TaxTMI 
TaxTMI 
2021 (5) TMI 112
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....on filed by Adv. Tom K Thomas and 7 others. They have mentioned the default amounts but the default date is not mentioned in most of the cases. 3. It is stated that 11.12.2003, the Respondent had entered into a Joint Venture agreement with M/s Cherupushpam (landowner), to construct and develop the Kerala Trade Centre project. Subsequently, the parties of the Joint Venture entered into multiple Agreements for Sale, and thereafter executed Sale Deeds with various allottees, including the 8 Applicants herein under, promising them timely delivery of specific units in the project. 4. It is further stated that because of various violations of the approved building plan during the construction of the project, the Respondent failed in securing essential requirements such as an electricity connection, water connection and even possession certificates for the various units in the project as on the promised dates of delivery as per the Agreements for Sale and Sale Deeds executed with the Applicants. 5. Thereafter, due to surfacing of certain allegations of misappropriation of money committed by the officials of the Respondent, the landowner, M/s Cherupushpam Films (P) Ltd, revoked the Powe....
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....tes that the insolvency resolution process or liquidation proceedings, if filed, fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, attracts penal action." The Code is a beneficial legislation which puts the Corporate Debtor back on its feet, not being a mere recovery legislation for creditors. It envisages resolution of insolvency and not a recovery proceeding to recover the dues of the creditors. Thus, the act of the Applicants in the present case clearly makes them liable to be penalised under Section 65 of the Code for filing the Application with a fraudulent and malicious intent for the purpose other than the resolution of insolvency. c. It is further stated that the right to sue accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the Application, the Application would be barred under Article 137 of the Limitation Act. Hence, if the default has been occurred by breach of Agreement of Sale, then the date of default will be the date on which the Corporate Debtor failed to deliver possession. In terms of Clause 13 of Agreement of Sale, the period of default sta....
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....s proposed. Both enjoy the ownership of the land and building on 50:50 basis. Power of Attorney was also executed in favour of the Corporate Debtor by M/s Cherupushpam which authorised the Corporate Debtor to award contract for building after intimation to M/s. Cherupushpam Films (P) Ltd. It is also stated that all expenses for construction and completion of the building was treated as joint investment of both parties. M/s. Cherupushpam Films (P) Ltd agreed to sign all papers for getting the building permit, to get the plan approved and getting sanction from all authorities for which already power of attorney was executed. Both parties were to raise loan jointly, separate books of accounts shall be kept for the entire construction and accounts to be audited by the Auditor approved by both sides. The Corporate Debtor has to accept advance and remit the same in building construction account in a Nationalised Bank and to be operated jointly. In the agreement, the condition was that the net income will be apportioned in the ratio of 40:60 between the Corporate Debtor and M/s Cherupushpam Films (P) Ltd. The validity of the Agreement has not been disputed by the parties. Since both parti....
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....orate Debtor" under Section 3(8) of the Code since no debt is owed. j. It is further stated that to initiate CIRP the Applicant, has to file Form-1 referred under the Adjudicating Authority Regulation. Entry 5 &6 of Form No.1 mandate the Financial Creditor to submit application on its behalf. The authorisation letter is to be enclosed. In the present Aplication no authorisation letter has been attached by Sri. Mathews J. Aykaraand and Sri. George Mathew who are the authorised representatives and power of Attorney Holder of 3 Applicants. In this context the Corporate Debtor referred to the following decisions: - (i) Palogix Infrastructure Private Limited V. ICICI Bank Ltd [Company Appeal (AT) (Insolvency) No.30 of 2017] (ii) Innoventive Industries Limited V. ICICI Bank and another [Appeal Nos. 8337-8338 of 2017] k. It is also stated that the joint Application filed by Applicants under Chapter II of Part II of the Code and the I&B (Application to Adjudicating Authority) Rules, 2016 is incomplete and needs to be rejected u/s 7(5)(b) of the Code. The following defects were also there in the Application: - i. Since the application is made jointly by Applicants, a copy of author....
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....rnational, Lulu Samuel and other investors were present. The investors themselves suggested a Settlement Deed between the two joint venture partners and their representatives agreed to settle their disputes. * Subsequently one of the applicants Lalu Samuel has also sent an e mail to Respondent on 16.08.2019 stating that he would aid in regularisation of the building if M/s Cherupushpam and Respondent enter into an irrevocable agreement registered and legalised resolving all existing disputes. * Thereafter, a binding and enforceable Settlement Deed was entered into between the Respondent and M/s Cherupushpam on 05.08.2020 through which the parties therein decided to permanently settle amongst themselves all their disputes on the basis of mutual trust and good faith. Furthermore, the Hon'ble High Court of Kerala in l.A. 1/20 of WP (C) 15765/2019 has recorded he Settlement Deed/compromise vide its order dated 20.08.2020. * The Applicants have very well acknowledged the inter se disputes between the partners but still concealed this material fact from this Tribunal. The Applicants herein have invoked the insolvency resolution process under the Code fraudulently, with maliciou....
