82 homebuyers settled. The 3 who sued wanted to walk away. The court said —

Three homebuyers dragged a builder to insolvency court. Then 82 others made a deal with the builder. The three original filers wanted out too. The law said: too late.

A housing project in Gurgaon called Krrish Provence Estate had been stalled for eight years. Three homebuyers filed for insolvency against Jasmine Buildmart Pvt. Ltd., seeking refunds totalling about Rs. 6.93 crores. In November 2019, the National Company Law Tribunal (NCLT) admitted the case, appointed an interim resolution professional (IRP — the person who takes over the company's management during insolvency), and set the process in motion. The IRP's first report, a thin file of preliminary findings, landed on the tribunal's desk just as the builder's appeal began its journey upward.

Then the unexpected happened. While the builder's promoter, Amit Katyal, fought the admission all the way to the Supreme Court, 82 out of 128 homebuyers reached a settlement. The builder promised to complete the project within one year. The three original applicants also agreed to settle, accepting over Rs. 3.36 crores the promoter had deposited with the Supreme Court registry. Everyone wanted out. But the IBC has a strict rule: once a corporate insolvency resolution process (CIRP — the formal process of trying to revive a company under the IBC) is admitted, it cannot simply be withdrawn. The law, on its face, said: too late.

When the project stopped selling

Jasmine Buildmart Pvt. Ltd. launched Krrish Provence Estate in Gurgaon with promises of timely delivery. Years passed. The flats never came. Three homebuyers — financial creditors under the IBC (creditors who have lent money or made payments for goods or services) — decided they had waited long enough. In December 2018, they filed a petition under Section 7 of the IBC (the provision that allows a financial creditor to start insolvency proceedings against a company) before the NCLT in New Delhi. The stack of settlement letters from the 82 homebuyers would later sit on the court's table, a silent testament to how many had chosen negotiation over litigation.

The NCLT admitted the application on November 28, 2019. It appointed an IRP and imposed a moratorium (a legal freeze on all debt recovery actions against the company). The builder's promoter, Amit Katyal, appealed to the National Company Law Appellate Tribunal (NCLAT). The NCLAT dismissed his appeal on November 9, 2020. Katyal then approached the Supreme Court in Civil Appeal No. 3778 of 2020.

The settlement that changed everything

While the appeal was pending before the Supreme Court, Katyal deposited over Rs. 3.36 crores with the court registry. Then the negotiations began. Eventually, 82 homebuyers agreed to a settlement: the builder would complete the project and hand over possession within one year. The three original applicants — the ones who had started the whole process — also agreed to withdraw, taking the deposited money. A majority of the 128 homebuyers were on board. The courtroom fell silent as the settlement letters were read aloud, the weight of eight years of waiting compressed into a few sheets of paper.

But there was a legal problem. Section 12A of the IBC (the provision that allows withdrawal of an insolvency application) says that once a case is admitted, withdrawal requires the approval of 90% of the committee of creditors (COC — the group of creditors that oversees the insolvency process). In this case, no COC had even been constituted because the Supreme Court had stayed the proceedings. The procedural rule — Regulation 30A of the CIRP Regulations (the detailed rules that govern how insolvency proceedings are conducted) — also prescribed a specific process for withdrawal. None of that had been followed.

What the court was asked to decide

The core question was simple: could the Supreme Court allow withdrawal of an admitted insolvency case when the majority of creditors had settled, but the strict procedural requirements of Section 12A and Regulation 30A had not been met?

The promoter argued that the settlement served the larger interest of all homebuyers. The project would be completed, not liquidated. The three original applicants supported the withdrawal. The IRP had no objection. Everyone agreed — except the letter of the law. The smell of old paper and the quiet rustle of files filled the courtroom as the bench considered the arguments.

The other side of the argument was that the IBC's framework is designed to be rigid for a reason. Once a company enters CIRP, the process is meant to protect all creditors, not just a majority. Allowing withdrawal outside the prescribed procedure could set a dangerous precedent, where powerful promoters buy off a few creditors to escape insolvency.

Why the Supreme Court found a way

The bench of Justice M.R. Shah and Justice B.V. Nagarathna did something careful. They did not rewrite Section 12A. Instead, they invoked Article 142 of the Constitution (the Supreme Court's power to pass any order necessary to do complete justice) read with Rule 11 of the NCLT Rules (the inherent powers of the tribunal to make orders necessary to meet the ends of justice).

The court noted that no substantive CIRP proceedings had taken place after the COC was supposed to be constituted, because the Supreme Court's stay had frozen everything. The IRP had been appointed but had not done much. The settlement, the court said, served the object and purpose of the IBC — which is not to kill companies but to keep them running as going concerns. "The object and purpose of IBC is not to kill the company and stop/stall the project," the court observed, "but to ensure that the business of the company runs as a going concern."

