NCLT Chandigarh - Minimum Threshold Will Be Applicable To Any Amount Raised From Allottee

Background Fact

The Applicant (Financial Creditor/Allottee) purchased 8 commercial units in the project of the Respondent (Corporate Debtor/Promotor), and the allocation of all 8 units was provided to the applicant through 8 distinct Builder - Buyer Agreements.

According to the stipulated conditions outlined in clause 12, the respondent was obligated to pay applicant a monthly sum of Rs.2,60,000/- plus 18% G.S.T for the 8 Units, amounting to a total of Rs.3,06,800/-.

The respondent paid the applicant the monthly assured amount of Rs. 3,06,800 for all 8 Units until September 2018. However, after that, the respondent arbitrarily stopped the payment.

As per the terms, the applicant raised the payment demand for the months of October and November 2018, however, the respondent did not pay the amount to applicant and stated that they are undergoing some internal transition, thus there shall be some delay in the payments, and same shall be resumed in sometime.

After continuous failure by the respondent to pay the amounts, the applicant, through his Counsel, sent a Legal Notice dated 28.08.2019 to the respondent, demanding a sum of Rs.33,74,800/-, which was the due amount from October 2018 until the end of July 2019. However, the applicant received no reply from the respondent regarding the notice.

The applicant filed an application under Section 7 of the IBC to initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent.

NCLT Verdict

The NCLT rejected the applicant's application to initiate Corporate Insolvency Resolution Process (CIRP) proceedings against the respondent, holding that in the present case, the applicant falls under the category of Allottee within a real estate project under section 5(8)(f) of the IBC. Thus, to initiate CIRP proceedings against the respondent, the applicant should meet the criteria of the minimum threshold as prescribed under the IBC.

The NCLT further held that the requirement of satisfying the minimum threshold will be applicable to any amount raised from an allottee, irrespective of whether the allottee is alleging the default of interest or the principal amount.

NCLT relied on the on the NCLT New Delhi Principal Bench decision in the case of Surinder Kumar Jain and Ors. vs. M/s Orris Infrastructure Pvt. Ltd [CP (IB) – 319(PB)/2020] wherein it was held that the requirement of satisfying the minimum threshold will be applicable to any amount raised from an allottee irrespective of the fact whether the said allottee is alleging the default of interest or the principal amount.

NCLT also relied on the NCLAT decision in the case of Dheeraj Raikhy v. Raheja Developers Ltd. [Company Appeal (AT) (Insolvency) No.1336 of 2023 & I.A. No.4741 of 2023], wherein it was held that the status of the party, i.e., allottee, does not change. Therefore, the Adjudicating Authority has rightly concluded that the threshold not being met, one allottee cannot trigger the insolvency.

In conclusion, the NCLT dismissed the Section 7 application filed by the applicant for the initiation of CIRP against the respondent, holding that the applicant will fall under the category of allottee. Thus, it should comply with the minimum threshold prescribed under the IBC.

Case: Mr. Tek Chand Narula vs M/s Vatika Ltd.

Citation: CP (IB) No.528/Chd/Hry/2019 & IA No. 302/2022

Counsel for applicant: Ms. Sonal Anand

Counsel for respondent: Mr. Anand Chhibar, Senior Advocate with Ms.Swati Vashisht and Mr. Vaibhav Sahni

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