The National Company Law Tribunal (NCLT) has dismissed an interlocutory application filed by homebuyers challenging the approved resolution plan in an insolvency case involving Monarch Brookefields LLP.
The ruling sets a precedent regarding the rights of individual creditors in such cases, reaffirming the authority of the Committee of Creditors (CoC) in decision-making processes related to resolution plans. The dispute stemmed from homebuyers’ dissatisfaction with the terms of the approved resolution plan, which granted them only 60% of their claim amount without entitlement to a specific apartment. Despite their claim being admitted during the Corporate Insolvency Resolution Process (CIRP), the approved plan fell short of meeting their expectations. Central to the matter was the discrepancy between the expectations of the homebuyers and the terms of the resolution plan. While the applicants had hoped for a resolution that addressed their concerns and secured their entitlement to the purchased apartment, the approved plan did not meet these expectations.
The resolution professional clarified that the developer lacked permission to construct the 10th floor in the building wing named ‘Arizona’, as municipal authorities had withdrawn permission to build beyond the 9th floor. This fact was crucial in determining the outcome of the dispute. The tribunal’s decision emphasised the principle that once a resolution plan is approved by the requisite majority, individual creditors or homebuyers within the class cannot challenge it on commercial grounds. The ruling underscored the authority of the CoC in exercising commercial wisdom in reaching decisions related to resolution plans. In response to the applicants’ challenge, the company, represented by the resolution professional, argued that the approved resolution plan was lawful and compliant with the Insolvency and Bankruptcy Code. The tribunal concurred with this argument, highlighting that the challenge to the commercial terms of the plan was not admissible. Ultimately, the NCLT’s ruling strengthens the authority of the CoC in insolvency cases, setting a precedent for future disputes and underscoring the importance of adhering to the decisions made by the majority of creditors.
