2019 (1) TMI 1704 - Tri - Insolvency and Bankruptcy

Petition under Insolvency & Bankruptcy Code admitted against Corporate Debtor for default in debt repayment

The Tribunal found the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016 maintainable against the Corporate Debtor due to default in ... Maintainability of application - initiation of Corporate Insolvency Resolution Process - Respondent/Corporate Debtor unable to liquidate the financial debt - existence of debt and dispute - HELD THAT:- As per the averments made by the Financial Creditor, the Corporate Debtor had induced him to book the flat with them. They had instructed the allotees to make payment and enter into an agreement with one of their wholly owned subsidiaries. It is at their direction that the payments were made to the subsidiary Company i.e., Golden Peacock Pvt. Ltd. It is evident that there was privity of contract between the Financial Creditor and the Corporate Debtor. Also, there is no direct communication between the Financial Creditor and M/S Golden peacock Residence Private Limited. Hence the plea that the Homestead Infrastructure Development Pvt Ltd is not the Corporate Debtor is not correct. There is clearly a default of repayment of financial debt by the Corporate Debtor. As per Section 2(11) of the Code, 'debt' is defined as a liability or obligation in respect of a claim which is due from any person, further, a financial debt has been clarified to mean and include money borrowed against payment of interest - petition merits admission. Petition admitted - moratorium declared. Issues Involved:1. Maintainability of the Petition under Section 7 of the Insolvency & Bankruptcy Code, 2016.2. Privity of Contract between the Financial Creditor and the Corporate Debtor.3. Existence of Financial Debt and Default.4. Admission of Petition and Imposition of Moratorium.Issue-wise Detailed Analysis:1. Maintainability of the Petition under Section 7 of the Insolvency & Bankruptcy Code, 2016:The petition was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to their inability to liquidate the financial debt. The applicant, Sharad Vadehra, contended that he had made substantial payments towards a residential unit in the Corporate Debtor's project, but the possession was not handed over, and compensation as per the Flat Buyer’s Agreement was not provided.2. Privity of Contract between the Financial Creditor and the Corporate Debtor:The Respondent argued that the application was not maintainable due to the absence of privity of contract between the Financial Creditor and the Corporate Debtor. They contended that no agreement was executed between them, and the alleged debt emanated from transactions with a subsidiary of the Corporate Debtor. The Respondent also highlighted that the Financial Creditor had filed a consumer complaint against the subsidiary before the National Consumer Disputes Redressal Commission (NCDRC).However, the Tribunal found that the Corporate Debtor had induced the Financial Creditor to book the flat and directed payments to be made to its subsidiary. The Corporate Debtor was also a party in the proceedings before the NCDRC. Email correspondences and documents annexed with the petition, including construction updates, allotment letters, and demand letters, were on the letterhead of the Corporate Debtor, establishing a privity of contract.3. Existence of Financial Debt and Default:The Tribunal noted that the Corporate Debtor had acknowledged the receipt of payments from the Financial Creditor and had issued various demand letters. The Flat Buyer’s Agreement stipulated a timeline for the completion of construction and possession, which had expired. The Corporate Debtor was liable to compensate the Financial Creditor for the delay as per the agreement. The outstanding debt was determined to be Rs. 4,55,93,624/- along with a further amount of Rs. 1,83,780/- per month.4. Admission of Petition and Imposition of Moratorium:Given the facts and circumstances, including the statement of account reflecting the outstanding debt, the Tribunal admitted the petition. A moratorium was imposed in terms of Section 14 of the Code, which included:- The institution or continuation of suits or proceedings against the Corporate Debtor.- Transferring, encumbering, or disposing of any assets of the Corporate Debtor.- Actions to foreclose, recover, or enforce any security interest created by the Corporate Debtor.- Recovery of any property by an owner or lessor occupied by the Corporate Debtor.The Tribunal confirmed the appointment of Mr. Jitesh Gupta as the Interim Resolution Professional (IRP) and directed him to take necessary steps under the statute and file a report within 30 days.Conclusion:The Tribunal concluded that there was a default in the repayment of financial debt by the Corporate Debtor, and the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, was admitted. The moratorium was imposed, and the IRP was appointed to proceed with the CIRP.