Corporate Insolvency Process Begins for Developer; Moratorium Imposed, IRP Appointed to Manage Affairs, Assets Frozen.

The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, thereby initiating the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor, M/s. Krishna Assets Developers Private Limited. Mr. Akarsh Kashyap was appointed as the Interim Resolution Professional (IRP). A moratorium was declared as per Section 14, halting all legal proceedings and asset transactions involving the corporate debtor. The IRP was instructed to announce the CIRP admission and fulfill duties as outlined in the Code, with cooperation mandated from all associated personnel. The applicant was directed to deposit Rs. 2 lakhs for IRP expenses.

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Issues Involved:

1. Jurisdiction of the Tribunal.
2. Financial Creditor's claim and evidence of debt.
3. Default by the Corporate Debtor.
4. Applicability of Section 7 of the Insolvency and Bankruptcy Code, 2016.
5. Appointment of Interim Resolution Professional (IRP).
6. Declaration of Moratorium.
7. Directions to the Interim Resolution Professional and related parties.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its territorial jurisdiction over the respondent corporate debtor, M/s. Krishna Assets Developers Private Limited, whose registered office is located in Delhi. This is in accordance with Section 60(1) of the Insolvency and Bankruptcy Code, 2016 (the Code).

2. Financial Creditor's Claim and Evidence of Debt:
The applicant, Mrs. Ruby Kumari, claimed to have invested in the respondent's real estate project, "3 Dimension," by disbursing a total sum of Rs. 4,50,000/-. Evidence included cheques and receipts, and an Apartment Buyer's Agreement dated 22.05.2016. The applicant alleged that the corporate debtor failed to deliver the possession of the booked flat within the stipulated 36 months and ceased construction work, substantiated by photographs and lack of communication from the debtor.

3. Default by the Corporate Debtor:
The Tribunal noted the respondent's failure to repay the financial debt and the absence of any rebuttal from the corporate debtor, who did not file a reply or appear in the proceedings. The applicant's claim of default amounting to Rs. 9,02,250/- as of 31.01.2019 remained uncontested.

4. Applicability of Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal emphasized that under Section 7, only a "Financial Creditor" can initiate the Corporate Insolvency Resolution Process (CIRP). The Code defines "Financial Creditor" and "Financial Debt" under Sections 5(7) and 5(8), respectively. The amendment to Section 5(8) clarified that amounts raised from allottees under real estate projects are considered financial debts. The Supreme Court's ruling in Pioneer Urban Land & Infrastructure Ltd. v. Union of India affirmed that home buyers are financial creditors, thus enabling them to initiate CIRP.

5. Appointment of Interim Resolution Professional (IRP):
The applicant proposed Mr. Akarsh Kashyap as the IRP, who met all the requirements under Section 7(3)(b) of the Code. The Tribunal found no disciplinary proceedings pending against him and confirmed his appointment.

6. Declaration of Moratorium:
The Tribunal declared a moratorium as per Section 14 of the Code, prohibiting:
- 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 or enforce any security interest.
- Recovery of any property by an owner or lessor.

7. Directions to the Interim Resolution Professional and Related Parties:
The IRP was directed to make a public announcement of the CIRP admission and to perform duties under Sections 15, 17, 18, 19, 20, and 21 of the Code. The Tribunal mandated cooperation from all personnel associated with the corporate debtor and allowed the IRP to seek further orders if any illegal transactions by ex-directors were discovered. The Tribunal also instructed the applicant to deposit Rs. 2 lakhs with the IRP for expenses.

Conclusion:
The Tribunal admitted the application under Section 7 of the Code, initiating the CIRP against the corporate debtor, M/s. Krishna Assets Developers Private Limited, and appointed Mr. Akarsh Kashyap as the IRP. The Tribunal declared a moratorium and directed necessary actions to be taken by the IRP and related parties.

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