NCLT Orders Mahindra Homes to Notify Homebuyers in Share Capital Reduction Plan

NCLT Directs Mahindra Homes to Notify Homebuyers

The National Company Law Tribunal (NCLT) has instructed Mahindra Homes, a subsidiary of Mahindra Group’s real estate company Mahindra Lifespace Developers, to inform homebuyers about its plan to reduce its share capital. This directive came after Mahindra Homes filed a petition for approval of a special resolution passed by its shareholders.

Special Resolution for Share Capital Reduction

The special resolution aims to reduce the company’s share capital by canceling some series B and C equity shares held by Actis, a global investment firm, and Mahindra Lifespace Developers. NCLT’s order, issued on Wednesday, mandates that Mahindra Homes notify all creditors, including homebuyers, about the hearing. This requirement is based on Section 66 of the Companies Act, 2013.

Homebuyers as Financial Creditors

The tribunal’s order highlights that advances from homebuyers are considered financial liabilities until they receive possession of their properties, in line with IND AS 115 and the Insolvency and Bankruptcy Code, 2016. Mahindra Homes has received ₹213.84 crore in advances from homebuyers, which is currently listed as a liability due to the non-delivery of the properties.

Protection of Homebuyers’ Interests

NCLT emphasized that, under current financial reporting and bankruptcy laws, homebuyers waiting for possession are classified as creditors. Therefore, their interests must be safeguarded in any capital restructuring plan. The tribunal also noted that there are no disputes or defaults with the homebuyers regarding their advances, and the company has assured that possession will be delivered according to the agreed terms.

Background of Mahindra Homes

Mahindra Lifespace Developers established Mahindra Homes in June 2010 to develop residential projects across India, in a joint venture with Actis, with each holding a 50% economic interest. The NCLT Mumbai bench has scheduled the next hearing for October 30.

Next Steps

Mahindra Homes is required to notify the Real Estate Regulatory Authority (RERA) and all homebuyers to ensure their representation in the proceedings. This ruling sets a precedent for future cases involving capital reduction and restructuring, underscoring the importance of thorough communication with all affected parties, particularly homebuyers, to maintain trust and compliance in the real estate sector.