TaxTMI 
TaxTMI 
2025 (5) TMI 800
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....the application preferred by the Applicant, seeking appropriation directions against the Respondent to admit the claim of the Appellant has been dismissed. 2. Sh. Vivek Kumar Resolution Professional of M/s AVJ Developers (India) Private Limited is the Respondent. 3. The Appellant stated that he submitted claims on 25.02.2021 under Form- C as a Financial Creditor to Resolution Professional. This claim pertains to 59 individual accounts of borrowers who obtained housing loans for purchasing residential units within the Corporate Debtor's project. The total amount claimed by the Appellant, as of 21.10.2019, is Rs. 17.46 Crores. 4. The Appellant brought out that he received a communication on 01.09.2022 from the Resolution Professional, who stated that the Appellant's claim had been rejected. The primary reason for this rejection was that only individual homebuyers are entitled to file claims directly with the Resolution Professional. The Appellant's was also deemed to lack locus standi, as it was made on behalf of the homebuyers without any formal authorization. The Appellant contends that this decision is unjust, as it undermines the collective interests of the h....
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....ny responsibilities of repayment. The Appellant amplified that it is the intent of the Agreement which is vital to determine whether it is Financial Debt in terms of Section 5 (8) of the Code or not as well as who is the Financial Creditor. The Appellant submitted that in present case clearly he is the Financial Creditor as he directly lent money to the Corporate Debtor, albeit on behalf of the Homebuyer/borrower, with clear and specific clause that in case of any default by the Homebuyer/borrower or Builders/Corporate Debtor not delivering flat to the Borrower etc. the Builders/Corporate Debtor will refund money to the Appellant Bank. 9. The Appellant submitted that he has approached the Debt Recovery Tribunal ('DRT') by filing Original Applications ('OAs') against the individual homebuyers (borrowers) concerning the outstanding dues. In its rulings on these OAs, the DRT, Delhi, has directed that the primary liability to refund the outstanding dues owed to the Applicant Bank lies with the Corporate Debtor. Specifically, one such OA filed by the Appellant, bearing number 356/2019, was disposed of in accordance with this directive. 10. The Appellant submitted that in a separat....
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.... facts and circumstances, the dismissal of L.A. 836/2023 is unsustainable under the law as the Adjudicating Authority failed to recognize that the Appellant cannot be left without a remedy concerning the admitted and adjudicated debt and default. Furthermore, the reliance placed by the Adjudicating Authority on the judgment in Value Infracon India Limited (Supra) is not applicable to the present case, given the specific orders issued by the DRT, Delhi, which allow the bank to pursue its claim before the Liquidator or the National Company Law Tribunal, as appropriate. The Adjudicating Authority has also overlooked that under the framework of the Code, particularly as per Section 5(8), the Appellant has the right to maintain its claim as a Financial Creditor against the Corporate Debtor in this case. 16. The Appellant submitted that the contractual arrangement established between the parties explicitly required the Corporate Debtor to indemnify the Bank in the event of a default. The Appellate submitted that the Allottees or borrowers, who received the loan, have not submitted any claims to the Respondent/ Resolution Professional. Consequently, in the absence of such claims being ....
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....n class and they are represented by the Authorized Representative. In terms of Section 5(8)(f) the Allottees are identified as Financial Creditors. The Appellant elaborated that when any claim falls under the definition of the financial debt then such liability in the case of presence of guarantee or indemnity by any Person will also fall under the category of financial debt and in terms of Section 5(8)(i) such claimant is to be treated as Financial Creditors. The Appellant emphasised that the analogy is that when in case of contract of guarantee if a claim of the principal borrower falls under the head of financial debt then upon invocation of guarantee the claim against the guarantor by the creditor will also fall under the head of financial debt and such creditor will be treated as Financial Creditors. The Appellant elaborated that in the present case, the Corporate Debtor has already undertaken to secure the amount in Tripartite Agreement then the Appellant is also to be treated as financial creditor because the claim of the Allottee falls under the head of financial debt in view of Section 5(8)(i) of the Code. 21. The Appellant submitted that consequence of event of defa....
