2021 (1) TMI 936 - Tri - IBC

Tribunal Dismisses Insolvency Petition; Emphasizes Code Not for Recovery or Forum Shopping, Allows Other Legal Remedies.

The Tribunal dismissed the petition filed under section 7 of the Insolvency and Bankruptcy Code, 2016, for failing to meet the threshold requirements for ... Maintainability of petition under section 7 by homebuyers - threshold requirement of minimum number of financial creditors (homebuyers) - Insolvency and Bankruptcy Code not a substitute recovery forum - forum shopping - enforcement of orders under the Real Estate (Regulation & Development) ActMaintainability of petition under section 7 by homebuyers - threshold requirement of minimum number of financial creditors (homebuyers) - The petition under section 7 filed by two homebuyers is not maintainable as they do not satisfy the minimum threshold prescribed for homebuyer financial creditors. - HELD THAT: - The Tribunal noted the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 permits collective filing by homebuyers only where the petitioning homebuyers constitute either 100 homebuyers or 10% of the total homebuyers, whichever is less. In the present case only two homebuyers have filed the petition and they do not amount to 10% of the class nor to 100 homebuyers. For this reason the petition fails at the threshold and cannot be entertained. [Paras 10]Petition dismissed for want of maintainability as the petitioners do not meet the statutory threshold for homebuyer financial creditors.Insolvency and Bankruptcy Code not a substitute recovery forum - enforcement of orders under the Real Estate (Regulation & Development) Act - forum shopping - The IBC cannot be used as a substitute forum for recovery where alternate orders under RERA are available and the petition is an attempt at forum shopping. - HELD THAT: - Relying on the settled principle that the Code is not intended to be a recovery forum, the Tribunal observed that the petitioners had obtained an order from K-RERA directing refund and related reliefs, which can be executed in the appropriate forum. The Tribunal emphasised that the availability of other remedies, even if more cumbersome, does not justify invoking the IBC when the statutory threshold for admission is not met, and that using CIRP proceedings to pursue recovery in such circumstances amounts to forum shopping. [Paras 11, 12]Tribunal refused to entertain the petition as a recovery mechanism and held the petition to be forum shopping.Maintainability of petition under section 7 by homebuyers - forum shopping - Liberty to file a fresh petition was declined where the present petition was dismissed for non-compliance with the statutory threshold and constituted forum shopping. - HELD THAT: - Having found the petition not maintainable and an attempt at forum shopping, the Tribunal declined the counsel's request for liberty to file a fresh petition. The Tribunal made clear that its dismissal does not preclude the petitioners from invoking other remedies available under law, but it will not permit refiling under the IBC on the present basis. [Paras 12, 13]Request for liberty to file a fresh petition refused; petition dismissed without costs, leaving open other remedies under law.Final Conclusion: C.P. (IB) No.01/BB/2021 dismissed as not maintainable because the petitioning homebuyers do not meet the minimum threshold required for collective proceedings under the IBC; the Tribunal held the Code is not a substitute recovery forum, declined liberty to refile, and left open the petitioners' remedies under other laws. Issues:Initiation of Corporate Insolvency Resolution Process under section 7 of the Insolvency and Bankruptcy Code, 2016 for default of financial debt.Analysis:The petitioners filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016 against the respondent, claiming a default of financial debt. The petition detailed agreements entered into between the parties for the purchase of property and the failure of the respondent to hand over possession as per the agreed timelines. The petitioners had obtained a loan from a bank for the purchase, and despite paying a significant sum, the respondent failed to fulfill its obligations. The petitioners also approached the Karnataka Real Estate Regulatory Authority, which passed an order directing the respondent to refund a specific amount with interest and discharge the bank loan. The respondent, however, failed to comply with this order, leading to the initiation of the insolvency resolution process.The Tribunal noted that the petition did not meet the threshold requirement for filing jointly as financial creditors under the Code. The Tribunal highlighted that the Code cannot be invoked solely for recovery purposes but should be used to initiate Corporate Insolvency Resolution Process for valid reasons. Referring to a Supreme Court case, the Tribunal emphasized that the Code is not a substitute for a recovery forum. Since the petitioners had already obtained an order from the Real Estate Regulatory Authority, the Tribunal ruled that the Code should not be used as a recovery forum when other avenues are available. The Tribunal dismissed the petition, stating that it was an attempt at forum shopping and did not meet the necessary criteria for admission under the Code.In conclusion, the Tribunal dismissed the petition as it failed to meet the minimum threshold requirements for admission under the Insolvency and Bankruptcy Code. The Tribunal clarified that the dismissal did not prevent the petitioners from seeking remedies under other laws to address their grievances. No costs were awarded in this matter.