The National Company Law Tribunal (NCLT) has mandated Mahindra Homes, a subsidiary of Mahindra Lifespace Developers, to inform homebuyers about its proposed equity share capital reduction. This directive follows a petition by Mahindra Homes seeking confirmation of a special resolution passed by its equity shareholders.
The resolution proposes a reduction in the company’s issued, subscribed, and paid-up equity share capital by cancelling and extinguishing portions of series B and series C equity shares, held by Actis, a global investment major, and Mahindra Lifespace Developers, respectively. The NCLT’s order, delivered on Wednesday, holds significant implications, as it requires Mahindra Homes to notify all creditors, including homebuyers, of the hearing. This acknowledgement aligns with Section 66 of the Companies Act, 2013, which classifies advances from homebuyers as financial liabilities under IND AS 115 and the Insolvency and Bankruptcy Code, 2016, until possession of the properties is handed over.
Mahindra Homes has received ₹213.84 crore as advances from homebuyers, which is currently recorded as a liability, reflecting the undelivered possession of the properties. The NCLT underscored that, according to prevailing financial reporting standards and bankruptcy laws, homebuyers awaiting possession are considered creditors, thus necessitating their inclusion in any capital restructuring plans. The tribunal noted that there were no disputes or defaults with the homebuyers regarding the advances made. Mahindra Homes has assured the tribunal that possession will be delivered as per the agreed terms and timelines.
Mahindra Lifespace Developers established Mahindra Homes in June 2010 as a special purpose vehicle to develop residential projects across key Indian markets. The joint venture was formed with an equal economic interest between Mahindra and Actis. The NCLT Mumbai bench has scheduled the next hearing for October 30. Mahindra Homes is required to serve notices to the Real Estate Regulatory Authority (RERA) and all homebuyers, ensuring their representation in the proceedings. This ruling sets a significant precedent for future cases involving capital reduction and restructuring. It underscores the importance of comprehensive communication with all affected parties, particularly homebuyers, to maintain trust and compliance within the real estate sector.
