TaxTMI 
TaxTMI 
2021 (7) TMI 1125
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....between the Applicant and the Corporate Debtor by way of which the Corporate Debtor owes an amount of Rs. 6,51,36,981/- on account of Maintenance Security Deposits and accrued interest thereon. iii. That the Apartment Owners entered into Flat Buyer's Agreements with Corporate Debtor from 2004 onwards for purchase of flats in a multi-stored group housing complex in the name and style of Vipul Greens situated at Sohna Road, Sector-48, Gurgaon, Haryana. There are total 644 number of flats in the Vipul Greens Complex, out of which many apartment owners are members of VGRWA. iv. That Clause 4(b) of the Flat Buyer's Agreement enabled Corporate Debtor to collect maintenance security deposit @ Rs. 50/- per sq.ft. of the super area of each flat. Pursuant to the said clause, Corporate Debtor has collected an amount of Rs. 6,51,36,981/- from the Apartment Owners under the head of Maintenance Security Deposit. v. That various Deeds of Declaration were executed by the Land Owner under the Haryana Apartment Ownership Act, 1983. The details of the Deed of Declarations are enumerated here in below: vi. That between 2007 to 2016, many of whom are members ....
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.... order to avoid disconnection of electricity connection. x. That, vide letter dated 31.03.2018, Corporate Debtor puts up arbitrary, irrational and illegal demands as precondition for handing over of Vipul Greens Complex to VGRWA despite the directive of Office DTCP dated 21.02.2013 wherein it was clearly directed that handover of condominiums should not be delayed by the colonizers. Some of the demands are as follows: a. Execution of Handing Over and Taking Over Agreement("HOTO"), a condition put up by Corporate Debtor to circumvent the directives of DTCP and solely for the purpose of delaying the hand over and thus the corpus of maintenance security deposit. b. The said letter further threatened VGRWA and its officers to execute HOTO as according to them it is the only legally and amicably possible knowing fully well that hand over could not have been delayed putting arbitrary conditions like above. c. Corporate Debtor threatened VGRWA to stop the services provided by the vendors. xi. That VGRWA vide letter dated 01.04.2018 expressed its anguish and surprise over the letter dated 31.03.2018 issued by Corporate Debtor over a sudden chang....
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.... xvi. That on 16.11.2018, Corporate Debtor responded to the letter dated 08.10.2018 whereby it was agreed to release certain amounts of maintenance security deposit, if the said amount is reasonable. But no amount is released by them. xvii. That a meeting was held on 22.11.2018 between office bearers of VGRWA and senior employees of Corporate Debtor wherein CEO of Corporate Debtor expressed that they are in financial stress and hence not in the position to commit any payment schedule. It is also a matter of record and accordingly mentioned in minutes of the aforesaid meeting that some of the flat owners, even after the handover on 01.04.2018, erroneously continued to pay to Corporate Debtor the Common Area Maintenance charges and electricity bills. An amount of Rs. 25,31,045/- was paid by some Residents to the Corporate Debtor until November, 2018 and the same is still lying with them till date in spite of the assurance by the Corporate Debtor. The same was intimated to the Corporate Debtor vide Letters dated 25.10.2018 and 30.11.2018. xviii. That Corporate Debtor sent a letter dated 27.11.2018 in pursuance if the Minutes of Meeting held between repre....
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....onstrate the date and time when the alleged debt has become due and payable. In the present matter no debt is due and payable to the Petitioners by the Respondent Company. iv. It is an admitted case of the Petitioner that neither any agreement has been entered into between the Petitioner and the respondent Company nor any amount has been paid/transferred by the Petitioner to the Respondent Company. v. That the amount as being claimed by the Petitioner is not a financial debt within the purview of Section 5(8) of the Code as neither the amount attracts interest nor the same has been disbursed against the consideration for the time value of money. vi. That the Respondent Company has developed a multi-storied group housing complex in the name and style of "Vipul Greens" and there are as many as 644 flats in the instant housing complex. vii. That, the Petitioner is a self-proclaimed residents Welfare association of Vipul Greens claiming itself to be acting for and on behalf of the 'residents of Vipul Greens'. It is pertinent to note that the Petitioner has only approximately 300 flats as its members out of the total 644 fiats of Vipul Greens.....
