TaxTMI 
TaxTMI 
2023 (1) TMI 254
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....uyers Association. Mr. Rakesh Taneja, Advocate JUDGMENT ASHOK BHUSHAN, J. This Appeal by a Corporate Debtor - Wave Megacity Centre Private Limited ("Wave Megacity") has been filed challenging the order dated 06.06.2022 passed by National Company Law Tribunal, New Delhi, Principal Bench allowing IA No.2026 of 2021 and IA No.2378 of 2021 filed under Section 65 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code") and dismissing Company Petition No. (IB) No.197(PB)/2021 filed by Appellant under Section 10 of the Code. 2. Brief facts of the case necessary to be noted for deciding this Appeal are: (i) A Lease Deed dated 02.09.2011 was signed between Noida Authority and Wave Megacity Ltd. in respect of Plot No.CC-001, admeasuring 618,952.75 sq. mtrs. situated at Sector 25A and Sector 32, NOIDA for a period of 90 years. Wave Megacity paid payment of 10% of the total consideration, i.e., Rs.662.29 Crores. Wave Megacity was to pay the balance premium of 90% in staggered manner as indicated in the Lease Deed. Wave Megacity could not complete the construction of the Project and failed to repay the remaining 90% of the premium amount. ....
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....elopment, Government of Uttar Pradesh vide Appeal, dated 31.07.2020. The State Government issued an order dated 17.11.2020 directing the Noida Authority to take a decision regarding its dues. Pursuant to the letter dated 17.11.2020, fresh demand notice dated 24.12.2020 was issued, demanding an amount of Rs.2519,33,47,546/-. The demand made by Noida Authority was also challenged by means of writ petition before Allahabad High Court by Wave Megacity Centre Homebuyers Association, which petition is claimed to be still pending. (vii) The Corporate Debtor filed an Application under Section 10 of the Code dated 25.03.2021 praying for initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor on the ground of default on the part of the Corporate Debtor. (viii) On 05.04.2021, the Adjudicating Authority passed following order: "Mr. Chaudhary, Ld. Sr. Counsel undertakes to serve the copy to the financial creditor, the association of the home buyers and other creditors and also to ROC and Income Tax Department. List on 03.05.2021." (ix) In the CP (IB) No.197(PB)/2021 filed by the Corporate Debtor, several Interventi....
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....d order submits that Adjudicating Authority committed error in rejecting Section 10 Application filed by the Corporate Debtor, which was filed on the ground of default of the Corporate Debtor in paying the dues of Noida Authority and the pre-conditions as mentioned in Section 10 of the Code, having been fulfilled, Section 10 Application ought to have been admitted. It is submitted that debts of the Noida Authority have been reflected in the Books of account of the Appellant and is also proved by the demand notices dated 26.02.2022 and notices issued thereafter. The Adjudicating Authority has nowhere examined the very existence of debt and default in the impugned order. The pendency of any criminal investigation against the Corporate Debtor has no bearing on Section 10 petition. Further, pendency of litigations against the Corporate Debtor in different Forums do not have any adverse effect on maintainability of Section 10 Application. The very purpose of Code is to protect and preserve the valuation/ assets of the Corporate Debtor. Only few handful of the allottees had filed objections opposing the Application, whereas majority of the Homebuyers would have benefited from the initiat....
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....d by the State Government under Section 41 of the Uttar Pradesh Urban Planning and Development Act, 1973 vide order dated 17.11.2020, the Noida Authority revised the payment and final demand notice was issued on 24.12.2020. The final demand notice being dated 24.12.2020, which is during the prohibited period as per Section 10A, no Application under Section 10 could have been filed by the Appellant. The proceedings under Section 10 being proceeding in rem, both Financial Creditor and Operational Creditor can object to the very admission of the Application. The Noida Authority has filed detailed objection before the Adjudicating Authority, opposing admission of Section 10 Application. Section 10 Application was filed by the Appellant prematurely since the Appellant had not exhausted the remedy available to it under Section 41 of the Uttar Pradesh Urban Planning and Development Act, 1973 and Section 12 of the Uttar Pradesh Industrial Development Act, 1976. Default alleged by the Wave Megacity was not genuine and the same is motivated by fraud. Noida Authority is proper and necessary party to the proceeding. Noida Authority vide IA No.4270 of 2021 has raised objection to the maintainab....
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.... 10 Application has not been filed for any genuine resolution of the insolvency of the Corporate Debtor, rather the same was filed with intent to save the Appellant from its responsibilities, liabilities and prosecution. The Adjudicating Authority has rightly allowed the Applications filed under Section 65 of the Code by the Homebuyers and rejected the Section 10 Application, which does not warrant any interference by this Appellate Tribunal. 7. We have considered the submission of the Learned Counsel for the parties and have perused the records. 8. The challenge in the present Appeal is the order passed by the Adjudicating Authority allowing Applications filed under Section 65 and consequently rejecting Section 10 Application. The subject matter of the Appeal is thus, challenge to order allowing Section 65 Applications. We, thus, need to consider as to whether there were sufficient ground for allowing Section 65 Applications by the Adjudicating Authority. 9. As noted above, two Section 65 Applications were filed by the Homebuyers. First by Rakesh Taneja and Ors. and second by Anshu Saran and Ors. Before we come to the respective submission of the Counsel for the parties r....
