TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 843
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Mr. Abhishek Arora, Advocates for R-2. JUDGMENT ASHOK BHUSHAN, J. Company Appeal (AT) (Insolvency) No. 513 of 2024 has been filed by the suspended Director of the Corporate Debtor ("CD") - M/s Gayatri Hospitality and Realcon Ltd., challenging the order dated 04.03.2024 passed by National Company Law Tribunal ("NCLT"), New Delhi Principal Bench allowing IA No.4163(PB)/2021, IA No.3422(PB)/2022 and IA No.3534(PB)/2022 for impleadment as Applicants and admitting Section 7 application filed by the creditors in a class, i.e., Respondent Nos.1 to 106 in the Appeal. Aggrieved by the order admitting Section 7 application, this Appeal has been filed. 2. Company Appeal (AT) (Insolvency) No. 1053 of 2024 has been filed challenging only part of the order dated 04.03.2024 insofar it has appointed Mr. Anand Sonbhadra as Resolution Professional ("RP") whereas Financial Creditors had filed an application praying for change of RP as prayed in Section 7 Application from Anand Sonbhadra to Mr. Anurag Nirbhaya. 3. Brief facts of the case necessary to be noticed for deciding the Appeal(s) are: (i) Greater Noida Industrial Development Authority ("Greater Noida") vide Lease Deed dated 11.02.2011....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... before the Hon'ble Supreme Court by Writ Petition No.26 of 2020 under Article 32 of the Constitution of India. Prior to enactment of the Act No.1 of 2020, an Ordinance, by which the Amendment came into effect dated 28.12.2019 was also challenged before the Hon'ble Supreme Court. The Adjudicating Authority in the CP(IB)/288(PB)/2019 passed an order directing the Applicants to come up after interim order is modified by the Hon'ble Supreme Court. The Hon'ble Supreme Court vide its judgment dated 19.01.2021 decided the Writ Petition, challenging the IBC First Amendment Act, 2020 and upheld the amendments [by judgment reported in (2021) 5 SSC 1 - Manish Kumar vs. Union of India and Anr.)]. The Writ Petition and Transferred Cases were dismissed. Certain directions with regard to filing of application under Section 7 were also issued. (vii) Subsequent to the above judgment of the Hon'ble Supreme Court, the Applicants in CP(IB)/288(PB)/2019 filed an IA No.4163 of 2021 on 15.07.2021 seeking impleadment of 52 allottees in Section 7 Application. In the application, the Applicants have pleaded that they come across news article published in Times of India on 14.09.2019 that there are four T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting Authority passed an order on 26.07.2023 directing the CD to convene a meeting of all 1124 allottees and an Advocate Commissioner was appointed to conduct the meeting. The CD circulated the settlement proposal to the Homebuyers and decided to put the settlement proposal for e- voting from 14.09.2023. The Advocate Commissioner submitted its Report stating that 746 allottees participated in the e-voting, out of which 81% voted in favour of proposal. The Applicants, i.e. creditors in class (Respondents herein) objected to the e-voting process and submitted that, those, who have e-voted were not genuine allottees. The Adjudicating Authority directed the Advocate Commissioner to file a Report. The Advocate Commissioner submitted a Report that all 746 allottees, who have participated, their relevant files have not been placed by the CD before the Advocate Commissioner, hence verification of allottees, who participated in the voting cannot be made. (xi) The Adjudicating Authority heard the Applicants as well as the CD and Advocate Commissioner appointed by the Adjudicating Authority and by the impugned order dated 04.03.2024, IA Nos.4163 of 2021, 3422/2022 and 499 of 2023, impleaded....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and prayed for direction to refund the entire amount paid by the Applicant i.e. Rs.21,37,571/- along with SBI FD interest rates in terms of paragraph 9 of the order dated 11.03.2024. The Respondents have also filed reply to the IAs. 7. We have heard Shri Abhijeet Sinha, learned Senior Counsel appearing for the Appellant in Company Appeal (AT) (Ins.) No.513 of 2024; Shri Ashvary Vikram, learned Counsel for Respondents Financial Creditors in a class and also for Appellant in Company Appeal (AT) (Ins.) No.1053 of 2024; Shri Krishnendu Datta, learned Senior Counsel for Intervenor in IA No.5085 of 2024. We have also heard learned Counsel for other Intervenors. 8. Shri Abhijeet Sinha, learned Senior Counsel appearing for the Appellant in support of the Appeal submits that Section 7 Application, which was initially filed by 08 Homebuyers on 11.01.2019, did not fulfill the threshold as directed by Amendment Act 2020. The Applicants failed to modify the application to conform to the amended requirements inserted by Amendment Act 2020. Hence, the application deserved to be rejected on this ground alone. It is submitted that on the date of filing of the application there are 888 Homebuyers,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat orders passed by UP RERA were brought on the record, where UP RERA had granted time for construction till November 2019 and November 2020, which period was further extended by various Notifications. There was no default committed by the CD and Adjudicating Authority without adverting to all relevant pleas raised before it and being relevant materials on record, committed error in admitting Section 7 Application. It is submitted that majority of the Homebuyers are opposing initiation of CIRP, since that creates hurdle in completion of the Project. At present more than four Towers are completed and possessions have also been offered by the CD and about 250 Homebuyers are residing in the Towers. The Appellant is ready to abide by its settlement proposal, which was circulated in pursuance of the order dated 26.07.2023 of the Adjudicating Authority, i.e. to grant exit to those Homebuyers, who wanted SBI FD interest rate, within 60 days and to offer possession to those, who want possession of their units. It is submitted that the Appellant is ready to carry out the construction. The submission