Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLAT) 590

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Yogesh Khanna, Member (Judicial), Ajai Das Mehrotra, Member (Technical)
Chandar Narayan Chavan – Appellant
Versus
M. D. Devcon Private Limited – Respondent
Company Appeal (AT) (Insolvency) No. 1370 of 2024|Intervention Petition No. 31 of 2023|CP(IB) No. 3574/MB/2019

Advocates:
For the Appellants/Petitioners: Aayush Agarwala, Gaurav Verma
For the Respondents: Prateek Dwivedi, Krishan Mishra

A financial creditor who has cancelled their allotment and sought a refund ceases to be a homebuyer; thus, the threshold requirement for allottees under the third proviso to Section 7 of the IBC is not applicable.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 (including first, second, and third provisos) and Section 61 - Real estate project - Initiation of CIRP by financial creditor - Threshold requirement for allottees - The third proviso to Section 7 requires applications filed by allottees before the amendment and not admitted to be modified within 30 days to meet the threshold of 100 allottees or 10% of total allottees; however, where the petitioner had cancelled the allotment and sought refund, they ceased to be homebuyers and the debt was a financial debt simpliciter, rendering the proviso inapplicable. (Paras 11 and 12)

(B) Power of Tribunal - Recall vs. Review - The Tribunal has inherent power to recall its own order but not to review it - Recall is permissible only on limited grounds: (i) the order suffers from inherent lack of jurisdiction; (ii) it was obtained by fraud or collusion; (iii) there was a mistake of the court prejudicing a party; or (iv) a judgment was rendered in ignorance of a necessary party not being served - An application filed after inordinate delay without a valid explanation is liable to be dismissed on the ground of delay and laches. (Paras 8, 9, and 10)

Facts of the case:
The appellant, claiming to be a homebuyer in a real estate project of the corporate debtor, filed an intervention petition seeking to be made a party in a Section 7 petition filed by two individuals (the original petitioners) against the corporate debtor, and to recall the admission order dated 27.05.2021. The intervention petition was dismissed by the NCLT, leading to this appeal.

Findings of Court:
The NCLAT upheld the dismissal, finding that the original petitioners had exercised the option to cancel their allotment and claim a refund, thus ceasing to be homebuyers. Consequently, the third proviso to Section 7 (requiring a minimum number of allottees) was not applicable. The court further found that the appellant had not established any ground for recall (such as lack of jurisdiction, fraud, or procedural error), and that the application was filed after a delay of over two years without a satisfactory explanation, constituting delay and laches.

Issues: (1) Whether the order admitting the corporate debtor into CIRP was bad in law for non-compliance with the third proviso to Section 7 of the IBC; and (2) Whether the NCLT erred in dismissing the intervention and recall petition.

Ratio Decidendi: The order admitting the Section 7 petition was not passed without jurisdiction, nor was it based on fraud or misrepresentation. The petitioners, having terminated their allotment and sought a refund, were not “allottees” under the second proviso, and thus the third proviso was inapplicable. The intervention petition was filed after an inordinate delay with no valid cause, and the appellant lacked locus standi to intervene in a pre-admission stage of a Section 7 petition. Result : Appeal dismissed. No order as to costs. Pending application(s) disposed of. (Per: Ajai Das Mehrotra, Member (Technical))

Table of Content
1. introduction to the appeal and factual background of the case (Para 1 , 2 , 3 , 4)
2. appellant's arguments regarding non-compliance with section 7 provisos (Para 5)
3. court's analysis on power of recall, lack of jurisdiction, and third proviso applicability (Para 6 , 7 , 8 , 9 , 10 , 11 , 12)
4. appeal dismissed, impugned order upheld (Para 13)

[Per: Ajai Das Mehrotra, Member (Technical)]

The present appeal has been filed by Mr. Chandar Narayan Chavan against the impugned order dated 12.06.2024 passed by the NCLT, Mumbai in Intervention Petition No. 31/2023 in CP(IB) No. 3574/MB/2019 filed by the Appellant, wherein the Ld. NCLT dismissed the said Intervention Petition.

2. In the Intervention Petition No. 31/2023, the Applicant/Appellant had sought two main reliefs as follows:

“(i) The Adjudication Authority be graciously pleased to allow the present intervention application and pass an order allowing the Applicant herein to intervene as party in the above-captioned Company Petition; and (ii) The Adjudicating Authority be further pleased to pass an order to recall/vacate the Order dated 27.05.2021 being without jurisdiction and contrary to law.”

3. The aforesaid Intervention Petition was dismissed by the Ld. NCLT vide order dated 12.06.2024, and being aggrieved by it the present appeal has been filed.

4. The brief facts of this case are as under:

i. CP(IB) No. 3574/MB/2019 was filed by Mr. Indranil Das and Mrs. Nandita Das under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘IBC, 2016’) seeking to initiate Corporate Insolvency Resolution Process (hereinafter referred to as the ‘CIRP’) against M.D. Devcon Private Limited (hereinafter referred to as the ‘Corporate Debtor’) alleging default in payment of financial debt.

ii. The Corporate Debtor was carrying on business of construction and development and one of upcoming residential project known as “SAVANNAH” was being constructed on land bearing CTS No. 1285 A/E, Kanjurmarg (East), Mumbai.

iii. The Petitioners, Mr. Indranil Das and Mrs. Nandita Das were allotted Flat No. 1504 on the 15^th Floor vide letter allotment dated 25.08.2019.

iv. The Corporate Debtor failed to start the project and the Petitioners wrote letter dated 08.09.2016 and finally, on 13.12.2016 had sent the final termination letter of allotment and requested the Corporate Debtor to refund the amount with interest as per clause 9 of the allotment letter.

v. As per clause 9 of the allotment letter it was clearly mentioned that if the Corporate Debtor fails to execute the agreement for sale or fails to start the construction, then the Petitioners had the right to terminate the letter of allotment and claim the refund amount paid under the allotment letter along with interest @ 15% p.a.

vi. The Petitioners filed the following chart giving the total amount payable by the Corporate Debtor:

vii. The Petitioners submitted before the Ld. NCLT that FIR has been registered against the Corporate Debtor and the matter is under investigation by Economic Offences Wing and one of the Directors of the Respondent company was arrested and recently granted bail by the Hon’ble Metropolitan Magistrate, 47^th Court, Mumbai.

viii. The Ld. NCLT vide order dated 27.05.2021 admitted the Corporate Debtor into CIRP and appointed Mr. Kedar Parshuram Mulye as the Insolvency Resolution Professional (hereinafter referred to as the ‘IRP’).

ix. The Intervention Petition of the Applicant/Appellant requesting for intervention in the company petition bearing CP(IB) No. 3574/MB/2019 and recall of the order dated 27.05.2021 was rejected through the impugned order, as under:

“15. We have carefully scrutinized the matter and have given due weightage to the rival contentions.

16. The Applicant/Intervenor seeks to challenge the Admission Order dated 27.05.2021, primarily on the basis that the Petition/ Application filed under Section 7 of the Code failed to meet the statutory threshold as outlined in the second and th

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2026 Supreme(Online)(NCLAT) 590

A financial creditor who has cancelled their allotment and sought a refund ceases to be a homebuyer; thus, the threshold requirement for allottees under the third proviso to Section 7 of the IBC is not applicable.

Cases Referred (1)