2019 (9) TMI 1616 - Tri - Insolvency and Bankruptcy

Allottees as Financial Creditors under Insolvency Code: Tribunal grants moratorium, appoints Resolution Professional

The petitioners, allottees of a real estate project, were deemed 'Financial Creditors' under the Insolvency and Bankruptcy Code. The Corporate Debtor ... 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:- The form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code. A default amounting to lacs of rupees has occurred. As per requirement of Section 4 of the Code if default amount is one lac or more then the CIR Process would be issued. The application under sub section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. As per the judgment of the Hon'ble NCLAT rendered in the case of IDBI BANK LTD. VERSUS ODISHA SLURRY PIPELINE INFRASTRUCTURE LTD. [2019 (1) TMI 1718 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] no third party could intervene at admission stage to oppose admission. Secondly if some homebuyers are satisfied with the breach of obligation then it cannot be a lawful ground to resist those who have vested right to invoke the provisions of Section 7 of the Code. Such a course is wholly unwarranted and would not be sustainable in the eye of law. Petition admitted - moratorium declared. Issues Involved:1. Whether the petitioners qualify as 'Financial Creditors' under the Insolvency and Bankruptcy Code, 2016.2. Whether there was a default in delivering possession of the residential apartments by the Corporate Debtor.3. Whether the arguments raised by the Corporate Debtor regarding land acquisition and project delays are valid.4. Whether the application for initiation of Corporate Insolvency Resolution Process (CIRP) meets the requirements of Section 7 of the Insolvency and Bankruptcy Code, 2016.5. Whether the petition filed by the petitioners is malicious as argued by the intervening applicants.6. Whether the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 should be declared.Detailed Analysis:1. Qualification as 'Financial Creditors':The petitioners, who are allottees of a real estate project, qualify as 'Financial Creditors' under Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016. The Supreme Court in Pioneer Urban Land and Infrastructure Limited v. Union of India upheld the amendment that includes allottees of flats/apartments as financial creditors. Therefore, the petitioners are deemed Financial Creditors.2. Default in Delivery of Possession:The Corporate Debtor, Rajesh Projects (India) Private Limited, failed to deliver possession of the residential apartments by the stipulated date of 31.03.2016, with an additional grace period of three months. Despite multiple emails from the petitioners seeking a refund and interest due to the delay, the possession was not handed over, establishing a default.3. Arguments on Land Acquisition and Project Delays:The Corporate Debtor argued that delays were due to land acquisition proceedings and the Master Plan 2021. However, the Tribunal found these arguments unfounded as the Master Plan of 2001 was in force when the lease deed was executed, and no interim stay orders were presented. Additionally, the argument that time was not the essence of the contract was rejected, considering the unreasonable delay in completing the project.4. Requirements of Section 7 of IBC:The petitioners fulfilled all requirements under Section 7 of the Insolvency and Bankruptcy Code, 2016, for initiating the Corporate Insolvency Resolution Process. The application was complete, and there were no disciplinary proceedings against the proposed Interim Resolution Professional, Mr. Gaurav Katiyar. The Tribunal was satisfied that a default amounting to lacs of rupees had occurred.5. Allegation of Malicious Petition:An intervening applicant argued that the petitions were malicious, as many homebuyers were satisfied with the RERA timelines. However, the Tribunal dismissed this argument, noting that no third party could intervene at the admission stage to oppose the petition. The satisfaction of some homebuyers could not override the rights of others to invoke Section 7 of the Code.6. Declaration of Moratorium:The Tribunal declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery of any property by an owner or lessor. The moratorium does not apply to transactions notified by the Central Government or to a surety in a contract of guarantor to a Corporate Debtor. Essential services like water and electricity must continue during the moratorium period.Conclusion:The Tribunal admitted the petition and appointed Mr. Gaurav Katiyar as the Interim Resolution Professional. The Interim Resolution Professional was directed to make a public announcement and perform his duties as per the Code. The Financial Creditors were instructed to deposit a sum of Rs. 2 lacs with the Interim Resolution Professional to cover expenses. The Tribunal also directed the ex-management to provide all necessary documents and information to the Interim Resolution Professional within one week. The Registrar of Companies was ordered to update the status of the Corporate Debtor on its website.