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.... of the Department of town & Country Planning, Haryana, the Petitioner and respondent Company started the negotiations for transfer of administration and operations of the Vipul Greens. xii. That the Respondent Company proposed to enter into one Handing Over and Taking Over Agreement ("HOTO") with the Petitioner so as to protect the interest of the flat owners of Vipul Greens. The aforesaid HOTO agreement is still pending and has not been executed by the Petitioner till date on one pretext or the other. xiii. That, as the HOTO agreement was pending at the end of the Petitioner and as the Petitioner was putting pressure upon the Respondent Company to transfer the administration, xiv. Therefore, it was decided that from 01.04.2018 the administration of the Vipul Greens shall be taken over by the petitioner. It was further agreed that the Respondent Company shall continue to be engaged with the affairs of the Vipul Greens till the time HOTO agreement is executed between the parties. It is precisely for this reason that the respondent Company has written to various agencies involved with the Vipul Greens that from 01.04.2018 administration shall be looked aft....
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....on to pay a lumpsum amount at the rate of 1.05% for the period upto 31.03.2014 towards the Haryana Value Added Tax Act, 2003. xxi. That, the Respondent Company in view of the notification of the government has written letters and/or e-mails and thereafter reminder letters to the flat owners of Vipul Greens to pay the respective amount payable towards Value Added -Tax as demanded by the government authorities. xxii. That, total amount of INR 50,72,651/- is outstanding and due and payable by the flat owners of Vipul Greens to the Respondent Company towards the Haryana Value Added Tax. xxiii. That, in terms of Clause 8 read with Clause 8(b) of the Flat Buyer's Agreement the flat owners are under mandate to pay the outstanding amount towards the Haryana Value Added Tax, which has not been paid and is lying outstanding. xxiv. That the aforesaid outstanding amount due and payable to the Respondent Company is to be adjusted against the Maintenance Security deposit as per the clause agreement executed between the flat owners and the Respondent Company. xxv. That in terms of Clause 4(b) of the Flat Buyer's Agreement the accounts are to be....
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....ns of delaying the handover and thereby keep on enjoying the benefits of "Maintenance Security Deposit" for as long as possible. It is further stated that the alleged HOTO agreement was deliberately drafted by the Respondent Company in such a manner which is not only prejudicial to the interests of the flat owners but also seeks restructuring of the repayment of "Maintenance Security Deposit" to Petitioner. vi. That the Petitioner is/was never in a position of putting any sort of pressure upon Respondent Company but was actually time and again requesting the respondent Company to hand over the administration of "Vipul Greens" condominium along with Maintenance Security Deposit which rightfully belongs to Petitioner. The signing of Deed of Indemnity was another ploy on part of the Respondent Company to delay the process of handover since the Petitioner was constantly persisting with its legal demand. vii. It is further stated that the alleged amount of Rs. 8,05,56,962/- is exorbitantly high pitched penalty calculated at the rate of about 750% per month on the pending maintenance charges, if any. viii. That the alleged demand letters and reminders are nothi....
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.... law or has not yet become due in the sense that it is payable at some future date. And in the matter at hand the debt has not yet become due as the same can only become due after the settlement of accounts i.e., in future after the reconciliation. v. That in terms of Section 7(5) of the Code no default appears to have occurred if there are pending obligations on the part of the Financial Creditor itself, and the default is to arise only after fulfilling the obligations on part of the Financial Creditor and only then the amount is said to become due and payable. And in the matter at hand the Petitioner has failed to fulfill its obligations and therefore, the instant Petition filed Under Section 7 of the Code is liable to be rejected. 6. The Petitioner/Financial Creditor has further filed a counter affidavit dt. 13.09.2019, which is nothing but repetition of the facts mentioned in petition and rejoinder except the following: i. That the contents of Supplementary Affidavit dated 20.08.2019 are patently false, frivolous and contrary to not only the records, but also to Respondent Company and its Authorized Representative's own knowledge and Petitioner Associat....
