The Supreme Court on March 03, 2022 in the matter of Amit Katyal vs Meera Ahuja, allowed withdrawal of Corporate Insolvency Resolution Process (“CIRP”) against a builder in an application filed by three homebuyers. The court exercised power under Article 142 of the Constitution of India to permit withdrawal of CIRP proceedings and set aside all the pending matter between the parties in the interest of majority homebuyers.

The bench reserved the liberty in favor of the homebuyers to approach it in case the settlement does not go as per the proposal.

In the instant case, the builder came up with a housing project in Gurgaon, namely, ‘Krrish Provence Estate’, which he could not complete in eight years. Three home buyers (original applicants) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC“) before the NCLT, Delhi seeking initiation of the CIRP. A Resolution Professional (“RP”) was appointed and moratorium was declared. The promoters challenged the admission of Section 7 application before NCLT which was dismissed by NCLAT and the CIRP was directed to be initiated. The promoters filed a Special Leave Petition (“SLP”) before the Apex Court challenging the order passed by the NCLAT.

The Court observed that under Section 12A of IBC, NCLT may allow withdrawal of the application admitted under Section 7 on an application filed by the applicant with approval of 90% voting share of Committee of Creditors (“CoC”).

The Hon’ble Supreme Court relied on the case of Swiss Ribbons Pvt. Ltd. And Anr. v. Union of India And Ors. wherein, it permitted the original applicants to withdraw the CIRP proceedings in view of the settlement entered between parties.

It observed:

“Therefore, in the peculiar facts and circumstances of the case, where out of 128 home buyers, 82 home buyers will get the possession within a period of one year, as undertaken by the appellant and respondent No.4 – Corporate Debtor, coupled with the fact that original applicants have also settled the dispute with the appellant/Corporate Debtor, we are of the opinion that this is a fit case to exercise the powers under Article 142 of the Constitution of India read with Rule 11 of the NCLT rules, 2016 and to permit the original applicants to withdraw the CIRP proceedings. We are of the opinion that the same shall be in the larger interest of the home buyers who are waiting for the possession since more than eight years.”

It further observed:

“If the original applicants and the majority of the home buyers are not permitted to close the CIRP proceedings, it would have a drastic consequence on the home buyers of real estate project.”

The court noted that the purpose of IBC is not to kill the company but to ensure that it can run it being a going concern.