2024 (4) TMI 478 - AT - Insolvency and Bankruptcy

Homebuyers with RERA orders remain financial creditors, must comply with Section 7(1) second proviso requirements

Shri Rahul Gyanchandani, Shri Manoj Kumar, Shri Bimal Kumar, Shri Rohit Gyanchandani Versus Parsvnath Landmark Developers Pvt. Ltd.

NCLAT dismissed homebuyers' appeal challenging rejection of Section 7 application for non-compliance with Section 7(1) second proviso. The tribunal held ... Rejection of Section 7 Application filed by the Appellant (homebuyers) on the ground of non-compliance of Section 7, sub-section (1), 2nd Proviso - decree-holder is class of Financial Creditor or not - HELD THAT:- The judgment of the Hon’ble Supreme Court in Kotak Mahindra Bank [2022 (6) TMI 13 - SUPREME COURT] itself clearly provides that a person, who has a recovery certificate, which is akin to Decree, is entitled to file Section 7 Application as Financial Creditor. Whether the debt is fructified in a Decree or not, if debt is a financial debt it gives right to Financial Creditor to initiate proceedings under Section 7. The judgment of the Hon’ble Supreme Court in Vishal Chelani [2023 (10) TMI 949 - SUPREME COURT] has been relied by the Adjudicating Authority. It is relevant to notice the facts and ratio of the judgment of Vishal Chelani, which has been relied by the Adjudicating Authority. Vishal Chelani and other were Homebuyers, who had filed their claim on the basis of order passed by UPRERA. They filed claim in Form-CA in the category of Homebuyers. The RP informed the Appellants that they should file their claims in Form-C as a Financial Creditor. The Appellants filed an Application before the Adjudicating Authority, claiming that they should be treated as Homebuyers and they be permitted to file claim in Form-CA, which Application was rejected. The allottees in Vishal Chelani’s case were Applicants, who had also got order in their favour from RERA, but it was held by the Hon’ble Supreme Court that their status as a ‘Financial Creditor’ does not change and they were entitled to file their claim in Form-CA as a ‘Financial Creditor’. The above judgment of the Hon’ble Supreme Court, which was relied by the Adjudicating Authority, clearly supports the submission of learned Counsel for the Appellant. The Appellant cannot be said to go out of the definition of ‘allottees’ merely because they have an order in their favour by RERA and the Appellants’ submission that they should be treated in a different category, i.e., category of ‘Decree Holder’ and are not required to comply with Section 7, sub-section (1), 2nd Proviso cannot be accepted - Thus, Homebuyers, whether they have an order or Decree from the RERA or who do not have any Decree or order from RERA, belong to same category of allottees and no distinction can be made on the said ground. The Appellants are ‘allottees’ within the meaning of the Code and as a Financial Creditor, when they have filed the Application under Section 7, they were required to comply with Section 7, sub-section (1), 2nd Proviso and Adjudicating Authority did not commit any error in rejecting their Application due to non-compliance of Section 7, sub-section (1), 2nd Proviso. There is no merit in the Appeal and the Appeal is dismissed. Issues Involved:1. Condonation of delay in filing and refiling the appeal.2. Rejection of Section 7 Application by NCLT.3. Classification of Appellants as Financial Creditors or Decree Holders.4. Applicability of Section 7, sub-section (1), 2nd Proviso of the Insolvency and Bankruptcy Code, 2016 (IBC).Summary:1. Condonation of Delay:IA No. 905 of 2024 was filed for condoning the delay of 51 days in refiling the Memo of Appeal, and IA No. 1032 of 2024 for condoning the delay of 9 days in filing the Appeal. 'Sufficient cause being shown, the delay in refiling, as well as delay in filing of the Appeal is hereby condoned.'2. Rejection of Section 7 Application:The Appellant, a Financial Creditor, filed an appeal against the order dated 17.10.2023 by NCLT, New Delhi, which rejected the Section 7 Application on the ground of non-compliance with Section 7, sub-section (1), 2nd Proviso. The NCLT noted, 'the Petitioners before us are neither 100 in number nor are they 10% of the allottees. Thus exercise of the petition is not maintainable.'3. Classification of Appellants:The Appellants argued that they should be classified as Decree Holders rather than allottees, citing Section 3, sub-section (10) of the Code. They contended that the RERA order for refund converted their status to Decree Holders. The Tribunal referred to the Hon'ble Supreme Court's judgment in 'Vishal Chelani & Ors. vs. Debashis Nanda,' which held that homebuyers with RERA orders remain Financial Creditors and must comply with the threshold requirements of Section 7, sub-section (1), 2nd Proviso.4. Applicability of Section 7, sub-section (1), 2nd Proviso:The Tribunal emphasized that the Appellants, despite having a RERA order, 'continued to be allottees' and must comply with the threshold requirement of Section 7, sub-section (1), 2nd Proviso. The Tribunal concluded, 'Appellants are 'allottees' within the meaning of the Code and as a Financial Creditor, when they have filed the Application under Section 7, they were required to comply with Section 7, sub-section (1), 2nd Proviso.'Conclusion:The appeal was dismissed, affirming that the Appellants, as allottees, must meet the threshold requirements under Section 7, sub-section (1), 2nd Proviso of the IBC. The judgment reiterates that homebuyers with RERA orders are still considered Financial Creditors and are subject to the same statutory requirements as other allottees.