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.... That by virtue of Clause 2(D) of the MSA, the Corporate Debtor is entitled to adjust the Working Capital Loan (i.e. 25% of the Security Deposit) against any default in payment of Maintenance bills by the apartment owners, however, no adjustment or set-off is allowed from the Interest-bearing Deposit (i.e. 75% of the Security Deposit), as wrongly alleged by the Corporate Debtor on the basis of the FBA. As per Clause 16 (Entire Agreement) of the MSA, the MSA revokes and supersedes all previous discussions/correspondences and agreements between the parties covering the matters covered in this agreement whether written, oral or implied which makes it imperative that clause 2(D) of the MSA supersedes clause 4(b) of FBA. iii. It is further contended, out of the total Security Deposit, the Corporate Debtor is entitled to adjust the Working Capital Loan that too only against default in payment of maintenance bills by individual apartment owners on one-to-one basis. Section 5(8)(a) of the Code, the present debt is a 'Financial Debt' which means and include 'money borrowed against payment of interest', and includes any amount raised under any transaction which has c....
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.... is clearly unsustainable in the eye of law, as held by this Tribunal, to prevent an aberration of justice. Consequently, the Appeal succeeds.' Therefore, in terms of Section 3(11) read with Section 5(8) of the Code, the Security Deposit amount, at least to the extent of Interest-bearing Deposit (including interest accrued thereon) and unadjusted Working Capital Loan, qualifies as "Financial Debt" against which default has been committed by the Corporate Debtor as it has failed to transfer the same to the Petitioner at the time of handover of maintenance of the complex. v. It is further contended that the Petitioner RWA is duly competent in terms of the provisions of the Haryana Apartment Ownership Act, 1983 to act on behalf its members i.e. the apartment owners and furthermore, the Petitioner is the assignee of the Security Deposit as per Clause 2D and Clause 5 of the MSA and as such is financial Creditor to the Corporate Debtor in terms of Section 5(7) of the Code which includes a person to whom financial debt has been legally assigned or transferred. Thus, the nature of debt (as submitted above) owed to the Petitioner is a financial debt and as such the Pet....
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....ting and confirming the Security Deposit of Rs. 6,51,36,981/- and interest payable thereon by the Respondent that are on record disclose the admissions and acknowledgement made by the 'Corporate Debtor' of its liability to repay the Petitioner's debt along with interest categorically constitute default at the behest of the Corporate Debtor. Thus, CIRP shall be initiated against the Corporate Debtor on account of such default. x. It is further contended, the Petitioner that the total amount of claim at time of-filing the present petition is Rs. 10,80,77,619/- which has now reached to Rs. 13,85,49,940/- as on 31.03.2021 against which the Corporate Debtor, in its Reply dated 22.04.2019, stated unpaid maintenance charges of Rs. 8,05,56,962/-. Pertinently, this amount was "all-inclusive total amount". xi. It is further contended, post hearing on 16.07.2019, the Corporate Debtor filed another affidavit dated 20.08.2019 and increased the amount of unpaid maintenance charges to Rs. 15,43,86,151/-. The Corporate Debtor inflated this amount by adding Exorbitant interest of Rs. 4,67,10,561/- and penalty of Rs. 8,66,14,184/- so as to save itself from the consequen....
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....rms of Clause 2D of Maintenance Services Agreement) raised from the apartment owners in the Complex, the Corporate Debtor, in its own affidavits, has admitted the following liability towards the amount which needs to be transferred to the Petitioner but the Corporate Debtor has failed to do so: * plus accused interest thereon @ SBI rate for 3-years term deposit. xv. The aforesaid amount itself, being more than Rs. 1,00,000/-, is sufficient to initiate CIRP against the Corporate Debtor. 8. The Respondent/Corporate Debtor has filed its written submissions and has stated almost same statement as stated in their reply and additional affidavit except the following: i. That the application under Section 7 of the Code can only be filed by a Financial Creditor either by itself or jointly with other Financial Creditors. In the present case, the present Application has been filed by an Association (VGRWA/Applicant) in a representative capacity of the Flat buyers/Home buyers, which Is not permissible under the Code. Placed reliance on the Supreme Court Judgment in Civil Appeal Nos. 8337-8338 of 2017 M/S. Innoventive Industries Ltd. Versus ICICI Bank & Anr. ....
