TaxTMI 
TaxTMI 
2025 (4) TMI 1405
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..... K. Kohli, Advocate for IRP. JUDGMENT ( Hybrid Mode ) [ Per : Arun Baroka, Member ( Technical ) ] The present appeal is being filed by the Appellant-Shailendra Agarwal (Suspended Director of M/S NHA Infrabuild Pvt. Ltd) before this Tribunal under section 61 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), being aggrieved by the order dated 31.01.2025 passed in the I.A. No. 250 of 2024 in Company Petition (IB) No. 11/ALD/2024 by the NCLT, Allahabad Bench, Prayagraj (AA-Adjudicating Authority), whereby the AA has allowed the Company Petition preferred by Respondent No. 1-22 and admitted the Respondent No.23-M/s NHA Infrabuild Pvt. Ltd into Corporate Insolvency Resolution Process (CIRP). Brief facts: 2. The facts relevant for deciding the appeal are captured as follows: 20.09.2011 A Tripartite Agreement was executed among Maa Mansa Devi Sahkari Awas Samiti Ltd. (landowner), Nikhil Home Associates (developer/constructor), and Nikhil Homes Pvt. Ltd. (marketing company). All Builder-Buyer Agreements executed with the allottees were jointly signed by these three entities. 2012 Corporate Debtor-Nikhil Home Associates, Nikhil Homes Pvt. Ltd ....
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.... on time as the entire labor was forced to leave the construction site unexpectedly. 18.06.2022 UP RERA amended its earlier order by directing that amount should be calculated again after obtaining necessary documents from both the parties. 30.06.2022 Acknowledgement under Balance Sheet of Corporate Debtor. 06.08.2022 Nikhil Home Associates was registered as a company in terms of Section 366 of the Companies Act, 2013. 24.12.2022 UP RERA vide public notice cancelled the registration of Project of Corporate Debtor. 12.01.2024 Company Petition bearing C.P. No. 11 of 2024 was filed by the Answering Respondent before Ld. Adjudicating Authority u/s 7 of the IBC seeking initiation of CIRP against the CD. 04.05.2024 Aggrieved by this, the CD filed an I.A-250/2024, seeking the dismissal of Company petition bearing CP (IB)-11/ALD/2024. 31.01.2025 Adjudicating Authority dismissed the I.A. No. 250 of 2024 in Company Petition (IB) no. 11/ALD/2024 and allowed company Petition (IB) NO. 11/ALD/2024. Submissions of the Appellant: 3. Adjudicating Authority erroneously admitted the Company Petition and initiated the CIRP without co....
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....e of the two units claimed to be allotted to Ruchi Mittal, the entire principal amount has been paid to her. f) As regards one unit of the three units of Nitin Agarwal, the entire principal amount has been paid to him. g) As regards all other Original Petitioners, all of them have been repaid in part, save and except Original Petitioner No. 18, 19, 20, and 22. Thus, the Original Petitioners by no means fulfil the threshold prescribed under Section 7 of IBC. 6. Furthermore, serious allegations of fraud and misrepresentation were raised against certain Respondents, including forgery of signatures on allotment letters and concealment of material information which was fortified by forensic reports brought on record. 7. Further, perusal of the Company Petition itself shows that at Original Petitioners are speculative investors which is evident from the following facts: a. Nandini Garg individually has 8 units in her name, which makes it clear that such units have been taken as a speculative investor and nothing else; and b. Harsh Mittal and Ruchi Mittal have four flats in their name which makes it clear that such units have been taken as a sp....
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.... afresh with each successive instance of default. The Respondent places its reliance on Mist Direct Sales Private Limited vs Nitin Batra & Ors., Company Appeal (AT) (Insolvency) No. 127 of 2023. 12. The Respondent relies on the judgment of the Hon'ble Supreme Court in Kotak Mahindra Bank Ltd. V. A. Balakrishnan & Anr - (2022) 9 SCC 186 in which the question of limitation from the perspective of issue of recovery certificate in terms of provisions of the Recovery of debits and Bankruptcy Act, 1993 was examined. 13. It is also contended by the Respondents that Company Petition satisfies the threshold requirements. It is claimed that in the present case, the total number of units in the project is 247, and the Answering Respondent collectively hold 34 allotted units, thereby meeting the statutory threshold. The Appellant's objection regarding the eligibility of certain allottees is without merit as the Answering Respondent satisfy the threshold requirement under Section 7(1) of the Code. 14. Respondent vehemently denies the claim of forgery and claims that the Adjudicating Authority under Code does not have the jurisdiction to adjudicate allegations of forgery, as held by thi....
