2019 (1) TMI 1503 - AT - Insolvency and Bankruptcy

Appellate Tribunal Overturns NCLT Decision on Joint Application

Mrs. Mamatha Versus AMB Infrabuild Pvt. Ltd. & Ors.

Mrs. Mamatha Versus AMB Infrabuild Pvt. Ltd. & Ors. - TMI Issues Involved:1. Joint maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against two Corporate Debtors.2. Validity of the collaboration agreement and memorandums of understanding between the parties.3. Adherence to the procedural requirements under the Insolvency and Bankruptcy Code, 2016.Detailed Analysis:1. Joint Maintainability of an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Two Corporate Debtors:The primary issue addressed was whether an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) can be jointly maintained against two Corporate Debtors. The National Company Law Tribunal (NCLT) had initially rejected the application on the grounds that the I&B Code does not provide for a joint petition against two Corporate Debtors, particularly when they have collaborated for a Joint Venture. The Tribunal observed that the payment was made to one Corporate Debtor while the insolvency process was sought against both. Additionally, the application did not adhere to the required format, notably failing to name the Insolvency Resolution Professional, which is a mandatory requirement under Clause 3 of Sub-Section 3 of Section 7 of the I&B Code.2. Validity of the Collaboration Agreement and Memorandums of Understanding Between the Parties:The judgment delves into the Collaboration Agreement dated 3rd May 2013 between AMB Infrabuild Pvt. Ltd. (Owner) and Earth Galleria Pvt. Ltd. (Developer). This agreement facilitated the development of a commercial complex on a piece of land owned by AMB Infrabuild Pvt. Ltd. The agreement authorized the Developer to undertake planning, designing, construction, development, selling, and marketing of the project. The Developer was also empowered to advertise the project, indicating it as a joint venture project with the Owner. Furthermore, a Memorandum of Understanding dated 20th June 2014 between Earth Infrastructure Ltd. (Developer) and the Appellant for booking a cineplex was highlighted, where the Appellant paid an advance in terms of the agreement. Another Memorandum of Understanding dated 6th February 2016 between the Appellant and the Respondents (Developer and Land Owner) was also discussed, wherein the Developer and Land Owner were collectively referred to as the 'Company' and the Appellant as the 'Allottee.'3. Adherence to the Procedural Requirements under the Insolvency and Bankruptcy Code, 2016:The judgment scrutinizes the procedural adherence under the I&B Code, particularly the requirement to name the Insolvency Resolution Professional in the petition. The Tribunal initially found the petition deficient in this regard. However, the Appellate Tribunal noted that the collaboration agreement and subsequent memorandums of understanding indicated a joint venture project, thus justifying a joint application against both Corporate Debtors. The Appellate Tribunal emphasized that if two Corporate Debtors collaborate and form an independent corporate unit for developing land and allotting premises, a Section 7 application is maintainable against both jointly.Conclusion:The Appellate Tribunal concluded that the NCLT failed to consider the joint venture nature of the project and wrongly held that the Corporate Insolvency Resolution Process could not be initiated against two Corporate Debtors. The judgment was set aside, and the case was remitted to the NCLT, New Delhi Bench, for admission if the record was complete. The Tribunal also allowed the Respondents an opportunity to settle the matter before admission. The appeal was allowed with no cost.