The NCLAT upheld the admission of the insolvency petition despite claims of insufficient notice and delayed contractual obligations.
The National Company Law Appellate Tribunal 9NCLAT), New Delhi Bench of Justice Yogesh Khanna (Judicial Member) and Indevar Singh (Technical Member) was hearing an appeal and held that proper notice of the petition was deemed sufficient despite the appellant’s claims, and a delay in completing contractual obligations does not bar the admission of an insolvency petition if the petition is filed after the legally permissible period, as stipulated by the contract and relevant provisions.
The appeal was filed against the National Company Law Tribunal (NCLT) Kolkata Bench's order dated July 6, 2023, which admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by home buyers seeking resolution of the corporate debtor’s insolvency. The petition, filed on November 18, 2022, claimed a default amount of ₹3,80,34,952.90, inclusive of interest. The appellant argued that it had not been properly notified of the petition, thus breaching natural justice principles and prejudicing its case. However, the NCLAT reviewed the records and found that summons were duly sent to the appellant’s registered office and email, which were verified as valid service.
The appellant further contended that since the contract stipulated delivery of flats within 24 months and the alleged default fell within the period prescribed under Section 10A of the Code, the Section 7 petition was not maintainable. The NCLAT rejected this argument, noting that the agreement included a clause for paying interest at 8% per annum for delays beyond 24 months up to a maximum of 40 months, after which legal action could be taken. The relevant period for filing the petition did not fall within Section 10A's restriction, thus validating the petition's admissibility.
Additionally, the NCLAT observed that despite the NCLT's order allowing the corporate debtor to continue operations with previous management, the debtor failed to complete the construction and deliver possession of the flats, leading to the vacating of the earlier order. Given the circumstances, the NCLAT upheld the NCLT’s decision, finding no merit in the appeal and dismissing it accordingly.
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