TaxTMI 
TaxTMI 
2023 (11) TMI 782
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.... the same order dated 21.10.2022 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi, Bench-VI, by which order the Adjudicating Authority held Application under Section 7 filed by Mr. Nitin Batra and Others, Respondents herein under Section 7 of the IBC as maintainable. Aggrieved by the said order, these three Appeals have been filed by the Appellants who were Respondents in Section 7 Application filed by the allottees of a Real Estate Project. 2. Brief facts of the case necessary to be noticed for deciding these Appeals are:- 2.1. The Appellant in Company Appeal (AT) (Insolvency) No. 1506 of 2022 i.e. 'Anand Infoedge Pvt. Ltd.' was allotted land measuring 100,980 sq. mtrs. bearing Plot No.1, Sector 143 Noida by the New Okhla Industrial Development Authority by Lease Deed dated 21.08.2008. 'Anand Infoedge Pvt. Ltd.' was given possession on 28.08.2008. 'Anand Infoedge Pvt. Ltd.', the lessee of the land entered into Collaboration Agreement with 'M/s. Mist Avenue Private Limited', the Appellant in Company Appeal (AT) (Insolvency) No. 1478 of 2022 (hereinafter referred to as "Mist Avenue") w.e.f. 26.10.2012 for development of the project land. 'Mist Av....
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.... the allottees have been duly informed by 'Mist Direct', hence, the Applicants (allottees) have no right to raise any objections against 'Mist Avenue'. The RERA registration permission to construct and other rights and obligations are solely with 'Mist Direct' and not with 'Mist Avenue', hence, the application under Section 7 was not maintainable. It was contended on behalf of 'Mist Direct' that their application as initially stated to have been filed by 143 allottees/ Financial Creditors. Applicants have numbered joint allottees separate Financial Creditor so as to increase the number of Financial Creditors. In fact, the application was filed only by allottees of 115 units. It was pleaded that five allottees have settled their claims, hence, due to extinguishment of outstanding claim they are not Financial Creditors. It was further pleaded that 11 claims were barred by Section 10A and could not have been filed or entertained. Large number of claims of Appellants were barred by limitation. One claimant Mr. Yarmohammad was disqualified since he has not made the entire payment. The threshold as prescribed under Section 7 of the IBC being not fulfilled, application was not maintainabl....
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....e Adjudicating Authority erred in consolidated the companies as three companies which do not pass any test mentioned by this Appellate Tribunal in case of "Radico Khaitan Ltd. vs. BT & FC Pvt. Ltd.- Company Appeal (AT) (Ins.) No.919 of 2020" 5. Shri Krishnendu Dutta, Learned Senior Counsel appearing for 'Mist Direct' submits that the application filed by allottees did not fulfil the threshold as prescribed under Section 7. Application was not filed by 100 allottees although there were 115 unit holders who have filed the application but the claims of large number of applicants was not valid claim nor they could have been part of the application. Shri Krishnendu Dutta elaborating his submission submits that the claims of 18 applicants were barred by limitation whereas claims of 11 allottees were barred by under Section 10A since default has occurred during 10A period. Claims of eight allottees were settled, hence, could not be part of application. Claims of three allottees were premature. In view of the above number of allottees who could not have joined the application, the threshold of 100 of allottees was not fulfilled and the application was liable to be dismissed on this grou....
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....nts has relied on the judgment of the Hon'ble Supreme Court in "Manish Kumar vs. Union of India & Anr.- 2021 SCC OnLine SC 30" and submits that the issue has been settled. 8. We have considered the submissions of the Counsel for the parties and perused the record. 9. Three main questions which arise for consideration in this Appeal are:- (i) Whether the joint application under Section 7 against 'Anand Infoedge Pvt. Ltd.', 'Mist Avenue' and 'Mist Direct' is maintainable? Three Respondents- Appellants herein being separate corporate entities. (ii) Whether Section 7 Application filed by the allottees fulfils the threshold as prescribed under the IBC? (iii) Whether while scrutinizing the claims of each applicants of joint application filed under Section 7, it has to be established that the financial debt exist against each applicant in which default has been committed and the claim of the applicants is not barred by limitation and applicants fulfil all eligibility of valid allottee who is entitled to file Section 7 application? Question No.(i) 10. For answering Question No.(i), we need to first notice the nature of transaction entered between the ....
