TaxTMI 
TaxTMI 
2024 (3) TMI 928
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....ion has come up in this Appeal. 2. Brief facts of the case, necessary for deciding this Appeal are : (i) On 31.10.2003, the land in question was purchased by one M/s Subros Ltd. from various land holders. On 27.08.2004, a Notification under Section 4 of Land Acquisition Act, 1894 was issued by the Govt. of Haryana, proposing to acquire certain land for setting up Industrial Township. The land in question was initially part of the above Notification, however, M/s Subros Ltd. applied to the Government of Haryana for release of property from land acquisition proceedings and filed a Writ Petition (CWP) No.2787 of 2006 before the Punjab and Haryana High Court, challenging the acquisition dated 27.08.2004. M/s Subros Ltd. received a letter from Govt. of Haryana on 22.08.2007 for release of the land owned by Subros from the land acquisition proceedings. On that basis, the Writ Petition filed by M/s Subros Ltd. was withdrawn on 20.09.2007. On 29.01.2010, a decision was taken by Govt. of Haryana to drop/ close the acquisition proceedings. (ii) On 23.01.2012, M/s Subros Ltd. sold the land along with licnese to develop to M/s Akme Projects Ltd. vide registered Sale Deed. ....
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....ement and the said land is covered within the judgment dated 12.03.2018 passed by the Hon'ble Supreme Court in Civil Appeal No.8788 of 2015. The Appellant also challenged the order of DRT before the DRAT by filing Regular Appeal No.72 of 2020 (viii) The Respondent herein, who are allottees of Project filed an Application under Section 7 on 25.09.2020 for initiation of CIRP against the Corporate Debtor for default of INR 78,09,94,385.56/-. (ix) An Application for clarification was filed by Homebuyers through their Association in Civil Appeal No.8788 of 2015 before the Hon'ble Supreme Court. On 13.10.2020, the Hon'ble Supreme Court passed an order clarifying that M/s Subros Ltd. was not part of the land acquisition and is not covered within the said restraint, the clarification was issued on 21.07.2022. (x) Regular Appeal No.72 of 2020 filed by the Corporate Debtor against the order dated 07.01.2020 before the DRAT, was also dismissed on 07.06.2021. (xi) The Adjudicating Authority issued notice in Section 7 Application and after hearing the parties, by the impugned order dated 26.09.2023, admitted Section 7 Application. The Appellant aggrieved by t....
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.... on behalf of the DTCP recorded in the order dated 04.03.2020 before the High Court, where the DTCP stated that the matter is covered by judgment of Rameshwar & Ors. Vs. State of Haryana and Ors. Hence, it was even the understanding of the DTCP also that land is covered in view of of the order of the Hon'ble Supreme Court in Civil Appeal No.8788 of 2015. Hence, there was no question of carrying out any construction or committing any default by the Corporate Debtor. The land was subsequently released on 09.05.2023 by an administrative order. Hence, at no point of time any default is committed by the Corporate Debtor to initiate the CIRP proceedings. It is further submitted that the Corporate Debtor is only an auction purchaser and the Corporate Debtor is not party to Flat Buyers Agreement executed between Akme Projects ltd. and allottees. The allottees have already filed their claim in the CIRP of Akme Project Ltd., which clearly indicate that allottees were treating the Akme Project Ltd. as a Company, who has committed the default. The Corporate Debtor has spent an amount of INR 40.75 Crores about eight years back with no returns. It is submitted that the Appellant, however, now de....
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....he Corporate Debtor took the property in auction in the year 2016 and never took any steps to start construction or obtain necessary license etc. and it was the homebuyers, who file an Application before the Hon'ble Supreme Court seeking a clarification that the land of the Project is not covered by the direction of the Hon'ble Supreme Court and Hon'ble Supreme Court issued such clarification on 21.07.2022. Thus, the default was committed by the Corporate Debtor in not carrying out the construction. The Corporate Debtor owed debt to the Respondents and there has been default. Hence, Section 7 Application was rightly filed by the allottees. Order of the High Court and the DRT, which are relied by the Appellant also did not prohibit the Corporate Debtor to obtain necessary license and complete the construction. It is submitted that the Corporate Debtor is enjoying the possession of the property along with the building, without undertaking any work. In the real estate Project, the builder is obliged to take steps with statutory Authorities for license and construction of the Project. It is submitted that the Appellant has no intention to carry out the delivery of the units to the allo....
