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2024 (4) TMI 238 - AT - Insolvency and BankruptcyCIRP - denial of rights to be heard to protect the Financial Interest of Hundreds of Home Buyers / Allottees - Applicability of Threshold - Requirement of joint filing by either 100 allottees or 10% of the total number of allottees of the same real estate project, whichever is less for application u/s 7 - Violation of principles of natural justice - denial of rights to be heard to protect the Financial Interest of Hundreds of Home Buyers / Allottees - appellant submits that the impugned order holding that the Section 7 Petition, filed under I B Code, 2016, is not maintainable, since the Allottees, belong to different Projects, and the Impugned Order, was passed without, considering the facts, placed on record - wrongful interpretation of explanation (ii) of Section 5 (8) of the I B Code, 2016. HELD THAT - In the instant case, the Appellant / Petitioner, takes a stand that in the Order dated 09.05.2022 of the National Consumer Disputes Redressal Commission (vide Consumer Complaint No. 1951 of 2016), the plea of the Respondent / Corporate Debtor ascribing reasons, in regard to the delay, relating to the time, when the Respondent / Corporate Debtor, accepted the bookings from the Allottees, and regularly raised demands and accepted amounts, from the Allottees, were rejected, a clear adverse circumstance, against the Respondent / Corporate Debtor, all the more, when the outbreak of Pandemic Covid-19, came after a decade. The emphatic stand of the Respondent / Corporate Debtor is that Sushant Megapolis Township, comprise of Multiple Commercial Real Estate Projects, all the sub-projects are independent of each other, and were being developed and sold as separate Projects, within the Township. Moreover, they were Registered, under RERA Act, 2016, with different RERA Registration Numbers. As a matter of fact, each Project, is further divided into Multiple phases, with different complete Schedules - Indeed, as per definition Section 5(8)(f) explanation (ii) of the I B Code, 2016, the expressions 'allottee' and 'real estate project' shall have the meanings respectively assigned to them in clauses (d) and (zn) of Section 2 of the Real Estate (Regulation and Development) Act, 2016, (16 of 2016). Section 7 of the I B Code, 2016, provides for an initiation of Corporate Insolvency Resolution Process, by Financial Creditor. The two essential features of an Admission of an Application, under Section 7 of the Code are (a) Existence of Debt and (b) Default - In fact, an Adjudicating Authority / Tribunal s jurisdiction is restricted to determine, whether the Application is complete and whether, there is any Debt and Default, as per decision in Dr. H.N. Nagaraj vs. Edelweiss Asset Reconstruction Company Ltd. 2018 (7) TMI 968 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI . The proceedings, under the I B Code, 2016, are not a Litigation, to be decided by a Court of Law. It is not the Property, which is at the base of the Code. It is the Liquidity, which is the foundation for triggering the Corporate Insolvency Resolution Process. In the instant case, the Respondent / Corporate Debtor, had executed, at least Three kinds of Agreements, with the Petitioners (before the Adjudicating Authority / Tribunal) (a) Plot Allottee Agreement (b) Builtup Unit Allottee Agreement and (c) Apartment Allottee Agreement - One cannot ignore an important fact, that the second proviso to Section 7(1) of the I B Code, 2016, mentions that for financial creditors , who are allottees , under a real estate project , an application, for initiating Corporate Insolvency Resolution Process, against the Corporate Debtor, shall be filed jointly by not less than one hundred of such allottees, under the same real estate project or not less than ten percent of the total number of such allottees under the same real estate project, whichever is less. In the present case, the Appellant / Petitioner and other Petitioners, who filed CP (IB) No. 596 (PB) / 2021, under Section 7 of the I B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, before the Adjudicating Authority / Tribunal, for initiating Corporate Insolvency Resolution Process, against the Respondent / Corporate Debtor, are from different numerous projects, and they have not established their case, as Creditors of a class, concerning any particular project, registered with The Real Estate (Regulation Development) Act, 2016 (16 of 2016), with a view to fulfil the requirement of 10% or 100 Allottees , as envisaged, as per Section 7 (1) of the I B Code, 2016. This Tribunal, on a careful consideration of divergent contentions, advanced on either side, considering the facts and circumstances of the instant case, comes to an irresistible and consequent conclusion that the CP (IB) No. 596 (PB) / 2021, filed by the Appellant / Petitioner and other Petitioners, before the Adjudicating Authority / NCLT, Principal Bench, New Delhi, is prima facie not maintainable in the eye of Law. Further, this Tribunal, on going through the Impugned Order, dated 06.01.2023 in CP (IB) No. 596 (PB) / 2021, passed by the Adjudicating Authority / Tribunal, the views expressed in dismissing the CP (IB) No. 596 (PB) / 2021, is free from any legal flaws. Appeal dismissed.
Issues Involved:
1. Maintainability of the Section 7 Application under I & B Code, 2016. 2. Interpretation of "Real Estate Project" and "Allottee" under the I & B Code and RERA. 3. Applicability of the RERA registration requirements to the case. 4. Consideration of the Appellant's and Respondent's contentions. 5. Adjudicating Authority's jurisdiction and scope in deciding the application. Summary: 1. Maintainability of the Section 7 Application under I & B Code, 2016: The Appellant, representing the allottees, filed a Section 7 application u/s 7 of the I & B Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The application was dismissed by the Adjudicating Authority on the grounds that the allottees belong to different projects and do not meet the threshold of "100 allottees" or "10% of the total allottees" of the same real estate project. 2. Interpretation of "Real Estate Project" and "Allottee" under the I & B Code and RERA: The Appellant argued that the entire "Sushant Megapolis" project should be considered as a single real estate project. The Respondent contended that the project comprises multiple independent sub-projects, each with separate RERA registrations. The Tribunal referred to Section 5(8)(f) explanation (ii) of the I & B Code, 2016, which adopts the definitions from RERA. The Tribunal noted that the projects have different sanctioned plans and independent terms, thus supporting the Respondent's stance. 3. Applicability of the RERA registration requirements to the case: The Tribunal highlighted the explanation to Section 3(1) of RERA, which states that each phase of a project must be registered separately. The Respondent complied with this by obtaining separate RERA registrations for different phases of the "Sushant Megapolis" project. The Tribunal found that the Appellant failed to meet the threshold requirement for a single real estate project as required under Section 7 of the I & B Code, 2016. 4. Consideration of the Appellant's and Respondent's contentions: The Appellant argued that the Adjudicating Authority wrongly interpreted the provisions and that the delay in the project was not justified. The Respondent countered that the delays were due to factors beyond their control, including resistance from landowners, legal issues, and the COVID-19 pandemic. The Tribunal found the Respondent's explanations credible and noted that the Appellant did not establish a case as creditors of a class concerning any particular project. 5. Adjudicating Authority's jurisdiction and scope in deciding the application: The Tribunal reiterated that the Adjudicating Authority's role is to determine the existence of debt and default, not to act as a recovery forum. The Tribunal emphasized that the I & B Code, 2016, is aimed at resolving insolvency and not for debt recovery. The Tribunal upheld the Adjudicating Authority's decision, finding no legal flaws in dismissing the Section 7 application. Result: The appeal was dismissed, and the Tribunal upheld the Adjudicating Authority's decision that the application was not maintainable. The connected pending interlocutory applications were also closed.
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