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....per the rights, powers, privileges and benefits as mentioned herein, the Developer agrees that after completion of the said project, as per specifications agreed separately in writing, the share of the parties in the built up space (the said buildings) will be as follows: OWNER: 15% (Fifteen Percent) Developer: 85% (Eighty Five Percent) The Developer is however solely authorized for Sale of the entire project area including Owner's share of15% share of built up space in its exclusive discretion. All contracts entered into by the Developer in this regard will be binding on the Owner. This Collaboration agreement will not be treated as a partnership between the Owner and the Developer." 11. By the Collaboration Agreement, developer was authorised to develop the building and entitled to sell or recover 85% of the units constructed and was also entitled to sell the balance 15% of the units belonging to 'Anand Infoedge Pvt. Ltd.' on their behalf. 'Mist Avenue' in pursuance of the Development Agreement has allotted different units to the allottees who are Respondents herein. Copy of one Builder Buyers' Agreement has brought on record by....
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....licable thereafter. The intending allottee(s) would only be refunded service tax subject to refund from the Govt. or any competent authority, any Incidental and processing charges in this regard shall be recovered from the allottee(s)." 12. The first Collaboration Agreement was cancelled by 'Anand Infoedge Pvt. Ltd.' vide cancellation deed dated 27.07.2017 entered between 'Anand Infoedge Pvt. Ltd.' and 'Mist Avenue'. The Cancellation Agreement provided that second party has handed over the possession of the project land back to the first party on "AS IS WHERE IS WHAT EVER THERE IS" basis along with all material/ equipment etc. lying at the site. On the same day i.e. on 27.07.2017, Collaboration Agreement was entered between 'Anand Infoedge Pvt. Ltd.', 'Mist Direct' and 'Mist Avenue'. 'Mist Avenue' which by Second Collaboration Agreement has granted development construction right and development of project to 'Mist Direct'. Agreement also contemplates execution of General Power of Attorney i.e. 'Mist Direct' revenue share was provided in clause 3.1 which is to the following effect:- "3. REVENUE SHARE 3.1. In consideration of the grant/transfer/assignment of the ....
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....AAICM6219N [email protected] Date-02-Dec-17 To Mr. Gaurav Bhardwaj FLAT No. 615, Supertech Avant GARDE, Plot No. 1, Sec-5, Vaishali Ghaziabad Subject: important Communication Dear Customer, At the outset we wish to thank you all for your support and patronage with which the Festival City' (Project) is coming up inspite of various challenges/delays caused in obtaining various permissions and approvals (since obtained by the Company). We were monitoring the progress of the Project closely with an intention to expedite the same to ensure delivering of your Unit(s) as early as possible inspite of the many speed breakers/disturbances. We found that there was need for strengthening the process. If necessary reorganizing the Project implementation plan. We are happy to inform you that erstwhile Management for various reasons ultimately we decided to bring us as new and efficient implementing partner so that our esteemed buyers may be delivered their Units as early as possible. Accordingly, the arrangements of Anand Infoedge Private Ltd. ('AIPL') with ea....
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....ted units. Collaborator No. 1 and 2 are part of project who were entrusted with the development and sale of units. It was collaborator No. 1 who received the payment from the allottees towards allotment of units in favour of the Respondents. All the three Appellants being involved with the one single project in which the allottees have been allotted units, all are necessary ingredients of any resolution which may help the allottees to receive their units, in absence of any of the appellants in Corporate Insolvency Resolution Process, Resolution of project and revival of the Resolution of project is impossible. 17. We need to look into some decided cases which have been cited by both the parties in support of their submissions. We may first notice Judgment in C.A.(AT) Ins. No. 155 of 2018, Mamatha Vs. AMB Infrabuild Pvt. Ltd. & Ors. The above case was a case where an application was filed under Section 7 by a Real Estate Allottee, against two corporate debtors were impleaded in the Application, Application was rejected by the Adjudicating Authority. In the Application AMB Infrabuild Pvt. Ltd. who was owner of the land and Earth Galleria Pvt. Ltd. who was developer, both were impl....
