82 homebuyers backed his settlement. The Supreme Court let him walk away from insolvency.

A builder owed flats to 128 families for 8 years. 82 of them said: give him one more chance. The Supreme Court agreed—and killed the insolvency case.

On a March morning in 2022, a Gurgaon housing project that had been stalled for nearly a decade became the centre of a legal question that the Insolvency and Bankruptcy Code had not fully answered: what happens when the people who want to kill a company are outnumbered by the people who want to save it?

The answer, delivered by a two-judge bench of the Supreme Court, was this: the company lives.

Eight years of waiting. Then three buyers filed the case.

Jasmine Buildmart Pvt. Ltd. launched a housing project called Krrish Provence Estate in Gurgaon. Homebuyers paid. The builder built—but never finished. Eight years passed. Families who had booked flats in the hope of a home were still waiting for possession.

Three of those homebuyers decided they had waited long enough. They filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the provision that allows a financial creditor to trigger insolvency proceedings against a company that has defaulted on its dues).

The National Company Law Tribunal (NCLT) — the specialised court that handles corporate insolvency cases — admitted the application. That meant the company was now in the Corporate Insolvency Resolution Process (CIRP), a formal procedure where a resolution professional takes over the company's management and tries to find a buyer or a rescue plan. If no plan succeeds, the company faces liquidation — a corporate death sentence where assets are sold off and the company ceases to exist.

The builder's promoter, Amit Katyal, challenged the NCLT's decision before the National Company Law Appellate Tribunal (NCLAT). He lost. He then appealed to the Supreme Court.

The settlement that split 128 families

While the appeal was pending, something unusual happened. Katyal and his company approached the three homebuyers who had filed the insolvency case and offered to settle. They would refund the money to the three original applicants. For the remaining 128 homebuyers, they made a promise: complete the project within one year.

Then came the number that would shape the court's decision. Of the 128 remaining homebuyers, 82 agreed to the settlement. They signed on. They said: give him one more year.

Forty-six homebuyers did not agree. But 82 out of 128 was a majority — and a decisive one.

The promoter and the company asked the Supreme Court to allow the withdrawal of the insolvency proceedings. The three original applicants, having been paid, had no objection. The 82 homebuyers who supported the settlement had no objection. The question was whether the law would allow the case to be killed when 46 people still wanted the company to go through insolvency.

The procedural trap

The Insolvency and Bankruptcy Code has a provision for withdrawal of insolvency proceedings: Section 12A. It allows an application to be withdrawn after it has been admitted, but only if the adjudicating authority approves. The procedure for this withdrawal is laid out in Regulation 30A of the CIRP Regulations — a rule that prescribes a specific process, including approval by the Committee of Creditors (the group of creditors that oversees the insolvency process).

The problem was that in this case, no Committee of Creditors had been properly constituted. The insolvency process had been stayed by the Supreme Court early on. So the strict procedure under Regulation 30A could not be followed.

The court had to decide: should it insist on strict compliance with the procedure, even if that meant forcing a company into insolvency that most of its homebuyers wanted to save? Or could it use its broader constitutional powers to do what the majority wanted?

Why the court chose the majority

The Supreme Court looked at the numbers and the facts. The three original applicants had been paid. Eighty-two out of 128 homebuyers supported the settlement. The homebuyers, taken together, constituted the bulk of the Committee of Creditors — the very body that would have to approve any withdrawal under the standard procedure.

The court noted that no substantive proceedings had taken place before the Committee of Creditors. The resolution professional had been appointed, but the process had not moved far. The company was still alive. The project could still be completed.

Then the court turned to the purpose of the Insolvency and Bankruptcy Code itself. The object of the IBC, the bench observed, is not to kill the company and stop or stall the project. The object is to ensure that the business of the company runs as a going concern. Where a settlement achieves this purpose better than the insolvency process, withdrawal should be permitted.

This was a crucial shift in framing. The court was saying: the IBC is a rescue code, not a liquidation code. If the company can be saved and the homebuyers can get their homes, that outcome is preferable to a process that might end in liquidation — where homebuyers would face "haircuts" (a reduction in what they are owed) or lose their money entirely.

The legal machinery that made it possible

To permit the withdrawal, the court used a combination of legal tools. It invoked Article 142 of the Constitution (the Supreme Court's power to pass any order necessary to do complete justice in a case before it). It read this power together with Rule 11 of the NCLT Rules (which gives the tribunal inherent powers to make orders necessary to meet the ends of justice).

Together, these provisions allowed the court to bypass the strict procedure under Regulation 30A. The court held that Regulation 30A is directory, not mandatory — meaning it sets out a general procedure, but strict compliance can be dispensed with depending on the facts of each case.

The court also relied on its own precedents. In Swiss Ribbons Private Limited v. Union of India, the Supreme Court had upheld the constitutional validity of the IBC and emphasised that the code aims to revive the corporate debtor, not to destroy it. In Brilliant Alloys Pvt. Ltd. v. S. Rajagopal, the court had permitted withdrawal of insolvency proceedings where the parties had settled. In Kamal K. Singh v. Dinesh Gupta, the court had reiterated that the IBC is not meant to be a recovery mechanism but a resolution mechanism.

What the court ordered

The Supreme Court allowed the withdrawal. It quashed all orders of the NCLT, including the appointment of the resolution professional and the constitution of the Committee of Creditors. It set aside the NCLAT judgment that had upheld the insolvency admission. It also dismissed a connected consumer case and a criminal complaint that had been filed against the promoter.

But the court did not simply let the builder walk away. It imposed conditions. The promoter and the company were directed to file undertakings within one week, promising to complete the project within one year from March 1, 2022. The three original applicants were paid Rs. 3,36,02,000 with accrued interest. The court also directed that Rs. 6,00,000 be paid to the resolution professional for his expenses and litigation costs.

What this means

This judgment creates a clear path for settlement in insolvency cases involving real estate projects. Where the original applicants have been paid, and a majority of homebuyers support the settlement, the Supreme Court may use its constitutional powers to permit withdrawal — even if the standard procedure under the regulations has not been followed.

For homebuyers, the message is that the court will prioritise getting them their homes over pushing a company into liquidation. For builders, the message is that settlement with a majority of creditors can be a viable exit from insolvency — but only if they can actually deliver on their promise to complete the project.

THE PLAY: If you are a corporate debtor facing insolvency and a majority of your financial creditors support a settlement, move the Supreme Court under Article 142 read with Rule 11 of NCLT Rules to bypass the strict procedure under Regulation 30A — but only if you can demonstrate that the settlement will actually revive the company and deliver value to creditors.

The 82 homebuyers who said "give him one more chance" got their chance. The question now is whether the builder kept his promise.