Tribunal initiates CIRP against Corporate Debtor for default in payment and possession

The Tribunal admitted the petition and initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to default in payment and non-delivery of possession to Financial Creditors investing in the "Marvella City" project. The Tribunal imposed a moratorium under Section 14 of the Insolvency & Bankruptcy Code, appointing an Interim Resolution Professional to oversee the process and take necessary steps as per the Code. The Corporate Debtor's legal contentions were dismissed, emphasizing adherence to payment terms and timely possession delivery in construction contracts.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Default in payment and non-delivery of possession by the Corporate Debtor.
3. Legal contentions raised by the Corporate Debtor.
4. Admission of the petition and imposition of moratorium.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016:
The petition was filed by multiple Financial Creditors under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking the initiation of CIRP against the Corporate Debtor due to its inability to liquidate its financial debt. The Financial Creditors had invested in a residential project named "Marvella City" launched by the Corporate Debtor in June 2015, with assurances of project completion by 2017.

2. Default in payment and non-delivery of possession by the Corporate Debtor:
Each Financial Creditor had entered into a Builder Buyer Agreement and a Memorandum of Understanding with the Corporate Debtor, which included an assured return of Rs. 48,000 per month until the registry of the unit. Despite payments made by the Financial Creditors, the Corporate Debtor failed to deliver possession of the units by the agreed date of December 2018 and dishonored the post-dated cheques (PDCs) issued for the assured returns. The Financial Creditors issued legal notices and demanded refunds, but the Corporate Debtor did not comply.

3. Legal contentions raised by the Corporate Debtor:
The Corporate Debtor raised several defenses:
- The petition was not filed in the correct form and format, and relevant documents were missing.
- The amount of debt claimed was exaggerated and miscalculated.
- The petition was not properly verified, and bank statements were incomplete.
- The Corporate Debtor offered alternative units to the Financial Creditors, which were not accepted.
- Allegations of cash transactions were denied, asserting that payments were only accepted through banking channels.
- Operational difficulties due to the Managing Director's judicial custody and frozen bank accounts by the Income Tax Department were cited as reasons for non-compliance.

4. Admission of the petition and imposition of moratorium:
After considering the arguments and documents submitted by both parties, the Tribunal found that the Corporate Debtor had agreed to the payment terms and the amount of Rs. 16,00,000 as per the Memorandum of Understanding. The Corporate Debtor's refusal to hand over possession due to the alleged shortfall in payment was not legally tenable. The Tribunal referenced the case of Sunil Handa & Ors. v. Today Homes Noida India Ltd., emphasizing that time is the essence in construction contracts, and the builder cannot evade obligations.

The Tribunal admitted the petition and initiated the CIRP against the Corporate Debtor. A moratorium was imposed under Section 14 of the Code, prohibiting suits, asset transfers, foreclosure actions, and recovery of property from the Corporate Debtor. The Tribunal appointed Mr. Mukesh Kumar Grover as the Interim Resolution Professional (IRP) and directed him to take necessary steps under Sections 15, 17, and 18 of the Code and file his report.

The case was renotified for the IRP's report.

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