Statutory Delays Not Force Majeure: NCLT Admits Insolvency Against Raheja Developers

Insolvency Proceedings Against Raheja Developers

Facts of the Case

1. Background
   • Homebuyers filed an insolvency petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against Raheja Developers Ltd., alleging default in delivering possession of residential units.
   • The petitioners claimed that despite payments made towards the purchase of flats, Raheja Developers failed to deliver possession within the stipulated time as promised in the agreement.
2. Developer’s Defense
   • Raheja Developers argued that the delay in completing the project was caused by statutory compliance requirements, which, according to them, constituted a force majeure event.
   • They further contended that delays in obtaining regulatory approvals and unforeseen circumstances were beyond their control and should exempt them from liability under the agreements.
3. Evidence of Default
   • The homebuyers presented email communications and acknowledgements from Raheja Developers admitting the delay and assuring delivery.
   • These communications demonstrated the developer’s continued liability and failure to honour contractual commitments.
4. Legal Issue
   • Whether delays arising from statutory compliance can be considered a force majeure event to shield the developer from liability under Section 7 of the IBC.

Final Judgement

1. NCLT’s Decision
   • The National Company Law Tribunal (NCLT) rejected the defence of force majeure and admitted the insolvency petition against Raheja Developers under Section 7 of the IBC.
   • The Tribunal held that:
     • Statutory compliance delays cannot be treated as force majeure unless explicitly stated in the agreement and supported by evidence of genuine inability beyond the developer’s control.
     • The continued acknowledgement of liability through emails and other communications proved the default in delivering possession.
2. Key Observations
   • The developer’s failure to adhere to contractual obligations despite multiple extensions undermined their defence.
   • A force majeure clause cannot be invoked arbitrarily without clear, specific, and justified circumstances.
   • Non-delivery of possession despite payments is a valid ground for initiating insolvency proceedings under Section 7 of the IBC.
3. Outcome
   • The NCLT admitted the insolvency application and appointed an Interim Resolution Professional (IRP) to manage the corporate insolvency resolution process of Raheja Developers.

Significance of the Judgement

This judgement emphasizes that statutory compliance delays alone do not qualify as force majeure unless expressly agreed upon and evidenced. It reinforces the principle that homebuyers’ interests are paramount under the IBC and establishes that acknowledgement of liability constitutes proof of default.