of the Respondents that the Appellant has given out different numbers of Homebuyers and the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fect the time of 40 months, during which the construction was required to be completed. The defence of force majeure taken by the Appellant is unfounded. The Appellant was well aware of the physical possession of the plot and period of 40 months in which the construction was to be completed. The CD cannot now take the plea that complete possession of entire plot was not handed over till 01.09.2017. The present is not a case for applicability of clause force majeure. The Project is substantially incomplete and out of ten Towers, only two Towers are structurally complete. The offer submitted by the CD, which was placed for e-voting before the Homebuyers was not approved by majority, as pleaded. Those, who participated in the voting, were not genuine allottees and Advocate Commissioner, has submitted Report that he was unable to verify the genuineness of those Homebuyers, who participated in the voting. The Adjudicating Authority has rightly not accepted the voting result, which took place in September 2023. The Homebuyers are interested to receive their possession of the units and they are not interested in refund, as was offered. The cancellation of the Flats by the CD during the pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idated hereinabove. The Corporate Debtor has been charging interest at 24% per annum from financial creditors as per clause no. 11 of BBA in case of delay in disbursement. So the financial creditors are also entitled for refund with interest at the same in terms of section 2(za)(i) of RERA 2016. In any default to provide the flats/units to the buyers the company is liable to refund the amount/ consideration given to it by the homebuyers with interest. It is submitted that such disbursement was in terms of a Builder Buyer Agreement (hereinafter, 'the Agreement') executed by the Corporate Debtor with each of the Applicants. As per the terms of the Agreement, the possession to each of the Applicants was due to be handed over as on the following dates: S. No. Name of the Allotee Date of Signing of the Allotment Letter Date of handing over the possession 1. Ajit Srivastava 29-10- 2012 29-08- 2016 2. Kanishko Enterprise 03-08- 2012 08-08- 2016 3. Abhishek Shrivastava 22-05- 2011 22-03- 2015 4. Sanjay Kumar 23-03- 2012 23-01- 2016 5. Sultan Masood Salim 03-08- 2012 03-06- 2016 6. Surendra Kumar 03-3- 2012 03-01- 2018 Samaresh Nandi 29-12- 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....creditors in the same class, whichever is less: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less: Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first or second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second provisos as the case may be within thirty days of the commencement 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vs. Union of India and Anr. The amendments made in Section 7, sub-section (1), came for consideration before the Hon'ble Supreme Court in Manish Kumar's case. The third Proviso added in Section 7, sub-section (1), which is relevant for the present case, was specifically noticed and considered by the Hon'ble Supreme Court in Manish Kumar's case. In paragraph 331, the Hon'ble Supreme Court noticed the third Proviso. Paragraph 331 of the judgment is as follows: "331. We will recapitulate the third proviso, at this juncture. "7. Initiation of corporate insolvency resolution process by financial creditor.- * * * * * * Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos and has not been admitted by the adjudicating authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn befo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing applications, be modified in the manner done. There is a determining principle, namely, the perception from experience about how the entire object of the Code would stand jeopardised if applications already filed could go on even when a fair and reasonable number of kindred souls are not available to support it. Once there is a principle, it cannot be capricious, excessive or disproportionate unless we find that the time given under the proviso is manifestly arbitrary. A vested right under a statute can be taken away by a retrospective law. A right given under a statute can be taken away by another statute. We cannot ignore the fact that there was considerable public interest behind such a law. The sheer numbers, in which applications proliferated, combined with the results it could produce, cannot be brushed aside as an irrational or capricious aspect to have been guided by in making the law. Being an economic measure, the wider latitude available to the law giver, cannot be lost sight of. 438. The issue, which, however remains, is the period of 30 days made available. Is it reasonable to expect that a single applicant could, under the aegis of the laws, collect information,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isdiction. Where would the Court draw the line? We find it difficult to hold that within the time-limit of 30 days it is impossible to comply with the requirements." 20. Ultimately the Hon'ble Supreme Court upheld the amendment and in paragraphs 447 and 448 held following: "447. We uphold the impugned amendments. However, this is subject to the following directions, which we issue under Article 142 of the Constitution of India: 447.1. If any of the petitioners move applications in respect of the same default, as alleged in their applications, within a period of two months from today, also compliant with either the first or the second proviso under Section 7(1), as the case may be, then, they will be exempted from the requirement of payment of court fees, in the manner, which we have detailed in the paragraph just hereinbefore. 