NCLT Rightly Rejects Sec. 7 Plea Filed by Real Estate Allottee for Failing to Meet Threshold Requirements | NCLAT

Case Details: Rita Malhotra v. Orris Infrastructure (P.) Ltd. - [2024] 164 taxmann.com 232 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Ashok Bhushan, Chairperson, Barun Mitra & Arun Baroka, Technical Member
  • Rajat Malhotra, Sunil Malhotra, Madhu K. Singh, Ms Priya Mishra & Amit Agnihotri, Advs. for the Appellant.
  • P. Nagesh, Sr. Adv. Ms Ranjana Roy Gawai, Shikher Upadhayay, Prateek Gupta, Akshay Sharma & Pervinder, Advs. for the Respondent.

Facts of the Case

In the instant case, the Respondent (i.e. the corporate debtor) floated a scheme to develop/construct a commercial building/complex. Under an assured investment return plan, the appellants applied for office space under an assured return scheme and entered into an agreement with the corporate debtor, which guaranteed a monthly assured return on investment.

However, the corporate debtor breached the agreement and failed to pay towards the return on investment; a petition under section 7 of the IBC was filed by the appellants against the corporate debtor.

However, a settlement was reached between the parties, and the petition was withdrawn in view of cheques issued for payment till June 2019, but the corporate debtor defaulted again, leading appellants to revive the CIRP petition.

However, the NCLT, vide the impugned order, rejected the said application, stating that only 2 allottees out of 504 allottees filed the application, and 366 allottees were under the assured return scheme. Therefore, the appellants did not satisfy the threshold for filing an application under section 7 of the IBC.

The appellant challenged the NCLT’s order on the ground that they were claiming an amount that had become due and payable on account of the MAR Plan and, therefore, the threshold provided under the second proviso to section 7(1) was not applicable.

It was noted that the NCLT had correctly held that even a commercial space or unit allotted to the Assured Returns Class of Creditors was also covered in the ambit of an allottee. Further, the appellants happen to be part of the Assured Returns Class of Creditors. They continue to belong to the substratum of ‘allottees’ and, therefore, continue to be governed by the threshold limit prescribed under the second proviso to Section 7(1) of the Act.

NCLAT Held

The NCLAT held that since the application was filed before IBC Amendment Act 1 of 2020 had come into effect, consequently upon amendment, the appellant (i.e. the financial creditors), who were allottees under a real estate project, were required to meet threshold criteria of not being less than 100 such creditors in the same class or not being less than 10% of the total number of creditors in the same class, whichever was less, to qualify to file section 7 application against the corporate debtor.

Further, the NCLAT held that since the parameter had not been complied with, thereby making the section 7 application non-maintainable, the impugned order passed by the NCLT rejecting the section 7 application was justified.

List of Cases Reviewed

• Ms. Rita Malhotra v. Orris Infrastructure (P.) Ltd. [2023] 154 taxmann.com 471 (NCLT – New Delhi) (para 19) affirmed.