NCLAT Upholds CIRP Against M.D. Devcon; Refund-Seeking Allottees Not ‘Homebuyers’ Under Section 7 IBC

May 7, 2026 : The National Company Law Appellate Tribunal (NCLAT) has upheld the Corporate Insolvency Resolution Process (CIRP) initiated against M.D. Devcon Private Limited and ruled that allottees who cancel their allotment and seek refund with interest cease to be “homebuyers” for the purposes of Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Appellate Tribunal held that such claims transform into pure financial debt claims, making the threshold requirement applicable to real estate allottees under the second and third provisos to Section 7(1) inapplicable.

A Bench comprising Justice Yogesh Khanna, Member (Judicial), and Ajai Das Mehrotra, Member (Technical), dismissed an appeal filed by Chandar Narayan Chavan challenging the order of the National Company Law Tribunal (NCLT), Mumbai Bench, which had rejected his intervention petition seeking recall of the CIRP admission order dated May 27, 2021.

The dispute arose from a Section 7 application filed by Indranil Das and Nandita Das against M.D. Devcon Pvt. Ltd. in connection with the company’s residential project “Savannah” at Kanjurmarg, Mumbai. The allottees had been allotted Flat No. 1504 under an allotment letter dated August 25, 2015. According to the financial creditors, the developer failed to commence the project within the stipulated timeline. Invoking Clause 9 of the allotment letter, the allottees terminated the allotment on December 13, 2016 and sought refund of the amount paid along with interest at 15% per annum. Their total claim before the NCLT stood at ₹27.78 lakh, including principal and accrued interest.

The NCLT admitted the insolvency petition in May 2021 and initiated CIRP against the corporate debtor. More than two years later, the appellant sought recall of the admission order, contending that the project had nearly 725 homebuyers and that the insolvency proceedings could not have been initiated by merely two allottees after the 2020 amendment introducing the minimum threshold requirement for real estate allottees under Section 7 of the IBC.

Rejecting the contention, the NCLAT observed that once the original petitioners exercised their contractual right to terminate the allotment and seek refund with interest, they no longer retained the status of homebuyers. The Tribunal held that the debt thereafter assumed the character of a financial debt recoverable from the corporate debtor. Referring to Clause 9 of the allotment letter, the Bench observed that the petitioners had already opted for cancellation and refund, and therefore the statutory threshold applicable to real estate allottees did not apply to their case.

The Appellate Tribunal further held that the Section 7 petition had been admitted on the basis of existence of financial debt and default exceeding the threshold prescribed under Section 4 of the IBC at the relevant time. It specifically noted that there was no requirement to comply with the third proviso to Section 7 because the petitioners were no longer acting in the capacity of homebuyers.

On the issue of recall jurisdiction, the NCLAT reiterated that tribunals possess limited inherent powers to recall orders only in exceptional situations such as lack of jurisdiction, fraud, collusion, procedural irregularity, or gross failure of justice. Relying on the Supreme Court decisions in Budhia Swain v. Gopinath Deb and Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, the Bench held that none of the recognised grounds for recall were established in the present case.

The Tribunal also noted that the intervention petition was filed after a delay of more than two years from the date of admission of CIRP and that no satisfactory explanation had been furnished for such delay. Allegations of collusion between the financial creditors and the corporate debtor were also rejected for lack of supporting evidence.

Reaffirming the settled position regarding Section 7 proceedings, the NCLAT observed that at the pre-admission stage only the financial creditor and the corporate debtor are necessary parties and that third-party intervention is not contemplated. The Bench relied on earlier NCLAT rulings including Vekas Kumar Garg v. DMI Finance Pvt. Ltd. and Prayag Polytech Pvt. Ltd. v. Hind Tradex Ltd. to hold that the appellant lacked locus to intervene either before or after admission of the CIRP.

Accordingly, the appeal was dismissed and the order rejecting the intervention petition was upheld.

Case Title: Chandar Narayan Chavan v. M.D. Devcon Private Limited & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 1370 of 2024
Coram: Justice Yogesh Khanna (Member Judicial) and Ajai Das Mehrotra (Member Technical)