Allottees must still meet IBC's Section 7(1) threshold even after RERA grants a favorable order: NCLAT Delhi
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, headed by Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member), and Shri Arun Baroka (Technical Member), ruled in the case of Shri Rahul Gyanchandani & Ors. v Parsvnath Landmark Developers Pvt. Ltd. that being an 'allottee' does not automatically qualify one as a 'decree holder' under the Insolvency and Bankruptcy Code (IBC), solely based on a favorable order from the Real Estate Regulatory Authority (RERA) mandating refund of the entire amount.
According to the second proviso to Section 7(1) of the IBC, financial creditors categorized as allottees under a real estate project must collectively file an application to initiate the corporate insolvency resolution process (CIRP) against the corporate debtor, meeting specific criteria.
Even after securing a favorable order from RERA, an allottee must still adhere to the threshold outlined in the second proviso to Section 7(1) of the IBC when filing a petition under Section 7.
The appellants argued that they should be treated as 'decree holders' and not required to comply with Section 7(1), second proviso, based on their status as financial creditors. However, the NCLAT dismissed this contention, stating that even after the RERA order, the appellants remained allottees and were obligated to meet the specified threshold for filing under Section 7.
The tribunal emphasized that allottees remain in the same category, regardless of whether they obtain a RERA order or decree, and upheld the NCLT's decision to reject the petition for incompliance with the second proviso to Section 7(1) of the IBC.