Section 7 Petition Seeking ‘Joint’ CIRP Of Separate Corporate Entities Involved In Common Real Estate Project Is Maintainable: NCLAT Delhi

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that a petition under Section 7 of IBC, filed by allottees for joint CIRP of separate corporate entities involved in a common real estate project is maintainable. Three separate companies were engaged in the development of a real estate project. When the construction of units was not completed within time, the Allottees filed a Section 7 petition under IBC, seeking initiation of joint CIRP against all three companies involved. The NCLAT while upholding the maintainability of such Section 7 petition, has observed as under: “All the three Appellants being involved with the one single project in which the allottees have been allotted units, all are necessary ingredients of any resolution which may help the allottees to receive their units, in absence of any of the appellants in Corporate Insolvency Resolution Process, Resolution of project and revival of the Resolution of project is impossible………We are in agreement with the view expressed by the Adjudicating Authority that Section 7 Application filed against all the three appellants together is maintainable. The three appellants being part of one Common Real Estate Project and the Applicants of Section 7 Application being part of the said project they had every right to initiate Section 7 Application against all the three appellants together.” Background Facts On 21.08.2008, Anand Infoedge Pvt. Ltd. (“AIPL”) was allotted land measuring 100,980 sq. mts. situated at Sector 143 Noida (“Project Land”) by the New Okhla Industrial Development Authority (NOIDA) vide Lease Deed. After taking possession of the land, AIPL entered into Collaboration Agreement with Mist Avenue Pvt. Ltd. (“MAPL”) for development of a real estate project named Festival City (“Project”) on the Project Land. The Respondents (Allottees) entered into Builder Buyer Agreement with MAPL and were allotted units in the Project. In 2017, the first Collaboration Agreement was terminated and a second Collaboration Agreement was executed between AIPL and Mist Direct Sales Private Limited (“MDSPL”) for the development of Project. Despite of the two collaborations, the Project could not be completed within stipulated timelines. In 2021, Mr. Nitin Batra and several other allottees (Financial Creditors/Allottees) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking ‘joint’ initiation of Corporate Insolvency Resolution Process (“CIRP”) against AIPL, MAPL and MDSPL. On 21.10.2022 the NCLT held the Section 7 petition to be maintainable and directed the application to be listed for hearing on 10.11.2022. AIPL, MACL and MDSPL (collectively, “Corporate Debtors/Appellants”) filed an appeal against order dated 21.10.2022 before the NCLAT. The Corporate Debtors argued that the NCLT does not possess jurisdiction to consolidate the CIRP of three different companies at the stage of admission of Section 7 petition. Issue Whether a joint petition under Section 7 of IBC is maintainable against three separate corporate entities? NCLT Verdict The Bench opined that all three Appellants (Corporate Debtors) had joined hands to develop the Project and each one of them had undertaken several responsibilities towards Allottees. However, none of them could successfully develop the Project. It was noted that the construction of the Project will not be achieved if joint insolvency is not initiated against all the three Corporate Debtors and the allottees would be put to severe loss and hardship. “CIRP in the Real Estate Project has different contours and ramification. It is also on the record that at a time when 2nd Collaboration Agreement was entered between ‘Anand Infoedge Pvt. Ltd.’and ‘Mist Direct’, ‘Anand Infoedge Pvt. Ltd.’ has 99.99% shareholding in ‘Mist Direct’. All three companies who are impleaded as Respondents in Section 7 Application and Appellants before us are closely connected with the construction and implementation of the project. The developer who have issued allotment letter and executed Builder Buyer Agreement was acting on behalf of ‘Anand Infoedge Pvt. Ltd.’ who has given authority to ‘Mist Direct’.” It was observed that the three Corporate Debtors are intrinsically interwoven with the Project. MAPL and MDSPL were entrusted with development and sale of units and MAPL received the payment from the allottees towards allotment of units. “All the three Appellants being involved with the one single project in which the allottees have been allotted units, all are necessary ingredients of any resolution which may help the allottees to receive their units, in absence of any of the appellants in Corporate Insolvency Resolution Process, Resolution of project and revival of the...

Section 7 Petition Seeking ‘Joint’ CIRP Of Separate Corporate Entities Involved In Common Real Estate Project Is Maintainable: NCLAT Delhi

Pallavi Mishra

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Pallavi Mishra

Section 7 Petition Seeking ‘Joint’ CIRP Of Separate Corporate Entities Involved In Common Real Estate Project Is Maintainable: NCLAT Delhi

Pallavi Mishra

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Pallavi Mishra

This is a premium content
Available exclusively to
Our subscribers