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of <h1>Appellate Tribunal overturns order, remits case for fresh decision under Section 7</h1> The Appellate Tribunal set aside the Adjudicating Authority's order due to defects in the application under Section 7 of the I & B Code, 2016. The ... Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors (Homebuyers) - minimum threshold as required under Section 7 of the I & B, Code, 2016 (regarding minimum number of allottees), met or not - Respondents stated that total 39 Financial Creditors file the original application filed under Section 7 of the I & B Code, 2016 who were allotted 20 Real Estate Units of a Phase II having 170 units and therefore met the threshold limits. Whether, the Application under Section 7 of the I & B Code, 2016 was complete and without defects and the same was considered accordingly, by the Adjudicating Authority? - HELD THAT:- From the reading of the ingredients of Section 7 of the Code, it is obvious that, if an Application, filed under Section 7 of the I & B Code, 2016, is found to be incomplete, then the Adjudicating Authority, in compliance of proviso to Section 7 of the I & B Code, 2016 is required to issue Notice, and provide an opportunity to rectify the Defects, within seven days, failing which, the Petition, can be rejected. An incomplete or improper authorisation, may vitiates, the entire proceedings, rendering Legal Action, Devoid of Authority. It is therefore, felt that the rectification of defects, if any, is of utmost importance and cannot be ignored. This Tribunal, aptly points out the decision of the Hon’ble Supreme Court of India in M/S. SURENDRA TRADING COMPANY VERSUS M/S. JUGGILAL KAMLAPAT JUTE MILLS COMPANY LIMITED AND OTHERS [2017 (9) TMI 1566 - SUPREME COURT], wherein it is observed and held that the time provided for rectifying the Defective Application, under Section 9 (5) of the I & B Code 2016, is directory in nature, and in the given circumstances, the Adjudicating Authority (Tribunal), can provide more than 7 days’ time, to rectify the defect. The requirement of Section 7 of the Code, is that the Application, should be complete in all respects and in case of defects, the Adjudicating Authority (Tribunal), should provide an opportunity, to the Applicant, for rectifying these defects, before Accepting/ Rejecting of the Application - The Finding in the impugned order, is cryptic, bereft of any qualitative or quantitative discussions, smacks of any reasoned speaking order, is therefore, clearly Unsustainable. Even, the Respondents herein, have not brought out any details, to allay the doubts raised, by the Appellant herein, either in the Appeal or in the Reply/ Rejoinder in the Original Petition, before the Adjudicating Authority. This Tribunal, relevantly points out that it is not expressing its opinion on the merits or demerits of the case, and hence, remits back the case to the Adjudicating Authority (Tribunal), with directions to look into all factual and legal aspects and decide the Petition Denovo, on merits, by providing, adequate opportunity of Hearing, to the respective Parties, and also, by adhering to the Principles of Natural Justice. Appeal disposed off. Issues Involved:1. Completeness and defectiveness of the application under Section 7 of the I & B Code, 2016.2. Consideration of the project as a single or multiple phases for threshold requirements.3. Treatment of joint allottees as single or multiple allottees.Issue No. (I): Completeness and Defectiveness of the ApplicationThe Appellant argued that no authority letters were produced for several financial creditors, and the signatures on the authority letters appeared different from those on the Agreement for Sale and PAN Card. The Appellant also claimed that the financial creditors did not sign as required under Form 1 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016, making the petition defective. The Adjudicating Authority did not consider these objections on merit and concluded that the application was complete. The Appellate Tribunal noted that an incomplete or improperly authorized application might vitiate the proceedings. It emphasized the importance of rectifying defects and found that the Adjudicating Authority's order was unsustainable due to its lack of detailed discussion and reasoning.Issue No. (II): Single Project vs. Different PhasesThe Appellant contended that the Real Estate Project 'Prakruthi Solitaire' should be treated as a single project, not as separate phases, for calculating the threshold requirements under Section 7 of the I & B Code, 2016. The Appellate Tribunal did not delve into this issue due to the primary issue of defects in the application.Issue No. (III): Treatment of Joint AllotteesThe Appellant questioned whether joint allottees of an apartment should be treated as single or multiple allottees. The Appellate Tribunal did not address this issue in detail, as it focused on the primary issue of the application's completeness and defects.Conclusion:The Appellate Tribunal set aside the impugned order dated 20.10.2022, passed by the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench) due to the defects in the application and remitted the case back to the Adjudicating Authority for a de novo decision. The Adjudicating Authority was directed to consider all factual and legal aspects, provide adequate hearing opportunities to the parties, and adhere to the principles of natural justice, preferably within twelve weeks.
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