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NCLT Complaints - The Process of Filling - LawSimpl

NCLT Complaints – The Process of Filling

Overview:

NCLT is a body of authority that is quasi-judicial, established by the Ministry of Corporate Affairs to provide speedy resolution to corporate disputes. The forum for the home buyers to resolve any issue with the developers. Besides approaching the Real Estate Regulation and Development Authority and the Consumer Court, the builder can approach the NCLT.

NCLT has been constituted on 01st June 2016 under Sec. 408 of the Companies Act, 2013.

Who Can approach the NCLT?

As per section 5(8) (f) of the Insolvency and Bankruptcy Code (IBC) renders home buyers with the right to address the NCLT against builders, in the role of a ‘financial creditor’. Prior to the order by the Supreme court of India in January 2021, that involves a single home buyer, with claims of a minimum of Rs 1 lakh, to move a defaulting builder to the NCLT to start insolvency procedures under Section 7(1) of the IBC. 

The Supreme Court, on January 19, 2021, said at least 10% of total buyers in a housing plan where needed, to begin insolvency proceedings upon a defaulting developer. While supporting the constitutional legality of the amendments made to the Insolvency and Bankruptcy Code (IBC) in 2020, the SC confirmed that a minimum of 100 home buyers should come together to file an insolvency application in the NCLT against a defaulting developer.

Process:

The NCLT follows a well-defined procedure:

Stage 1 – Petition to the NCLT: 

When a company fails to furnish payments to its creditors, the creditors can rightfully bring forward a petition for Corporate Insolvency Resolution Process before the Adjudicating Authority. 

Once filed, the NCLT analyses the points of the petition for its admissibility. 

Stage 2 – Appointment of Interim Resolution Professional: 

The resolution professional (RP) is referred under Sec. 27 of the IBC, is a privileged insolvency professional designated and chosen by the Committee of Creditors. Before that appointment, the NCLT appoints the IRP. 

Stage 3 – Interim period

The interim period starts once the tribunal admits the petition. Following the sec14 of IBC, on the declaration of this period, the tribunal prohibits;

  1. Institution of fresh suits or continuation of pending suits against the corporate debtor;
  2. Defence of the corporate debtor from any operational, financial, legal or managerial burden;
  3. Any additional foreclosure or recovery of debt against the corporate debtor under the SARFAESI Act, 2002; and
  4. Recovery from the corporate debtor of any property that he possesses at the time of the insolvency process. 

The interim period remains in subsistence till the time the CIRP process is concluded for a period of 180 days, and if required for additional 90 days, subject to certain conditions.

Stage 4 – Examination and analysis of facts: 

The IRP is accountable for classifying the claims made in the petition by the petitioner systematically and conducting an investigation of the same following sec. 18 (b) of IBCe. In case the IRP requires a review of a claim made by the petitioner, then The Code authorizes the IRP to summon a meeting with the petitioner concerning the same for the clarification required.

The IRP is also required to constitute a Committee of Creditors (COC) by the virtue of Section 18 (c) of IBC within 30 days of the commencement of the CIRP.

Stage 5 – Resolution Plan: 

Once the IRP/RP verifies the claims made by the petitioner, a public announcement of the same is made by the COC. The announcement is symbolic of the bankruptcy by declaring that the corporate debtor is undergoing an insolvency process. Moreover, it calls all interested applicants or bidders are requested to submit a resolution plan that could potentially be implemented. These bidders could be prospective investors, creditors etc.

Stage 6 – Final Decision: 

The resolution plan established upon by the COC is presented before the NCLT. If the NCLT approves the resolution plan, the same is effected and becomes confining the corporate debtor and all the stakeholders. 

However, if the NCLT does not approve the resolution plan or, the COC is incapable to finalize a resolution plan in the assigned period, then the tribunal directs the liquidation of the corporate debtor and the same has to be concluded within one year of passing such order.

Checklist for Filing Before NCLT:

It is recommended that the petition is checked before filing it, therefore we have prepared a checklist for the same:

  • Whether the petition falls under the territorial jurisdiction of the board, where you are filing it.
  • Whether the petition is written in English
  •  Make sure that the margin of 4 cm from the top, 2.5 cm from the right and 5 cm from the left are maintained along with the double spacing, written on one side of A5 size papers.
  • The relevant provision of the Companies Act 2013 and the NCLT Rules 2016 are mentioned.
  • Whether the petitioner is an eligible petitioner under Sec. 241 and 242  of the Companies Act 2013.
  • Whether the name and the address of the petitioners are in detail and specifically mentioned.
  • Whether each of the papers of the petition is verified and the annexures are serially numbered.
  • Attach the relevant documents regarding the shareholders, about paid-up capital and balance sheet along with the petition.
  • The Vakalatnama requires to be duly notarized by paying the appropriate stamp fee.
  • A notice should be issued to the Central Government along with a copy of the petition.
  • A brief synopsis and the date of events should be filed along with the petition.

The documents required for filing in NCLT are as follows:

  • Copy of the application for buying the property
  • The agreement made between the buyer and the builder
  • Acknowledgement of payment made to the builder – receipt, bank statement etc.
  • Formal communication between the buyer and builder.
  • Brochure of the project shared at the time of agreement made between the buyer and builder
  • Allotment letter

Testimonials: 

LawSimpl can help you by providing legal advice and guidance while filing and also throughout the procedure through one of the eminent corporate lawyers from their team. 

It shall prevent you to get overburdened with the tribunal procedures and the formalities relevant to the petition, and you can concentrate on other necessary areas of your business.

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