NCLAT calls IBBI's cancellation of homebuyers' representative's licence excessive

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, on 14 October 2026 held that the cancellation of the registration of an insolvency professional by the Insolvency and Bankruptcy Board of India (IBBI) was disproportionate. The professional had acted as the authorised representative of about 1,428 homebuyers, holding around 91% of the votes, in the insolvency process of Revital Realty Private Limited. The NCLAT sent the matter back to IBBI to decide a fresh penalty within 30 days of receiving the order.

What Happened

Per the order, Revital Realty's corporate insolvency resolution process began on 4 June 2024, and the professional was appointed to represent the homebuyers, as a class of creditors, on 4 July 2024. On 20 August 2026, IBBI's Disciplinary Committee found that the professional had breached Regulation 16A(10) of the CIRP Regulations, on keeping records of meetings with the class, and Section 25A(3) of the Insolvency and Bankruptcy Code, which requires a representative to act on the class's instructions. It cancelled the professional's registration.

The NCLAT found both contraventions established. It held that the professional agreed to extend the deadline for revised resolution plans on 17 March 2026 and 19 March 2026 without prior instructions from the homebuyers, and that the record-keeping lapse continued through the process.

However, the NCLAT noted that there was no finding of fraud, dishonesty, personal gain, collusion or conflict of interest, and no identified harm to any homebuyer or to the outcome. It said the extension was linked to a claim of the EPFO that had to be dealt with in the plans. It held that cancellation, the most severe penalty available, was completely disproportionate. It gave the professional interim protection, recorded an undertaking that no fresh assignment would be accepted in the meantime, and noted that the creditors' committee had already passed a resolution to replace the representative.

What It Means

For homebuyers in a builder's insolvency, the ruling confirms that their authorised representative must keep a record of meetings with them and take their instructions before agreeing to decisions on their behalf. The NCLAT's order may be appealed to the Supreme Court.

Source: NCLAT order