Persistent Non‑Performance and Expired Permits Show Insolvency Beyond Mere Delay: NCLT Admits Homebuyers Petition u/s 7 [Read Order]

The National Company Law Tribunal (NCLT) Cochin Bench has admitted the insolvency petition against a company submitted by homebuyers, holding that persistent non-performance and expired building permits show insolvency beyond delay.

The case arose from the promise of five residential towers and a commercial complex with full amenities by Skywings Township Project by SRK constructions. Completion was targeted by September 2009. Homebuyers had purchased undivided shares in King East and Queen East towers, executing agreements and sale deeds. However, SRK miserably failed to complete construction. The company cited its financial crisis, while simultaneously diverting resources to other projects

Between 2012 and 2014, Alka Ventures, the respondent in the present case, took over the project through a memorandum of understanding. Quadripartite agreements and a final takeover agreement were also executed. The corporate debtor undertook to complete king east anbd queen east by 2015 and the entire township by 23018. But there was no progress.

The petitioners, representing 98 allotees through the Skywings members society, claimed that over Rs 36.83 crore had been paid. And this consititutted 75% of the apartment values. The petitioners alone had contributed Rs 11.85 crore, but still, the tower was incomplete

They highlighted repeated defaults which includes, undertakings before the Non-Resident Keralites Commission (2018) to complete by March 2020, RERA orders directing completion by June 2023, later extended to August 2024 and December 2024, and failure to renew building permits requiring ₹1.92 crore in fees.

They further argued that the corporate debtor’s persistent non-performance, expiry of permits, and attachment of project property in execution proceedings demonstrated financial incapacity and default under Section 7 of the IBC.

Alka Ventures opposed the petition, arguing that homebuyers were not financial creditors under section 5(7) of the code and that disputes were merely contractual. Thus, it was governed by the Estate (Regulation and Development) Act, 2016 (RERA). They claimed construction was nearly complete and RERA had already directed completion by August 2024.

The respondent contended that petitioners had paid only 60% of apartment values, with the balance payable upon completion. They argued that mere delay in construction did not constitute “financial debt” or default under the IBC, and that remedies lay exclusively before RERA or Civil Courts.

The Tribunal examined whether petitioners qualified as financial creditors and whether default existed. The tribunal noted that amounts raised from allottees in real estate projects deemed to be financial debt as per section 5(8)(f). The SupremeCourt’s ruling in Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019) confirmed that homebuyers fall within the definition of financial creditors.

On default, the Tribunal observed repeated unfulfilled commitments which included, takeover agreements (2014), undertakings before the Non-Resident Keralites Commission (2018), and successive RERA deadlines up to December 2024. The corporate debtor failed to complete construction, renew permits, or resolve attachment of project property. This cumulative non-performance satisfied the definition of default under Section 3(12) of the Code.

The Tribunal further observed that the respondent’s contention that RERA was the exclusive forum. It referred to the Supreme Court’s recent judgment in Mansi Brar Fernandes v. Shubha Sharma (2025), which clarified that while RERA is the primary forum for real estate disputes, the IBC may be invoked in genuine cases of insolvency where developers are commercially unable to complete projects or repay amounts.

The Tribunal held that the petitioners had exhausted remedies before RERA and other forums, and the facts disclosed genuine financial distress warranting insolvency proceedings.

The two-member bench of Vinay Goel (Judicial Member) and Madhu Sinha (Technical Member) concluded that the petitioners qualify as financial creditors under Section 5(8)(f). It was also observed that persistent non-performance and inability to renew permits or discharge obligations constitute default. Also, the corporate debtor is financially distressed, and the petition is maintainable under Section 7 of the IBC.

Accordingly, the Tribunal admitted the petition, declared a moratorium under Section 14, and directed the initiation of CIRP against Alka Ventures Pvt. Ltd. An Interim Resolution Professional was appointed to take charge of the corporate debtor’s affairs.

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