The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that when a unit holder is handed over possession and a Conveyance Deed has also been executed, no claim survives of such unit holders. According to the statutory requirements controlling the collection and verification of the claim, the RP must first determine if a claim submitted by a Financial Creditor in a class merits admission.
Harpal Singh Chawla, the suspended director of Spaze Towers Pvt. Ltd., the corporate debtor, filed an appeal contesting the NCLT’s ruling dated October 21, 2024, which admitted the Respondents’ Section 7 application (Respondent Nos. 1 to 26: Financial Creditor as a class).
In a Section 7 application, the Respondents—Financial Creditors in a class that is allotted to a project called “Spaze Arrow” in Sector 78, Gurugram—claimed a default on the Corporate Debtor (“CD”) and sought to start the Corporate Insolvency Resolution Process (“CIRP”) against the CD. After hearing the parties, the adjudicating authority accepted the Section 7 application in an order dated October 21, 2024.
Boost Your Business with SME IPO Funding Strategies – Enroll Now, Click Here
The appellant filed Civil Appeal No.12189 of 2024—Harpal Singh Chawla vs. Vivek Khanna & Ors.—after being dissatisfied with the Tribunal’s ruling dated 28.102.024. The Hon’ble Supreme Court resolved the civil appeal on 08.11.2024.
Adhering to the Supreme Court’s ruling, which the appellant filed on November 8, 2024. According to the appellant, Respondent Nos. 1 through 26 are creditors in the class of the Project Spaze Arrow, and in order to start a CIRP against the CD, they filed an application under Section 7 that only pertains to the Project Spaze Arrow. As a result, the CIRP is limited to just one project, Spaze Arrow.
Additionally, it was asserted that the initiation of CIRP with respect to 12 completed projects would be detrimental to the interests of the allottees and put the already-finished projects in peril.
Boost Your Business with SME IPO Funding Strategies – Enroll Now, Click Here
According to the respondent’s own argument, the Appellant/Applicant argued that the CD abandoned the Project Spaze Arrow because the landowners’ disagreement and the interim orders against the CD prevented the project from being finished.
Furthermore, it was stated that restricting CIRP to the Spaze Arrow Project would amount to denying rights to Financial Creditors who have already filed their claims and had those claims accepted by the IRP, since the CoC has already been established and consists of 228 allottees across all Projects. The landowner’s attorney argued that CD had no authority to build anything on the Project land, which is undeniably Ishan Singh’s.
After reviewing the case’s circumstances, the tribunal noted that, in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution for Corporate Persons) Regulations, 2016, all financial creditors had the right to submit a claim at the time the CIRP was initiated against the CD.
The real estate allottees are Financial Creditors according to the IBC’s provisions, according to the bench consisting of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member). If any real estate allottee has a claim against the CD, he has the right to file a claim against the CD at the start of the CIRP. It is true that a unit holder loses all of their rights when they are given possession and a conveyance deed is likewise completed.
The tribunal stated that in accordance with the statutory requirements controlling the collection and verification of the claim, the RP must first determine whether a claim submitted by a Financial Creditor in a class merits admission.
The tribunal ruled that restricting the CIRP to only one Project – Spaze Arrow, shall tantamount to excluding the claims filed before the RP from different Projects when the Claimants have filed claims for the Project Corporate Park, which we have noted above, and who have pleaded that the Project is not complete despite Occupancy Certificate and Completion Certificate.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
