Amidst an insolvency resolution process pursuant to the insolvency and bankruptcy code, Karnataka RERA has mandated a Bengaluru-based developer to transfer possession to a buyer at a commercial project within the city. The developer, Vikram Structures, failed to deliver possession of a 10,000 sq ft commercial space in North Bengaluru following the agreement’s deadline in 2015. Chandrakanth Yatnatti, the buyer who paid Rs 5 crore for the space but couldn’t take possession, lodged a complaint with KRERA.
The developer presented an NCLT order from February 2022, issued by the Bengaluru bench of the National Company Law Tribunal (NCLT) under section 14 of the Insolvency and Bankruptcy Code (IBC), which imposed a moratorium on all legal proceedings against the developer. This moratorium, halting recovery proceedings across various legal platforms, including the high court, would also impede RERA’s efforts. However, KRERA, in its February 14 ruling, pointed out the IBC’s Section 12, highlighting that the moratorium cannot endure indefinitely. Noting the lapse of two years since the NCLT order and the developer’s failure to demonstrate the moratorium’s continuation, KRERA emphasized the developer’s obligation to hand over possession of the property to the complainant.
In a landmark decision on January 29, 2024, the Supreme Court underscored that companies couldn’t seek refuge behind an NCLT-ordered moratorium, asserting that proceedings could commence against the company’s promoters, officers, and directors. The court clarified that the moratorium didn’t shield directors, officers, and promoters from legal action. Legal experts welcomed the ruling, highlighting how companies previously misused the moratorium provision to impede recovery proceedings. Chandrachur Bhattacharyya, who argued in the case, noted the prevalent trend of developers declaring bankruptcy amid ongoing recovery proceedings, causing delays. However, with the Supreme Court’s ruling, assets of promoters and directors previously safeguarded by the moratorium could now be targeted, potentially expediting recoveries.
