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NCLT: Minimum Threshold Applies To All Amounts Raised From Allottees
NCLT: Minimum Threshold Applies To All Amounts Raised From Allottees
The National Company Law Tribunal (NCLT) Chandigarh bench, comprising Justice Dr. P.S.N. Prasad (Judicial Member) and Umesh Kumar Shukla (Technical Member), has determined that the necessity to meet the minimum threshold of either 10% or 100 allottees applies to any funds obtained from an allottee, regardless of whether the allottee claims default on interest or the principal amount.
In 2012, the corporate debtor approached the financial creditor, offering to sell commercial units in the India Next City Centre project in Gurugram, promising guaranteed and assured returns on investments.
The financial creditor paid Rs. 1,60,00,000 towards the basic sale consideration and Rs. 4,12,000 towards service tax for 8 units. Subsequently, they entered into eight distinct builder-buyer agreements for these units.
According to the stipulated conditions outlined in clause 12, the respondent was obligated to pay the applicant a monthly sum of Rs.2,60,000/- plus 18% GST for the 8 units, amounting to a total of Rs.3,06,800/-.
The respondent consistently disbursed the monthly assured sum of Rs. 3,06,800 for all 8 units to the applicant until September 2018. However, thereafter, the respondent abruptly ceased the payments.
In accordance with the agreement, the applicant requested payment for the months of October and November 2018. However, the respondent failed to fulfill this obligation, citing internal transition as the reason for the delay in payments and ensuring that the payments would resume shortly.
Following the respondent's persistent failure to fulfill the payment obligations, the applicant, represented by legal counsel, issued a legal notice dated 28 August, 2019 demanding a total sum of Rs. 33,74,800/-, representing the outstanding amount from October 2018 to the end of July 2019. Despite the issuance of the notice, the respondent did not provide any response to the applicant.
The applicant initiated the Corporate Insolvency Resolution Process (CIRP) against the respondent by filing an application under Section 7 of the IBC.
The NCLT dismissed the applicant's petition seeking to commence the Corporate Insolvency Resolution Process (CIRP) against the respondent. The tribunal determined that in this instance, the applicant is classified as an allottee within a real estate project as per Section 5(8)(f) of the IBC. Therefore, for the applicant to trigger CIRP against the respondent, they must satisfy the specified criteria of the minimum threshold outlined in the IBC.
The NCLT also affirmed that the obligation to meet the minimum threshold applies to any funds raised from an allottee, regardless of whether the allottee is claiming default on interest or the principal amount.
The NCLT drew upon its precedent set in the case of Surinder Kumar Jain and Ors. v. M/s Orris Infrastructure Pvt. Ltd. at the New Delhi Principal Bench, affirming that the obligation to meet the minimum threshold applies to any funds raised from an allottee, regardless of whether the allottee alleges default on interest or principal amount.
The NCLT also referenced the NCLAT ruling in the case of Dheeraj Raikhy v. Raheja Developers Ltd., wherein it was affirmed that the status of the party, namely the allottee, remains unchanged. Consequently, the adjudicating authority correctly determined that without meeting the threshold requirement, an individual allottee cannot initiate insolvency proceedings.
NCLT dismissed the Section 7 application brought by the applicant seeking the initiation of CIRP against the respondent. The dismissal was based on the determination that the applicant falls within the allottee category and thus must adhere to the minimum threshold requirement specified under the IBC.