The court also clarified that Regulation 30A — the procedural rule for withdrawal — is directory, not mandatory. It depends on the facts of each case. In this case, where a majority of homebuyers had settled and the original applicants also sought withdrawal, the court could permit it. The bench's order, read aloud in a measured tone, seemed to hang in the air as the parties absorbed its implications.

The court drew on three key precedents. In Swiss Ribbons Private Limited and Another v. Union of India and Others, the Supreme Court had held that the IBC's primary objective is resolution, not liquidation. In Brilliant Alloys Pvt. Ltd. v. S. Rajagopal, the court had permitted withdrawal even after admission where the applicant and the corporate debtor had settled, though that case involved a single financial creditor. And in Kamal K. Singh v. Dinesh Gupta & Another, decided just months earlier in August 2021, the court had again emphasised that the IBC's purpose is to keep companies as going concerns. Together, these cases built a foundation for the court's flexibility in the present matter.

The order that cleared the slate

The Supreme Court allowed the withdrawal. It quashed all NCLT orders, including the appointment of the IRP and the constitution of the COC. It dismissed the NCLAT order. It also allowed the withdrawal of related consumer and criminal proceedings — Consumer Case No. 984/2019 and Criminal Complaint No. 540/2021 — as withdrawn. The promoter was directed to pay Rs. 6,00,000 to the IRP within two weeks for costs incurred. The IRP's undertaking document, signed and filed, marked the formal end of a process that had barely begun.

The three original applicants received their Rs. 3.36 crores with accrued interest. The 82 homebuyers who settled got their promise of completion within one year. The remaining homebuyers — those who had not settled — were left with whatever rights they had under the settlement plan that the promoter was directed to place on record.

What this means for homebuyers and insolvency practitioners

This judgment does not open a free exit from CIRP. It is a fact-specific exercise of the Supreme Court's extraordinary powers. But it does establish a principle: where a majority of financial creditors have settled, no substantial CIRP proceedings have taken place, and the original applicants also seek withdrawal, the court may permit it even if the strict procedural requirements of Section 12A have not been met.

The ratio decidendi of the case rests on three pillars. First, where a majority of homebuyers have settled with the corporate debtor or promoter, and the original Section 7 applicants also seek withdrawal, the Supreme Court may exercise power under Article 142 read with Rule 11 of NCLT Rules to permit withdrawal of CIRP proceedings — particularly where no substantive CIRP proceedings have taken place after COC constitution due to a stay order. Second, the object and purpose of the IBC is not to kill the company and stop or stall the project, but to ensure that the business of the company runs as a going concern; CIRP withdrawal that enables project completion serves the IBC's purpose. Third, Regulation 30A of the CIRP Regulations prescribing the procedure for withdrawal under Section 12A is directory and not mandatory, depending on the facts of each case.

The procedural journey of this case illustrates the multiple layers of review available under the IBC framework. The Section 7 application was filed before the NCLT in New Delhi on December 6, 2018, and admitted on November 28, 2019. The promoter's appeal to the NCLAT was dismissed on November 9, 2020. The civil appeal before the Supreme Court, registered as Civil Appeal No. 3778 of 2020, was finally disposed of on March 3, 2022, with the CIRP withdrawal permitted. The entire process, from filing to final disposal, took just over three years — relatively swift by Indian judicial standards.

The provisions engaged in this case span multiple statutes. Section 7 of the IBC served as the procedural vehicle for initiating CIRP. Section 12A was the primary interpretation target, with the court determining its scope in settlement scenarios. Section 14, dealing with moratorium, and Section 33, dealing with liquidation, were supporting and cross-reference provisions respectively. Regulation 30A of the IBBI Regulations was interpreted as directory rather than mandatory. Rule 11 of the NCLT Rules and Article 142 of the Constitution provided the procedural vehicles for the court to do complete justice.

For insolvency practitioners, the judgment offers a practical roadmap. When a majority of financial creditors in a real estate project have settled and the original applicants also seek withdrawal, the path forward involves approaching the Supreme Court under Article 142 rather than attempting to navigate the strict requirements of Section 12A before the NCLT. The key conditions are: no substantial CIRP proceedings after COC constitution, a stay order that has frozen the process, and a settlement that serves the larger interest of all stakeholders.

THE PLAY: If you are a homebuyer who has filed for insolvency and a majority of other buyers settle, do not assume you are locked in — approach the court for withdrawal, especially if no committee of creditors has been formed and no substantial proceedings have occurred.

The three homebuyers who started it all walked away with their money. The builder got a second chance. The 82 who settled got a promise. And the law bent — just enough — to let a stalled project breathe again.