NCLAT shuns insolvency plea against Parsvnath Landmark Developers

The National Company Law Appellate Tribunal (NCLAT) has dismissed the plea filed by four unit buyers of Parsvnath Landmark Developers to initiate insolvency proceedings against the subsidiary of Parsvnath Developer.

The appellate tribunal upheld the orders of the Principal bench of the National Company Law Tribunal (NCLT), which on October 17, 2023, rejected their plea on technical grounds as the number of petitioners was only four, while the total number of allottees by Parsvnath Landmark is 488.

The matter relates to La Tropicana Khyber Pass, a Delhi-based project of the realty firm.

Section 7(1) of the Insolvency and Bankruptcy Code (IBC) mandates a petition on behalf of the homebuyers (as financial creditors) is maintainable only if either 100 in number or 10 per cent of the allottees join the petition.

Moreover, the appellate tribunal also rejected the plea of flat buyers that they are of a different class, having an order from Delhi RERA directing the developer to refund the amount with interest on October 22, 2022.

The developer was under obligation to refund the amount within 45 days of the order, but no amount was paid. Thus it had defaulted by not refunding Rs 24.14 crore, along with 10 per cent interest to each petitioner.

According to them, they are not financial creditors in the category of real estate allottees but are financial creditors in the category of decree holders.

However, the NCLAT rejected the submissions, referring to a Supreme Court decision, in which the apex court had said allottees' status as a 'financial creditor' does not change.

"The appellant cannot be said to go out of the definition of allottees' merely because they have an order in their favour by RERA and the Appellants' submission that they should be treated in a different category, i.e., category of Decree Holder' and are not required to comply with Section 7, sub-section (1), 2nd Proviso cannot be accepted," the NCLAT said.

Homebuyers, whether they have an order or decree from the RERA or who do not have any decree or order from RERA, belong to the same category of allottees and no distinction can be made on the said ground, it added.

"There is no merit in the Appeal, the Appeal is dismissed," said a three-member NCLAT bench headed by Chairperson Justice Ashok Bhushan.

Earlier, on February 11, 2019, the appellants had filed a petition against the realty firm, and the NCLT had also directed them to comply with the changed provisions under Section 7, second amendment ordinance, in which criteria for 100 flat buyers or 10 per cent of their total number was added.

However, they withdrew it on January 3, 2020.

Later, when the developer failed to develop the project and complete it within the agreed time, they filed five different complaints with Delhi RERA, which directed the refund of the amount with interest.