Joint Insolvency Applications in Real Estate and Fulfillment of Threshold under IBC: Limitation and Validity of Claims

Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

Reported as:

2023 (11) TMI 782 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI

Case Background

The judgment in question revolves around three appeals filed against an order by the National Company Law Tribunal (NCLT), New Delhi, which declared an application under Section 7 of the Insolvency and Bankruptcy Code (IBC) as maintainable​​. The appeals were filed by corporate entities involved in a real estate project, who were respondents in the Section 7 application filed by the allottees of the project​​.

Key Legal Issues

1. Maintainability of Joint Application Under Section 7: The central issue was the maintainability of a joint application filed against three separate corporate entities involved in the real estate project.
2. Fulfillment of Threshold under IBC: The appeals challenged whether the Section 7 application filed by the allottees met the threshold requirements (default of more than Rs. 1 Crore) as prescribed under the IBC.
3. Limitation and Validity of Claims: The determination of whether the claims of the allottees were within the limitation period and valid as per the criteria established in the IBC.

Detailed Analysis

1. Joint Application Maintainability: The Tribunal examined the nature of the transactions and agreements involved in the real estate project. The collaboration agreements and the subsequent development of the project were intricately linked among the three appellants. This interconnection was deemed sufficient to treat the joint application as maintainable. The Tribunal relied on precedents like the MRS. MAMATHA VERSUS AMB INFRABUILD PVT. LTD. & ORS. - 2019 (1) TMI 1503 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI case and others, emphasizing the uniqueness of real estate projects in such contexts​​.

2. Threshold Fulfillment under IBC: The appeals raised questions about the number of allottees required to initiate the CIRP under the amended Section 7 of the IBC. The Tribunal analyzed the claims and concluded that despite objections regarding limitation and the validity of certain claims, the threshold of 100 allottees was met. This conclusion was reached by considering the ongoing nature of the breach of contract, as the project remained incomplete, and the applicability of the judgments in cases like Samruddhi Cooperation Housing Society Ltd. Vs. Mumbai Mahalaxmi Construction Pvt. Ltd​​.

3. Consideration of Limitation and Validity of Claims: The Tribunal refuted the argument that claims barred by limitation should not be counted towards the number of allottees. It highlighted that the continuous breach of contract, in this case, led to a continuous cause of action, thereby extending the limitation period. This was in line with Section 22 of the Limitation Act and the principles laid down in the SAMRUDDHI CO-OPERATIVE HOUSING SOCIETY LTD VERSUS MUMBAI MAHALAXMI CONSTRUCTION PVT. LTD - 2022 (1) TMI 1404 - SUPREME COURT case​​​​.

Conclusion

The Tribunal upheld the maintainability of the joint application under Section 7 against the three appellants, considering their interconnected roles in the development of the real estate project. It also affirmed that the threshold requirement under the IBC was met and that the claims of the allottees were valid despite challenges based on limitation.

Full Text:

2023 (11) TMI 782 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI