2025 (11) TMI 1343 - AT - IBC

Fresh Section 7 IBC plea barred during ongoing CIRP, but project-wise CIRP for NCR Green permitted

NCLAT upheld the Adjudicating Authority's refusal to admit a fresh Section 7 IBC petition by a financial creditor bank since CIRP against the corporate ... Refusal to admit a fresh Section 7 petition by a Financial Creditor - CIRP against the Corporate Debtor has already commenced, against which order the appeals have been decided by this Tribunal - no Occupancy Certificate issued in NCR Green project - HELD THAT:- CIRP having already commenced against the Corporate Debtor, which CIRP is still in process, the Adjudicating Authority did not commit any error in not admitting another CIRP application filed by the Punjab and Sind Bank claiming to the Financial Creditor of one of the project of the Corporate Debtor - there are no error in the order warranting any interference in the order of the Adjudicating on appeal filed by the Punjab and Sind Bank. However, the Applicant is entitled to seek directions as prayed in I.A. No.3206 of 2025. The project-wise CIRP with respect to a real estate company has already been noticed by this Tribunal in Para 38 of the judgment dated 16.02.2024, as noted above. The CIRP Regulations, 2016 as amended also envisages project-wise resolution in a real estate company. As per earlier order, the resolution of one project Estella is directed. Project NRC Green in which Punjab and Sind Bank claims to be Financial Creditor is still unfinished - the Resolution Professional is free to proceed with the CIRP of Project NCR Green and issue Information Memorandum and Form G and proceed further in accordance with I&B Code and CIRP Regulations, 2016. Application disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority erred in refusing to admit a fresh Section 7 petition by a Financial Creditor where CIRP against the Corporate Debtor has already commenced and is ongoing. 2. Whether a project-wise CIRP is permissible and, if so, whether the Resolution Professional is competent to initiate project-specific CIRP steps (issuance of Form G and Information Memorandum) for a project claimed by the Applicant Financial Creditor where that project remains unfinished. 3. Whether a claimant Financial Creditor excluded from the Committee of Creditors for one project has remedy by a separate Section 7 when a project-wise CIRP for another project is already in progress. 4. Whether amounts infused by the promoter into an unfinished project qualify for consideration by the Committee of Creditors as interim finance or other recognized claims during the project-wise CIRP. 5. Whether the Adjudicating Authority and Resolution Professional may proceed with consideration of a Resolution Plan pending before the Adjudicating Authority, and what rights remain available to stakeholders to object to the Plan or to the scope (single project v. entire corporate debtor) of issuance of Form G. ISSUE-WISE DETAILED ANALYSIS Issue 1: Admissibility of a fresh Section 7 petition where CIRP is already pending Legal framework: The IBC regime contemplates initiation of CIRP by Financial Creditors under Section 7; however, the code and adjudicatory practice do not permit parallel or multiplicative CIRP proceedings against the same Corporate Debtor where CIRP has already commenced. Precedent Treatment: The Tribunal relied on its prior findings that a previously allowed 12A proposal was unsustainable absent requisite CoC approval; it applied the principle that once CIRP is revived/commenced, subsequent Section 7 petitions relating to the same Corporate Debtor are not to be admitted where CIRP is in process. Interpretation and reasoning: The Tribunal held that the Adjudicating Authority did not err in refusing admission of the fresh Section 7 petition because CIRP against the Corporate Debtor had already commenced and was ongoing. Allowing a second, overlapping CIRP would be inconsistent with the statutory scheme and the order reviving CIRP; the statutory machinery and ongoing proceedings provide the appropriate forum for resolution of claims. Ratio vs. Obiter: Ratio - where CIRP against a Corporate Debtor is ongoing, an additional Section 7 petition by a Financial Creditor in respect of the same Corporate Debtor is not to be admitted; stakeholders' claims should be pursued within the ongoing CIRP process. Conclusions: The appeal against non-admission of Section 7 was dismissed; the Adjudicating Authority's refusal to admit the petition was upheld as correct in law and fact. Issue 2: Permissibility and conduct of project-wise CIRP; powers of the Resolution Professional to issue Form G and Information Memorandum for an unfinished project Legal framework: The IBC and CIRP Regulations, 2016 (as amended) envisage project-wise resolution for a real estate corporate debtor; Form G and Information Memorandum are procedural steps for initiating CIRP marketing and inviting resolution plans. Precedent Treatment: The Tribunal referred to its prior direction for reverse/project-wise CIRP in analogous fact patterns and to regulatory provisions permitting project-specific resolution in real estate companies. Interpretation and reasoning: The Tribunal observed that the initial direction confined CIRP to a completed