NCLAT observed that even the appellant's status as an allottee does not affect the validity of the Section 7 application due to non-compliance with the necessary provisions under the IB Code.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) was hearing an appeal and ruled that a transaction must involve disbursal against the consideration for the time value of money to qualify as a financial debt under the Insolvency and Bankruptcy Code (IBC). In this case, a sale and purchase agreement for land did not meet this criterion. Additionally, the appellant's status as a Real Estate Project allottee did not validate the application under Section 7 of the IBC due to non-compliance with necessary provisions. Therefore, the NCLAT upheld the rejection of the Section 7 Application by the National Company Law Tribunal.
The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal against the rejection of a Section 7 Application filed by an appellant against a decision made by the National Company Law Tribunal (NCLT), Mumbai Bench. The NCLT had rejected the Section 7 Application, which claimed a financial debt against the respondent company. The appellant contended that the transaction between them constituted a financial debt under the Insolvency and Bankruptcy Code (IBC).
The case revolved around a Memorandum of Understanding (MoU) and subsequent agreements for the sale of land owned by the respondent company to the appellant. The appellant alleged that the respondent owed them a balance amount of Rs. 13,48,07,556/-, which the respondent contested, asserting that the transaction was not a financial debt but a sale and purchase agreement.
The NCLAT considered the nature of the transaction, which involved the sale of land for a fixed consideration and provisions for refunds or excess payments based on future sales. It also examined whether the appellant qualified as an "allottee" under the Real Estate (Regulation and Development) Act, 2016 (RERA), which would have implications under the IBC.
The NCLAT concluded that the appellant's claim did not meet the criteria for a financial debt under the IBC. It also found that the appellant's status as an allottee did not affect the application's validity under Section 7 of the IBC due to non-compliance with the necessary provisions. Therefore, it upheld the NCLT's decision to reject the Section 7 Application.
In summary, the NCLAT dismissed the appeal, affirming the NCLT's rejection of the Section 7 Application, as it found no error in the decision.
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