2020 (2) TMI 1405 - Tri - Insolvency and Bankruptcy

Homebuyers' petition admitted, Corporate Insolvency Resolution Process initiated against Skylark Mansions Private Limited.

The Tribunal admitted the petition filed by homebuyers, initiating Corporate Insolvency Resolution Process (CIRP) against M/s. Skylark Mansions Private ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Existence of debt and dispute or not - HELD THAT:- Before initiating CIRP, it is paramount responsibility of Adjudicating Authority to examine various aspects of Corporate Debtor by keeping in view the elements of debt and default in question and object of code etc. As stated supra, basic facts with regard to debt and default are not by the Respondent. Section 2 of the Code says that provisions of Code to any Company incorporated under the provisions of Companies Acts, LLPs,; partnership firms etc., in relation to their insolvency, liquidation, voluntary liquidation, bankruptcy as the case may be. And by examining Annexure-23 (Independent Auditor's Report) that as per the Balance Sheet placed at page 1105, its Long Term Borrowings increased from ₹ 386.54 crore as on 31.03.2017 to ₹ 475.22 crore as on 31.03.2018. As per the Cash Flow Statement placed at page 1107 its cash flow showed a decrease from ₹ 15.12 Crores as on 31.03.2017 to ₹ 4.48 Crore as on 31.03.2018. Its losses as given at page 1115 show an increase from ₹ 20.11 crore as on 31.03.2017 to ₹ 29.10 crore as on 2017-18. Thus it is seen that the Company been showing increasingly borrowings and losses, and reducing cash flow over the years. This indicates an unhealthy financial status with regard to its ability to pay its debts. Therefore, the Company, apart from failing to complete the projects in question so as to deliver Flats as agreed upon between the parties, is prima facie insolvent. We are also not convinced with the financial status of the Company filed by the Respondent, as per Brief note dated 07.02.2020. Since the Respondent has failed to come forward to settle the issue raised in the instant Company Petition, there is no other alternative for the Adjudicating Authority except to consider the case as per merits - It is also relevant to point out here that we cannot keep the grievances of more than 250 Home buyers pending that too without any response coming from the Corporate Debtor to show any sort of solution for the issue raised in the instant Petition. As per law, even after initiating CIRP, it is permissible for the parties to settle the issue in question and can withdraw the Petition with permission of Adjudicating Authority, by filing appropriate Application. As per the ratio laid down in Apex court judgment M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK & ANR. [2017 (9) TMI 58 - SUPREME COURT] once debt and default in question is established to satisfaction of Adjudicating Authority, Application/Petition is filed in accordance with law and eligible Resolution Professional is suggested to appoint as IRP, an Application/Petition filed Under Section 7 of Code is to be admitted - In the instant case, we are satisfied that debt and default in question are occurred and established being not controverted by the Respondent, and qualified Resolution Professional namely Mrs. Ramanathan Bhuvaneshwari, as IRP; who has filed her Written Consent in Form-2 dated 23.09.2019, by inter-alia affirming that she is eligible to be appointed as the Interim Resolution Professional and as Independent Director in respect of the Corporate Debtor herein and that there are no disciplinary proceedings pending against her with the Board or Indian Institute of Insolvency Professional of ICAI (IIIPI); she is currently serving as an Interim Resolution Professional/Resolution Professional in three (03) CIRP process and Liquidator in NIL proceedings. Therefore, we are of the considered opinion that said Resolution Professional is provisionally eligible to be appointed as IRP, and it is a fit case to admit to initiate CIRP against the Corporate Debtor by appointing IRP, imposing moratorium etc. Petition is admitted by initiating Corporate Insolvency Resolution Process (CIRP) in respect of M/s. Skylark Mansions Pvt. Ltd., Corporate Debtor. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) by homebuyers.2. Failure of the Corporate Debtor to complete the project and deliver apartments.3. Financial status and solvency of the Corporate Debtor.4. Non-compliance with statutory obligations and RERA orders.5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP) by Homebuyers:The petition was filed by M/s. Skylark Ithaca Buyers Welfare Association, consisting of 255 homebuyers, under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate CIRP against M/s. Skylark Mansions Private Limited for defaulting on an amount of Rs. 220,90,27,614/- including principal and interest. The homebuyers had entered into agreements for the purchase of apartments, but the Corporate Debtor failed to complete the project and deliver the apartments.2. Failure of the Corporate Debtor to Complete the Project and Deliver Apartments:The Corporate Debtor, in association with its subsidiary ITHACA Estates Private Limited, failed to complete the construction of the apartments as per the agreed timelines. Despite receiving substantial payments from the homebuyers, the construction was not commensurate with the payments made. The Corporate Debtor and IEPL had promised to complete the project by various dates, but the work remained incomplete, leading to financial distress for the homebuyers who continued to service their home loans.3. Financial Status and Solvency of the Corporate Debtor:The financial statements of the Corporate Debtor indicated increasing borrowings and losses, with long-term borrowings rising from Rs. 386.54 crore to Rs. 475.22 crore and cash flow decreasing from Rs. 15.12 crore to Rs. 4.48 crore. The company showed an unhealthy financial status, indicating its inability to pay its debts. Despite claims of ongoing projects and financial solvency by the Corporate Debtor, the evidence suggested otherwise.4. Non-compliance with Statutory Obligations and RERA Orders:Several homebuyers had approached the Real Estate Regulatory Authority (RERA) and obtained orders directing the Corporate Debtor to pay compensation for delays. However, the Corporate Debtor failed to comply with these orders. The homebuyers issued a demand notice, but the Corporate Debtor's response was vague and did not address the core issues. The Corporate Debtor's balance sheets also indicated non-compliance with statutory requirements and default in loan repayments.5. Appointment of Interim Resolution Professional (IRP) and Declaration of Moratorium:The Tribunal appointed Mrs. Ramanathan Bhuvaneshwari as the Interim Resolution Professional (IRP) and declared a moratorium prohibiting suits, transferring of assets, and recovery actions against the Corporate Debtor. The IRP was directed to carry out functions as per the IBC, 2016, and submit progress reports to the Tribunal. The moratorium would remain in effect until the completion of the CIRP.Conclusion:The Tribunal admitted the petition filed by the homebuyers, initiating CIRP against M/s. Skylark Mansions Private Limited. The Corporate Debtor's financial distress, failure to complete the project, non-compliance with statutory obligations, and inability to pay debts were key factors in the decision. The appointment of an IRP and declaration of moratorium aimed to resolve the insolvency issues and protect the interests of the homebuyers.