project (Estella) but recognized that another project (unfinished) remained outside CIRP. Given regulatory recognition of project-wise CIRP, the Tribunal held the Resolution Professional is free to proceed with CIRP for the unfinished project - including issuing Information Memorandum and Form G - and to conduct the process in accordance with the I&B Code and CIRP Regulations. Ratio vs. Obiter: Ratio - project-wise CIRP is permissible for a real estate Corporate Debtor; the Resolution Professional may initiate project-specific CIRP steps for an unfinished project notwithstanding an ongoing CIRP for another project. Conclusions: The Resolution Professional was authorized to proceed with CIRP for the unfinished project (issue Form G, prepare Information Memorandum, constitute project-specific CoC) and to follow statutory timelines and procedures. Issue 3: Rights of a Financial Creditor excluded from the CoC of one project when CIRP for another project is ongoing Legal framework: Composition of CoC is governed by admitted financial debts relevant to the CIRP; project-wise CIRP permits distinct CoC constitution per project subject to admitted claims. Precedent Treatment: The Tribunal corrected its earlier order to include one Financial Creditor in the CoC for the Estella project while excluding the Applicant Financial Creditor from that particular CoC; it upheld that composition on facts. Interpretation and reasoning: The Tribunal found that exclusion from one project's CoC does not by itself entitle the excluded Financial Creditor to initiate a separate Section 7 where CIRP is ongoing; instead, the excluded creditor may participate in project-specific processes when Form G and IM are issued for the project it claims, and may seek relief within the CIRP framework, including applications for appropriate relief if handover/other obligations fail. Ratio vs. Obiter: Ratio - exclusion from a project-specific CoC is not remedied by filing a separate Section 7 during an ongoing CIRP; statutory remedies lie within the CIRP process and project-specific procedures. Conclusions: The Applicant Financial Creditor's remedy is to engage in the project-wise CIRP process for the claimed project (once initiated) rather than seeking admittance of a separate Section 7; the Adjudicating Authority's non-admission was proper. Issue 4: Treatment of promoter-infused funds and interim finance claims in project-wise CIRP Legal framework: The I&B Code recognizes various claims and interim finance (Section 5 definitions and related regulations/case law on treatment of infusion of funds), but admission and classification of claims depend on evidence and CoC determination. Precedent Treatment: The Tribunal referred to the promoters' assertions of substantial fund infusion and held that such amounts require consideration by the CoC in the project-wise CIRP. Interpretation and reasoning: The Tribunal observed that whether amounts infused by the promoter qualify as interim finance or another admissible claim is a matter for the CoC to decide during the project-wise CIRP once the Resolution Professional constitutes the project CoC and admits claims. The Tribunal did not adjudicate the substantive character of such infusions at this stage. Ratio vs. Obiter: Obiter leading to practical direction - promoter-infused amounts should be considered by the CoC for potential treatment as interim finance or other claim within the CIRP; the Tribunal did not make a final legal determination. Conclusions: The question of classifying promoter-infused funds is left to the CoC and Resolution Professional in the project-wise CIRP; stakeholders may raise objections before the Adjudicating Authority as appropriate. Issue 5: Rights to object to a pending Resolution Plan and scope of Form G (single project v. entire corporate debtor) Legal framework: The Adjudicating Authority considers approval of Resolution Plans and entertains objections; Form G's scope (project-specific v. whole corporate debtor) affects stakeholder rights and notice. Precedent Treatment: The Tribunal emphasized procedural propriety and stakeholders' right to object to plans pending before the Adjudicating Authority; it directed that the Adjudicating Authority determine whether Form G was issued for one project or the entire Corporate Debtor. Interpretation and reasoning: The Tribunal declined to adjudicate objections to the substantive Resolution Plan in this proceeding, leaving such determinations to the Adjudicating Authority. It clarified that all concerned parties remain entitled to file objections and that the Adjudicating Authority must consider whether the Form G issuance was project-limited or corporate-wide when adjudicating objections. Ratio vs. Obiter: Ratio - stakeholders retain the right to object to a Resolution Plan before the Adjudicating Authority; the Adjudicating Authority must examine the scope of Form G in adjudicating such objections. Conclusions: The Tribunal dismissed the appeal regarding Section 7 non-admission, authorized project-wise CIRP steps for the unfinished project, reserved classification of promoter-infused funds to the CoC, and confirmed stakeholders' rights to object to Resolution Plans and to have the Adjudicating Authority determine the scope of Form G issuance.