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....the decision is supported by the legal principles established by this Appellate Tribunal in the Value Infracon India Private Limited (Supra), wherein it was held that Bank can't be treated as Financial Creditor in real estate project and it is only Homebuyers who are to be considered as the Financial Creditor as a class. 28. The Respondent submitted that, based on the said judgment, the Appellant cannot be classified as a Financial Creditor with respect to the loans extended to homebuyers for the purpose of financing the allotment of flats in the AVJ Heights project of the Corporate Debtor. 29. The Respondent submitted that the Appellant has attempted to establish its status as a Financial Creditor by relying on the tripartite agreements entered into among the homebuyers, the Appellant, and the Corporate Debtor. The Respondent referred to the recitals in these tripartite agreements states: "WHEREAS the Borrower has approached the Bank to grant him a loan of Rs.11,00,000 (Rupees Eleven Lac Only) for the purchase of Schedule B property, and the Bank has, via its sanction letter dated ..., agreed to sanction the loan of Rs.11,00,000 (Rupees Eleven Lac Only) to the Borrower (here....
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....s irrelevant in the absence of a registered charge under Section 77 of the Companies Act, 2013. The Respondent stated that the existence of a tripartite agreement does not alter the nature of the amount borrowed by the homebuyer in relation to the Bank and the Corporate Debtor. 33. The Respondent submitted that many homebuyers have already filed their claims in accordance with the law and accepting the Appellant's claim would lead to duplicity of claims, which could adversely impact the value of the Corporate Debtor and potentially disrupt the ongoing CIRP. 34. The Respondent submitted that the Appellant has relied on the order dated 26.08.2022 issued by the Debt Recovery Tribunal in O.A. No. 356/2019 which was obtained by the Appellant through the concealment of material facts and in violation of Section 14(1)(a) of the Code, which imposes a moratorium on the institution of suits or continuation of pending suits or proceedings against the corporate debtor, including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel, or other authority. The Respondent stated that the Appellant filed its claim on 01.09.2021, while the order from t....
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....uyer, and specific provisions for indemnification are explicitly included within that agreement. Therefore, any claims by the Appellant regarding a guarantee or indemnification by the Corporate Debtor lack legal merit and should be rejected. 37. The Respondent submits that the appellant claim regarding a prior charge or mortgage over the property, as stipulated in the Lease Deed dated 01.09.2010 between the Greater Noida Industrial Development Authority (GNIDA) and the Corporate Debtor, is without merit. The Respondent explained that Lease Deed explicitly states that the Corporate Debtor could only create a charge or mortgage on the property after obtaining prior permission from GNIDA. In this instance, the Respondent stated that no such permission was ever sought or obtained by the Corporate Debtor, thereby rendering any purported charge in favor of the Appellant invalid. The Respondent emphasized that Appellant was fully aware of the terms of the Lease Deed, as these terms were also referenced in the Builder Buyer Agreement executed between the allottee and the Corporate Debtor. This agreement was available to Appellant at the time of executing the Tripartite Agreement, furthe....
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.... his claim and give him the claim amount in prorata basis to the other creditor, under which category he falls accordingly Resolution Plan need not to be return to CoC at any event. "1. In case any additional fund required for the completion of project or for the payment of any inability as per the resolution plan, the same shall be infused by the RA from his own source." 45. The Intervenor further argued that even if the claim of the Appellant/Canara Bank is admitted, its share in the Committee of Creditors (CoC) would remain negligible, amounting to less than 1%. Furthermore, if additional claims are admitted after CoC approval of the Resolution Plan and the plan is subsequently referred back to the CoC, it could create perpetual delays, hindering the approval of the Resolution Plan by the CoC and, consequently, by the Adjudicating Authority. 46. Concluding his arguments, the Intervenor requested this Appellate Tribunal to dismiss this appeal. Findings 47. We note that the Appellant/Canara Bank filed claims asserting that it advanced funds to Corporate Debtor on behalf of the individual homebuyers for dwelling units. We note that the Corporate Debtor defaulte....
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....eans a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de materialised 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 amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; [Explanation. -For the purposes of this sub-clause, - (i) any 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 esta....
