When Number Of Allottees Disputed, NCLT To Decide S.7(1) Compliance Prior To Admission : NCLAT Delhi

The Bench has set aside a NCLT order whereby insolvency proceedings were initiated against a real estate developer company, without deciding the issue pertaining to compliance of Section 7(1) of IBC.

Background Facts

Homebuyers of the project developed by K.D. Lite Developers Private Limited (“Corporate Debtor”) filed a petition under Section 7 of IBC, seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor. The petition was jointly filed by less than 21 homebuyers.

The second proviso to Section 7(1) of IBC requires that when homebuyers file a petition under Section 7 of IBC, then the same must be filed jointly by either 10% of the total allottees or by not less than 100 allottees, whichever is less.

Parikshit Madanmohan Sharma (“Appellant”) opposed the petition while contending that the total number of allottees in the Project are 209 and the Section 7 petition must be filed by at least 21 homebuyers i.e. 10% of total allottees. However, the petition has been filed by less than 21 homebuyers and is therefore not compliant of second proviso to Section 7(1) of IBC.

The NCLT admitted the petition and initiated CIRP on 08.02.2023.

The Appellant filed an appeal before NCLAT against the order dated 08.02.2023. The Appellant submitted that issue of limitation and incompliance of Section 7(1) was raised before the NCLT, but the Order dated 08.02.2023 is a non-speaking order which does not contain any finding to that effect.

NCLAT Verdict

The Bench noted that as per the Homebuyers the total number of allottees are 124 whereas the Appellants contends that there are 209 allottees. The question of actual number of allottees should have been decided first by the NCLT.

While holding the NCLT order to be non-speaking and against principles of natural justice, the Bench observed as under:

“In such a circumstance, where there is a dispute on facts as to whether the number of allottees are 209 as stated by the appellant or 124 as stated by the Respondent nos. 1 to 20 except 9 and 12, the Tribunal should have decided this question of fact first then the question of law but there is no discussion in regard to this fact as to whether the contention of the appellant is correct or not. In such circumstances, it is apparent that the impugned order is non-speaking and against the principle of natural justice. Therefore, the present appeal is hereby allowed.”

The Bench has set aside the order dated 08.02.2023 and remanded the matter to NCLT to decide it again after hearing all the parties and by passing a speaking order.

Case title: Parikshit Madanmohan Sharma v M.S. Gopikrishnan & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 206 of 2023

Counsel For Appellant: Mr. Arun Kathpalia, Sr. Advocate with Mr. Viraj Praekh, Mr. Nitin Mishra, Ms. Mitali Gupta, Mr. Himanshu Vij, Advocates.

Counsel For Respondents: Mr. Vikas Mehta, Mr. Vishesh Kalra, Mr. Treenok Guha, Mr. Ayush Chaturvedi, Advocates for R- 1- 8, 10, 11, 13 to 20. Mr. Milan Negi, Mr. Nikhil Jha, Advocates for R21 & 22. Mr. Abhhirup Dasgupta, Mr. Ishaan Duggl, Ms. Ruchi Goyal, Advocates for Intervenor.

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