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.... Judgment of this Tribunal which was dismissed by the Hon'ble Supreme Court vide its Order dated 04th January, 2019 which reads as follows: "1) Heard the learned Senior Counsel for the appellant. 2) We see no reason to interfere with the order passed by the National Company Law Appellate Tribunal, New Delhi. 3) Accordingly, the Civil Appeal is dismissed. 4) Pending applications stand disposed of." 19. Next Judgment relied by Learned Counsel for the Respondents is Judgment of this Tribunal in C.A.(AT) Ins. No. 377 of 2019, Edelweiss Asset Reconstruction Company Ltd. Vs. Sachet Infrastructure Pv.t Ltd. The above was also a case of an Infrastructure Company. The principal borrower was Adel Landmarks Ltd. Corporate Guarantee was given by different corporate guarantees for securing the loan, separate applications were filed under Section 7 of the Code. Application against the principal borrower under Section 7 was admitted by the Adjudicating Authority and when the question arose regarding applications under Section filed against the principal guarantors this Tribunal in paragraph 9 noted the case of the Appellant : "9. According to the Ap....
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....g Authority to admit Section 7 Application and to initiate a consolidated Resolution Plan for total development. In paragraph 42, following was held: "42. The Adjudicating Authority will admit the applications under Section 7 filed by 'Edelweiss Asset Reconstruction Company Limited' against 'Sachet Infrastructure Pvt. Ltd.'; 'Magad Realtors Pvt. Ltd.'; 'Mehak Realtech Pvt. Ltd.'; 'Sameeksha Estate Pvt. Ltd.' and 'Jamvant Estates Pvt. Ltd.' and appoint the 'Resolution Professional' of 'Adel Landmarks Limited'- (Developer) ('Principal Borrower') as common 'Resolution Professional' to ensure that the 'Corporate Insolvency Resolution Process' against 'Adel Landmarks Limited'- ('Corporate Debtor') proceed jointly and 'Information Memorandum' is prepared in a manner that the 'Residential Plotted Colony' at village Palwal at Sectors 8 & 9 in terms of the License No. 46 of 2009 and License No. 53 of 2009, is completed in one go by initiating a consolidated 'Resolution Plan(s)' for total development." 22. The above two judgments clearly support the submission of the Respondents that consolidated Insolvency Resolution Process can be initiated against one or more Corporate Debtors....
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....charge of the inventories already sold by the Respondent No. 2 Company and have received all the papers together with the account of money paid by the financial creditors. However, it is pertinent to mention here that allotment letter was issued in the letterhead of Respondent No. 2 and payments were made in the account of Respondent No. 2. 15. Further, we are of the considered view that Respondent No. 1 Company and Respondent No. 3 Company are being controlled and managed by the same group of promoters. Mere change in the shareholding of the Respondent No. 3 Company will not save the Respondent No. 1 Company since the conspectus of facts it is evident that Respondent No. 3 Company was created by the Respondent No. 1 Company only as a face for the project Festival City, whereas the ultimate beneficiary is the Respondent No. 1 Company only as in the Second Collaboration Agreement, the Respondent No. 3 Company was authorized to take all appropriate actions as well as it was made obliged to incur costs in relation to the project and also responsible for developing strategy of marketing and such other decisions regarding the marketing, branding, pricing, sales and all other de....
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....mmencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission. Explanation.-For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor." 27. We in the present case are concerned with the Second Proviso which provides that an Application for initiating Corporate Insolvency Resolution Process against the corporate debtor shall be filed jointly by not less than 100 of such allottees under the same real estate project or not less than 10 % of the total number of such allottees under the same real estate whichever is less. The present is a case where all the allottees that is applicants under Section 7 were allottees of same real estate project that is Festival City which project was being developed on Plot No. 1, Sector 139, NOIDA of land allotted to Anand Infoedge Pvt. Ltd. by lease deed dated 21st August, 2008 on land admeasuring 1,00,980 sq. m. 28. The challenge which has been mounted by Mr. Krishnendu Datta, Learned Sr. Counsel appearing for Mist Avenue Pvt. Ltd. is the th....
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....ld that claim of 37 allottees whose claim were barred by limitation, six allottees whose claims were settled and five allottees whose claims were premature, satisfied the criteria provided in Second Proviso of Section 7(1). The Adjudicating Authority thus returned a finding that there are 103 valid allottees hence the application fulfilled the threshold. 30. We now proceed to examine the submission of Learned Sr. Counsel, Mr. Krishnendu Datta submitting that threshold was not fulfilled. 31. Learned Counsel for the allottees refuting the submissions submitted that the requirement of Section 7, 2nd Proviso as now explained by the Hon'ble Supreme Court as has been held in 2021 5 SCC 1, Manish Kumar Vs. Union of India and Anr. is that Applicants who prove that there is default of debt of Rs. 1 Crores, it is not necessary that all the applicants should have default of Rs. 1 Crore each or all the applicants should have come up within the period of limitation and fulfilled all necessary ingredients for filing an application under Section 7 of the Code. Submission of Learned Counsel for the allottees is that if default of Rs. 1 Crore towards any of the allottees is fulfilled, all app....
