Real estate allottees' Section 7 application upheld despite challenge over 100-member threshold requirement

NCLAT dismissed the appeal challenging NCLT's admission of Section 7 application by real estate allottees. The tribunal held that the threshold of 100 allottees was fulfilled, clarifying that the number of allottees, not financial creditors, determines the threshold. The court found no valid possession was given to allottees as occupancy certificates remained pending with Greater Noida Authority. The tribunal rejected appellant's arguments to delete 23 units from applicants and exclude 36 unitholders claiming assured returns. The appeal was dismissed with time exclusion from interim order period.

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Issues Involved:
1. Admission of Section 7 application.
2. Fulfillment of the threshold of 100 allottees.
3. Validity of No Dues and No Claim Certificates.
4. Status of possession and completion of the project.
5. Interim order and continuation of CIRP.

Summary:

1. Admission of Section 7 Application:
The appeal was filed by a Suspended Director of the Corporate Debtor challenging the order dated 07.02.2023 by the Adjudicating Authority (NCLT), Principal Bench, New Delhi, which admitted a Section 7 application filed by the Respondents-allottees of a Real Estate Project. The Corporate Debtor, M/s. Vardhman Estates & Developers Pvt. Ltd., failed to complete the project and handover possession, leading to the application by 117 Financial Creditors representing 104 allotted units.

2. Fulfillment of the Threshold of 100 Allottees:
The Corporate Debtor argued that the threshold of 100 allottees u/s 7 of the IBC was not met, claiming the calculation should be based on units, not applicants. However, the Adjudicating Authority found the number of allottees crossed the threshold of 100. The Hon'ble Supreme Court in "Manish Kumar vs. Union of India And Anr.- (2021) 5 SCC" clarified that the number of allottees, not units, is relevant for fulfilling the threshold. The amended application included 146 Financial Creditors representing 122 allotted units, thus meeting the required threshold.

3. Validity of No Dues and No Claim Certificates:
The Corporate Debtor presented No Dues and No Claim Certificates from some Financial Creditors, arguing these should exclude them from the Section 7 application. However, the Adjudicating Authority and the Tribunal found that these certificates did not negate the status of the allottees. Agreements remained valid, and the certificates merely indicated a waiver of certain claims, not a relinquishment of allottee status.

4. Status of Possession and Completion of the Project:
The IRP's report indicated that no Occupancy or Completion Certificates were issued, and significant construction work was pending. The Tribunal noted that even if possession was claimed for some units, without valid Occupancy Certificates, these allottees retained their status. The project was incomplete, and the Corporate Debtor's claim of possession was not substantiated.

5. Interim Order and Continuation of CIRP:
An interim order on 21.02.2023 directed the IRP to ensure the Corporate Debtor ran as a going concern and to take steps for project completion with the assistance of suspended directors/ex-management. The CoC was not to be constituted. The Tribunal dismissed the appeal, directing the exclusion of the period from 21.02.2023 to 31.05.2024 in the CIRP of the Corporate Debtor, allowing the CIRP to proceed in accordance with law.

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