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....tive. 19. Respondents also claim that the liabilities of the Corporate Debtor persist despite conversion under Section 369 of the Companies Act, 2013. It is claimed that the Corporate Debtor, M/s NHA Infrabuild Private Limited, was incorporated through the conversion of the partnership firm M/s Nikhil Associates, pursuant to a resolution dated 10.05.2022 and its execution on 06.08.2022. However, such conversion does not absolve the Corporate Debtor of its pre-existing liabilities, debts, or contractual obligations. Accordingly, all financial liabilities and obligations incurred by M/s Nikhil Associates before its conversion remain binding on M/s NHA Infrabuild Private Limited. The Corporate Debtor cannot evade its pre-existing commitments by merely undergoing a change in its legal structure. The principles enshrined in Section 369 reaffirm that the entity continues to bear the same financial and contractual responsibilities, and the present proceedings must be adjudicated considering the continuity of obligations post-conversion. 20. Respondents contends that they have been due to non-delivery of possession of homes and refunds since 2011. The present case pertains to a long-....
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....on the ground of being time-barred. It is also contended by the Appellants that the accounts filed with the Uttar Pradesh Real Estate Regulatory Authority (UPRERA) on 30.06.2022 do not amount to an acknowledgment of debt under Section 18 of the Limitation Act. The filing of financial statements with UPRERA does not extend the limitation period without a clear acknowledgment of liability. 27. The Appellant has placed reliance on the judgements of Hon'ble Supreme Court in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal, Civil Appeal No. 323 OF 2021 and also Asset Reconstruction Company India Limited Vs Uniworth Textiles Limited CA(AT) (Ins) No. 991 of 2020 of this Appellate Tribunal. The relevant extracts of the judgement of Hon'ble Supreme Court are as follows: "14. Several judgments of this Court have indicated that an entry made in the books of accounts, including the balance sheet, can amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act. ... 16. An exhaustive judgment of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115 ["Beng....
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....dgment period. It is therefore desirable that while looking such entries of debt amounting to acknowledgment, one has to consider the overall scenario which may be evident from Director's Report, Auditor's Report, notes to the accounts etc. It may also be relevant to consider the entire series of events starting from such loans/ debts to the filing of application under section 7 of the Code, to gauge the true intent of such entries and caveats, if any, which impact the intended acknowledgements or genuine denial of liability on part of the Corporate Debtor. While doing this examination, it may be worthwhile to look into the overall eco system of such transactions which may help in understanding the impact on limitation period based on such acknowledgements." [emphasis supplied] Both the above noted judgements uphold the view that that entries in the Balance Sheet may amount to an acknowledgement of debt for the purpose of extending limitation under Section 18 of the Limitation Act and therefore don't help the cause of the Appellant. 28. In the present case, we don't find any caveats while acknowledging the amounts due to the Allottees in statement of accounts placed ....
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....tes several fundamental rules of civil procedure. The rules breached are: (i) No amount of evidence can be looked into, upon a plea which was never put forward in the pleadings. A question which did arise from the pleadings and which was not the subject-matter of an issue, cannot be decided by the court (ii) A court cannot make out a case not pleaded. The court should confine its decision to the question raised in pleadings. Nor can it grant a relief which is not claimed and which does not flow from the facts and the cause of action alleged in the plaint. (iii) A factual issue cannot be raised or considered for the first time in a second appeal." .... 17. In the absence of a claim by plaintiffs based on an easementary right, the first defendant did not have an opportunity to demonstrate that the plaintiffs had no easementary right. In the absence of pleadings and an opportunity to the first defendant to deny such claim, the High Court could not have converted a suit for title into a suit for enforcement of an easementary right. The first appellate court had recorded a finding of fact that plaintiffs had not made out title. The High Court....
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....on of law and fact, requiring an analysis of both legal provisions and the factual matrix. The relevant extract of which is as follows: "....63. Section 5 of the Limitation Act, 1963 does not speak of any application. The Section enables the Court to admit an application or appeal if the applicant or the appellant, as the case may be, satisfies the Court that he had sufficient cause for not making the application and/or preferring the appeal, within the time prescribed. Although, it is the general practice to make a formal application under Section 5 of the Limitation Act, 1963, in order to enable the Court or Tribunal to weigh the sufficiency of the cause for the inability of the appellant/applicant to approach the Court/Tribunal within the time prescribed by limitation, there is no bar to exercise by the Court/Tribunal of its discretion to condone delay, in the absence of a formal application." [emphasis supplied] 33. We find that all these points were duly considered by the Learned Adjudicating Authority, which recorded that the Company Petition was filed within the limitation period in its impugned order. The Adjudicating Authority gave its finding that the....
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...., they had booked units in the real estate project developed by the Corporate Debtor and have paid substantial amounts towards consideration. However, despite receiving these payments, the Corporate Debtor has failed to deliver possession within the stipulated timeline, thereby committing default within the meaning of Section 3(12) of the Code. 38. We find that in terms of the second proviso to Section 7(1) of the Code, an application for initiation of CIRP against a real estate developer must be filed by at least 100 allottees or 10% of the total number of allottees, whichever is lower. In the present case, the total number of units in the project is 247, and the Answering Respondent collectively hold 34 allotted units, thereby meeting the statutory threshold. The Corporate Debtor's contention that certain allotment letters are forged is not borne out of the material placed on record and appears is misconceived. Thus we find that the Appellant's objection regarding the eligibility of certain allottees is without merit and the Respondent satisfies the threshold requirement under Section 7(1) of the Code. The Adjudicating Authority has also noted that "the refunds claimed to have....
