Top Stories Homebuyers having order or Decree from RERA are allottees, required to comply with 2nd Proviso to Section 7(1) of IBC: NCLAT [Read Order] Homebuyers having order or Decree from RERA are allottees and hence are required to comply with 2nd Proviso to Section 7(1) of IBC, rules NCLAT By Kalyani B. Nair – On April 22, 2024 2:32 pm – 2 mins read

The New Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) observed that the homebuyers having order or Decree from the Real Estate Regulatory Authority ( RERA ) are allottees and are required to comply with 2nd Proviso to Section 7(1) of the Insolvency and Bankruptcy Code, 2016 ( IBC ). The appeal has been filed by the Financial Creditor of the Corporate Debtor–Parsvnath Landmark Developers Ltd. ( Respondent herein ) has been filed challenging order dated 17.10.2023 passed by National Company Law Tribunal, New Delhi, Principal Bench rejecting Section 7 Application filed by the Appellant on the ground of non-compliance of Section 7, sub-section (1), 2nd Proviso.

The Counsel for the Appellants challenging the impugned order submitted that Adjudicating Authority committed error in not adverting to the provisions of Section 3, sub-section (10) of the Code. It was submitted that Section 3, sub-section (10), itself makes it clear that decree-holder is class of Financial Creditor and that Section 18 read with Section 2(d) of the RERA Act, 2016 makes it clear that person, who is granted refund of entire amount paid to the promoter for allotment of a real estate unit, does not remain allottee as the refund order is preconditioned by withdrawal from the Project. The judgment of the Supreme Court in Kotak Mahindra Bank itself clearly provides that a person, who has a recovery certificate, which is akin to Decree, is entitled to file Section 7 Application as Financial Creditor. Whether the debt is fructified in a Decree or not, if debt is a financial debt it gives right to Financial Creditor to initiate proceedings under Section 7.

A Three Member Bench comprising Justice Ashok Bhushan, Chairperson, Barun Mitra,  Member ( Technical ) and Arun Baroka, Member ( Technical ) observed that “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 Appellants even after order of the RERA, directing for refund by the Corporate Debtor, continued to be allottees and they have filed Section 7 Application as Financial Creditor of the Corporate Debtor.”