NCLAT Chennai: Prospective Homebuyer Has No Locus to Intervene in Section 7 IBC Proceedings Without Registered Sale Deed

April 22, 2026 : The National Company Law Appellate Tribunal, Chennai Bench, has upheld the rejection of an intervention application filed by two prospective homebuyers seeking to join insolvency proceedings initiated against Koncept Nirman Private Limited. The Tribunal ruled that such applicants lack locus standi in proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, particularly where no legally enforceable right in the property exists.

The Bench comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) dismissed the appeal challenging the order of the National Company Law Tribunal, Hyderabad Bench, which had refused to implead the appellants in the ongoing corporate insolvency resolution process (CIRP).

The appellants had sought intervention on the basis of an agreement to purchase a flat from the corporate debtor. However, the Tribunal noted that the agreement relied upon was unregistered, and therefore did not confer any legally enforceable right in immovable property. It reiterated that a person can be recognised as a purchaser only upon execution of a registered conveyance deed in accordance with the Transfer of Property Act, 1882 and the Registration Act, 1908.

Addressing the scope of impleadment, the Tribunal observed that while the provisions of the Code of Civil Procedure, 1908 are not strictly applicable to insolvency proceedings, the principles underlying Order I Rule 10 CPC may guide the determination of necessary and proper parties. It emphasised the doctrine of dominus litis, holding that the applicant initiating proceedings retains the prerogative to decide the parties, and third parties cannot compel impleadment unless their presence is essential for effective adjudication.

Interpreting the statutory framework, the Appellate Tribunal clarified that proceedings under Section 7 of the Code are confined to the relationship between the financial creditor and the corporate debtor. It noted that a financial creditor can initiate CIRP only against a corporate debtor, defined under Section 3(8) as a person who owes a financial debt. Since the appellants neither owed any financial debt nor had any assignment of such debt in their favour, they could not be treated as necessary parties to the proceedings.

The Tribunal further observed that any claim arising from the agreement for sale would lie solely against the corporate debtor and not against the financial creditor who initiated the insolvency proceedings. It cautioned that permitting such interventions could open the door to misuse of the insolvency process by multiple prospective homebuyers who have no direct role in Section 7 proceedings.

Concluding that the appellants were neither necessary nor proper parties, the Tribunal found no infirmity in the NCLT’s order rejecting the intervention application. The appeal was accordingly dismissed, and the CIRP proceedings were directed to continue without their impleadment.

Cause Title: Mr. Krishna Pabsetti & Anr. v. Koncept Nirman Private Limited & Anr.

Case No.: Company Appeal (AT) (CH) (Ins) No. 220 of 2026