{"id":306614,"date":"2023-11-06T13:00:26","date_gmt":"2023-11-06T07:30:26","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=306614"},"modified":"2023-11-07T16:36:22","modified_gmt":"2023-11-07T11:06:22","slug":"single-real-estate-allottee-cannot-trigger-insolvency-proceedings-under-section-7-of-ibc-nclat-scc-blog","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/11\/06\/single-real-estate-allottee-cannot-trigger-insolvency-proceedings-under-section-7-of-ibc-nclat-scc-blog\/","title":{"rendered":"Single Real Estate Allottee cannot trigger Insolvency Proceedings under Section 7 of IBC: NCLAT"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">National Company Law Appellate Tribunal:<\/span> In an appeal against the rejection of application under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549806\" target=\"_blank\" rel=\"noopener\">7<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">Insolvency and Bankruptcy Code, 2016<\/a> (IBC), a Division bench comprising of Ashok Bhushan, J., and Barun Mitra (Technical Member), held that in the light of the law laid down by the Supreme Court in <span style=\"font-style: italic;\">Vishal Chelani<\/span> v. <span style=\"font-style: italic;\">Debashis Nanda<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/Z0DYY188\" target=\"_blank\" rel=\"noopener\">2023 SCC OnLine SC 1324<\/a>, it is established that the status of the party, i.e., the allottee, does not change, and therefore, the Adjudicating Authority correctly concluded that the threshold requirement had not been met by a single allottee to trigger insolvency.<\/p>\n<p style=\"margin-bottom: 3%;\">The instant appeal arose from an order dated 08-08-2023, in which the application filed by the appellant under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549806\" target=\"_blank\" rel=\"noopener\">7<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> has been rejected by the Adjudicating Authority. The Adjudicating Authority based its decision on the judgment of this Appellate Tribunal, arguing that the decree-holder does not change its original character as a Real Estate Allottee. Furthermore, it held that in this case of a single allotment, the threshold requirement under the second proviso to Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549806\" target=\"_blank\" rel=\"noopener\">7(1)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> was not met.<\/p>\n<p style=\"margin-bottom: 3%;\">The appellant challenged the Adjudicating Authority&#8217;s order citing <span style=\"font-style: italic;\">Sushil Ansal<\/span> v. <span style=\"font-style: italic;\">Ashok Tripathi<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/tdVRdjCe\" target=\"_blank\" rel=\"noopener\">2020 SCC OnLine NCLAT 680<\/a>, where this Tribunal clarified the concept of &#8216;financial debt&#8217; under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549784\" target=\"_blank\" rel=\"noopener\">5(8)(f)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a>. It was argued that the appellant should be considered a financial creditor due to the commercial effect of the transaction. The respondent cited <span style=\"font-style: italic;\">Vishal Chelani<\/span> (Supra), where the issue in hand is covered.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court noted that Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549738\" target=\"_blank\" rel=\"noopener\">238<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> contains a non-obstante clause, giving overriding effect to its provisions, and, therefore, the provisions of the IBC take precedence over RERA. The Court found that the distinction made by the Resolution Professional was artificial and amounted to &#8220;hyper-classification,&#8221; which contravened Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001574870\" target=\"_blank\" rel=\"noopener\">14<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\" rel=\"noopener\">Constitution of India<\/a>.<\/p>\n<p style=\"margin-bottom: 3%;\">The NCLAT concurred with <span style=\"font-style: italic;\">Vishal Chelani<\/span> (Supra) where the Supreme Court clarified that once an allottee seeks remedies under the RERA Act and opts for a refund of money, they are still considered homebuyers and can seek remedies under RERA. The distinction made between homebuyers who opt for a refund and those who do not is considered inequitable.<\/p>\n<p style=\"margin-bottom: 3%;\">The NCLAT upheld the rejection of the Section 7 application and held that the status of an allottee does not change, and one allottee cannot trigger insolvency proceedings.<\/p>\n<p style=\"margin-bottom: 3%;\">The present appeal was dismissed.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\"><span style=\"font-style: italic;\">Dheeraj Raikhy<\/span> v. <span style=\"font-style: italic;\">Raheja Developers Ltd.<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/aNYuf7Tq\" target=\"_blank\" rel=\"noopener\">2023 SCC OnLine NCLAT 1404<\/a>, order dated 17-10-2023<\/span>]<\/p>\n<hr\/>\n<p>Advocates who appeared in this case :<\/p>\n<p style=\"margin-left: 18pt;\">Mr. Sonal Anand, Ms. Surbhi Singh, Counsel for the Appellant<\/p>\n<p style=\"margin-left: 18pt;\">Mr. Gaurav Mitra, Ms. Suditi Batra, Mr. Adit Singh, Ms. Manmeet Kaur, Mr. Abhishek Rana, Ms. Gaurangi Khanna, Counsel for the Respondent<\/p>\n<h3 style=\"color: #000080;\">Buy Constitution of India &nbsp;<a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=33\" target=\"_blank\" rel=\"noopener\">HERE<\/a><\/h3>\n<p style=\"margin-bottom: 3%;\"><a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=33\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/constitution-of-india-300x200.jpg\" alt=\"Constitution of India\" width=\"300\" height=\"200\" class=\"aligncenter size-large wp-image-294438\" srcset=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/constitution-of-india-300x200.jpg 300w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/constitution-of-india-768x511.jpg 768w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/constitution-of-india-440x293.jpg 440w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/constitution-of-india-650x433.jpg 650w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/constitution-of-india.jpg 886w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/constitution-of-india-60x40.jpg 60w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">The underlying claim of an aggrieved party, such as an allottee, is crystallized in the form of a court order or decree, and this does not alter or disturb their status as financial creditors.<\/p>\n","protected":false},"author":67514,"featured_media":293392,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[30361,54324,43410],"class_list":["post-306614","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-ibc","tag-non-obstante-clause","tag-rera-act"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Single Real Estate Allottee cannot trigger Insolvency Proceedings under Section 7 of IBC: NCLAT | SCC Blog<\/title>\n<meta name=\"description\" content=\"NCLAT held that Single Real Estate Allottee cannot trigger Insolvency Proceedings under Section 7 of IBC.\" \/>\n<meta name=\"robots\" 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