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....ower and guarantors, on the date mentioned hereunder, to repay the amount due. As the borrowed guarantors failed to repay the amount, the Bank took possession of the mortgaged property mentioned herein below on the date mentioned against the property. The borrower /mortgagors/ guarantors hereby requested to repay the outstanding amount as demanded in the said Demand Notice within 30 Days of publication of this notice, as per the provisions under the Rules 8 and 9 of the Rules. If the borrower/ guarantors fail to repay the debts, the property (including encumbrances, if any.) mentioned herein below will be sold on "AS IS WHERE IS", "AS IS WHAT IS BASIS"; "WHATEVER THERE IS BASIS" and 'NO RECOURSE BASIS'. Interested Parties /Persons are requested to submit their sealed tenders FOR THE PROPERTY up to the below-mentioned dates during office hours on any business day, to Authorised Officer, YES BANK Limited, at, D-12, South Extension Part II, New Delhi - 110049 indicating the details of the property on the envelop for which tender has been submitted." 9. It is also relevant to notice that in Sale Notice dated 02.04.2016 encumbrances were noticed where a total area 10.881 Acres si....
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....uction process and the successful bidder will be required to honour and acknowledge all lawful allotment and such bidder will be entitled to receive the unpaid portion of the consideration of the allotted flats. It was further informed that pursuant to the Order dated November 23, 2015 of Honble High Court of Punjab & Haryans in CWP NO. 24714 of 2015, YES Bank Ltd. has not taken the possession of Flat No.F-1702 allotted to Mr. Akhilesh Kumar and is not a part of auction proceedings." 10. The above Sale Confirmation Advice makes it clear that the right of lawful allottees on respective Units flats is not undergoing any change in the auction process and the successful bidder will be required to honour and acknowledge all lawful allotment and such bidder will be entitled to receive the unpaid portion of the consideration of the allotted flats. 11. YES Bank issued Sale Certificate on 19.07.2016 in favour of the Grandstar Reality Pvt. Ltd. Description of the immovable property was mentioned therein. Under 'List of encumbrances' following was mentioned: "1. Nil except flats allotted to respective allottees as per list attached as Annexure-1." 12. In the Annexure-1, '....
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....ion Advice have already been noticed by us. Sale Confirmation Advice dated 17.06.2016 contained following stipulation "it is also clarified that the right of lawful allottees on respective Units flats is not undergoing any change in the auction process and the successful bidder will be required to honour and acknowledge all lawful allotment and such bidder will be entitled to receive the unpaid portion of the consideration of the allotted flats". The above stipulation clearly indicates that Grandstar Reality Pvt. Ltd., i.e., successful auction purchaser is obliged to honour and acknowledge all lawful acknowledgment. Thus, the obligation of Akme towards the allottees has been continued and attached with the purchase of assets by the Appellant. The obligation under Flat Buyer's Agreement is an obligation to be discharged by the Appellant. The submission of the Appellant that the Appellant's only obligation is to carry out construction is not the only obligation, which has been undertaken by the Grandstar Reality Pvt. Ltd. All obligation under the Flat Buyer's Agreement has to be treated to have been taken over and acknowledged by the Grandstar Reality Pvt. Ltd. Thus, the definition o....
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....eration for the time value of money is also clear as the money that is "disbursed" is no longer with the allottee, but, as has just been stated, is with the real estate developer who is legally obliged to give money's equivalent back to the allottee, having used it in the construction of the project, and being at a discounted value so far as the allottee is concerned (in the sense of the allottee having to pay less by way of instalments than he would if he were to pay for the ultimate price of the flat/apartment). 72. Shri Krishnan Venugopal took us to ACT Borrower's Guide to the LMA's Investment Grade Agreements by Slaughter and May (5th Edn., 2017). In this book "financial indebtedness" is defined thus: "Definition of Financial Indebtedness (Investment Grade Agreements) "Financial indebtedness" means any indebtedness for or in respect of: (a) moneys borrowed; (b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the....
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.... The precise scope of this limb can be uncertain. Ideally, from the borrower's perspective, if there are additional categories of debt which should be included in "financial indebtedness", these should be described specifically and this catch-all paragraph, deleted. A few strong borrowers do achieve that position. Most, however are required to accept the "catch all" and will therefore need to consider which of their liabilities might be caught by it, and whether specific exclusions might be required." 74. What is clear from what Shri Venugopal has read to us is that a wide range of transactions are subsumed by para (f) and that the precise scope of para (f) is uncertain. Equally, para (f) seems to be a "catch all" provision which is really residuary in nature, and which would subsume within it transactions which do not, in fact, fall under any of the other sub-clauses of Section 5(8). 75. And now to the precise language of Section 5(8)(f). First and foremost, the sub-clause does appear to be a residuary provision which is "catch all" in nature. This is clear from the words "any amount" and "any other transaction" which means that amounts that are "raise....
