Tribunal rules for applicant in undervalued transaction case, directs respondent to comply with sale agreement

The Tribunal ruled in favor of the applicant, the resolution professional, in a case concerning an alleged undervalued transaction and illegal possession of a property by the respondent. The respondent was directed to deposit the balance amount for the property sale within 15 days and comply with the sale agreement. Failure to do so would empower the liquidator to initiate a fresh sale of the property. The Tribunal concluded by disposing of the relevant motions in the insolvency matter.

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Issues Involved:
1. Whether the transaction between the respondent and the corporate debtor is an undervalued transaction under Section 45 of the Insolvency and Bankruptcy Code, 2016.
2. Whether the respondent is illegally holding possession of Unit No. 7.
3. Compliance with previous orders and payment obligations by the respondent.
4. The respondent’s claim for three car parking spaces as per the agreement.

Issue-wise Analysis:

1. Undervalued Transaction under Section 45 of the Insolvency and Bankruptcy Code, 2016:

The applicant, in the capacity of the resolution professional, argued that the transaction involving the sale of Unit No. 7 to the respondent for Rs. 3,78,00,000 was significantly below the prevailing market rates, thus qualifying as an undervalued transaction under Section 45 of the Code. The applicant provided details of other transactions to substantiate this claim. Additionally, the applicant highlighted discrepancies in the unregistered agreement dated September 2, 2016, provided by the respondent. The respondent countered this by asserting that the transaction was conducted in the ordinary course of business and was not undervalued, as the agreed price was higher than the Ready Reckoner price at that time.

2. Illegal Possession of Unit No. 7:

The applicant contended that the respondent had been illegally occupying Unit No. 7 since August 2013 by paying only Rs. 4,50,000, which was reflected as "advances from related parties" in the corporate debtor's balance sheet. The applicant argued that the respondent's possession was based on an unregistered agreement and was fraudulent, aiming to misappropriate the assets of the corporate debtor. The respondent admitted to occupying the unit but claimed it was based on a legitimate letter of allotment dated August 4, 2013, followed by an agreement for sale dated September 2, 2016.

3. Compliance with Previous Orders and Payment Obligations:

The Tribunal had previously directed the respondent to either pay the total consideration of Rs. 3,78,00,000 or pay monthly compensation for occupying the property. The respondent expressed willingness to purchase the unit on an "as is where and whatever it is basis" by paying the balance consideration in installments. However, despite multiple orders and reminders, the respondent delayed the payment and issued a post-dated cheque, which was dishonored. This led to further legal actions, including a demand notice under Section 138 of the Negotiable Instruments Act, 1881.

4. Claim for Three Car Parking Spaces:

The respondent filed an Interlocutory Application seeking the allotment of three car parking spaces as assured in the agreement dated September 2, 2016. The Tribunal rejected this application, stating that the applicant had no power to allot car parking. The respondent argued that the refusal to include the car parking spaces in the revised agreement led to the stoppage of the cheque payment. The Tribunal directed the respondent to pay the balance amount and complete the sale, failing which the liquidator was instructed to proceed with a fresh sale of the property.

Conclusion:

The Tribunal directed the respondent to deposit the balance amount with the liquidator within 15 days and proceed with the execution of the sale agreement. If the respondent fails to comply, the liquidator is authorized to take necessary steps for a fresh sale of the property. The Tribunal disposed of M.A. No. 2894 of 2019 and M.A. No. 642 of 2018 in C.P. No. 1092/MB/C-II/2017 with these observations and directions.

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