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Issues: (i) Whether debt and default on part of the corporate debtor have been proved so as to initiate CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016; (ii) Whether the CIRP initiated against the corporate debtor ought to be confined to the project Raheja Shilas (Low Rise); (iii) Whether CIRP should be closed because allottees have received possession of their units; (iv) Whether intervention applications by financial creditors of other projects are entitled to prosecute their Section 7/9 applications independently.
Issue (i): Whether debt and default on part of the corporate debtor have been proved so as to initiate CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016.
Analysis: The Section 7 petition set out particulars in Part IV and supporting documents in Part V showing amounts paid, amounts claimed in default and dates of default for each allottee. The Adjudicating Authority found possession obligations were due in 2012-2014 with a six month grace, debt was acknowledged in communications, and default was continuing. Those findings were considered and not shown to be vitiated on appeal.
Conclusion: The Adjudicating Authority's finding that debt and default have been established is affirmed; initiation of CIRP under Section 7 is justified.
Issue (ii): Whether the CIRP initiated against the corporate debtor ought to be confined to the project Raheja Shilas (Low Rise).
Analysis: Precedents of this Tribunal and Supreme Court principles recognise that when allottees or financial creditors of a single real estate project initiate CIRP, the process should be project specific to protect stakeholder interests and avoid affecting distinct projects of the same developer. The facts show the Section 7 petition pertains to allotments in Raheja Shilas (Low Rise) only and other projects have separate stakeholders and approvals.
Conclusion: The impugned order admitting CIRP is modified to confine CIRP to the project Raheja Shilas (Low Rise) only; other projects are excluded from the scope of this CIRP.
Issue (iii): Whether CIRP should be closed because allottees have received possession of their units.
Analysis: Although occupancy certificates and possession of many units were obtained and handed over, certain disputes remain (including contested delay compensation calculations and outstanding project liabilities). Respondent financial creditors opposed closure. The Tribunal noted settlement and statutory withdrawal mechanisms exist for concluding CIRP.
Conclusion: No order for closure of the CIRP is made; if parties settle, respondents may apply for withdrawal under the statutory procedure (Section 12A of the Insolvency and Bankruptcy Code, 2016).
Issue (iv): Whether intervention applications by financial creditors of other projects are entitled to prosecute their Section 7/9 applications independently.
Analysis: The modification confining CIRP to the Raheja Shilas (Low Rise) project removes that CIRP as a bar to independent proceedings by creditors of other projects. Principle of project wise CIRP permits creditors of distinct projects to pursue separate remedies.
Conclusion: Financial creditors and institutions relating to other projects are free to prosecute their independent proceedings in accordance with law; the Adjudicating Authority may proceed to examine applications relating to other projects unimpaired by the modified order.
Final Conclusion: The appeal is disposed by modifying the Adjudicating Authority's order to confine the CIRP to the Raheja Shilas (Low Rise) project; the admission of CIRP on grounds of debt and default stands affirmed, CIRP is not closed, and creditors of other projects retain the right to pursue independent proceedings.
Ratio Decidendi: Where a Section 7 petition by allottees or financiers relates to a single real estate project, the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 is confined to that project and does not extend to other separate projects of the same corporate debtor.
Project-specific CIRP in real estate insolvency confined to one project, while debt, default and separate creditor proceedings were upheld.
A Section 7 petition based on allottee claims was supported by particulars of payment, default dates and acknowledgements, so debt and default were treated as established and CIRP was justified. The process was confined to the Raheja Shilas (Low Rise) project because project-specific real estate insolvency should not extend to distinct projects of the same developer, and other projects were excluded from the CIRP scope. CIRP was not closed merely because many units had been delivered, as disputes and liabilities remained; withdrawal would lie through the statutory procedure if the parties settled. Creditors of other projects could continue their independent proceedings unaffected by the modified order.
