Homebuyers Qualify as Financial Creditors: NCLT Initiates CIRP Against Real Estate Developer for ₹6.76 Crore Default [Read Order]

The National Company Law Tribunal (NCLT) Chandigarh Bench has admitted an insolvency petition against Primezone Developers Private Limited, holding that homebuyers qualify as financial creditors under the Insolvency and Bankruptcy Code, 2016 (IBC) and that the developer had committed default in respect of claims aggregating to ₹6.76 crore.

The petition was filed jointly by 33 allottees led by Mr. Sandeep Turan under Section 7 of the IBC seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the real estate developer. The allottees had booked plots in the Prime City-Assandh project situated in Sector-10, Assandh, Karnal, Haryana, and had paid substantial amounts pursuant to allotment letters issued by the company.

According to the applicants, the developer had assured delivery of possession within a reasonable period and execution of sale deeds after receipt of the full consideration. However, despite collecting payments, the company failed to undertake meaningful development activities at the project site and did not hand over possession of the plots.

The allottees stated that repeated requests and visits yielded no response from the company. They further pointed out that consumer complaints had been filed before the Haryana State Consumer Disputes Redressal Commission and that the project licence was eventually cancelled by the authorities due to non-development.

The corporate debtor argued that the applicants had failed to satisfy the threshold requirement prescribed under Section 7 of the IBC and claimed that project-related difficulties arose because of attachment and subsequent auction of project land following proceedings under the Prevention of Money Laundering Act (PMLA).

The Tribunal held that the petition satisfied the statutory threshold applicable to real estate allottees. The Bench further observed that amounts raised from homebuyers are deemed to have the commercial effect of borrowing and therefore constitute financial debt under Section 5(8)(f) of the IBC.

The Bench comprising Mr. Khetrabasi Biswal (Judicial Member) and Mr. Shishir Agarwal (Technical Member) held that the developer’s inability to complete the project due to attachment and auction proceedings could not absolve it of liability towards homebuyers. Finding the existence of debt and default, the Tribunal admitted Primezone Developers Private Limited into CIRP and appointed an Interim Resolution Professional to take charge of the process.

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