Satish Verma Case Redefines Real Estate Insolvency

From Statutory To Suo-Motu Settlement: Understanding the Satish Chander Verma Case in light of IBBI (Amendment) Regulations 2025

Introduction

While the Real Estate sector has taken a steadfast position given the impetus gained by the formal industrial and business sector, and the rising demand for permanent settlement, the Real Estate industry, while gaining an impetus in recent years, has also been met with complex real-estate disputes ranging from non-allotment of the property concerned, failure in transfer of the property, etc. With the NCLAT’s order in Nikhil Mehta and Sons v. AMR Infrastructure Ltd., Real-Estate Insolvency under the IBC framework has been brought into inception with the Allotees being stamped as ‘Financial Creditors’. In the midst of Homebuyers being accorded the status of Financial Creditors after the 2018 amendment to the Insolvency and Bankruptcy Code 2016 [“IBC”], the Reverse Corporate Insolvency Resolution Process [“CIRP”] has also been given a judicial stamp in Flat Buyers Association Winter Hills 77 v. Umang Realtech Pvt. Ltd. [“Flat Buyers Association”] after which, the erstwhile bar on the Promoters from taking part in the CIRP under Section 29A IBC has been diminished with the infusion of financial and technical expertise of erstwhile promoters in a pending CIRP, subject to its conformity with the mandate of Committee of Creditors [“CoC”]  and the Resolution Professional [“RP”].

While NCLAT affirmed the Reverse CIRP principle in Flat Buyers Association case in a host of cases including Rajesh Goyal v. Babita Gupta and Pradip Kumar Chaudhuri v. M/s Dagcon (India) Pvt. Ltd. (later affirmed by the apex court in Asset Reconstruction Company (India) Ltd. v. M/s Dagcon (India) Pvt. Ltd.), the current law stands settled on the institutionalization and rubber stamping of Reverse CIRP. Despite Reverse CIRP being accorded a judicial status, there remains a chain of uncertainty regarding the absence of a time-bound and debtor-centric CIRP, leading to delays in allotment of the concerned property and a lack of capital infusion by the Promoters dilatory commercial practices. However, the NCLAT in its recent order in Satish Chander Verma v. Grand Reality Pvt. Ltd. [“Satish Chander Verma”] (Company Appeal (AT) (Ins.) No. 289 of 2023) has deviated from the strict and formalistic interpretation of Section 12A IBC r/w Regulation 30A Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 [“IBBI Regulations 2016”] and ordered for a non-statutory settlement of the pending CIRP in Real Estate Insolvency.

Thus, the author aims to pen down a brief chronology of judicial precedents on the Settlement Framework in the debt resolution ecosystem of IBC, and examine how the aforesaid settlement framework can be facilitated by the recently introduced IBBI (Amendment) Regulations 2025 with the active assistance of Facilitators, Monitoring Committee, etc.

JUDICIAL STANCE ON SETTLEMENT OF CIRP PROCEEDINGS IN IBC

Before commencing discussion on the NCLAT’s observation in the Satish Chander Verma case, it is pertinent to mention that NCLAT has time and again taken a firm stand to settle pending CIRP proceedings in accordance with Section 12A r/w Regulation 30A, by taking into confidence the RP, and the CoC and before accepting the Expression of Interest [“EoI”] from the Prospective Resolution Applicant [“PRA”]. To elaborate further, apex court in Indiabulls Asset Reconstruction Company Limited v. Ram Kishore Arora (Civil Appeal No. 1925/2023) passed a slew of measures, including passing an order for interim financing by the erstwhile Promoters for a pending CIRP, project-wise Reverse CIRP, thereby paving the way for project-wise CIRP and leading to fruitful resolution of insolvency by the ex-management, i.e., the erstwhile Promoters.

While Reverse CIRP was treading towards the path of Settlement of Real Estate Insolvency disputes through efficient and door step resolution, the course of mutual and non-statutory settlement gained traction when NCLAT in Sachin Malde v. Hemant Nanji Chheda [“Sachin Malde”] (Company Appeal (AT) (Insolvency) No. 123 of 2024) made it clear that while the parties arrive on a mutual consensus to settle the dispute and no claims are pending by the Creditors, then it is not necessary to ask the Financial Creditor to file a Section 12A Application which shall only be an empty formality. The apex court bolstered this argument in GLAS Trust Company LLC v. BYJU Raveendran [“Byju Raveendran”] (Civil Appeal No. 9986/2024) wherein it has been held that subject to adherence to the proper procedure prescribed under Section 12A IBC r/w Regulation 30A IBBI Regulations 2016, NCLAT can use its inherent powers under Rule 11 of the NCLAT Rules to accept the Settlement/Withdrawal applications.

