NCLAT Delhi: Lending Institutions Offering Loans To Homebuyers Not Recognized As Financial Creditors Under IBC

NCLAT Delhi: Lending Institutions Offering Loans To Homebuyers Not Recognized As Financial Creditors Under IBC

The National Company Law Appellate Tribunal (NCLAT) Delhi Bench, consisting of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha, and Mr. Indevar Pandey (Technical Members), has ruled that lending institutions providing loans to homebuyers do not qualify as 'Financial Creditors' under the Insolvency and Bankruptcy Code, 2016 (IBC).

The case involved two flat buyers who took out a loan from India Infoline Housing Finance Limited (Appellant) to purchase flats in the Amadeus Residential Project developed by Saha Infratech Pvt. Ltd. (Corporate Debtor) in Sector 143, Noida.

On February 28, 2020, the National Company Law Tribunal (NCLT) in Delhi admitted the corporate debtor into the corporate insolvency resolution process under Section 7 of the IBC, appointing Mr. Shiv Nandan Sharma as the Resolution Professional (RP).

The appellant filed a claim of Rs. 2.31 crore on August 17, 2023, which was not admitted despite multiple reminders. Consequently, the appellant filed an interlocutory application with the tribunal, seeking a directive for the RP to admit their claim. However, NCLT Delhi dismissed the application on January 23, 2024.

The appellant then appealed against the NCLT Delhi's Order dated January 23, 2024, seeking acknowledgment and admission of its claim.

The appellant argued that the January 23, 2024, order disregarded its lawful rights as a secured creditor. They emphasized that the homebuyers had purchased the flats using the loan provided by the appellant and had mortgaged these units as security. Therefore, the appellant should be considered a secured creditor concerning the mortgaged flats, and their claim should be admitted.

The NCLAT Delhi dismissed the appeal, ruling that lending institutions providing loans to homebuyers do not qualify as 'Financial Creditors' under the IBC.

The Appellate Tribunal referred to the NCLT Delhi's Order dated January 23, 2024, which relied on the Supreme Court's decision in Pioneer Urban Land & Infrastructure Ltd. & Anr. v. Union of India & Ors. The Supreme Court had observed that homebuyers should be considered 'financial creditors' of the corporate debtor, irrespective of whether they self-financed their flats or took out loans.

NCLAT concurred with the Supreme Court's reasoning that the default is relevant only between the home allottee and the bank. It held that banks or financial institutions that provide loans to homebuyers cannot be considered 'Financial Creditors' included in the Committee of Creditors (CoC), as the liability to repay lies with the individual homebuyers.

The Tribunal further observed that in a tri-partite agreement among the homebuyer, the bank, and the builder, the bank can cancel the agreement in case of default, allowing the bank to pay the sale consideration and register the property. However, no evidence of such a cancellation was presented in this case.

In conclusion, NCLAT Delhi noted that this interpretation aligns with the objective of the IBC, which aims to ensure the resolution and maximization of the assets of the corporate debtor.