2024 (2) TMI 871 - AT - Insolvency and Bankruptcy

Rectification of defects in section 7 application - ambit of a Power of Attorney - Home Buyers - NCLT rejected the application for initiation of CIRP - the authorization letters from the appellants were not attested by an advocate or notary - It is the version of the Appellants, as per Section 7(5) of the Code, the Adjudicating Authority/Tribunal should have granted an opportunity to Appellants, to rectify the defects in the Application - HELD THAT - Under Part IV of Application under the Head, particulars of Financial Debt, of the Applicant , the total amount of debt granted it was mentioned that a total financial debt of Rs.1,27,05,10,277 (Rs. One hundred and twenty seven Crores five lakhs ten thousand two hundred seventy seven only) was the due sum defaulted, as the Respondent/corporate debtor have cumulatively defaulted the financial debt, paid by the Applicants/Financial Creditors/Allottees towards the purchase of their respective Units. The Appellants in Section 7 Application had mentioned the amount claimed in default as Rs.191,65,13,949/- (Rupees One hundred ninety one crores sixty five lakhs thirteen thousand nine hundred forty nine only). The Default, according to the Appellants, was continuing as soon as, since the year 2016. Further, it was mentioned that the Default was committed by the Respondent/Corporate Debtor as soon as since the years 2016 (being the latest date of Default committed by the Corporate Debtor as per the Agreement). The maximum time, in accordance with the agreement of the Applicant/Allottees for delivering the possession was mentioned as 2016. Also that the Default is continuing even till date, as the construction of Project was not complete and the possession was not handed over. This Tribunal, keeping in mind of the prime fact that in Law, there is no Estoppel against Statute, to raise all Factual and Legal issues / contentions in a Legal Proceedings before the Competent Forum, at this stage, without delving deep into the merits of the matter nor expressing any opinion, one way or the other on the controversies / disputes centring around the Case, permits the Appellants to raise all Factual and Legal Pleas. This Tribunal, based on Fair Play, Good Conscience quite in the fitness of things, remits back the petition for a de novo enquiry to be conducted, by the Adjudicating Authority/Tribunal and to proceed with the matter by providing opportunity of hearing to both parties, by adhering to the principles of natural justice and to proceed further on merits, and to dispose of the petition in a fair, just and in an unbiased manner, by passing a reasoned speaking order in a dispassionate manner, dealing with the issues/points so raised and to render a finding in accordance with Law and in the manner known to Law, of course, uninfluenced and untrammelled with any of the observations made by this Tribunal, in this Appeal. Appeal disposed off.

Summary

Issues Involved:
1. Validity of Letters of Authorization
2. Compliance with NCLT Rules and Legal Requirements
3. Determination of Petitioners as Speculative Investors or Allottees
4. Adjudicating Authority's Obligation to Allow Rectification of Defects

Summary:

Validity of Letters of Authorization:
The Adjudicating Authority/NCLT, Bengaluru Bench, observed that the Letters of Authorization provided by the Petitioners were not attested by either an Advocate or a Notary Public, and many were not in accordance with the laws of the countries where the Petitioners resided. Consequently, the petition was considered as filed only by Petitioner Nos. 1 and 2, failing to meet the minimum requirement of 10% or 100 in number, leading to its dismissal.

Compliance with NCLT Rules and Legal Requirements:
The Appellants argued that the Adjudicating Authority did not specify which rules required attestation by an Advocate or Notary Public. They contended that under Section 7(5) of the Code, the Authority should have granted an opportunity to rectify the defects in the application. The Appellants cited decisions, including *Surendera Trading Company V. Juggilal Kamlapat Mills Company Limited* and *Travels Private Ltd. V. Altius Travels Pvt Ltd*, to support their claim that the requirement to rectify defects within seven days is directory, not mandatory.

Determination of Petitioners as Speculative Investors or Allottees:
The Respondent contended that many Petitioners were speculative investors, not bona fide allottees, and thus did not qualify as Financial Creditors under Section 7 of the I&B Code. The Tribunal noted that the Adjudicating Authority did not frame a specific issue to determine whether the Petitioners were speculative investors or allottees.

Adjudicating Authority's Obligation to Allow Rectification of Defects:
The Tribunal highlighted that the Adjudicating Authority should have allowed the Appellants an opportunity to rectify the defects in their application, as per the proviso to Section 7(5)(b) of the I&B Code. The Tribunal cited multiple decisions emphasizing that the time provided for rectifying defects is directory and that the Authority should consider allowing rectification beyond seven days in appropriate cases.

Conclusion:
The Tribunal remitted the case back to the Adjudicating Authority/NCLT, Bengaluru Bench, for a de novo enquiry, directing it to provide an opportunity for hearing to both parties and to dispose of the petition by passing a reasoned speaking order. The Tribunal emphasized the need to determine whether the Petitioners are speculative investors or allottees and to address all legal and factual issues raised. The appeal was disposed of with no costs, and the connected IA was closed.