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2023 (3) TMI 20 - AT - Insolvency and BankruptcyRejection of application filed under Section 7 of the Insolvency Bankruptcy Code 2016 - rejection primarily on the ground of not meeting the required minimum number of allottees as per amendment in Section 7 of the IBC - rejection also on the ground of contractual dispute - HELD THAT - On going through the investment agreement there is no difficulty in coming to the conclusion that appellants had invested money for a specified period and that too for some period they received interest as admitted by the Respondent/Corporate Debtor in para 4(j) of it affidavit in reply. The investment agreement was unambiguous for 24 months and in lieu charge was created to the plots. In such situation there was no reason for the adjudicating authority to treat the appellants as allottees. The Adjudicating Authority has further misunderstood the observation of the Hon ble Supreme Court in Manish Kumar case 2021 (1) TMI 802 - SUPREME COURT . It is evident that the fact remains that after the amendment in section 7 was introduced appeal was filed before the Supreme Court and Hon ble Supreme Court by its order dated 13.01.2020 while issuing notice directed to maintain status quo with respect to pending applications. Though the Hon ble Supreme Court finally upheld the amendment the Hon ble Supreme Court further extended time to cure the defects within two months from the date of order of Hon ble Supreme Court. On examination of the aforesaid direction of the Hon ble Supreme Court it is clear that the impugned order of the Adjudicating Authority fortfeits the right of the appellant to cure the defect in compliance with the order of Hon ble Supreme Court. It is not in dispute that before amendment under Section 7 was brought by the Govt of India the application under section 7 filed by the appellant was pending and during pendency of the said application the amendment travelled upto the Hon ble Supreme Court. Initially Hon ble Supreme Court directed to maintain status quo and finally on 19.01.2021 while upholding the amendment provided two months time from the date of the order of Hon ble Supreme Court for curing the defect. However the Adjudicating Authority before expiry of two months has passed the impugned order on 23.02.2021. Accordingly there is no reason to allow the impugned order to continue. Contractual dispute - HELD THAT - In view of specific averment made in the Investment Agreement and non-raising of dispute by the Corporate Debtor on debt there was no reason to record that there was contractual dispute - on this issue also the finding of the Adjudicating Authority is erroneous. The impugned order is hereby set aside and the matter is remitted back to the Adjudicating Authority to hear the parties afresh and pass appropriate order in accordance with law particularly considering the time extended by the Hon ble Supreme Court in Manish Kumar case and unequivocal Investment Agreement entered in between appellants and the Corporate Debtor - Appeal allowed.
Issues Involved:
1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code (IBC) due to the amendment requiring a minimum number of allottees. 2. Whether the disputes raised by the petitioners are purely contractual and beyond the jurisdiction of the Tribunal. 3. Whether the appellants should be considered as financial creditors or allottees. 4. Compliance with the Supreme Court's judgment in Manish Kumar vs. Union of India regarding the amendment to Section 7 of the IBC. Issue-Wise Detailed Analysis: 1. Maintainability of the Application under Section 7 of the IBC: The National Company Law Tribunal (NCLT) dismissed the application filed under Section 7 of the IBC by the appellants, citing that the appellants did not meet the required minimum number of allottees as per the amendment to Section 7 of the IBC. The amendment, effective from 13.03.2020, mandates that a petition must be filed by at least 100 allottees or 10% of the total allottees, whichever is less. The appellants, being less than 100, did not meet this criterion. The Tribunal dismissed the application as withdrawn due to non-compliance with this requirement. 2. Contractual Disputes Beyond Tribunal's Jurisdiction: The NCLT observed that the disputes raised by the petitioners were purely contractual and could not be adjudicated under Section 7 of the IBC in summary proceedings. The Tribunal noted that the claims of the petitioners were based on contractual agreements and suggested that the petitioners should seek remedies under civil law before a competent court. 3. Financial Creditors vs. Allottees: The appellants argued that they should be considered financial creditors under Section 5(8)(a) of the IBC, as they had invested money in the project under specific investment agreements. The NCLT, however, treated the appellants as allottees based on the terms of the investment agreements, particularly highlighting Clause 3(b) which provided the appellants with an option to purchase plots under the N.A. Plot Scheme. The Tribunal's classification of the appellants as allottees was contested by the appellants, who maintained that they were financial creditors due to the nature of their investment agreements. 4. Compliance with the Supreme Court's Judgment in Manish Kumar vs. Union of India: The appellants contended that the NCLT did not provide them an opportunity to comply with the amended Section 7 of the IBC, as mandated by the Supreme Court in Manish Kumar vs. Union of India. The Supreme Court had upheld the amendment but granted a two-month period from the date of its judgment (19.01.2021) for petitioners to cure defects in their applications. The NCLT passed its order on 23.02.2021, before the expiry of this two-month period, thereby not allowing the appellants the opportunity to comply with the amended requirements. Conclusion: The judgment of the NCLT was set aside on the grounds that the appellants were not given the opportunity to cure the defects in their application as per the Supreme Court's directive in Manish Kumar vs. Union of India. The matter was remitted back to the NCLT for a fresh hearing, with instructions to consider the appellants' status as financial creditors and the time extension granted by the Supreme Court to comply with the amended Section 7 of the IBC. The NCLT's observation that the disputes were purely contractual was also deemed erroneous, given the specific terms of the investment agreements and the acknowledgment of debt by the Corporate Debtor.
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