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.... 2019], by virtue of which, the Home Buyers in real estate projects were deemed to be Financial Creditors under the provisions of IBC, 2016, Section 5(8)(1) definition of financial debt was amended and an explanation was added to classify any amount raised from allottee under a real estate project shall be deemed to be an amount having commercial effect of borrowing and such debt to be further classified as a financial debt. In addition, the home buyers being financial creditors are entitled to be represented in the Committee of Creditors (COC) through their authorised representative and also possess voting rights pursuant to Regulation 16A & 25A of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016. b. Secondly, the Hon'ble National Company Law Appellate Tribunal, New Delhi Bench at New Delhi, in the matter of Axis Bank Limited Vs. Value Infracon India Private Limited & Aur [Company Appeal (AT) (Insolvency) No. 582 of 20201 vide order dated 20.12.2021, stated "17. Be that as it may, we are of the considered view that this subject matter cannot be viewed from such a narrow compass. It is definitely ....
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....the Appellant Bank. We also note that in the rejecting claim the Respondent stated that "the liability to pay back the borrower amount lies upon the borrower and not the Corporate Debtor." And finally, the Resolution Professional found that it is prerogative of the homebuyers to either file claim with the Resolution Professional or not to file claims but it is not for bank to file such claims but Appellant bank can take the legal recourse against homebuyers in accordance with the law. 53. Now it will be desirable to look into and examine the relevant clauses of the tripartite agreement entered into amongst the Appellant Bank, the Homebuyers and Borrower/ Corporate Debtor. The relevant portion of the tripartite agreement is reproduced as under :- "उत्तर प्रदेश UTTAR PRADESH CA 138831 Tripartite Agreement (To be executed by the Borrower, Canara Bank and Land owning Builder/PA holder of the land owner having rights to construct and sell Flats) WHEREAS under an Agreement for Sale dated entered into between the Builder and the Borrower, the Builder has agreed to sell Schedul....
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....akes to deliver the same along with original Registration fee receipt directly to the Bank and not to the Borrower (s). Before the execution of the Sale Deed /Conveyance Deed/ Lease Deed, the Builder shall inform the Bank about the same and date of registration shall be fixed with written consent of Bank. On receipt of the entire loan amount, the Builder shall deliver possession of Schedule B property to the Borrower. 13. The Borrower/s, hereby undertakes to create equitable mortgage in favour of Bank after obtaining the original sale deed of Schedule B Property as per guidelines of the Bank. 16. In the event of default of repayment of the loan and/or the Borrower(s) committing any other default which make the Borrower liable for the re payment of the entire amount outstanding in the said loan as per the terms of the loan agreement executed between the Borrower's and the Bank, or if the Borrower withdraws from his agreement or Builder cancels the booking of the Borrower, or in the event of failure of the Builder to complete the project, or in the event of death of the Borrower, or in any event where the title to the schedule flat/dwelling unit is not/not being....
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.... rejected by the RP on 01.09.2022. Aggrieved against that decision of the RP, the application bearing I.A. No. 836 of 2023 has been filed which too has been dismissed vide the impugned order relying to a decision of this Tribunal in the case of Axis Bank Vs. Value Infracon India Pvt. Ltd. & Anr. CA (AT) (Ins) No. 582 of 2020 decided on 20.12.2021 in which it has been held that :- "17. Be that as it may, we are of the considered view that this subject matter cannot be viewed from such a narrow compass. It is definitely not the scope and objective of the Code to include Banks/Financial Institutions which have advanced loans to Home Buyers to be considered as 'Financial Creditors' and included in the CoC, specifically in the light of the fact the liability to repay the Home Loan is on the individual Home Buyers. This would defeat the very spirit and objective of the Code aiming at Resolution and maximisation of the assets of the 'Corporate Debtor'. Presence of a mere tri-partite Agreement does not change the character of the amount borrowed by the Home Buyer vis-a-vis the Bank and vis-avis the 'Corporate Debtor'. Viewed from any angle, the Appellant cannot be included as a 'S....
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.... However, if the intervenor make an application in the remanded Company Appeal for intervention, the same shall be considered by the NCLAT in accordance with law. : (Emphasis Supplied) 56. The case referred by the Respondent as well as the Adjudicating Authority in the case of Pioneer Urban Land (Supra) and the relevant portion of the judgment reads as under :- "18. It can be seen that the Insolvency Law Committee found, as a matter of fact, that delay in completion of flats/apartments has become a common phenomenon, and that amounts raised from home buyers contributes significantly to the financing of the construction of such flats/apartments. This being the case, it was important, therefore, to clarify that home buyers are treated as financial creditors so that they can trigger the Code under Section 7 and have their rightful place on the Committee of Creditors when it comes to making important decisions as to the future of the building construction company, which is the execution of the real estate project in which such home buyers are ultimately to be housed. 19. Shri Shardul Shroff, whose dissent was provided to us in the form of an e-mail, after....