Initiation of Corporate Insolvency Resolution Process (CIRP) - debt and default on part of the corporate debtor - project-wise insolvency - independence of proceedings relating to other projects - Withdrawal of CIRP by settlement under Section 12A - Whether the Financial Creditors in a class in their Section 7 application being (IB)No.239(PB)/2023 have been able to prove debt and default on the part of the CD, so as to initiate CIRP against the CD? Whether the CIRP against the CD ought to have been confined to the project Raheja Shilas (Low Rise), in which project, Respondent Nos.1 to 43 Financial Creditor in a class had received the units? Proof of debt and default for initiation of CIRP - Admission of Section 7 petition against the Corporate Debtor on the ground of debt and continuing default. - HELD THAT: - Part-IV of Section 7 application, gives details pertaining to each of the Applicants and the amount in default. Part-IV of Section 7 application mentions total amount paid and the number of the unit allotted to each of the Applicants. For example, Vipul Jain and Rachna Jain unit No. is IF3-02 and the total amount paid is Rs. 59,07,450/-. In Column -1. In Column-2 of Part-IV, total amount claimed in default with respect to Vipul Jain and Rachna Jain mentioned as Rs. 1,87,48,141/- and date of start of default is mentioned as 06.03.2012. Accordingly, details with regard to all the Respondent – Financial Creditor in a class, the units allotted to them, the amount paid by them and the amount claimed to be in default are mentioned. In Part-V, copy of Allotment Letter, Agreement to Sell and copy of Statement of Account and calculations are mentioned. The Tribunal found that Part IV and Part V of the Section 7 application furnished particulars of allotment, amounts paid and amounts claimed in default, and that the Adjudicating Authority correctly concluded that possession was contractually due in 2012-2014 (with a six month grace) and that debt had been acknowledged by communications. On those findings, the initiation of CIRP was sustained as there was sufficient proof of debt and default to admit the Section 7 application. [Paras 13] The Adjudicating Authority's admission of the Section 7 petition was upheld on the ground that debt and default were established. Whether the CIRP ought to be confined to the Raheja Shilas (Low Rise) project and whether other projects of the Corporate Debtor are affected. - HELD THAT: - In the judgment of this Tribunal in Flat Buyers Association Winter Hills [2020 (2) TMI 1409 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] was quoted with approval by this Tribunal, where this Tribunal has held that in a CIRP against the real-estate company, if allottees/ Financial Creditors or Financial Institutions are Operational Creditors of one project have initiated a CIRP against the CD, it should be confined to the particular project and it cannot affect any other project. Thus, the above proposition of law as laid down in Flat Buyers Association Winter Hills was again been reiterated in the judgment of Gagan Tandon.[2026 (1) TMI 661 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI.] Gangan Tandon was a case where IL& FS Financial Services Ltd. – Financial Creditor has initiated proceedings under Section 7. It was held by this Tribunal in the above case that IL&FS has obtained various securities from the CD and CIRP should confine only to those projects in which Financial Creditor has securities. The CD was holding various projects in different States and different Cities and the State of UP, were not to be affected. The conclusions were recorded on the said judgment. The above judgment fully supports the submissions of the Appellant that allottees being only to the project Raheja Shilas (Low Rise), the CIRP should confine to the project Raheja Shilas (Low Rise) only. We, thus, are satisfied that the impugned order needs to be modified, confining the CIRP to the project Raheja Shilas (Low Rise) only. Thus, the Court held that when allottees or financial creditors initiate CIRP in respect of a single real estate project, the CIRP must be confined to that project and cannot be extended to other separate projects of the same corporate debtor. Accordingly, the impugned order admitting CIRP was modified to limit the CIRP to the Raheja Shilas (Low Rise) project, and claim/relief in respect of other projects remain independent and may be pursued separately. [Paras 17, 18, 23] Whether Respondent Nos.1 to 43 having received possession of their units, the CIRP initiated by the impugned order needs to be closed? - HELD THAT: - The view that CIRP initiated by the impugned order, needs to be confined to the project Raheja Shilas (Low Rise) of the CD, it shall be open for the allottees of other projects and Financial Creditors in class and other Financial Institutions to pursue their appropriate proceedings under Section 7 against the CD and the order passed by the Adjudicating Authority dated 19.11.2024 as modified by this order shall not come into the way and Adjudicating Authority shall proceed to examine applications filed relating to other projects of the CD in accordance with law. Whether Intervention Applications filed by Financial Creditor in a class of other projects of the CD, are entitled to prosecute their Section 7/9 applications before the Adjudicating Authority? - HELD THAT:- As already noticed the submissions of learned Counsel appearing for Respondent Nos.1 to 43, who has contended that issues have not been fully solved and there are large number of issues pending with the CD, are unresolved. Learned Counsel appearing for Respondent Nos.1 to 43 is consistently raising objection to the statement of the Appellant regarding resolution of the issues. The view that no order can be passed in this Appeal for closing the CIRP. We only observe that in event the issues between the CD and the Respondent Nos.1 to 43 are resolved and any settlement is entered, it shall be open for Respondent Nos.1 to 43 to file an application under Section 12A for withdrawal of the CIRP. Final Conclusion: The Tribunal upheld the Adjudicating Authority's finding of debt and default to admit the Section 7 petition, modified the admission order to confine the CIRP to the Raheja Shilas (Low Rise) project only, allowed creditors relating to other projects to pursue independent remedies, and refused to close the CIRP while leaving open withdrawal by settlement under Section 12A.