Third-party intervention applications dismissed during insolvency proceedings under Section 7 IBC for lacking statutory provisions

NCLT Delhi dismissed intervention applications filed by companies holding units in a corporate debtor's project during insolvency proceedings under Section 7 of IBC. The tribunal held that IBC contains no provisions for third-party intervention at pre-admission stage, particularly after financial creditors' arguments concluded. The applicants' scheme of arrangement under Section 230 of Companies Act could not override IBC proceedings. The tribunal found the applications were filed to delay proceedings and would prejudice individual allottees who filed the main petition, emphasizing that IBC only requires ascertaining financial debt existence and default.

---

---

Issues Involved:
1. Impleadment of Applicants in the main Company Petition.
2. Consideration of the scheme of compromise and arrangement under Section 230 of the Companies Act, 2013.
3. Delay in proceedings and objections to the intervention at the pre-admission stage.

Issue-wise Detailed Analysis:

1. Impleadment of Applicants in the main Company Petition:

The applicants in Ivn. P/11/2024 and Ivn. P/12/2024 sought to be impleaded in the main Company Petition (IB) 682/2021. They argued that they collectively held a significant number of units in the Festival City Project and that their interests would be directly affected by the outcome of the petition. The applicants contended that they were necessary and proper parties to the proceedings and that the initiation of the Corporate Insolvency Resolution Process (CIRP) would severely prejudice their interests. However, the Tribunal observed that similar applications had been dismissed previously and emphasized that the primary objective of the Insolvency and Bankruptcy Code (IBC) is the timely resolution of the CIRP process. The Tribunal concluded that the applicants' request for intervention could not be entertained at this stage as it would lead to unnecessary delays.

2. Consideration of the scheme of compromise and arrangement under Section 230 of the Companies Act, 2013:

The applicants also sought an opportunity for all allottees of the Project to consider a scheme of compromise and arrangement proposed by the Corporate Debtor under Section 230 of the Companies Act, 2013. They argued that a majority of the allottees should have the chance to evaluate the scheme before any adverse order is passed. The Tribunal noted that the Corporate Debtor had been filing applications to delay the proceedings and that the issue of maintainability had already been decided by higher courts. The Tribunal held that it could not direct the allottees/Financial Creditors who had filed the main Company Petition to consider the scheme proposed by the Corporate Debtor, as there were no provisions in the IB Code for such intervention at the pre-admission stage.

3. Delay in proceedings and objections to the intervention at the pre-admission stage:

The Tribunal observed that the Corporate Debtor had been attempting to delay the proceedings by filing multiple applications on various pretexts. The Financial Creditor strongly opposed the issuance of notice in the Intervention Petitions, arguing that there were no provisions in the IB Code for intervention at the pre-admission stage. The Tribunal emphasized that its role was to ascertain the existence of financial debt and its default in an application filed under Section 7 of the IBC, 2016. The Tribunal concluded that the present applications were filed with the intention of delaying the proceedings and could not be entertained, especially in light of the Supreme Court's directive to dispose of the main Company Petition expeditiously.

Conclusion:

The Tribunal dismissed both Intervention Petitions (Ivn. P/11/2024 and Ivn. P/12/2024) in limine, stating that the applications were motivated by an intention to delay the proceedings and that the applicants' requests could not be entertained at this stage. The Tribunal directed that a copy of the order be served to the parties concerned.

---