The Delhi Bench of National Company Law Appellate Tribunal ( NCLAT ) held that the pendency of a scheme involving the corporate debtor under Section 230 of the Companies Act, 2013 is not a ground to deny the admission of a Corporate Insolvency Resolution Process ( CIRP ) application under Section 7 of Insolvency and Bankruptcy Code, 2016 ( IBC ).
The Respondents, Homebuyers, of the Festival City Project filed a petition for a Corporate Insolvency Resolution Process (‘CIRP’), citing a failure to complete the project and hand over possession to the financial creditors. The petition involved three Corporate Debtors: M/s. Anand Infoedge Pvt. Ltd, the land-owning company , M/s. Mist Avenue Pvt. Ltd., the developer and M/s. Mist Direct Sales Pvt. Ltd. another developer following the cancellation of the previous Development Agreement.
The Corporate Debtors challenged the maintainability of the CIRP petition. The NCLAT and the Supreme Court dismissed these appeals, affirming that the CIRP application filed under Section 7 of the IBC was maintainable.
After the dismissal, the Corporate Debtors also filed an interlocutory application and three separate applications seeking to dismiss the main Company Petition and alleging misconduct by the financial creditors. These applications were also dismissed, with the Adjudicating Authority criticizing the Corporate Debtors for attempting to delay the proceedings and cautioning them against filing frivolous applications.
Following these proceedings, an interlocutory application was filed by Grand Developers Pvt. Ltd., the Appellant claiming to hold 102 units in the Festival City Project and seeking intervention in the Company Petition. The said application was rejected by NCLT New Delhi via Order dated 27.02.2024, which resulted in the filing of the appeal.
The Appellant argued that, despite the CIRP application not being admitted, it has every right to intervene as there is no prohibition under IBC against intervention before admission.
The Appellant claimed that its interests would be harmed by the CIRP’s admission against the Corporate Debtor. It was stated that the Corporate Debtor has submitted a Scheme under Section 230 of the Companies Act to the NCLT New Delhi, which is still pending. If approved, the Corporate Debtor would proceed with the construction according to the Scheme. Thus, initiating the CIRP under Section 7 would negatively impact the proposed Scheme.
The Appellant relied upon the decision in Krrish Realtech Private Limited and argued that its intervention application shall be allowed as it has a vested interest in the proceedings.
While dismissing the appeal, the three-member bench comprising Mr. Justice Ashok Kumar Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member) held that the pendency of a Section 230 scheme under the Companies Act, does not prevent the admission of a Section 7 CIRP application under the IBC.
It was ruled that although the petition relating to the Scheme under Section 230 of the Companies Act by the corporate debtor is an independent proceeding, its filing cannot be a ground to deny the admission of the CIRP proceedings under Section 7 of IBC.
The NCLAT upheld the decision of NCLT rejecting the intervention application and observed that the CIRP proceedings under Section 7 of IBC should proceed as per law despite the pendency of the Scheme under Section 230 of the Companies Act.
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