Supreme Court Bars RWA Intervention in Developer Insolvency Cases

The Supreme Court ruled that homebuyers' societies or Resident Welfare Associations cannot intervene in insolvency proceedings of developer companies. The decision reinforces that only statutorily defined creditors can participate in such proceedings, emphasizing alternative remedies for societies not recognized as creditors.

The Supreme Court has delivered a significant ruling barring homebuyers' societies or Resident Welfare Associations (RWAs) from intervening in the insolvency proceedings of developer companies. The court emphasized that only entities recognized as creditors under the Insolvency and Bankruptcy Code (IBC) can engage in these proceedings.

A bench comprising Justices JB Pardiwala and R Mahdevan upheld the insolvency proceedings pertaining to Takshashila Heights India Private Ltd, asserting that the IBC cannot be misused for expedient recovery. The court highlighted the importance of genuine intent in revival efforts for corporate debtors.

The ruling clarified that RWAs, distinct from individual buyers, lack the statutory recognition required to claim financial creditor status. The decision underscores the court's commitment to protecting homebuyers' rights while maintaining the integrity of the insolvency process.