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Informist, Thursday, Jan. 15, 2026

 

NEW DELHI – The Supreme Court Thursday said the committee of creditors of debt-ridden real estate companies must "mandatorily record cogent and specific reasons" for not giving possession of apartments and plots to homebuyers. Last year, the government had allowed resolution professionals of real estate companies to hand over plots, apartments, or buildings to homebuyers while the resolution process was still under way, after obtaining the approval of the committee of creditors and upon fulfilment of all obligations by the homebuyers.

 

The top court said the information memorandum of a company undergoing insolvency process should mandatorily disclose comprehensive and complete details of all allottees. An information memorandum under the Insolvency and Bankruptcy Code, 2016, is a document prepared by the resolution professional that provides detailed information about a corporate debtor to assist potential resolution applicants in formulating a resolution plan.

 

In addition, the court said, any recommendation for liquidation by the committee of creditors of a company should be accompanied by a reasoned justification recorded in writing, evidencing proper application of mind and due consideration of all viable alternatives. In November, the Insolvency and Bankruptcy Board of India had recommended both these amendments to the insolvency law. Government approval had been pending since then.

 

In theory, the court noted, the 2016 Code presents an effective solution to homebuyers' woes--a distressed project is rescued through the corporate insolvency resolution process, construction is completed, and the allotted units are delivered. In practice, however, homebuyers are gripped with anxiety when a project enters insolvency proceedings as they are caught between the developer and institutional lenders and feel their interests are threatened.

 

While homebuyers seek completion of the project they have invested in, lenders, who ordinarily command a dominant position in the committee of creditors, may prefer to accept a haircut and press for liquidation rather than take on the complexities and commercial risks involved in reviving a struggling real estate project, the court said. It is at such a juncture that the court must remind all concerned that the fundamental objective of the 2016 Code was resolution and revival, not mere recovery, said the bench of Justice J.B. Pardiwala and Justice R. Mahadevan.

 

The interests of homebuyers are paramount, the bench said, and must be protected within the legal framework. The appropriate course of action lies in constructive engagement with the committee of creditors with a view to completing the project and advancing the collective good rather than fragmenting the process through individual self-interest, it added.

 

In its order, the court upheld the admission of insolvency proceedings against Takshashila Heights India Pvt. Ltd. for unpaid dues to Edelweiss Asset Reconstruction Company Ltd. It also rejected Elegna Co-operative Housing and Commercial Society Ltd.'s application to become a party to the case as it was not a party to the financial transaction between the corporate debtor and the lenders.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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