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....e Bills and other charges as raised by VFM" vi. It is further contended, admittedly, the amount from all the Flat buyers along with the interest and delay payment charges payable by the Flat buyers to the Corporate Debtor comes to approx. Rs. 15 Crores. Supplementary Affidavit dated 20.8.2019 along with the calculation has already been filed by the Corporate Debtor. vii. That originally the present Application has been filed by the Applicant claiming the maintenance security deposit of all 644 flat buyers for an amount of Rs. 6,51,36,981/-, however, later on the Applicant filed an affidavit dated 14.10.2019 stating that all the Flat buyers are not the member of the Association and stated that the members of Association are in default and the amount of Rs. 2.77 Crs. is payable. 9. We have heard the Ld. Counsels for the petitioner and respondent and perused the averments made in the application, reply and rejoinder and additional reply filed by the respective parties as well as the written submissions filed by the respective parties. 10. In the course of hearing, Ld. Counsel for the petitioner and respondent have referred to the facts and law as mentioned in t....
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....ot less than ten per cent of the total number of such creditors in the same class whichever is less. Whereas the claim of the petitioner is that the petitioner is the registered Association of more than 300 flat buyers and as per the agreement that amount was required to be handed over to the association, as and when it was formed. Therefore, the present application is maintainable. 13. Now, in the light of aforesaid facts, we consider the claim of the petitioner. The corporate Debtor has also filed an additional written submissions and enclosed the order dated 08.01.2020 passed by Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 21 of 2020 in the matter of Vipul Limited Vs. M/s. Vipul Greens Residents Welfare Association and submitted that the Corporate Debtor had challenged the order dated 15.11.2019 passed by this Adjudicating Authority and the Hon'ble NCLAT has set aside the order dated 15.11.2019 and remitted the case to the Adjudicating Authority with a direction to decide the matter in accordance with law, taking into consideration the fact whether the claim, as made, comes within the meaning of 'financial debt' as defined under Section 5(8) and on th....
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.... it is pertinent to note that the petitioner has only approximately 300 (three hundred) flat buyers as its members out of total 644 (six hundred forty four) flats of Vipul Greens" 16. On the basis of this averment alone, it is seen that the petitioner is representing the members of 300 flat owners, out of total 644 flats and as per the requirement of Section 7 of IBC, 2016 proviso, an application needs to be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent of the total number of such creditors in the same class whichever is less. Since, the petitioner is representing 300 flat buyers, the petitioner is a registered Association duly elected by the 300 flat buyers and there is a resolution of the Association, which authorizes the petitioner to pursue the matter, in our considered view, the petitioner has fulfilled the minimum requirement for filing an application under the amended Section 7 of IBC, 2016. 17. Since the Hon'ble NCLAT in the Company Appeal (AT) (Insolvency) No. 21 of 2020 in the matter of Vipul Limited Vs. M/s. Vipul Greens Residents Welfare Association in para 07 referred to the decision of the Hon....
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....tion to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which....
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....y amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of 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-clauses (a) to (h) of this clause; Section 5 (7) of IBC : "Financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; 20. On plain r....
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....between deposit and loan may not be a relevant factor for interpreting the term 'Deposit'. To put it succinctly, under the new Companies Act, 2013, the definition of the term 'Deposit' is of Wider amplitude, as opined by this Tribunal. 39. The Learned Counsel for the Appellant refers to the judgement of this Tribunal dated 18.12.2020 in Co. Appl. (AT)(Ins.) 519 of 2020 in the matter of Mr. Rajnish Jain, the promoter, stakeholder and Managing Director of suspended Board of Directors V. 'Anupam Tiwari' (Resolution Professional for M/s. Jain Mfg. (India) Pvt. Ltd. & Anr. wherein it is held that the 3rd Respondent therein 'BVN Traders' is a 'Financial Creditor' within the meaning of Section 5(7) of the Code and the debt in question is a 'financial debt' within the meaning of Section 5(8) of the Code. 40. It is the plea of the Appellant that the 'I&B' Code statutorily acknowledges a deposit as a form of financial debt and further that there was no denial of the fact that the amounts being with the 'Corporate Debtor' as well as of the request to arrange funds for withdrawal. In this connection, it is the st....
