2020 (11) TMI 356 - AT - Insolvency and Bankruptcy

Tribunal Upholds Petition Admittance: Construction Default Justifies Creditor's Non-Payment

Shri Amit Katyal S/o Shri O.P. Katyal Versus Mrs Meera Ahuja, Mrs Ruby Sachdev, Mr Hemant Ahuja, Jasmine Buildmart Pvt Ltd Through Jugraj Singh Bedi Interim Resolution Professional

Shri Amit Katyal S/o Shri O.P. Katyal Versus Mrs Meera Ahuja, Mrs Ruby Sachdev, Mr Hemant Ahuja, Jasmine Buildmart Pvt Ltd Through Jugraj Singh Bedi ... Issues Involved:1. Whether the Corporate Debtor has committed default in not completing the construction of the flat in time and handing over possession of the same in terms of the AgreementRs.2. Whether Financial Creditor/Home Buyer committed default in making payment of the instalments as per the Apartment Buyer Agreement (ABA) under the construction link PlanRs.3. Whether the Application under Section 7 of the Insolvency and Bankruptcy Code (I&B Code) is filed fraudulently with malicious intent for purposes other than for the resolution of insolvency or liquidation, as defined under Section 65 of the I&B Code, 2016Rs.4. Whether the Application is barred by limitationRs.Detailed Analysis:Issue No. 1: Default by Corporate Debtor in Construction and PossessionThe Corporate Debtor was obligated to complete the construction and hand over possession of the flat by February 2016, including a grace period. However, the flat was not ready for possession even by November 2018. The Adjudicating Authority observed that the Corporate Debtor failed to honor the commitment in terms of the Agreement, and there was no proof of extension of time by the concerned Authority. Thus, the Corporate Debtor's default was established.Issue No. 2: Default by Financial Creditor/Home BuyerThe Corporate Debtor argued that the Financial Creditor/Home Buyer defaulted in making timely payments as per the construction-linked plan. The Financial Creditor countered that payments were stopped due to the Corporate Debtor's failure to complete the project on time. The Tribunal noted that the Financial Creditor had paid a substantial amount (Rs. 2,75,55,186/- out of Rs. 3,80,10,000/-) by 2013 and that the project was delayed. The Tribunal found that the Financial Creditor's non-payment was justified due to the Corporate Debtor's non-performance.Issue No. 3: Fraudulent and Malicious Intent under Section 65The Corporate Debtor contended that the Application under Section 7 was filed with malicious intent to pressurize the Corporate Debtor. The Tribunal referred to the Supreme Court's judgment in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, which allows the real estate developer to argue that the insolvency process was invoked fraudulently. However, the Tribunal found no evidence to suggest that the Financial Creditor was a speculative investor or had malicious intent. The Tribunal concluded that the Financial Creditor genuinely sought possession of the flat and not merely a refund.Issue No. 4: LimitationThe Corporate Debtor argued that the default occurred when the Financial Creditor stopped paying instalments, which was before the enforcement of the I&B Code. The Tribunal rejected this argument, stating that the date of default for the Financial Creditor was when the possession was to be handed over (February 2016). The petition was filed within three years from this date, making it within the limitation period.Conclusion:The Tribunal upheld the Adjudicating Authority's decision to admit the petition filed under Section 7 of the I&B Code. The Corporate Debtor failed to complete the construction and hand over possession in time, justifying the Financial Creditor's non-payment. The Application was not barred by limitation and was not filed with malicious intent. The appeal was dismissed, and no costs were imposed.