The NCLT, Mumbai Bench expounded that any agreement cannot alter the nature of the transaction and hence, the financial creditor will remain to be an allottee. 

In the present case, the Corporate Debtor could not start the construction for flat and subsequently the amount received for purchase of flat was converted to a loan that had to be repaid. The Tribunal noted that the actual nature of transaction was between the parties as builder and allottee. However, in lieu of Section 5(7) read with 5(8)(f) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”), it was propounded that the CIRP was to be filed by minimum of 100 of allottees under the same real estate project. In the present case, a single allottee had commenced the CIRP.

Brief Facts:

The present Interim Application has been filed under Section 60(5) of the IBC  by the Applicant (Respondent in the main petition) for bringing on record an order passed by the NCLAT vide which order of admission was set aside and the case was remanded back to the NCLT. 

Brief Background:

The main petition was filed under Section 7 of the IBC for initiating Corporate Insolvency Resolution Process (CIRP) against the Applicant. The Corporate Debtor could not start the construction for flat and subsequently the amount received for purchase of flat was converted to a loan that had to be repaid. 

The company petition was admitted by the NCLT against which an appeal was preferred. The NCLAT remanded the matter back to NCLT on the ground that NCLT did not look at third proviso to Section 7(1) adequately. 

Hence, the present matter. 

Observations of the Tribunal:

The Tribunal noted that the actual nature of transaction was between the parties as builder and allottee. It was opined that any agreement cannot alter the nature of the transaction and hence, the financial creditor will remain to be an allottee. 

However, in lieu of Section 5(7) read with 5(8)(f) of the IBC, it was propounded that the CIRP was to be filed by minimum of 100 of allottees under the same real estate project. In the present case, a single allottee had commenced the CIRP. 

The decision of the Tribunal:

On the basis of the aforementioned analysis, the interim application was allowed and the main petition of Section 7 was dismissed. 

Case Title: Shreepati build Infra Investment Limited v. Abhiyan Developers Private Limited

Case No.: IA/730/2022

Coram: Shri Kuldip Kumar Kareer (Hon’ble Judicial Member), Shri Shyam Babu Gautam (Hon’ble Technical Member)

Advocates for the Financial Creditor: Advs. Rohit Gupta, Kritika Sethi

Advocates for the Corporate Debtor: Advs. Cyrus Ardeshir, Anuj Tiwari, Ashwini Gawde

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