Home buyers without allotment letter will be treated as financial creditor: NCLT

Home buyers in a real estate project under insolvency will be treated as ‘Only Financial Creditor’ if they have not been allotted units even after the payments (full or partial) have been made.

The Delhi bench of the National Company Law Tribunal (NCLT) recently made this decision while admitting a petition by four property buyers who wanted themselves to be listed as Financial Creditors in a Class.

The property buyers – Abhishek Garg, Neha Garg, Anita Garg and Parul Mittal – had bought shops in a Sector 70 A, Gurgaon, project — NineX Mall – by corporate debtor Red Topaz Real Estate Private Ltd. Together they bought 12 units in the project costing around Rs 14.73 crore. They made partial payment of Rs 5.76 crore. While they were allotted 11 of the 12 units, one of the units for which Abhishek Garg had paid Rs 56.43 lakh was not allotted to him.

However, the real estate company failed to deliver any of the 12 units for which it had received an advance payment of Rs 5.76 crore. A corporate insolvency resolution process was started against the realtor on 23 August 2019.

When the insolvency proceedings began, the resolution professional refused to admit their claims under Financial Creditors in a Class category, and instead admitted their claim as independent financial creditors, which the buyers were opposed to.

The resolution professional’s rationale for not admitting claims as creditor in a class was that the 12 units under question were subject to double allotment by the realtor.

The buyers then filed a petition in NCLT against the resolution professional’s decision.

Passing the judgment in favour of the buyers, the NCLT observed that since the letter of allotment was issued to the buyers and the allotments were not cancelled by the realtor, the buyers should fall under the category of Creditor in a Class. However, in case of the unit against which advance payments were made but allotment was not given, the buyer would be put in the category of Financial Creditor only.