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....clear, the fact that from a huge report one word is picked up to indicate that all financial creditors must have debtors who owe money "solely" from financial transactions cannot possibly have the effect of negating the plain language of Section 5(8)(f) of the Code. In fact, what is important is that the threshold limit to trigger the Code is purposely kept low - at only one lakh rupees - making it clear that small individuals may also trigger the Code as financial creditors (as financial creditors include debenture holders and bond holders), along with banks and financial institutions to whom crores of money may be due. 69. That this amendment is in fact clarificatory is also made clear by the Insolvency Committee Report, which expressly uses the word "clarify", indicating that the Insolvency Law Committee also thought that since there were differing judgments and doubts raised on whether home buyers would or would not be included within Section 5(8)(f), it was best to set these doubts at rest by explicitly stating that they would be so covered by adding an explanation to Section 5(8)(f). Incidentally, the Insolvency Law Committee itself had no doubt that given the 'finan....
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....the view that this bank cannot be called as a creditor to the corporate debtor because the loans are given to the home buyers of the corporate debtor. Therefore, we have not found any merit in this application, hence dismissed as misconceived. 2. Succinctly put, the facts in brief are that the Section 7 Application filed by M/s. Daimler Financial Services Private Limited against the 'Corporate Debtor' was admitted on 04.05.2018; a Public Announcement was made by the IRP inviting claims on 09.05.2018; M/s. Axis Bank hereinafter referred to as the 'Appellant' filed its claim amounting to Rs.15,76,14,801/- on 20.09.2018 vide email, but the Office of the IRP refused to accept the Hard Copy; the RP rejected the document of the Appellant for want of documents on 07.10.2018; the Appellant submitted the claims once again with the relevant documents, but the same was not accepted; and thereafter the Appellant choose to file this Application before the Adjudicating Authority. 4. Submissions of Learned Counsel appearing on behalf of the Appellant: Learned Counsel for the Appellant vehemently contended that the Adjudicating Authority directed the RP to consider the c....
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....nks advancing loans to the real estate allottees for booking of the Real Estate units would be considered as 'Financial Creditors' in any case. The Hon'ble Apex Court in 'Pioneer Urban Land & Infrastructure Ltd. & Anr.' (Supra) has observed that Home Buyers are to be considered as 'Financial Creditors' irrespective of the fact 'whether he has borrowed money from the Banks or agreed to pay instalments under the Agreement for sale or whether he does it from his own finances' Assessment: 7. The central point in this Appeal is whether the Appellant/M/s. Axis Bank can be considered as a 'Financial Creditor' on account of its having sanctioned and released housing loans to some of the allottees who have purchased Flats/units in the Project floated by the 'Corporate Debtor' 9. The Hon'ble Supreme Court in paras 18 and 19 in 'Pioneer Urban Land & Infrastructure Ltd. & Anr.' (Supra) has observed as follows: 19. Shri Shardul Shroff, whose dissent was provided to us in the form of an e-mail, after finding that selffinanced home buyers may be financial creditors, but a home buyer who is a borrower is not, then went on to state : "8. If the ....
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.... default by the Borrower, the Bank would have the right to write to the builder for cancellation of Agreement executed between the developer and the Borrower, whereafter the Bank shall have the right to pay the sale consideration and get the subject property registered. There is no material on record to evidence that any such cancellation has taken place. The Home Loan Agreement read with the Demand Letters and the Allotment Letter clearly specify that when there is a 'default' on behalf of the Home Allottee a penalty interest would have to be paid by the allottee to the Bank. Therefore, the 'default' aspect is to be seen vis-a-vis the Home Allottee and the Appellant Bank only. It is contended by the Respondent that though the Allotment Letter shows that the payments were construction linked, the Bank released the entire amount prior to completion of construction. 17. Be that as it may, we are of the considered view that this subject matter cannot be viewed from such a narrow compass. It is definitely not the scope and objective of the Code to include Banks/Financial Institutions which have advanced loans to Home Buyers to be considered as 'Financial Creditors' and include....
