NCLT dismisses application under IBC; appellants labeled as allottees; order set aside for compliance

The National Company Law Tribunal (NCLT) dismissed the application under Section 7 of the Insolvency and Bankruptcy Code (IBC) due to the appellants not meeting the minimum allottees requirement. The disputes were deemed contractual and beyond the Tribunal's jurisdiction. The appellants' classification as allottees instead of financial creditors was upheld based on investment agreements. The NCLT's order was set aside as it did not allow the appellants to comply with the Supreme Court's directive for a two-month grace period to rectify application defects under the amended IBC section. The matter was remitted for reconsideration.

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Issues Involved:
1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code (IBC) due to the amendment requiring a minimum number of allottees.
2. Whether the disputes raised by the petitioners are purely contractual and beyond the jurisdiction of the Tribunal.
3. Whether the appellants should be considered as financial creditors or allottees.
4. Compliance with the Supreme Court's judgment in Manish Kumar vs. Union of India regarding the amendment to Section 7 of the IBC.

Issue-Wise
Detailed Analysis:

1. Maintainability of the Application under Section 7 of the IBC:
The National Company Law Tribunal (NCLT) dismissed the application filed under Section 7 of the IBC by the appellants, citing that the appellants did not meet the required minimum number of allottees as per the amendment to Section 7 of the IBC. The amendment, effective from 13.03.2020, mandates that a petition must be filed by at least 100 allottees or 10% of the total allottees, whichever is less. The appellants, being less than 100, did not meet this criterion. The Tribunal dismissed the application as withdrawn due to non-compliance with this requirement.

2. Contractual Disputes Beyond Tribunal's Jurisdiction:
The NCLT observed that the disputes raised by the petitioners were purely contractual and could not be adjudicated under Section 7 of the IBC in summary proceedings. The Tribunal noted that the claims of the petitioners were based on contractual agreements and suggested that the petitioners should seek remedies under civil law before a competent court.

3. Financial Creditors vs. Allottees:
The appellants argued that they should be considered financial creditors under Section 5(8)(a) of the IBC, as they had invested money in the project under specific investment agreements. The NCLT, however, treated the appellants as allottees based on the terms of the investment agreements, particularly highlighting Clause 3(b) which provided the appellants with an option to purchase plots under the N.A. Plot Scheme. The Tribunal's classification of the appellants as allottees was contested by the appellants, who maintained that they were financial creditors due to the nature of their investment agreements.

4. Compliance with the Supreme Court's Judgment in Manish Kumar vs. Union of India:
The appellants contended that the NCLT did not provide them an opportunity to comply with the amended Section 7 of the IBC, as mandated by the Supreme Court in Manish Kumar vs. Union of India. The Supreme Court had upheld the amendment but granted a two-month period from the date of its judgment (19.01.2021) for petitioners to cure defects in their applications. The NCLT passed its order on 23.02.2021, before the expiry of this two-month period, thereby not allowing the appellants the opportunity to comply with the amended requirements.

Conclusion:
The judgment of the NCLT was set aside on the grounds that the appellants were not given the opportunity to cure the defects in their application as per the Supreme Court's directive in Manish Kumar vs. Union of India. The matter was remitted back to the NCLT for a fresh hearing, with instructions to consider the appellants' status as financial creditors and the time extension granted by the Supreme Court to comply with the amended Section 7 of the IBC. The NCLT's observation that the disputes were purely contractual was also deemed erroneous, given the specific terms of the investment agreements and the acknowledgment of debt by the Corporate Debtor.

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