The NCLAT, New Delhi Bench opined that 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. Further 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. 

Brief Facts: 

The present 3 appeals have been filed against the order vide which the Section 7 application of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”) was held to be maintainable. 

The appeals have been filed by the Appellants who were Respondents in Section 7 Application filed by the allottees of a Real Estate Project. 

Brief Background: 

The Respondents were allottees of the different units in the project and in pursuance of the allotment i.e. Builder Buyer’s Agreement, various payments were made to the Respondents allottees. The Project could not be completed, hence a Section 7 application was filed to initiate CIRP against 3 Respondents. 

It was prayed that a joint Insolvency Resolution Process be initiated against all the three Corporate Debtors. 

Contentions of the Appellants:

It was contended that a joint insolvency could not have been initiated as all three Respondents to the Section 7 Application were separate corporate entities. It was further argued that NCLT has no jurisdiction to consolidate the process of insolvency of three separate companies at the stage of admission of the petition. 

It was urged that there was no commercial effect of borrowing between the parties, hence, there was no financial debt. 

It was also argued that the threshold of 100 alloteess were not fulfilled. It was submitted that all the applicants who are party to the joint application ought to fulfil the eligibility of an allottee i.e. who fulfil the event of default and the application by them within the limitation. 

Contentions of the Respondents:

It was argued that all the three Appellants were inter- connected and were jointly developing the project. further, it was not necessary for all applicants who have joined in application should have claim of more than Rupees One Crore and their claims should be all within time 

 Observations of the Tribunal: 

It was observed that all three Appellants had joined hands to develop the project. It was opined that CIRP in the Real Estate Project has different contours and ramification as unless all the Corporate Debtors are included, the construction would not have been achieved. 

Hence, it was held that Section 7 against all three Appellants was maintainable. 

Further, it was noted that claim of 37 allottees whose claim were barred by limitation, six allottees whose claims were settled and five allottees whose claims were premature, satisfied the criteria provided in Second Proviso of Section 7(1). 

The Bench ruled that 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. Further 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. 

The decision of the Tribunal: 

Based on the aforementioned reasons, the appeals were accordingly dismissed. 

Case Title: Mist Avenue Pvt. Ltd. V. Nitin Batra & Ors. and other connected matters

Case No.: Company Appeal (AT) (Insolvency) No. 127 of 2023 and other connected matters

Coram: Justice Ashok Bhushan (Chairperson),  Barun Mitra (Technical Member)

Advocates for Appellant: Advs. Mr. Dhruv Goel, Mr. Krishnendu Datta, Mr. NPS Chawla, Mr. Surekh Kant Baxy, Ms. Mahima Shekhawat, Mr. Rahul, Mr. Abhijeet Sinha, Mr. Apoorv Agarwal, Ms. Vaishnavi Prakash

Advocates for Respondent: Advs Mr. Sahil Sethi, Mr. Samriddh Bindal and Mr. Vikash Kumar, 

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