NCLAT: Section 7 IBC Application Maintainable Against Multiple Corporate Debtors In Same Real Estate Project
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi, comprising Justice Rakesh Kumar Jain, Justice Mohammad Faiz Alam Khan, and Mr. Naresh Salecha (Technical Member), has held that a Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC) can be filed against multiple corporate debtors forming part of the same real estate project. The ruling came in an appeal filed by 115 homebuyers of the “Earth Towne” project against the order of the NCLT, New Delhi Bench-IV, which had dismissed their insolvency application against Earth Towne Infrastructure Pvt. Ltd. (ETIPL) on the ground that the applicants did not meet the statutory threshold under Section 7(1) of the IBC.
Background
The appellants were allottees of flats in the Earth Towne project, jointly developed by Earth Infrastructure Ltd. (EIL) and Earth Towne Infrastructure Pvt. Ltd. (ETIPL). ETIPL was incorporated as a Special Purpose Vehicle (SPV) to hold the land, while EIL acted as the developer. Under a Development Agreement dated 09.09.2010, ETIPL retained 18% of the built-up area, and 82% was assigned to EIL. Out of a total of 3,400 units, ETIPL’s share was 612 units, of which 220 units were sold to the allottees, including the appellants. After construction was abandoned in 2017 and possession was not handed over by the promised date (31 December 2021), the homebuyers initiated insolvency proceedings under Section 7 of the IBC.
Proceedings Before NCLT
The NCLT New Delhi dismissed the application, holding that only 66 allottees (after excluding those who had filed claims in EIL’s CIRP) were eligible, and therefore the threshold of 100 allottees or 10% of the total allottees, whichever is less, was not satisfied.
NCLAT’s Observations
The Appellate Tribunal found that the Adjudicating Authority erred in calculating the threshold. It noted that ETIPL had only 220 allottees, meaning the threshold under the proviso to Section 7(1) was 22 homebuyers, and even if ETIPL’s 18% share of the 3,400 units was considered, the threshold would be 62 allottees. Since 115 homebuyers had filed the appeal, they clearly surpassed the statutory requirement. The Tribunal also observed that the Builder Buyer Agreements were executed jointly by EIL (developer) and ETIPL (landowner), giving the allottees independent remedies against both entities.
Referring to its earlier judgment in Mist Avenue Pvt. Ltd. v. Nitin Batra (Company Appeal (AT)(Ins.) No. 127 of 2023), the NCLAT reiterated that: “Applications under Section 7 of the IBC filed against two or more corporate debtors who were part of the same project are maintainable.” The bench emphasized that the threshold test must be applied at the time of filing the application, as clarified by the Supreme Court in Manish Kumar v. Union of India [(2021) 5 SCC 1], and not by subtracting claimants subsequently found to have filed claims in related CIRPs. It further relied on the analogy of the Earth Iconic project, where CIRP was admitted against Celestial Estates Pvt. Ltd. (landowner) even though CIRP against EIL (developer) was already underway.
Holding that the appellants met the statutory requirement and that their Section 7 petition was maintainable, the NCLAT set aside the NCLT’s order and remanded the matter to the Adjudicating Authority for fresh consideration. The Tribunal concluded: “An application under Section 7 of the IBC can be filed against multiple corporate debtors forming part of the same real estate project. The Adjudicating Authority erred in dismissing the petition on the ground of threshold.” The parties were directed to appear before the NCLT, New Delhi on September 26, 2025, for further proceedings.
Appearance
For Appellants: Ms. Vatsala Kak & Mr. Shaurya Shyam, Advocates.
For Respondent: None.
Cause Title: Mr. Satyabrata Mitra and Ors. Vs. Earth Towne Infrastructure Pvt. Ltd
Case No: Comp. App. (AT) (Ins) No. 2171 of 2024 & I.A. No. 8108 of 2024
Coram: Justice Rakesh Kumar Jain, Justice Mohammad Faiz Alam Khan, Mr. Naresh Salecha (Technical Member)