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....ion of Section 7 of the Code is clearly unsustainable in the eye of law, as held by this Tribunal, to prevent an aberration of justice. Consequently, the Appeal succeeds. 43. In fine, the instant Appeal is allowed. The impugned order of the Adjudicating Authority dated 13.02.2020 passed in (IB) 1886(ND)/2019 dated 13.02.2020 is set aside for the reasons assigned by this Tribunal, of course in this Appeal. The Adjudicating Authority is directed to restore the application filed by the Appellant/Financial Creditor/Petitioner (u/s 7 of the Code), to admit the same and to proceed further in the manner known to law and in accordance with law." 22. Now in the light of the decision (Supra), we consider the case in hand. We notice that it is an admitted fact that as per the clause (D) of the agreement at page 176 of the paper book, on the balance of 75% of the deposit, the developer shall pay annually interest at the rate of State Bank of India's rate for three years' term deposit and interest shall be paid from the date of providing maintenance services i.e., 01.05.2007 or from the date deposits are made by owner(s), whichever is later. 23. In view of this clause of ....
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....n their written submissions contended that the Corporate Debtor had filed a revised affidavit dated 26.11.2019, wherein they had admitted the unpaid maintenance charges of Rs. 96,02,491/- qua 364 members of the Petitioner, but In this Affidavit, the Corporate Debtor has concealed the amount of Rs. 3,73,84,308/- collected from these 364 apartment owners towards the Security Deposit and even after adjustment of the entire outstanding maintenance charges, the Corporate Debtor is liable to pay the balance Security Deposit of Rs. 2,77,93,782/- plus interest accrued thereon but it has defaulted in payment of this amount to the Petitioner, which is sufficient to initiate CIR Process against the Corporate Debtor. 29. So, considering these submissions, we are unable to accept the contention of the respondent that after adjusting the amounts shown in the Annexure R-II there are no outstanding dues, which are payable by the Corporate Debtor to the Financial Creditor. 30. Hence, for the reasons discussed above, we are of the considered view that there is a financial debt paid by the flat buyers, who are represented through the Registered Association and that amount has not been refunded ....
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..... Further: (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. (3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may he. 33. Financial Creditor is directed to deposit Rs. 2,00,000/- to meet the immediate expenses of the IRP within two weeks. The same shall be fully accountable by the IRP and shall be reimbursed by the CoC, to the Financial Creditor to be recovered as CIR costs and IRP is directed to fo....
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....rest together with the unused Deposit amount and the available audited/unaudited statement of cccounts for the amounts utilised by VFM as Working Capital shall be handed over to the ASSOCIATION as and when the work of providing maintenance services is handed over by the Developer to ASSOCIATION and no payment or withdrawal thereof shall be allowed on individual basis to any OWNER(S). In case of any failure on part of OWNER(S) to pay the Maintenance Bills, or any other charges, whatsoever, payable on or before their respective due dates. OWNER(S) in addition to permitting the VFM ASSOCIATION to deny him/her them the right to avail the TOTAL MAINTENANCE SERVICES, also authorises VFM to adjust the Working Capital Loan against any such defaults towards payment of Maintenance Bills. However, if on account of any adjustments the DEPOSIT falls below the agreed sum of Rs. 50/- per square ft. of the super area of the said FLAT, then OWNER(S) herein undertakes to replenish the shortfall within (15) fifteen days of demand by the VFM/ASSOCIATION. The ASSOCIATION through General Body resolution reserves the right to reasonably increase the Interest Bearing Maint....