NCLT Chandigarh Admits Primezone Developers To CIRP, Treats Plot Allottee Payments As Financial Debt

On 5 June, the Chandigarh Bench of the National Company Law Tribunal (NCLT) admitted Primezone Developers Pvt. Ltd. to the Corporate Insolvency Resolution Process (CIRP), holding that payments made by plot allottees constitute financial debt under the Insolvency and Bankruptcy Code.

Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal admitted the Section 7 petition filed by the allottees and initiated CIRP against the corporate debtor. The Bench held:

“The Corporate Debtor has admitted that the project could not be completed in a time bound manner due to the auction of the project land and appeals pending therein. This does not exonerate the Respondent/Corporate Debtor from the default of having accepted the price of the flats/units and failing to deliver the possession of the units or refunding the payment being made by the Petitioners.”

Sandeep Turan filed the petition after receiving authorisation from 33 plot allottees to act on their behalf in a joint application.

Primezone Developers, incorporated in 2011, launched its “Prime City–Assandh” project in Karnal, Haryana, and offered residential plots to prospective buyers. The allottees booked plots and made payments, and the company issued allotment letters promising possession and execution of sale deeds within a reasonable period. However, the company stalled the project and failed to deliver possession.

Later, allottees initiated consumer complaints and writ petitions over non-development, leading the Town & Country Planning Department to cancel the company's licence in October 2018.

In September 2020, the allottees learned that Rudraveerya Developers Ltd. had purchased the project land through auction for over Rs 10 crore. Despite repeated demands, Primezone Developers did not respond or refund the amounts, which led 33 allottees to file a Section 7 petition alleging default of Rs 6.76 crore plus interest.

The corporate debtor challenged the petition's maintainability and argued that only 28 of the 33 petitioners had properly authorised the application. It also contended that the petition failed the statutory threshold under Section 7(1) of the IBC, since it did not represent 100 allottees or 10 per cent of the total allottees.

The Tribunal addressed three issues. On maintainability and threshold compliance, it held that Section 7(1) requires at least 100 allottees or 10 per cent of allottees in a project to file jointly. It found that the project had only 37 units and that 33 allottees joined the petition, thereby satisfying the 10 per cent threshold. It also noted that the corporate debtor failed to disclose or rebut the total number of units.

On limitation, the Tribunal recorded the date of default as 30 June 2019. It held that even if 9 October 2018 (date of licence cancellation) was treated as the default date, the petition filed on 30 March 2022 remained within limitation due to the Supreme Court's COVID-19 exclusion orders.

On the nature of debt, the Tribunal held that payments made by plot allottees qualify as financial debt under Section 5(8)(f) of the IBC. It relied on the Supreme Court's ruling in Pioneer Urban Land & Infrastructure Ltd. v. Union of India and reaffirmed that allottees qualify as financial creditors.

Accordingly, the NCLT admitted the petition under Section 7(5) of the IBC, declared a moratorium under Section 14, and appointed Hemanshu Jetley as Interim Resolution Professional (IRP).