2021 (11) TMI 610 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors/Home Buyers - existence of debt and dispute or not - HELD THAT - It is the version of the Appellant that it was created as a Special Purpose Vehicle after erstwhile Andhra Pradesh Industrial Infrastructure Corporation Ltd pursuant to a process of international bidding and evaluation accepted the proposal of and accorded approval to the Appellant/Emaar Properties PJSC, Dubai for development and construction of a township as a part of an integrated project, spanning over 285 acres of land at Manikonda Village, Rajendranagar Mandal, Ranga Reddy District, Andhra Pradesh and accorded approval through Government Orders to it, for the implementation and execution of the township as part of the Integrated Project. It is brought to the Fore that the Insolvency and Bankruptcy Code (Amendment)Ordinance 2019 was promulgated by the Government of India on 28.12.2019 to amend the provisions of I B Code. As a matter of fact, the Ordinance, among other things stated that an application under Section 7 of the Code for initiating CIRP against the Corporate Debtor shall be filed jointly by not less than 100 all such creditors (i.e. Home Buyers). Indeed, the Ordinance among other things mentions that an application under Section 7 of the code for initiating CIRP against the Corporate Debtor shall be filed jointly by not less than 100 all such creditors (i.e. home buyers) or not less than 10% of the total number or such creditors (Home Buyers) whichever is less. In the instant case on hand, the impugned order passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench, Hyderabad) does not contain any direction being issued to the Respondents and other purported allottees to amend their application as laid down under Section of the code. Without there being a direction issued to the concerned financial creditor/allottees to amend their applications as per Section 7 of the Code, the directions issued by the Adjudicating Authority to its Registry as in the impugned order to club such applications together and place before it for hearing cannot be countenanced in the eyes of law. The matter is remitted back to the Adjudicating Authority for passing de novo orders on the issue of maintainability pertaining to clubbing of all matters - Petition disposed off.

Summary

Issues Involved:

1. Maintainability of the application filed by a single allottee under Section 7 of the IBC.
2. Compliance with the threshold requirements under the amended Section 7 of the IBC.
3. Clubbing of applications filed by allottees of the same project.
4. Adherence to the procedural requirements of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
5. Legal validity of the impugned order in light of the Supreme Court judgment in Manish Kumar vs. Union of India.

Issue-wise Detailed Analysis:

1. Maintainability of the Application Filed by a Single Allottee:

The Adjudicating Authority observed that the application filed by a single allottee under Section 7 of the IBC, pending for consideration, should not be rejected as not maintainable. The Authority referred to the Supreme Court judgment in Monish Kumar vs. Union of India, which clarified that single allottees' applications filed prior to the amendment cannot be rejected. The applications by allottees in the same project against the same corporate debtor are allowed to pursue their applications jointly. The Tribunal directed that all such applications should be heard jointly.

2. Compliance with Threshold Requirements:

The Appellant argued that the impugned order was contrary to the Supreme Court's directions in Manish Kumar vs. Union of India, which required compliance with the threshold requirements under the amended Section 7 of the IBC. Specifically, the minimum threshold of 10% or 100 allottees (whichever is less) must be met, and such allottees must file their application for initiating CIRP against the corporate debtor jointly. The Appellant emphasized that the applications must be modified to conform to the minimum threshold within one month, failing which they would be deemed withdrawn.

3. Clubbing of Applications:

The Adjudicating Authority's decision to club all pending applications filed by allottees against the Appellant was challenged by the Appellant. The Appellant contended that the Supreme Court's judgment in Manish Kumar vs. Union of India did not provide any scope for clubbing pending applications that were not in compliance with the 2nd proviso of Section 7 of the IBC. The Appellant argued that the Adjudicating Authority's direction to club such applications together and place them for hearing was not legally tenable.

4. Procedural Requirements:

The Appellant highlighted the procedural requirements under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. An application under Section 7 of the IBC must be filed in Form I, which seeks details of each financial creditor filing the application. Rule 4(4) of the Adjudicating Authority Rules prescribes that if an application is made jointly by financial creditors, they may nominate one among them to act on their behalf. The Appellant argued that the applications must be filed jointly, and one financial creditor should act on behalf of others, as required by the Adjudicating Authority Rules.

5. Legal Validity of the Impugned Order:

The Tribunal noted that the impugned order dated 18.06.2021 did not contain any direction for the Respondents and other allottees to amend their applications as required under Section 7 of the IBC. Without such a direction, the Adjudicating Authority's order to club the applications for hearing was not legally sustainable, especially in light of the Supreme Court's judgment in Manish Kumar vs. Union of India. The Tribunal concluded that the impugned order suffered from legal infirmities and set it aside to secure the ends of justice. The matter was remitted back to the Adjudicating Authority for passing de novo orders on the issue of maintainability, in accordance with the Supreme Court judgment and the law, after providing due opportunities to both parties to raise all factual and legal pleas.

Conclusion:

The Tribunal allowed the appeal, set aside the impugned order dated 18.06.2021, and remitted the matter back to the Adjudicating Authority for fresh consideration on the issue of maintainability, ensuring compliance with the Supreme Court's judgment and the legal requirements under the IBC.