Furthermore, NCLAT, while affirming with the Byju Raveendran and Sachin Malde case has followed suit in Gaurav Bhatia v. Smriti Bhatia (Comp. App. (AT) (Ins) No. 881 of 2025) and held that in a Section 7 CIRP application, when no claims are made by any of the financial creditors despite public announcement, then NCLAT can use its jurisdiction to settle the dispute between the parties, in spite of asking the financial creditor to file a Section 12A application, which then becomes an empty formality.

In view of the above settled law, the NCLAT in the Satish Chander Verma case has made certain observations –

1. Section 12A is an empty formality when the parties are at mutual consensus to settle the pending CIRP proceedings. Thus, the settlement can be reached without moving Section 12A application.
2. When implementation of the project qua Development Agreement has been achieved at the disposal level, then Real Estate Insolvencies can be put to rest.
3. Reverse CIRP can be ordered for the development of the project, and ensure speedy allotment of flats to the Allotees as relief to the Creditors.

THE NEED FOR AN EFFECTIVE EXECUTION OF THE IBBI (AMENDMENT) REGULATIONS 2025

While Satish Chander Verma case made a course correction in the domain of Real Estate Insolvency disputes by invoking Reverse CIRP, and giving an impetus to mutual settlement of disputes without taking a non-expeditious route to Section 12A application, the case also flagged some of the major concerns that demand action by the stakeholders, i.e., IBBI, RP, and the CoCs, and some of them are –

1. Lack of coordination between the implementation agencies, i.e., the Adjudicatory Authorities and the RP on the implementation of the project (since in the instant case, the CIRP was prolonged due to the delaying practice of the RP).
2. Non-facilitation of communication between the Allotees as Financial Creditors and the Developers as Corporate Debtors (pending claims were proved by RP to be satisfied post allotment of the flats).
3. Systemic issues faced by the Allotees while passing on group decisions to the RP or the Adjudicatory Authorities (regarding the Progress Report of the Development Project).
4. Lack of a uniform monitoring body to assess the implementation of the project and convey the status report on a periodical basis.

While these are some pressing issues that warrant action from the stakeholders, IBBI has taken promising efforts by bringing in IBBI (Amendment) Regulations 2025, which can be utilised to the fullest to facilitate the intent of IBC, i.e., maximisation of assets and sustaining the commercial viability of the business concern. Some of the Amendments that need a closer look in light of Satish Chander Verma case are –

1. REGULATION 16C – The instant regulation calls for the appointment of Facilitators in order to improve and streamline the communication regarding the CIRP proceedings between the Allotees and the RP. This may ensure informed decision-making from the side of the Allotees through their Authorized Representatives.
2. REGULATION 4E – In the midst of pending CIRP, the instant regulation ensures that with the implementation of the project, the Allotees can be provided the possession of the flats concerned in a time-bound manner, in order to make Real Estate Insolvency as less time-consuming (this challenge was felt in Satish Chander Verma case wherein, the flats were not provided for possession due to prolongation of CIRP by the RP concerned).
3. REGULATION 18(4) – The Competent Authorities, like RERA, can be brought on board for seeking their inputs on the development of the project (subject to no voting rights with the CoC), thereby ensuring sector specific expertise into the CIRP proceedings, and making the CIRPs tailored to the needs of the Real Estate industry.
4. REGULATION 38(4) – One of the most promising amendments brought forth in the IBBI Regulations is the introduction of Monitoring Committees for monitoring and supervising the implementation of the resolution plan, and such report shall be submitted on a quarterly basis, thereby making the Adjudicatory Authorities well-informed of the status of development and provide implementation specific reliefs, leading to more settlements and amelioration in pending CIRPs (this was seen in Satish Chander Verma case wherein, Local Commissioner and other authorities were appointed to assess the implementation and development of the project, creating multiple stakeholders for a single point assessment).

CONCLUSION

The jurisprudential trajectory concerning real estate insolvency has undergone a significant evolution, from the initial inclusion of homebuyers as financial creditors to the subsequent judicial endorsement of the Reverse CIRP. Recent judicial precedents, culminating in the NCLAT’s order in Satish Chander Verma, demonstrate a pragmatic shift sanctioning mutual settlements without the procedural rigours of a Section 12A application when such a process is deemed a mere formality.

This progression towards efficient resolution has, however, concurrently exposed systemic deficiencies in the realms of effective coordination & communication between the Allotees and various stakeholders like RP, CoC, and the Adjudicatory Authorities, and assessment of the projects concerned. The IBBI in its (Amendment) Regulations 2025 has brought a seminal change to address these deficiencies by establishing a robust implementation framework. Through the mechanisms such as the appointment of Facilitators, invitation of the Competent Authority for sector-specific inputs and expertise, and the introduction of Monitoring Committees for assessment of the implementation status periodically, the 2025 Amendment Regulations seek to operationalize the judicial intent, thereby aligning the resolution process more closely with the fundamental objectives of IBC of maximizing assets and ensuring timely, effective outcome for all stakeholders.