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....n through the sale agreements and sale deed individually executed in favour of the Applicants. Therefore, the Applicants are seeking to discover the Financial Credit that was extended for the purpose of the real estate project which has not been realised to the contract extended. In this connection the Applicants has referred to a decision in Annapurna Infrastructure Pvt ltd & another V. Soril Infra Resources Ltd, [CA (AT) (insolvency) No.32 of 2017] in which it is held that an Arbitral Award concludes the disputes between parties and is a valid record of default under the I&B Code,2016. ➢ Respondent has stated that the claims of the Applicants are barred by limitation and that the minimum threshold is not met. This is effectively put to rest as a bare perusal of Clause 13 of the Sale Agreement, which would reveal that a default is said to occur under the said Agreement only on the expiry of a period of two weeks from the date the allottees gave due notice to the Respondent. It is further stated that it is an admitted fact that there are extant arbitral proceedings, most of which have already reached their conclusions, which fact is not denied by the Respondent at arny jun....
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....parent that it is solely due to the fault of the builder that the project remains not completed till now. It is further submitted that the materials filed before this Tribunal makes it abundantly clear the buildings were not even numbered as per the regulations laid down by the Kerala Municipality Building Rules 1999 on the promised date of delivery to the allottees. This very fact forms clear evidence that there are deliberate acts of negligence and indifference on the part of the builder which would constitute a default, amounting to breach of Sale Agreement. It is also stated that the failure to even number the buildings is not merely an accident or a mistake but is a wilful act of indifference amounting to default. Moreover, without appropriate regularisation of the units of the building, the allotted real estate projects cannot be considered to have been delivered or even usable. ➢ Clause 21 of Annexure A9 Settlement Deed submitted by the Respondent, which was executed between M/s. Cherupushpam and KCCI, amounts to an acknowledgement of the existence of debt on the part of the Respondent with respect to the construction of Kerala Trade Centre project. ➢ It is....
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....sed Insolvency Resolution Professional. Therefore, while dealing the admission of Section 7 Application filed under the IBC, the two points required for adjudication is (i) whether there is an existence of ascertainable "debt" and (ii) whether there is an existence of "default" 11. Taking into consideration the following issues are framed for taking a decision in the matter: - I. Whether the Application was filed under Section 7 of I&B Code,2016 by the Applicants in the capacity of Allottees of Apartments or on the basis of Arbitral Award as Decree Holders? II. Whether the Application is barred by limitation? III. Whether the Application is maintainable against the Corporate Debtor/builder alone since the project is a joint venture by the Corporate Debtor and M/s. Cherupushpam Films (P) Ltd? 12. This Tribunal is considering the issues framed in the light of respective stand taken by the parties, submissions made on their behalf and the insolvency jurisprudence evolved till date. Issue No.1 13. The Applicant contends that they entered into an agreementwith the Corporate Debtor and M/s. Cherpushpam Films (P) Ltd to purchase the Apartment. In pursuance to this agreement the....
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....f a borrowing; and (ii) the expressions, "allottee" and "real estate project" shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);] (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clause (a) to (h) of this clause" 15. Sub-clause (f) of Sub-Section (8) of Section 5 provides that any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing would fall within the ambit of 'financial debt' and the explanation added to Sub-Section by Act No. 26 of 2018 provides that any amount raised from a....
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....Applicants failed to produce any proof to share the date of default against the Respondent. In reply to this contention the Applicants stated that Clause 13 of the sale Agreement would reveal that a default is said to occur only on the expiry of a period of two weeks from the date of the allottees gave due notice to the Corporate Debtor. 19. In order to establish the default an allotee would need to prima facie show a default by developer and for that purpose they would need to refer to the Agreement to sell as well as the information as registered with RERA. 20. The date of default according to the Allottees based on Clause 13 of the Agreement of Sale is "the ALLOTTEE shall be entitled to give notice in writing to the BUILDER and if the BUILDER further fails to deliver possession within two weeks from the date of receipt of such notice, the ALLOTTEE shall become entitled to receive @ Rs. 25/- per Sq.ft for every two months delay therefrom, for the area described in Schedule C & D hereto as liquidated damages till the date of actual handing over of possession from the expiry of the two weeks' time after the notice as stipulated herein." . it is also pertinent to note that the Cor....
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.... subsequently sale deed was also executed, which has occurred over three years prior to the date of filing of this Application. In the present case, the Corporate Debtor has not delivered the possession of the real estate property. The default has committed only when possession was scheduled to be delivered. Since the default had occurred over three years before the date of filing of Section 7 Application, the Application is a time barred Application. Issue No.3 22. Respondents contended that the Applicants herein have evidently entered into an Agreement of Sale with both M/s. Cherupushpam (Land Owner) and Respondent/Corporate Debtor (Builder) and not the Respondent alone. Furthermore, the agreements have been signed by the authorised signatory of Kerala Trade Centre and not the representative of Respondent/Corporate Debtor alone. By virtue of this joint venture agreement, the application under Section 7 willnot be maintainable against Respondent/Corporate Debtor alone. The Applicants refuted this contention and stated that it is the sole discretion of the Applicants to proceed against any one of the partners of the joint venture since, the joint venture Agreement was entered bet....