Joint Section 7 application upheld against three entities in common real estate project despite individual threshold concerns

NCLAT Principal Bench upheld maintainability of joint Section 7 application against three separate corporate entities involved in a common real estate project. The tribunal held that all three companies were intrinsically interwoven with the project, making joint application permissible as resolution would be impossible without all entities. Regarding threshold requirements, NCLAT followed SC precedent in Manish Kumar, ruling that Rs. 1 crore default need not exist against each applicant individually - collective default suffices. The tribunal clarified that limitation periods for some applicants being expired does not affect maintainability if overall default exceeds threshold and is within limitation. Appeal dismissed, confirming Section 7 application's maintainability.

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Issues Involved:
1. Maintainability of Joint Application under Section 7 against Multiple Corporate Debtors
2. Threshold Requirement under Section 7 of IBC
3. Validity of Claims and Limitation Period

Summary:

Issue 1: Maintainability of Joint Application under Section 7 against Multiple Corporate Debtors
The Tribunal examined whether a joint application under Section 7 of the Insolvency and Bankruptcy Code (IBC) against three separate corporate entities''Anand Infoedge Pvt. Ltd.', 'Mist Avenue Pvt. Ltd.', and 'Mist Direct Sales Pvt. Ltd.''is maintainable. The Tribunal noted that the three entities were intrinsically interwoven in the development of a single real estate project, 'Festival City.' The corporate debtors had entered into collaboration agreements and were jointly responsible for the project's development and sale of units. The Tribunal concluded that a consolidated insolvency resolution process is necessary for the project's resolution and revival, thus upholding the maintainability of the joint application.

Issue 2: Threshold Requirement under Section 7 of IBC
The Tribunal addressed whether the Section 7 application filed by the allottees met the threshold requirement of being filed jointly by not less than 100 allottees or 10% of the total number of allottees under the same real estate project. The Tribunal confirmed that the application was filed by 115 unit holders, satisfying the threshold requirement. The Tribunal referred to the Supreme Court's judgment in "Manish Kumar vs. Union of India & Anr." which clarified that the threshold requirement must be fulfilled at the time of filing the application and that the existence of a default of Rs. 1 Crore is sufficient for initiating the insolvency process.

Issue 3: Validity of Claims and Limitation Period
The Tribunal examined the objections raised by the appellants regarding the validity of claims, including issues of limitation, premature claims, and settled claims. The Tribunal held that the right to sue continues for the allottees due to the ongoing breach of contract by the corporate debtors, who failed to complete the project and deliver possession. The Tribunal also referenced the Supreme Court's judgment in "Samruddhi Cooperation Housing Society Ltd. vs. Mumbai Mahalaxmi Construction Pvt. Ltd." which supported the view that the breach of contract is continuous. The Tribunal concluded that the claims of the allottees were valid and within the limitation period, thus fulfilling the threshold requirement under Section 7 of the IBC.

Conclusion:
The Tribunal upheld the Adjudicating Authority's order, confirming the maintainability of the joint application under Section 7 and the fulfillment of the threshold requirement. The appeals were dismissed.

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