2024 (12) TMI 955 - AT - IBC

NCLAT rejects bid to limit insolvency proceedings to single project amid multiple creditor claims

Harpal Singh Chawla (Suspended Director of Spaze Towers Pvt. Ltd.) Versus Vivek Khanna & Ors.

The NCLAT dismissed an application seeking to confine CIRP proceedings to a single project (Spaze Arrow). The tribunal found that creditors from multiple ... Confinement of CIRP to a single project, 'Spaze Arrow' - admission of Section 7 Application filed by Respondents - HELD THAT:- Occupation Certificate is a pre-condition for occupying a premises or building. The facts, which have been brought on record, indicate that in pursuance of CIRP commencement against the CD, the claims have been filed by the allottees of Spaze Arrow and other different Projects. The Respondent has brought on record the list of unsecured Financial Creditors of real-estate allottees as Annexure-B. The Appellant in his rejoinder affidavit has also brought the same list of creditors as on 13.11.2024 as Annexure-30. From the list of creditors, it is clear that the claims filed by the allottees were to an amount of Rs.1,819,796,643/-. Out of which, the IRP has admitted claim of Rs.727,507,352/- and claims of Rs.868,961,658 is under verification. The Respondents, who had filed Application under Section 7, relate to Project Spaze Arrow, with regard to which claims have already been filed as noted above. The next Project for which several claims have been filed is the Project ‘Corporate Park’ - the CIRP against the CD commenced on 28.10.2021, i.e., subsequent to Occupancy Certificate or Completion Certificate as was obtained by the CD for Project Corporate Park. Against the order dated 28.10.2021, an Appeal was filed before this Tribunal, in which no interim order was passed. Hence, Civil Appeal No.6798 of 2021 was filed before the Hon’ble Supreme Court, challenging order of this Tribunal, which Appeal was disposed of on account of settlement between the contesting parties. It is relevant to notice that CIRP against the CD for Project Corporate Park had commenced on 28.10.2021, i.e. date subsequent to CD having obtained Occupancy Certificate and Completion Certificate. The said proceedings were ultimately set-aside on account of settlement before the Hon’ble Supreme Court on 18.11.2021. Large number of Claimants have filed claim arising from the Project Corporate Park. When the Claimants have filed claims for the Project Corporate Park, which we have noted above and who have pleaded that the Project is not complete despite Occupancy Certificate and Completion Certificate, by confining the CIRP to only one Project – Spaze Arrow, shall tantamount to excluding the claims filed before the RP from different Project. Considering the facts and circumstances, which have been brought on the record by the parties, are of the view that at this stage, it is not persuaded to pass an order, confining the CIRP to only one Project, i.e. Spaze Arrow, as prayed in the Application filed by the Appellant/ Applicant. Application dismissed. Issues Involved:1. Confine CIRP to a single project, 'Spaze Arrow'.2. Impact of CIRP on completed projects.3. Claims by financial creditors across multiple projects.4. Legal rights and obligations under existing agreements and arbitral awards.5. Validity and implications of occupancy and completion certificates.Issue-wise Detailed Analysis:1. Confine CIRP to a single project, 'Spaze Arrow':The appellant sought to limit the Corporate Insolvency Resolution Process (CIRP) to the 'Spaze Arrow' project, arguing that the Section 7 application was specifically related to this project. The appellant contended that the CIRP should not extend to other completed projects, as the claims by creditors were primarily concerning 'Spaze Arrow'. However, the tribunal found that claims had been filed by allottees from various projects, not just 'Spaze Arrow'. Therefore, confining the CIRP to a single project would unjustly exclude other creditors' claims. The tribunal rejected the appellant's request, emphasizing that all financial creditors are entitled to file claims under the Insolvency and Bankruptcy Code (IBC).2. Impact of CIRP on completed projects:The appellant argued that the CIRP should not affect the 12 completed projects, as they have already been handed over to allottees, and occupancy and completion certificates have been obtained. The tribunal noted that while these certificates indicate completion, claims from these projects had still been filed, suggesting unresolved issues. The tribunal highlighted that the presence of occupancy and completion certificates does not necessarily negate the existence of valid claims by creditors. Thus, the CIRP should not be limited based on the completion status of projects.3. Claims by financial creditors across multiple projects:The tribunal acknowledged that claims had been filed by financial creditors from various projects, including 'Spaze Arrow', 'Corporate Park', and others. The tribunal emphasized that these claims must be addressed within the CIRP framework. The tribunal noted that the Interim Resolution Professional (IRP) had already admitted claims worth Rs. 72 crores from 228 allottees across all projects. The tribunal stressed that it is for the Committee of Creditors (CoC) to decide on inviting resolution plans for individual or grouped projects.4. Legal rights and obligations under existing agreements and arbitral awards:The tribunal considered the legal context, including an arbitral award that restricted the corporate debtor's (CD) rights to carry out construction on the 'Spaze Arrow' project land. The tribunal noted that the CD's challenge to this award had been dismissed, reinforcing the award's validity. The tribunal also acknowledged the ongoing disputes and legal proceedings involving the CD and landowners, which impacted the project's completion.5. Validity and implications of occupancy and completion certificates:The tribunal examined the statutory provisions regarding occupancy and completion certificates under the Haryana Building Code, 2017, and the Haryana Development and Regulation of Urban Areas Act, 1975. It noted that these certificates are prerequisites for occupying a building but do not necessarily resolve all claims or issues. The tribunal emphasized that the presence of these certificates does not preclude the filing of claims by financial creditors, as evidenced by the claims submitted from various projects.In conclusion, the tribunal rejected the appellant's application to confine the CIRP to 'Spaze Arrow' alone, affirming the need to consider claims from all projects under the CIRP framework. The tribunal highlighted the importance of addressing these claims comprehensively, given the statutory rights of financial creditors under the IBC.