Resolution Professional Directed to Reinstate Homebuyer's Rights or Provide Alternative Allotment/Full Refund with Interest
In a significant judgment dated September 10, 2026, the National Company Law Tribunal (NCLT), Kolkata bench, under the judicial oversight of Smt. Bidisha Banerjee and technical member Rekha Kantilal Shah, delivered a landmark ruling protecting the rights of homebuyers under the Insolvency and Bankruptcy Code (IBC), 2016. The case, Sujay Shankar Mukherjee v. Ashish Chawchharia, Resolution Professional of Riverbank Developers Private Limited, dealt with the contentious issue of cancellation of allotment of real estate units prior to the initiation of Corporate Insolvency Resolution Process (CIRP).
The applicant, Mr. Sujay Shankar Mukherjee, had booked a flat along with a covered car parking space in the "Hiland Greens" project developed by Riverbank Developers Pvt. Ltd. Despite making payments exceeding Rs. 20 lakhs, he faced delayed possession and incomplete construction. Subsequently, he expressed an intention to cancel the allotment and sought a refund of Rs. 18 lakhs. Although the corporate debtor acknowledged the cancellation request and promised a refund, no formal cancellation order was issued, nor was any refund processed before the CIRP commenced.
The Resolution Professional (RP) contended that the cancellation made by the erstwhile management before CIRP initiation was beyond his powers to reverse. However, the NCLT held that cancellation of allotment without the actual refund of the agreed amount was invalid and did not extinguish the applicant's rights over the property. The Tribunal relied on precedents from the Telangana Real Estate Appellate Tribunal and the National Company Law Appellate Tribunal (NCLAT), emphasizing the vulnerability of homebuyers who often finance purchases through bank loans and suffer irreparable financial and mental distress due to such defaults.
Key observations from the ruling include:
1. Conditional Cancellation: The Tribunal clarified that the applicant's cancellation was conditional upon receipt of refund by the corporate debtor. Since no refund was made, the cancellation was not final or conclusive.
2. Protection of Homebuyers: Homebuyers are recognized as a vulnerable class under the IBC. The Tribunal underscored the inequity in depriving an allottee of possession without refunding payments made.
3. Role of Resolution Professional: Under Regulation 4E of the Insolvency and Bankruptcy Board of India (IBBI) Regulations, 2016, the RP is empowered to allot alternative apartments to allottees who have complied with payment terms. The RP was directed either to reinstate the original allotment or provide an alternative flat and covered parking space upon payment of necessary charges.
4. Compensation for Wrongful Cancellation: Since the flat was allegedly allotted to another party post-cancellation, the applicant is entitled to adequate compensation.
The NCLT's order directs the RP to take the following steps within 15 working days of the order's upload:
- Offer the applicant an alternative allotment of a similar unit in Hiland Greens Phase-I or
- Provide full refund of the paid amount with statutory interest.
Additionally, the RP must facilitate the registration and possession of the allotted property and ensure no third party acquires rights over the unit until the matter is resolved.
This ruling sets a precedent reinforcing that cancellation of allotment agreements in real estate projects under insolvency proceedings cannot be unilaterally enforced without complying with refund obligations. It further empowers homebuyers to seek relief against unfair practices by corporate debtors and ensures their claims are treated fairly during insolvency resolution.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Cancellation of allotment prior to initiation of Corporate Insolvency Resolution Process (CIRP) - Cancellation is conditional upon refund of the agreed amount - If refund is not processed, cancellation is invalid and allottee retains rights over the property.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 60(5), Rule 11 of NCLT Rules 2016, Regulation 4E of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
