2023 (10) TMI 1000 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Rejection of Section 7 application - status of the decree-holder - Real Estate Allottee or not - NCLT held that, being a single allotment, does not meet the threshold requirement as per second proviso to Section 7(1) of the I B Code - HELD THAT - Respondent has relied on judgment of Hon ble Supreme Court in VISHAL CHELANI ORS. VERSUS DEBASHIS NANDA 2023 (10) TMI 949 - SUPREME COURT where in it has been held that to treat a particular segment of that class differently for the purposes of another enactment, on the ground that one or some of them had elected to take back the deposits together with such interest as ordered by the competent authority, would be highly inequitable. In view of the law laid down by the Hon ble Supreme Court, it is now well settled that the status of the party i.e. allottee does not change and therefore the Adjudicating Authority has rightly concluded that threshold being not met one allottee cannot trigger the insolvency. The rejection of Section 7 application cannot be faulted - there are no merit in the appeal - appeal dismissed.

Summary

Issues involved:
The judgment involves the rejection of an application filed under Section 7 of the I&B Code, based on the status of the applicant as a Real Estate Allottee and the threshold requirement under the second proviso to Section 7(1) of the I&B Code.

Details of the judgment:

Issue 1: Rejection of application under Section 7
The Appellate Tribunal rejected the appeal against the order dated 08.08.2023, where the application filed under Section 7 was dismissed. The Adjudicating Authority held that the applicant, a decree-holder, did not meet the threshold requirement as a Real Estate Allottee under the I&B Code.

Issue 2: Interpretation of 'financial debt'
The Appellant challenged the Adjudicating Authority's decision by citing a judgment of the Appellate Tribunal in a previous case. The judgment highlighted that the relevant consideration for determining 'financial debt' includes transactions with the commercial effect of borrowing, such as amounts raised from Real Estate Allottees. The Respondents, in this case, claimed as decree-holders, not allottees seeking Corporate Insolvency Resolution Process.

Issue 3: Application of Supreme Court judgment
The Respondent's counsel referred to a Supreme Court judgment in another case to support their argument. The Appellant contended that the Supreme Court's judgment was distinguishable from the present case.

Conclusion:
After considering the arguments and records, the Appellate Tribunal upheld the rejection of the Section 7 application. Citing the Supreme Court's decision, the Tribunal affirmed that the status of the party as an allottee remains unchanged, and therefore, the threshold for triggering insolvency was not met. Consequently, the Appeal was dismissed for lack of merit.