The National Company Law Tribunal (NCLT) has directed Mahindra Homes to notify homebuyers about its proposed reduction in equity share capital, acknowledging them as creditors under Section 66 of the Companies Act, 2013. Mahindra Homes seeks to cancel a portion of series B and C equity shares held by Actis and Mahindra Lifespace Developers. The NCLT emphasised that advances from homebuyers, totalling INR 213.84 crore, are financial liabilities until possession is handed over. The ruling highlights the importance of transparent communication with all stakeholders and sets a precedent for future capital restructuring cases in the real estate sector. The next hearing is on October 30.
The National Company Law Tribunal (NCLT) has instructed Mahindra Homes, a subsidiary of Mahindra Lifespace Developers, which is part of the Mahindra Group's real estate and infrastructure development division, to notify homebuyers about its proposed equity share capital reduction. This directive came following a petition by Mahindra Homes seeking confirmation of a 'special resolution' approved by its equity shareholders. The resolution aims to reduce the company's issued, subscribed, and paid-up equity share capital by cancelling and extinguishing a portion of series B and series C equity shares. These shares are held by global investment firm Actis and listed real estate developer Mahindra Lifespace Developers, respectively.
The NCLT's order, delivered on Wednesday, is significant as it requires Mahindra Homes to inform all creditors, including homebuyers, of the hearing. This acknowledgment of homebuyers as creditors is in line with Section 66 of the Companies Act, 2013. This classification is consistent with IND AS 115 and the Insolvency and Bankruptcy Code, 2016, which regard advances from homebuyers as financial liabilities until possession of the property is handed over.
Mahindra Homes has received INR 213.84 crore in advances from homebuyers. This amount is currently recorded as a liability, reflecting the undelivered possession of the respective flats or properties. The NCLT underscored that, under current financial reporting standards and bankruptcy laws, homebuyers with pending possession are considered creditors. Consequently, their interests must be protected in any capital restructuring plans.
The tribunal noted that there were no disputes or defaults involving the homebuyers concerning the advances made. Mahindra Homes assured that possession would be delivered according to the agreed terms and timelines. Mahindra Lifespace Developers established the special purpose vehicle, Mahindra Homes, in June 2010 to develop residential projects in key markets across India. The joint venture was formed with a 50:50 economic interest between Mahindra and Actis.
The NCLT Mumbai bench has scheduled the next hearing on this matter for October 30. Mahindra Homes is required to notify the Real Estate Regulatory Authority (RERA) and all homebuyers, ensuring their representation in the proceedings.
This ruling sets a precedent for future cases involving capital reduction and restructuring. It highlights the importance of thorough communication with all affected parties, particularly homebuyers, to maintain trust and compliance within the real estate sector. This decision underscores the critical role of transparency and accountability in managing financial restructuring and protecting the interests of all stakeholders, including those who have yet to take possession of their homes.
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