2019 (8) TMI 1739 - Tri - Insolvency and Bankruptcy

Petition under IBC Section 9 rejected: Not an operational creditor; seek RERA remedies

Mr. Swaraj Kumar Versus M/s. Expat Projects Bangalore Holding Private Limited

Mr. Swaraj Kumar Versus M/s. Expat Projects Bangalore Holding Private Limited - TMI Issues Involved:1. Whether the debt claimed by the Petitioner qualifies as an 'Operational Debt' under the Insolvency and Bankruptcy Code (IBC), 2016.2. Whether the Petitioner qualifies as an 'Operational Creditor' under the IBC, 2016.3. Whether the Petition filed under Section 9 of the IBC, 2016 is maintainable.4. Whether the Power of Attorney holder can file the application under Sections 7, 9, and 10 of the IBC, 2016.5. Whether the existence of a dispute between the parties affects the maintainability of the Petition.6. Whether the Petitioner should seek remedy under the Real Estate (Regulation and Development) Act (RERA) instead of the IBC.Issue-wise Detailed Analysis:1. Whether the debt claimed by the Petitioner qualifies as an 'Operational Debt' under the Insolvency and Bankruptcy Code (IBC), 2016:The Tribunal examined whether the debt claimed by the Petitioner, amounting to Rs. 11,48,91,082, qualifies as an 'Operational Debt' under Section 5(21) of the IBC. The Tribunal referenced the Supreme Court's decision in Chitra Sharma and Ors. v. Union of India, which held that amounts raised from allottees under real estate projects are deemed to have the commercial effect of a borrowing and are considered financial debts. The Tribunal concluded that the debt in question does not qualify as an 'Operational Debt' but rather has the commercial effect of a borrowing, thus categorizing it as a financial debt.2. Whether the Petitioner qualifies as an 'Operational Creditor' under the IBC, 2016:The Tribunal analyzed whether the Petitioner fits the definition of an 'Operational Creditor' under Section 5(20) of the IBC. Given that the debt was not categorized as an 'Operational Debt,' the Petitioner could not be considered an 'Operational Creditor.' The Tribunal emphasized that the Petitioner’s role as an allottee in a real estate project aligns more closely with the definition of a financial creditor.3. Whether the Petition filed under Section 9 of the IBC, 2016 is maintainable:The Tribunal scrutinized the maintainability of the Petition under Section 9 of the IBC. It noted that the provisions of the IBC cannot be invoked for mere recovery of outstanding amounts but can be used to initiate the Corporate Insolvency Resolution Process (CIRP) for justified reasons. The Tribunal cited the Supreme Court's ruling in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, which stated that the existence of undisputed debt is a prerequisite for initiating CIRP. Given the classification of the debt as financial rather than operational, the Petition under Section 9 was deemed incomplete and thus not maintainable.4. Whether the Power of Attorney holder can file the application under Sections 7, 9, and 10 of the IBC, 2016:The Corporate Debtor contended that the Petition was filed by a Power of Attorney holder, which is not permissible under Sections 7, 9, and 10 of the IBC. The Tribunal, however, did not find substantial grounds to dismiss the Petition solely on this basis, as the Power of Attorney was executed in Bangalore and was valid under the law.5. Whether the existence of a dispute between the parties affects the maintainability of the Petition:The Tribunal considered the Corporate Debtor's argument that the existence of a dispute regarding the debt affects the Petition's maintainability. The Tribunal referenced the Supreme Court's decision in Mobilox Innovations, which held that the existence of a dispute is a critical factor. The Tribunal found that the Corporate Debtor admitted receipt of funds and liability to repay, but the classification of the debt as financial rather than operational was the primary reason for rejecting the Petition.6. Whether the Petitioner should seek remedy under the Real Estate (Regulation and Development) Act (RERA) instead of the IBC:The Corporate Debtor argued that since the Petitioner is a flat buyer, RERA is the appropriate authority for resolving such complaints. The Tribunal acknowledged this argument and suggested that the Petitioner could seek remedies under other applicable laws, including RERA.Conclusion:The Tribunal concluded that the Petition filed under Section 9 of the IBC, 2016, was incomplete and should be rejected. The Tribunal clarified that this order does not preclude the Petitioner from seeking other legal remedies to address their grievances. No order as to costs was made.