2023 (11) TMI 782 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Maintainability of joint application u/s 7 - separate corporate entities - sharing of Revenue - fulfilment of threshold as prescribed under the IBC or not - existence of financial debt against each applicant or not - time limitation. Whether the joint application under Section 7 against Anand Infoedge Pvt. Ltd. Mist Avenue and Mist Direct is maintainable? Three Respondents- Appellants herein being separate corporate entities? - HELD THAT - It is clear that all the three Appellants i.e. Anand Infoedge Pvt. Ltd. Mist Direct Sales Pvt. Ltd. and Mist Avenue Pvt. Ltd. are intrinsically interwoven with the project in question i.e. Festival City in which the Respondents allottees were allotted units. Collaborator No. 1 and 2 are part of project who were entrusted with the development and sale of units. It was collaborator No. 1 who received the payment from the allottees towards allotment of units in favour of the Respondents. All the three Appellants being involved with the one single project in which the allottees have been allotted units all are necessary ingredients of any resolution which may help the allottees to receive their units in absence of any of the appellants in Corporate Insolvency Resolution Process Resolution of project and revival of the Resolution of project is impossible. Thus Section 7 Application filed against all the three appellants together is maintainable. The three appellants being part of one Common Real Estate Project and the Applicants of Section 7 Application being part of the said project they had every right to initiate Section 7 Application against all the three appellants together - the decision of the Adjudicating Authority upheld holding that application under Section 7 is maintainable. Whether Section 7 Application filed by the allottees fulfils the threshold as prescribed under the IBC? - Whether while scrutinizing the claims of each applicants of joint application filed under Section 7 it has to be established that the financial debt exist against each applicant in which default has been committed and the claim of the applicants is not barred by limitation and applicants fulfil all eligibility of valid allottee who is entitled to file Section 7 application? - HELD THAT - From the ratio of the Judgment of Hon ble Supreme Court in Manish Kumar 2021 (1) TMI 802 - SUPREME COURT following conclusions are irresistible (i) In event the default of Rs. 1 Crore is made out against the Corporate Debtor it is not necessary that the default of Rs. 1 Crore should be qua of the applicants individually or separately if default of Rs. 1 Crore is made out qua any of the applicants or any other financial creditor who is not even part of the Application application under Section 7 is maintainable. (ii) what is required to be proved under Section 7 is that the default of Rs. 1 Crore which is due on the Corporate Debtor is not barred by limitation if default of Rs. 1 Crore due of corporate debtor is within limitation the fact that claim of certain other allottees who were joint in the application is barred by limitation is insignificant. In Manish Kumar itself it has been answered that requirement of threshold under proviso in Section 7(1) must be fulfilled as on the date of filing of the Application. The fact that eight allottees have settled the matter is thus inconsequential and eight allottees cannot be excluded in the counting of 100 allottees which are required to be fulfilled as threshold. The provision of Section 7(1) Second Proviso inserted by Act No. 1 of 2020 having been explained by the Hon ble Supreme Court the law is well settled that all applicants who have joined the Section 7 Application have not fulfilled the threshold individually nor claim of all the applicants individually has to be within time in event there is default of more than Rs. 1 Crore and default of Rs. 1 Crore on basis of which the application is filed is well within time. The mere fact that claim of some other barred by time is insignificant. Application under Section 7 of the Code triggered when default of Rs. 1 Crore qua some of the applicant or some other financial creditors is fulfilled Insolvency Resolution Process under Section 7 can commence. The Adjudicating Authority did not commit any error in returning the finding that threshold as required by Section 7(1) second proviso is fulfilled. In the present case the Application under Section 7 is maintainable and objection that application is not maintainable on the ground that it does not fulfil the threshold as provided under Section 7(1) Second Proviso has righty been rejected. Thus no error has been committed by the Adjudicating Authority in holding that application under Section 7 filed by the Respondents allottees is maintainable - there are no grounds raised in these Appeals to interfere with the Impugned Order - appeal dismissed.

Summary

Issues Involved:
1. Maintainability of Joint Application under Section 7 against Multiple Corporate Debtors
2. Threshold Requirement under Section 7 of IBC
3. Validity of Claims and Limitation Period

Summary:

Issue 1: Maintainability of Joint Application under Section 7 against Multiple Corporate Debtors
The Tribunal examined whether a joint application under Section 7 of the Insolvency and Bankruptcy Code (IBC) against three separate corporate entities''Anand Infoedge Pvt. Ltd.', 'Mist Avenue Pvt. Ltd.', and 'Mist Direct Sales Pvt. Ltd.''is maintainable. The Tribunal noted that the three entities were intrinsically interwoven in the development of a single real estate project, 'Festival City.' The corporate debtors had entered into collaboration agreements and were jointly responsible for the project's development and sale of units. The Tribunal concluded that a consolidated insolvency resolution process is necessary for the project's resolution and revival, thus upholding the maintainability of the joint application.

Issue 2: Threshold Requirement under Section 7 of IBC
The Tribunal addressed whether the Section 7 application filed by the allottees met the threshold requirement of being filed jointly by not less than 100 allottees or 10% of the total number of allottees under the same real estate project. The Tribunal confirmed that the application was filed by 115 unit holders, satisfying the threshold requirement. The Tribunal referred to the Supreme Court's judgment in "Manish Kumar vs. Union of India & Anr." which clarified that the threshold requirement must be fulfilled at the time of filing the application and that the existence of a default of Rs. 1 Crore is sufficient for initiating the insolvency process.

Issue 3: Validity of Claims and Limitation Period
The Tribunal examined the objections raised by the appellants regarding the validity of claims, including issues of limitation, premature claims, and settled claims. The Tribunal held that the right to sue continues for the allottees due to the ongoing breach of contract by the corporate debtors, who failed to complete the project and deliver possession. The Tribunal also referenced the Supreme Court's judgment in "Samruddhi Cooperation Housing Society Ltd. vs. Mumbai Mahalaxmi Construction Pvt. Ltd." which supported the view that the breach of contract is continuous. The Tribunal concluded that the claims of the allottees were valid and within the limitation period, thus fulfilling the threshold requirement under Section 7 of the IBC.

Conclusion:
The Tribunal upheld the Adjudicating Authority's order, confirming the maintainability of the joint application under Section 7 and the fulfillment of the threshold requirement. The appeals were dismissed.