Commercial realty buyer can drag company to bankruptcy court

With a recent judgment by a tribunal, an aggrieved buyer can now initiate bankruptcy proceedings against the developer if the latter has defaulted on the delivery of one’s commercial property or service apartment on time.


The recent judgment against AMR Infrastructure has upheld that buyers are entitled to be recognised as financial creditors, with promises of ‘assured returns’ made to them by the developer as a part of the deal.

However, the matter has raised questions about initiating bankruptcy proceedings, in view of the fact that financial creditors have a say in negotiating the debt recast. In the case of real estate projects, there could be thousands of eligible financial creditors.


Most experts opine that it will be difficult to hold a committee of creditors as required under the bankruptcy law if even 1% of these buyers attend any meeting. Souvik Ganguly of Acuity Law said, “If such creditors can collectively account for even 25% of claims, they could potentially interfere with the functioning of the committee of creditors. That has implications for the extent of influence lenders can exercise.”


The judgement in case of AMR was passed by the National Company Law Appellate Tribunal (NCLAT), which set aside previous verdicts of the National Company Law Tribunal (NCLT), Delhi and upheld considering realty buyers as financial creditors.


The NCLAT said, “The claim should be considered by the interim resolution professional (IRP) and the committee of creditors, in accordance with provisions of the Insolvency & Bankruptcy Code, 2016.”

Written by The Realty Paper

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