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....gation of satisfying a large number of judgments passed against the Developer pending satisfaction and the application u/s 10 IBC is an attempt to escape those Judgments and jeopardise the interests of the aggrieved homebuyers besides trying to evade/delay criminal prosecution. That one of the said erstwhile founding Directors being Manpreet Singh Chadha (DIN 00032276) since 7.6.11 has been transposed as Financial Creditor in the present petition. That the applicants most respectfully submit that the said changes in the board of the Company have been made just before the filing of the captioned petition on 11Jan21 with malafide intention in so far as all the other stakeholders are concerned including the homebuyers. Furthermore, this is a fact which has been conveniently concealed by the petitioner from this Hon'ble Tribunal and warrants immediate and urgent attention as this would reflect to the malicious intent of the petitioner. x) That the most mischievous and fraudulent action on the part the Company is an attempt at transposition of the said founding director of the Company Manpreet Singh Chadha (DIN 00032276) since 7.6.2011 (the day the Company was incorporated)....
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....nfrastructures Pvt. Ltd.; (ix) Sh. Harmandeep Singh Khandari; (x) Durga Enterprises Pvt. Ltd.; (xi) Isthmus Industries Pvt. Ltd.; (xii) National synthetics Ltd; and (xiii) Home buyers and commercial property buyers/ allottees as per the list annexed herewith as 'Annexure 22'. 11. It is also relevant to note that Harmandeep Singh Kandhari, who was also Director since 07.06.2011 is also shown as Financial Creditor. The financial debt of Manpreet Singh Chaddha has also been shown in Section 10 Application. The resignation of Directors few months before filing of Section 10 Application especially Manpreet Singh Chaddha, who was Director from day 1 and claiming dues as Financial Creditor in Section 10 Application fully proves the malicious intention of the Corporate Debtor. There is no doubt that 90% amount from the Homebuyers were received, which is claimed to be Rs.1400 crores and the Appellant has left most of the Project unfinished, depriving possession thereof to Homebuyers speaks for itself. The allegations made by the Homebuyers that amount has been siphoned by the Appellant finds credence by the sequence of events, which took place in the present case....
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....ous purpose other than resolution of the Corporate Debtor. The Adjudicating Authority has categorically returned a finding that in the garb of IBC proceedings, the Corporate Debtor has attempted to play fraud on its stakeholders. In paragraph 33, 34 and 37, following have been held: "33. Now a question arises, whether the CD has filed the Section 10 application with a malicious and fraudulent intent. The term malicious has not been defined anywhere under IBC, 2016. Therefore, at this juncture we refer to the Judgment of Hon'ble Supreme Court, passed in the matter of West Bengal State Electricity Board Vs Dilip Kumar Ray, Civil Appeal 5188 of 2006 dated 24.11.2006, wherein the term 'malicious' has been discussed. The extracts of the Judgment are reproduced below:- "Malice means in law wrongful intention. It includes any intent which the law deems wrongful, and which therefore serves as a ground of liability. Any act done with such an intent is, in the language of the law, malicious and this legal usage has etymology in its favour. The Lain militia means badness, physical or moral - wickedness in disposition or in conduct - not specifically or exclusively ill-will o....
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....for Section 10 also, wherein the Hon'ble Supreme Court observed as "The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority". 22. Section 10 does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the informations as required to be submitted in Form 6 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 subject to ineligibility prescribed under Section 11. If all informations are provided by an applicant as required under Section 10 and Form 6 and if the Corporate Applicant is otherwise not ineligible under Section 11, the Adjudicating Authority is bound to admit the application and cannot reject the application on any other ground. 23. Any fact unrelated or beyond the requirement under I & B Code or Forms prescribed under Adjudicating Authority Rules (Form 6 in the present case) are not required to be stated or pleaded. Non-disclosure of any fact, unrelated to S....
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....he resolution of insolvency, holding it that it is obligatory for the Adjudicating Authority to admit Section 10 Application, will be contrary to the statutory scheme under Section 65. In event conditions under Section 65 are fulfilled, Section 10 Application can be rejected, even if debt and default is proved. Thus, Section 65 has to be read as enabling provision to reject an application even on proving of debt and default Section 10 Application is not to be obligatorily admitted. The present is a case where it has been held that Application under Section 10 has been maliciously and fraudulently initiated for the purpose other than for the resolution of insolvency. The Hon'ble Supreme Court in (2010) 14 SCC 38 - Ramjas Foundation and Anr. vs. Union of India and Ors. has held that a person is not entitled to any relief, if he has not come to the Court with clean hand, which principle is also applicable to the cases instituted in other Courts and judicial Forums. In paragraph 21, following has been laid down: "21. The principle that a person who does not come to the court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such pers....
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....plication is dated 26.02.2020. The second demand notice is 18.03.2020. Both these notices were prior to 25.03.2020 as provided in Section 10A. It is, thus, clear that default was committed prior to 25.03.2020. As per the Lease Agreement, the Appellant failed to adhere to the payment schedule. It is not the case that Appellant committed default in payment of dues of Noida Authority only in the year 2020. The Noida Authority in its reply has annexed the letter dated 18.03.2020 as Annexure 15 to the reply, which contained the calculation from 30.06.2017 to 29.02.2020. Thus, we are satisfied that default committed by the Appellant was much before 25.03.2020. The Explanation to Section 10A clearly provides that provisions of Section 10A shall not apply to any default committed under the said Section before 25.03.2020. Thus, present is a case where Section 10A was not Applicable. 20. The learned Senior Counsel for the Noida Authority Shri Sanjiv Sen submits that since final demand notice was issued on 24.12.2020, after direction of the State Government dated 17.11.2020, the date of default need to be treated as 24.12.2020, which is covered by prohibited period. The direction dated 17.....