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....very certificates, will be considered Financial Creditors. 40. Respondent relies on the judgement of the Hon'ble Supreme Court in Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019) 8 SCC 416 where it was clarified that remedies under RERA and Code operate in distinct spheres, and proceedings under Code are in rem, intended for the revival of the Corporate Debtor. The Court held that RERA and IBC are complementary, with both statutes operating in their respective domains. While RERA provides specific remedies for homebuyers, the IBC offers a comprehensive mechanism for collective resolution when the default is significant and affects multiple creditors. This judgment very well supports the arguments of the Respondents. 41. The Respondents have also placed their reliance on the judgements of the Hon'ble Supreme Court in Kotak Mahindra Bank (supra) Civil Appeal No. 689 of 2021, decided on 30.05.2022 wherein the court had examined the question of limitation from the perspective of issue of recovery certificate. The relevant observation of Hon'ble Supreme Court in Kotak Mahindra Bank Ltd. V. A. Balakrishnan Kotak Mahindra Bank (supra) is as under:- "... ....
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....ribunal in Monotrone Leasing Pvt. Ltd. v. PM Cold Storage Private Ltd., (2020 SCC OnLine NCLAT 581), had held that penal action under Section 65 of the Code can only be taken where there is substantial evidence proving that the insolvency resolution process has been initiated fraudulently or for an ulterior motive. The relevant extract are as follows: "29. Section 65 of the Code provides for penal action for initiating Insolvency Resolution Process with a fraudulent or malicious intent or for any purpose other than the resolution. However, the same cannot be construed to mean that if a petition is filed under Section 7, 9 or 10 of the Code without any malicious or fraudulent intent, then also such a petition can be rejected by the Adjudicating Authority on the ground that the intent of the Applicant/Petitioner was not resolution for Corporate Insolvency Resolution Process. As the proceedings under IBC are summary in nature, it is difficult to determine the intent of the Applicant filing an application under Section 7, 9 or 10 of the Code unless shown explicitly by way of documentary evidence. This situation may arise in specific instances where a petition is filed under IB....
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....ed in any such suit or proceeding; but, in the event of the property of the company being insufficient to satisfy the decree or order, an order may be obtained for winding up the company 2 [in accordance with the provisions of this Act or of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)]." Therefore, the Statement of Affairs dated 30.06.2022 [ @1105 to 1118 APB] correctly depicts the liabilities of the Corporate Debtor including the Respondents- allottees' liabilities which are duly acknowledged by the Corporate Debtor upon its conversion. Accordingly, all financial liabilities and obligations incurred by M/s Nikhil Associates before its conversion remain binding on M/s NHA Infrabuild Private Limited. The Corporate Debtor cannot evade its pre-existing commitments by merely undergoing a change in its legal structure. The principles enshrined in Section 369 reaffirm that the entity continues to bear the same financial and contractual responsibilities, and the present proceedings must be adjudicated considering the continuity of obligations post-conversion. 46. From the materials on record, we find the Applicants are genuine allottees who have not received the possession....
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.... facie establishes such intent. In the instant case, there is no documentary evidence placed оn record by the Corporate Debtor/Respondent against the Applicants to prove that the insolvency process was initiated fraudulently with malafide intent. The only plea taken by the Corporate Debtor was that the RC/Decree Holders cannot be considered as home buyers under the provisions of the second proviso of section 7, and hence they are not eligible to initiate Section 7 proceeding and as the Applicants have already got the order of UPRERA for getting refunds, they are only indulging in forum shopping by filing application under section 7. Both the above pleas taken by the Corporate Debtor have not been found to be maintainable as we have already given our findings in this order. In our considered view, such pleas taken by the Corporate Debtor are not indicative of any fraud or malicious Intent at the part of the Applicants on initiation of Section 7 Application. Only in respect of two allotees, it was claimed that the allotment letters were forged and criminal cases are filed against them and full amounts were refunded to them along with two more allottees but even if these four al....
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....d participated in CoC meetings, indicating acceptance of the cancellation. This Appellate Tribunal had upheld the commercial wisdom of the CoC and found no procedural irregularity. In contrast, in the present case, the Respondents have neither accepted any refund nor acquiesced to any pre-CIRP action, and its claim is duly supported by documentary evidence on record. Unlike the allottees in Supriya Singh (supra), who had engaged in proceedings before UPRERA and accepted partial payments, the Respondents have consistently asserted their rights. Therefore, the reliance on Supriya Singh (supra) is misplaced and does not advance the case of the opposing party. 50. The Appellant's reliance on Vashdeo R Bhojwani Vs. Abhyudaya Co-Operative Bank Ltd. and Anr., Civil Appeal No. 11020 of 2018, is also misplaced as it dealt with a financial creditor's claim based on a Recovery Certificate, where the Court held that limitation under Article 137 begins from the date of default and rejected the argument of a continuing wrong. In the case cited, there was no allottee under the Code and in contrast, the present case concerns an allottee, where the nature of default, statutory protections, and l....