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..... The Application having been filed beyond three years from the date when right to apply accrues, the same deserves to be rejected." 33. We now need to notice the clause regarding position of the units of the allottees. Clause 2 of the Builder Buyers Agreement provides for the position which is to the following effect: "2. Possession 2.1 The company shall endeavour to complete the construction of the said IT shop within a period of 36 months with the grace period of 12 months from the date of execution of the Buyers Agreement subject to timely payment by the intending Allottee(s) of sale price, stamp duty and other charges due and payable according to the payment plan applicable to him or as demanded by the Company, failing which company shall pay Rs. 9 per sq. ft. per mohth delay charges for delayed period provided no force majeure prevails. The Company on obtaining certificate for occupation/completion and use from the competent authorities shall hand over the IT & IT enabled services shop (s) to the intending allottee(s) for his/her occupation and use and subject to the Intending Allottee(s) having complied with all the terms and conditions of the IT & IT en....
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....ject has not been completed by the Appellants and construction of units has not been completed nor any construction certificate has been obtained. In the facts of the present case, we are of the considered opinion that submissions of the Appellant that Applications of 18 allottees who is barred by time hence they should be excluded from number of 100 applicants has to be rejected. 35. Learned Counsel for the allottees have relied on Judgment of Hon'ble Supreme Court in 2022 4 SCC 103, Samruddhi Cooperation Housing Society Ltd. Vs Mumbai Mahalaxmi Construction Pvt. Ltd. In the above case, the Hon'ble Supreme Court had occasion to examine the question of limitation with regard to complaint under Consumer Protection Act, 1986. Hon'ble Supreme Court had referred to Section 22 of the Limitation Act in the above case, Section 22 of the Limitation Act provides as follows: "22. Continuing breaches and torts.-In the case of a continuing breach of contract or in the case of a continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort, as the case may be, continues." 36. In paragraph 13 and 18 of the Judgment, fol....
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....ing support of one hundred persons or onetenth of the allottees, whichever is lower, is unworkable and arbitrary having regard to the provisions of the Code. There can only be one default in a complaint, it is contended. When the required number of allottees may have to be drawn from allottees who may have entered into agreements with the builder on different dates, the date of default would be different. This would adversely impinge on the absolute right which otherwise exist with an allottee to make an application under Section 7 of the Code." 39. Hon'ble Supreme Court after noticing the explanation to Section 7(1) and the definition of default under Section 3(12) held that the financial debt which is owed to any other financial creditors of the Corporate Debtor would suffice to make an application on the basis of that default. In paragraph 164, following has been laid down : "164. The Explanation makes it clear that a financial debt, which is owed to any other financial creditor of the corporate debtor would suffice to make an application on the basis that the default has occurred. Default has been defined in Section 3(12) of the Code as follows: " 3 ( 12 ) ....
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....that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. 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. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be." 41. In Manish Kumar, the Hon'ble Supreme Court had also occasion to consider the question of delay in filing the Application under Section 7 with regard to the Applicants. Hon'ble Supreme Court in Manish Kumar case held that litmus test on the anvil of which, the adjudicating authority will scrutinise the matter is only the existence of the default as defined under Section 4 of the Code. If the Financial Debt of Rs. 1 Crores has not been paid the doors are thrown op....
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....of default, rendering the provisions unworkable and arbitrary." 43. The question of application being barred to sue and the allottees who are part of joint application was also answered in paragraph 175 of the Judgment which is to the following effect: "175. Another aspect, which is raised, is that in the example of a hundred allottees, if they have agreements, under which, the date of default is different, how is the application to be drafted and processed? What, if the debt is barred qua some of the applicants, whereas, it is not so in regard to the other applicants. Taking a cue from the Explanation to Section 7(1), all that would be required is, to plead the default, no doubt, in the sum of Rs. 1 crore, which is not barred as the cause of action. In other words, if a law contemplates that the default in a sum of Rs.1 crore can be towards any financial creditor, even if he is not an applicant, the fact that the debt is barred as against some of the financial creditors, who are applicants, whereas, the application by some others, or even one who have moved jointly, fulfill the requirement of default, both in terms of the sum and it not being barred, the application wo....