447.2. Secondly, we direct that if applications are moved under Section 7 by the petitioners, within a period of two months from today, in compliance with either of the provisos, as the case may be, and the application would be barred under Article 137 of the Limitation Act, on the default alleged in the applications, which were already filed, if the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Amendment Act No.01 of 2020, the provisions of Section sub-section (1) became clearly applicable with respect to Section 7 application and after the judgment of the Hon'ble Supreme Court delivered on 19.01.2021, there was no escape from complying with the provisions by modifying Section 7 application, which was filed prior to amendment. For the first time, the application for modification was filed on 15.07.2021 being IA No.4163 of 2021. The copy of the application has been brought on record by Respondents themselves. The pleadings in IA No.4163 of 2021 clearly indicate that Applicants were well aware of the Ordinance dated 28.12.2019 and amendments brought by the Ordinance. The Applicants have also referred to the judgment of the Hon'ble Supreme Court in Manish Kumar delivered on 19.01.2021. It is useful to notice paragraphs 2(C), (D) and (E), which are as follows : "2C. The Pleadings in the present matter were completed and arguments were going on. However, on 28.12.2019 the Ministry of Law and Justice published the Insolvency and Bankruptcy (Amendment) Ordinance, 2019 ("Ordinance") and the same came into effect from 28.12.2019. As per the ordinance, in sub-section 1 of sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Ordinance. In the said judgment, the Hon'ble Supreme Court also passed direction to the real estate developers to make the details of allottees available in the public domain." 23. The Applicants in the application has pleaded about the steps taken by them to find out the total number of units. In paragraph 2(G) and (H), following have been pleaded: "2G. That consequently the lead financial creditor made its own efforts to find out total no of the units in the real estate project in question of the Corporate Debtor i.e. Gayatri Aura. During collating allottees for completing the mandate under the Ordinance, the Lead financial Creditor came across a news article published in Times of India on 14.09.2019, wherein the spokesperson of the Corporate Debtor has stated that project Gayatri Aura comprises of four towers having total no. 544 units out of which 450 have been sold. Copy of news article published in Times of India dated 14.09.2019 is annexed and marked as Annexure A-3. H. As per the Ordinance, the application under section 7 of the Code has to be filed jointly by not less than 100 of such creditors who are allottees under the same real estate project or by not l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich the application shall be deemed to be withdrawn before admission". There are two parts of the above Proviso. Firstly, the application, which was filed prior to amendment has to be mandatorily modified to comply with the first and second Proviso and secondly, it is further provided that failing which the application shall be deemed to be withdrawn before its admission. Thus, in event the application is not modified within the time prescribed, underlying deeming fiction shall come into play and application shall be treated to be withdrawn. The above statutory provision makes it clear that in event the Applicant, fails to comply with the second Proviso to modify the application within thirty days from the date of amendment, deeming provision of law shall come into play and the application shall be deemed to have been withdrawn. The consequences provided by above legislative intent, cannot be defeated by any act of the parties. The legislature did not require any order of the Court for withdrawal of the application and application shall be deemed to be withdrawn. 26. We wonder as to why the above statutory provision was not adverted to by the Adjudicating Authority while passing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e application having been not taken from 30 days from the date of enactment, i.e. 18.12.2019 and at least from 30 days from 19.01.2021, when the Hon'ble Supreme Court upholds the Amendment and also upheld the third Proviso, the detailed discussion with regard to third Proviso, we have already extracted above in this judgment. 27. In view of the foregoing discussions, we are of the view that application filed under Section 7 CP(IB)/288(PB)/2019, shall be deemed to be withdrawn and order of the Adjudicating Authority proceeding with the application and admitting the said application is contrary to the statutory scheme and cannot be sustained. 28. Although, learned Counsel for the Appellant has advanced his submission on the basis of order of the State Government dated 02.08.2023, by which the State Government allowed the revision filed by the CD and declared the zero period from 14.02.2011 to 01.09.2017 and as per the Appellant, in view of the aforesaid zero period having been declared, the 40 months period for construction had not even elapsed on 11.01.2019, when the application under Section 7 was filed. We having already taken the view that application under Section 7 deemed to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e order. Balance 55 home buyers: We are offering alternate possession in completed towers or towers that are nearing possession i.e. Tower A, B, E & F. In case, they wish to take the refund, then we are ready to refund their money as well along with interest at SBI Bank FD Rate, 100% of the amount with interest within 60 days. For Home Buyers Who are not the Part OF NCLT Proceedings : Corporate Debtor is proposing a 3 months moratorium from the zero date on all demand. Next Demand shall be raised only after three months based on the payment plan under which units have been booked. There shall be no cost escalation and shall not be charged any extra money other than the charges mentioned in the builder-buyer agreement. If they wish to exit from the project corporate debtor is willing to refund their money along with interest rate at SBI Bank FD Rate. Future Course of Action: The corporate debtor/co-promoter agreed to infuse 25 crores and committed to infuse more if required. Infusion of 25 crores is also one of the key terms and conditions of the SWAMIH Investment Fund. Corporate debtor and co-promoter are willing to pay GNIDA demand within 60 days of issuance of ....