Petitioners' Claims Dismissed for Not Meeting Allottee Criteria

The Tribunal concluded that the Petitioners did not qualify as allottees under the Real Estate (Development & Regulation) Act and thus failed to meet the threshold required to initiate Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code. The petition was rejected, and relief sought under the Indian Contract Act was deemed outside the Tribunal's scope. The Petitioners' claims regarding non-repayment of debt and breach of contract were not upheld.

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Issues Involved:
1. Failure to abide by the terms of the Letter of Allotment.
2. Failure to register the building under the Real Estate (Development & Regulation) Act, 2016.
3. Failure to construct the building, leading to frustration of the contract.
4. Violation of Section 3 of the Real Estate (Regulations and Development) Act, 2016.
5. Failure to repay the debt amounts under the Indian Contract Act, 1872.
6. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Failure to Abide by the Terms of the Letter of Allotment:
The Petitioners alleged that the Corporate Debtor failed to abide by the terms of the Letter of Allotment dated 31 July 2015 for Flats No. 1601 and 1604. The Petitioners paid substantial amounts towards these flats, which were acknowledged by the Corporate Debtor. Despite assurances, the construction of the building did not commence, leading to frustration of the contract.

2. Failure to Register the Building under the Real Estate (Development & Regulation) Act, 2016:
The Corporate Debtor registered only Wing ‘A’ and Wing ‘B’ of the project under RERA but failed to register Wing ‘E’, where the Petitioners' flats were located. This non-registration was in violation of Section 3 of the RERA, 2016, which mandates registration before any sale or offer for sale.

3. Failure to Construct the Building, Leading to Frustration of the Contract:
The Corporate Debtor's failure to commence construction of Wing ‘E’ led to the frustration of the contract. The Petitioners argued that under Section 65 of the Contract Act, the consideration received must be repaid once a contract is frustrated. The Corporate Debtor initially agreed to repay the amount but later refused, leading to a breach of contract.

4. Violation of Section 3 of the Real Estate (Regulations and Development) Act, 2016:
The Corporate Debtor violated Section 3 of the RERA by accepting advance monies from the Petitioners without registering Wing ‘E’. This act was illegal and attracted penal actions under Section 59 of RERA, 2016.

5. Failure to Repay the Debt Amounts under the Indian Contract Act, 1872:
The Petitioners claimed that the Corporate Debtor failed to repay the debt amounts of Rs. 88,02,792/- despite receiving a demand notice under Section 8 of the IBC. The non-performance of the contract and non-repayment constituted a breach under Sections 55, 56, and 73 of the Indian Contract Act, 1872.

6. Maintainability of the Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Corporate Debtor argued that the Petitioners did not meet the threshold prescribed under the IBC for financial creditors who are allottees under a real estate project. The Petitioners contended they were 100% allottees in Wing ‘E’ and thus met the threshold. However, the Tribunal found that since Wing ‘E’ was not registered under RERA, the Petitioners could not be considered allottees under the IBC. The Tribunal also noted that the Petitioners failed to provide substantial proof of their intent to take possession of the flats, suggesting they might be speculative investors.

Conclusion:
The Tribunal concluded that the Petitioners did not qualify as allottees under the RERA and thus failed to meet the threshold required to initiate a CIRP under Section 7 of the IBC. The petition was rejected, and the relief sought under the Indian Contract Act, 1872, was deemed outside the scope of the Tribunal.

Order:
The Petition bearing CP (IB) 1726/MB/C-II/2017 filed by the Petitioners under Section 7 of the IBC for initiating CIRP against the Corporate Debtor was rejected.

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