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....and the Appellant/M/s. Axis Bank is reproduced as hereunder:- "It is agreed by and between the parties to this Agreement that in case if the BORROWER fails to honour the commitment, the developer/BUILDER shall inform the BANK and the BANK shall have the right to pay the Sale consideration and get it registered either in BANK's name or its nominee. Likewise in the event the Borrower defaults in payment of instalments then, in such an event also, the Bank shall have the right to inform about such default on the part of the Borrower to the Builder and shall accordingly have the right to write to the Builder cancellation of Agreement executed between the Builder and the Borrower, where after the Bank shall have the right to pay the Sale consideration and get the subject property registered either in the Bank's name or in the name of the Bank's nominee." ( Emphasis Supplied ) 65. This clause of Value Infracon India Private Limited (Supra) clearly indicate that in case borrower/ homebuyers failed to honour its commitment, the bank had right to pay the balance sale consideration and get it registered either in bank's name or its nominee's name. 66. In contrast t....
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....nterest etc., in terms of loan agreement. 69. Thus, the distinguishable aspect of the tripartite agreement of the present appeal vis-à-vis the tripartite agreement of Value Infracon India Private Limited (Supra) relied heavily by the Respondent (Resolution Professional) (as well as the Adjudicating Authority in the Impugned Order in rejecting of claims of the Appellant) is that in case of tripartite agreement of Value Infracon India Private Limited (Supra) there is no responsibility of the Corporate Debtor/ builder/ developer, whatsoever to repay any money of the bankers and the entire responsibility was of the homebuyers, where in in terms of clause 16 of the tripartite agreement of the present appeal, the primary responsibility of repayment of loan in case of any of the eventuality laid down in tripartite agreement falls on the builder/ Corporate Debtor. This indicate relationship of the Appellant Bank and the Corporate Debtor to meet the stipulation of Section 5(8) of the Code regarding the financial debt. This aspect was not available in the case of Value Infracon India Private Limited (Supra). 70. In Clause 16 of the tripartite agreement in the present appeal and ....
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..... Another pleas taken by the Respondent is regarding non registering of the charge created in favour of the Appellant as well as claims under recovery certificate issue by the DRT amounting to financial debt. 74. As regard the issue of non registration of mortgaged as per Section 77 of the Companies Act, 2013 the issue was dealt by this Appellate Tribunal in the matter of Canara Bank (Supra). The relevant portion of this judgment reads as under :- "52. Be that as it may, on a careful consideration of respective contentions, this Tribunal, keeping in mind of the prime fact that 'Right to recover' the money, lent by enforcing a mortgage is a 'Right to enforce', an interest in the property and that the claim of the 'First Charge Holder', shall prevail over the claim of the 'Second Charge Holder', and the `Appellant / Petitioner', can very well enforce the 'Security Interest', resting on Section 58(f) of the 'Transfer of Property Act', 1882 and `Rule 8 of the Security Interest (Enforcement) Rules, 2002', comes to a resultant conclusion that 'mortgage', is the result of the `Act of Parties', where the `Transfer of Ownership Interest', in a particular `Immoveable Asset' is cr....
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.... of the present case vis- a vis Value Infracon India Private Limited (Supra), as such we find that the Adjudicating Authority has erred in not considering the aspects brought out by the Appellant in the present appeal. 79. The Appellant Bank has directly disbursed the amount to the Corporate Debtor/ Builder, albeit, on behalf of the Borrowers/ Homebuyers and in terms of the Tripartite Agreements amongst the Allottees, Builder and the Bank, the Corporate Debtor/ Builder has undertaken to refund the entire amount advanced by the bank in case of event of default of repayment of loan. 80. We observe that Clause 9.5(v) of the Resolution Plan provides for submission of claims by allottee/ unit holder/ flat/ shop owner who had failed to file the same with the Respondent or who had filed it but the same was under verification, within 45 days of the approval of the Resolution Plan. Thus, even the plan is approved by CoC, the home-buyers/ Financial Creditor are entitled to file their claims and there is no extinguishment of the claims during such protected period. 81. We note that Intervenor brought to our notice the clause in Resolution Plan :- "1. In case any additional f....