Home Buyers Have No Right To File Intervention Application Prior To Admission Of Section 7 Petition: NCLAT Delhi

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Shri Naresh Salecha (Technical Member), while adjudicating an appeal filed in Vikash Kumar Mishra & Ors. v Orbis Trusteeship Service Pvt. Ltd. & Anr., has held that an intervention application filed by the homebuyers in petition under Section 7 of IBC is not maintainable before such petition gets admitted. The right to file such application would accrue after admission of the Section 7 petition. The homebuyers of ‘Sikka Kaamna Greens’ project had filed an intervention application supporting the case of the Corporate Debtor (Builder) that the petition under Section 7 of IBC must be rejected. Both NCLT and NCLAT rejected the application on grounds of maintainability.

BACKGROUND FACTS

M/s. Kindle Infraheights Pvt. Ltd. (“Corporate Debtor”) is engaged in the business of real estate development and is raising the project named ‘Sikka Kaamna Greens’ situated at Sector -143, Noida, U.P. (“Project”).

M/s. Orbis Trusteeship Service Pvt. Ltd. (“Financial Creditor”) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor, over an alleged default of Rs. 268 Crores approximately.

While the petition was pending adjudication, four homebuyers (Appellants) who had booked flats in the Project, filed an intervention application in the Section 7 petition. The Appellants contended that on 12.12.2022 the ‘UP Real Estate Regulatory Authority’ passed the following order in their favour:

“The opposite party is ordered to return the original amount allotted to the complainants. OC /CC, by March 2023 after completing all the facilities in the unit as per the contract. Also ensure to give physical possession of the unit and get the due stamp duty registered as per rule.”

In the intervention application the home buyers supported the claim of the Corporate Debtor that the Section 7 petition must be rejected. The NCLT rejected the intervention application since it did not find any rationale behind filing and maintaining it.

The Homebuyers filed an appeal before the NCLAT against the NCLT order.

NCLAT VERDICT

The Bench placed reliance on Surinder Pal Singh & Ors. Vs. Spaze Towers Pvt. Ltd., Company Appeal (AT) (Ins) No. 354 of 2023, wherein the NCLAT had declined to entertain an intervention application filed by the homebuyers in Section 7 proceedings and had held that such an application is not maintainable until the Section 7 petition is admitted. However, the homebuyers were given liberty to file fresh application in the event the Section 7 petition gets admitted.

Further reliance was placed on Prayag Polytech Pvt. Ltd. v Hind Tradex Ltd., 2019 SCC Online NCLAT 1029, wherein the NCLAT held that “In that view of the matter, we are of the view that there is no requirement for intervention of any Directors or shareholders of the ‘Financial Creditor’ or any other party before admission of Application under Section 7 of IBC. If the application is admitted, it would be open to any aggrieved party to move before this Appellate Tribunal.”

The Bench held that the decision in Surinder Pal Singh & Ors. Vs. Spaze Towers Pvt. Ltd. and Prayag Polytech Pvt. Ltd. v Hind Tradex Ltd. squarely answers the issue. The Bench held that no intervention application by the homebuyers is maintainable until the petition under Section 7 of IBC gets admitted. The right to file such application would accrue after admission of the Section 7 petition.

The appeal has been dismissed.

Case Title: Vikash Kumar Mishra & Ors. v Orbis Trusteeship Service Pvt. Ltd. & Anr.

Case No.: Comp. App. (AT) (Ins) No. 246 of 2023

Counsel For Appellants: Mr. Abhijeet Sinha, Mr. Piyush Singh, Mr. Akshay Srivastava, Ms. Heena Kochar, Advocates.

Counsel For Respondent: Mr. Krishnendu Datta, Sr. Advocate, Ms. Anindita Roy Chowdhury, Mr. Sushrut Garg, Ms. Neha, Advocates for R-1. Mr. Usman G. Khan, Advocate for R-2

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