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....nner that any transaction could stand alone to become a financial debt. In other words, any of the transactions stated in the said clauses (a) to (i) of Section 5(8) would be falling within the ambit of "financial debt" only if it carries the essential elements stated in the principal clause or at least has the features which could be traced to such essential elements in the principal clause. In yet other words, the essential element of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be treated as "financial debt" within the meaning of Section 5(8) of the Code. This debt may be of any nature but a part of it is always required to be carrying, or corresponding to, or at least having some traces of disbursal against consideration for the time value of money. 47. As noticed, the root requirement for a creditor to become financial creditor for the purpose of Part II of the Code, there must be a financial debt which is owed to that person. He may be the principal creditor to whom the financial debt is owed or he may be an assignee in terms of extended meaning of this definition but, and nevert....
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....ignment or transfers are two modes, which has been expressly included in the definition. In cases of amalgamation and demerger under the Companies Act, 2013 of a Corporate Debtor with another entity is obviously considered as Corporate Debtor on account of transfer/ vesting of assets and liabilities to the amalgamated/ transferee Company. Transferee Company cannot be permitted to escape the rigours of the Code by claiming that disbursement was not done to it directly. In the present case, where Grandstar Reality Pvt. Ltd. has taken over the Project under the SARFAESI Act, cannot escape the rigours of the Code and defeat the rights of the homebuyers under the Code. We, thus, are satisfied that there is a financial debt and the filing of the Application by the allottees under Section 7 cannot be faulted on this ground. Question No. ( II ) 20. The learned Senior Counsel for the Appellant submits that there is no default committed by the Appellant due to various orders passed by the Hon'ble Supreme Court, Hon'ble High Courts and DRTs, due to which the Grandstar Reality Pvt. Ltd. had no opportunity to carry out the construction. It is submitted that when there was a restraint by t....
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....arly covered by judgment of the Hon'ble Supreme Court. The Hon'ble Supreme Court has annulled the transactions/ transfers made by land holders during the period 27.08.2004 to 29.01.2010. The Appellant's submission that the land in question was covered by the judgment of the Hon'ble Supreme Court does not appeal to reasons. The learned Senior Counsel has placed reliance on the statement made by Counsel on behalf of DTCP before the Punjab and Haryana High Court, where the Counsel stated that land is covered under the Rameshwar's case. There was no direction or declaration by Punjab and Haryana High Court that the land was covered under the Rameshwar's case. Any statement of the Counsel cannot be accepted as against the express content of the judgment of the Hon'ble Supreme Court. It is further relevant to notice that no steps at all were taken by Grandstar Reality Pvt. Ltd. to carry on the construction or to take the Project forward. The judgment of the Hon'ble Supreme Court was delivered on 12.03.2018, hence, after the said date any doubt or dispute regarding the content of the order passed in Rameshwar's case, came to an end and there was no reason for the Appellant not to proceed ....
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....ating recommendation for withdrawal from acquisition, Subros withdrew its petition. Thereafter, it applied for license, and was granted the same on 13.06.2008. Subros did not enter into any collaboration agreement or sell its rights during the suspect period - it sold the lands to one Akme Projects Ltd. much later on 23.01.2012. 50. Having regard to the overall circumstances, this Court is of the opinion that the lands owned by both R.P. Estates and Subros should be excluded from the deemed award. The judgment of the Court dated 12.03.2018 is therefore clarified to the above extent. I.A. No. 111557/ 2020; I.A. No. 111562/2020; and I.A. No. 111563/ 2020 of M.A. No. 2067/2020; I.A. No. 116120/2021; I.A. No. 116128/2021 and I.A. No. 123690/2021 of M.A. No. 50/2019 are disposed off accordingly." 23. No steps were taken by the Grandstar Reality Pvt. Ltd. to start the construction or to seek any clarification or direction, clearly indicate inaction of the Grandstar Reality Pvt. Ltd., which is nothing but default committed by Grandstar Reality Pvt. Ltd. in proceeding to carry out its obligation under the auction purchase. 24. The learned Senior Counsel for the Appellant has....