Investors Can't Be Considered As Allottees In Absence Of “Agreement To Sell” Or “Allotment Letter”: NCLT Delhi

The National Company Law Tribunal (“NCLT”), Mumbai bench of Shri Sanjiv Dutt (Technical Member) and Shri K.R. Saji Kumar (Judicial Member) dismissed an interlocutory application filed by investors of a corporate Debtors, seeking impleadment as allottees in the real estate project. The Tribunal held that in the absence of an “agreement to sell” or an “allotment letter” investors can't be considered as allottees under the Insolvency and Bankruptcy Code, 2016 (“the code”). Background Facts: The Applicant, Mrs. Sujata Shekar Shah along with others, filed an Interlocutory Application (IA) seeking impleadment as allottees in a company petition initiated for initiation of Insolvency Proceedings under Section 7 against the Corporate Debtor, Mirador Construction Private Limited. The applicants claimed to have invested Rs.4,71,67,7361 in the Corporate Debtor's real estate project "Oasis Avani”. The investment was made through various investment agreements, under which the Corporate Debtor was required to repay the invested amount along with interest within a period of 24 months. In response, the Corporate Debtor contended it had made several attempts to make a settlement with the investors. It had offered them flat in other real estate projects and also offered reserved plots of land, both of which were denied by the Applicants. Findings: The Tribunal noted that the insolvency proceedings were initiated on 03.06.2019 by Mrs. Sujata Shekhar Shah on behalf of 14 Applicants. Pursuant to which, the interlocutory application was filed for impleadment of applicants as allottees in order to meet the threshold of under Section 7 of the Code, as amended. The amendment to Section 7(1) IBC, mandated that “an application for initiation of insolvency process by real estate allottees must be filed by filed by at least 100 allottees or 10% of the total allottees, whichever is less. Initially, the Tribunal dismissed the petition, holding that the number of allottees were lesser than the required limit. However, the Applicants challenged this order before the NCLAT. Subsequently, the NCLAT observed that the Tribunal had wrongly dismissed the petition and clarified that the Investment Agreement indicated that the appellants were investors and not homebuyers. Thus, the matter was sent back to the Tribunal for reconsideration. Upon reconsideration, the Tribunal examined the investment agreements and observed that the Applicants had provided funds for the project “Oasis Avani” and various Investment Agreements were entered into. As per the agreements, the Corporate Debtor had to return the amount in 2 years. Thus, it was clear that the Applicants were investors rather than “allottees” in the project “Oasis Avani” being developed by the Corporate Debtor. The tribunal noted that as per Section 2(d) of the Real Estate (Regulation and Development) Act, 2016, an "allottee" is defined as a person to whom a plot, apartment, or building has been allotted or sold by the promoter and only those are included who have a proper allotment letter. However, the Applicants neither had any allotment letter or an agreement to sell a plot or apartment with the Corporate Debtor. Therefore, as per the definition of “allottee” and in absence of “Agreement to Sell” or 'Allotment Letter”, the applicants can't be impleaded as allottees for initiation of insolvency proceedings under Section 7 of the Code. As, they have invested money in the real estate project of the Corporate Debtor their investment has a commercial effect of borrowing. Consequently, the impleadment application was dismissed by the Tribunal. Case Title: Sujata Shekhar Shah & Ors. V/s Mirador Construction Pvt. Ltd. Case Number: IA(I.B.C)/3892(MB) 2024 IN C.P. (IB)/2054(MB)2019 Judgement Date: 08.05.2025 Applicant/FC: Adv. Rohan Agarwal a/w Adv.Umang Thakar i/b Desai & Diwanji Respondent/CD: Adv. Mahlaqa M. Ladiwala Click Here To Read/Download The Order

Investors Can't Be Considered As Allottees In Absence Of “Agreement To Sell” Or “Allotment Letter”: NCLT Delhi

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