SC – Once Debt and Default are established, admission of Section 7 IBC Petition is mandatory.
Takshashila -Corporate Debtor – had taken loan of Rs.70 crores for the residential-cum-commercial project, from the original lender ECL Finance Ltd., which had transferred all its rights, title and interest in the said loan to Edelweiss AR Company Ltd (Financial Creditor).
On 6.11.2024, the NCLT dismissed section 7 petition that the project was complete substantially, insolvency proceedings would adversely affect the interests of home buyers and the stake holders and that too, IBC was invoked for recovery.
In appeal of the financial creditor, Elegna Society intervened on the ground that the outcome of the appeal would directly affect the proprietary and contractual rights of its members.
NCLAT allowed the appeal and directed admission of section 7 IBC petition. However, the intervention application was rejected on the ground of locus standi that it was not a party to the financial transaction forming subject matter of the appeal.
This Court has, time and again, been called upon to protect the rights of homebuyers navigating the turbulent waters of India’s real estate sector. Conscious of its constitutional and statutory duty, this Court has made sustained efforts, within the four corners of the law, to safeguard the legitimate interests of homebuyers.
In theory, the Insolvency and Bankruptcy Code, 2016 presents an effective solution to their woes: a distressed project is rescued through the corporate insolvency resolution process, construction is completed, and the allotted units are ultimately delivered. On paper, the framework appears straightforward. In practice, however, homebuyers are often gripped with anxiety when a project enters CIRP. Caught between the developer on one hand and institutional lenders on the other, their interests are particularly vulnerable.
If creditors elect to invoke the provisions of the Code, they must do so with a genuine willingness to pursue revival of the corporate debtor. Should revival not be their objective, the Code cannot be converted into a tool for expedient recovery; alternative statutory remedies, including under SARFAESI or other applicable laws, remain available in accordance with law.
The contention that EARCL misused the Code as a recovery tool is equally untenable. The Code does not prohibit a financial creditor from invoking CIRP merely because recovery proceedings under the SARFAESI Act or before the DRT are pending or have been initiated. Section 238 accords overriding effect to the Code, and upon admission, the moratorium under Section 14 stays all such proceedings.
Judgment dated 15.1.2026 of the Supreme Court of India in Civil Appeal No.10261 of 2025 of Elegna Coop. Housing and Comemrcial Society Ltd Vs Edelweiss Asset Reconstruction Company Limited and another with connected civil appeal
