corporate debtor through various documents, including builder-buyer agreements and a memorandum of understanding dated January 30, 2018, they should be classified as financial creditors in a class under Section 5(8)(f) of the Insolvency and Bankruptcy Code (IBC), 2016.

Investigating the Nexus of Funds

Central to the tribunal's concern was the evidentiary gap regarding the flow of funds. While the homebuyers presented receipts and allotment records as evidence of their investment, the RP maintained that the corporate debtor’s internal accounting records did not reflect these transactions. The tribunal found that the mere possession of allotment letters or receipts was insufficient to satisfy the rigorous requirements of proving a financial debt if the underlying capital could not be traced back to the corporate debtor’s project accounts.

In its observations, the tribunal emphasized the necessity for a clear financial trail to qualify for status as a financial creditor. The bench noted: “The material presently available on record does not conclusively establish that the amounts paid to NKR Infrastructure Pvt. Ltd. and Topline Traders Ltd. were subsequently transferred to, accounted for, or otherwise reflected in the books and records of the Corporate Debtor.” Consequently, the court held that without a established connection between the payments and the debtor’s liability, the statutory conditions for a financial debt—specifically the requirement for disbursement to the corporate debtor—remained unfulfilled.

Procedural Hurdles and Delays

The RP had initially contested the application on multiple grounds, including the fact that the claim was submitted well after the primary deadline set following the public announcement on December 25, 2022. The tribunal, however, dismissed the argument that a belated filing, by itself, served as a blanket disqualifier for the applicants. Referring to the evolving framework of insolvency regulations, the bench pointed to provisions that allow for the categorization and consideration of delayed claims if they are submitted within a reasonable window before the committee of creditors votes on a resolution plan.

The applicants also argued that the rejection of their claims was discriminatory, pointing out that other similarly situated homebuyers, whose payments were similarly routed through group entities, had their claims admitted by the RP. They claimed that this inconsistency violated the principle of parity, a core tenet of the resolution process. In their view, the failure of the corporate debtor to maintain precise accounting records should not be used as a weapon to prejudice the rights of legitimate homebuyers who have invested their life savings into the project.

Establishing Creditor Categorization

The tribunal’s directive provides a specific roadmap for resolving the impasse. The applicants have been granted liberty to present any additional documentation or evidence that can confirm the movement of their funds into the corporate debtor’s possession. Should the applicants successfully bridge this evidentiary gap, the RP is required to reconsider their status and elevate their claim to that of a financial creditor in a class. The court noted: “If the Applicants can establish that the amounts paid to NKR Infrastructure Pvt. Ltd. and Topline Traders Ltd. were ultimately transferred to or adjusted against the liability of the Corporate Debtor towards them, then their claim will have to be considered as that of allottees/Financial Creditors.”

However, the ruling sets a clear limitation: in the absence of such conclusive proof, the applicants may still be acknowledged as creditors, but they will be relegated to the category of "Other Creditors" rather than enjoying the status of financial creditors. This distinction is vital in the context of the IBC, as financial creditors in a class hold significant influence over the resolution process and the final distribution of assets.

The matter now returns to the RP, who must perform a rigorous audit of the transactions against the existing financial records of SRS Real Estate Ltd. The outcome of this verification will determine the extent to which these 54 units impact the final resolution plan currently pending before the adjudicating authority. For the time being, the tribunal has effectively balanced the need for strict proof in insolvency matters with the necessity of ensuring that genuine homebuyers are not unfairly excluded due to administrative failures or complex inter-company financial arrangements within the corporate structure of the developer. The parties are expected to engage in further discussions with the RP to conclude the verification process, which remains a key prerequisite for the finalization of the resolution process in this project.