TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 999
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....nch admitting Section 7 application filed by Respondent Nos. 1 to 165, who had filed application under Section 7 for initiating CIRP against the Corporate Debtor. Aggrieved by the order dated 04.06.2024, this appeal has been filed. 2. Brief facts necessary to be noticed for deciding this appeal are: 2.1 State Government Haryana vide Town and Country Planning Department Notification dated 19.08.2013 issued "Affordable Housing Policy 2013". Under the said policy, the Corporate Debtor was granted license by the Director General, Town and Country Planning, Haryana, Chandigarh, on 19.12.2014 for construction and development of an affordable group housing colony. 2.2 Building plan under the name and sign of 'Basera' was launched by the Corporate Debtor. In the project, allotments were made to several allottees. Project consisted of 15 towers. Units were booked from 2014 to 2017. In the project situated at Sector 79B Manesar Urban Complex, Gurugram, Haryana, Respondent Nos.1 to 165 were allotted different units and allotment letters were issued in favour of the Respondents and Flat Buyer's Agreement was entered between the Corporate Debtor and Respondent No.3, Mr. Ajay Vashnavi o....
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....rate Debtor is not acceptable. The Adjudicating Authority proceeded to hear the parties and by the impugned order has admitted Section 7 application. The Adjudicating Authority, in the impugned order held that the Corporate Debtor having not offered possession to the Respondents - unit holders within 48 months from 22.01.2016, default has been committed. The arguments raised on behalf of the Corporate Debtor that unless Occupation Certificate is received there is no obligation to offer possession was considered and rejected. The Corporate Debtor also raised submission that application is barred by Section 10A of the I&B Code, which too was considered and not accepted. The Adjudicating Authority admitted Section 7 application and appointed Shri Gaurav Katiyan as Resolution Professional. Aggrieved by order admitting Section 7 application, the Suspended Director of the Corporate Debtor has filed this appeal. 2.6 The appeal came to be heard by this Tribunal on 12.06.2024, thereafter on 02.07.2024. On 02.07.2024, following interim order was passed: "In the meantime, CoC may proceed to hold its meeting, however, no Form G shall be issued till the next date." Parties comple....
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....pplication for putting the Company into insolvency whereas there are 976 units and majority of the homebuyers are not in favour of the insolvency. It is submitted that in the insolvency of a real estate project seldom there is resolution and completion of construction. It is submitted that the timeframe for offering possession was subject to timely payment of instalment by the unitholders. Before the Adjudicating Authority, the Corporate Debtor has brought on record details of outstanding amount of various unitholders who were in default and payment of their consideration. Learned counsel for the Appellant has referred to the details of 56 allottees amongst the Applicants who has initiated the Section 7 application, where according to the Appellant, there are huge amount of default. It is submitted that dues with reference to 27 unitholders are more than Rs. 1 Lakh. It is submitted that timely payment by the allottees was relevant consideration for determining default on the part of the Corporate Debtor. The Adjudicating Authority has not adverted to the said pleading, thus, the conclusion of the Adjudicating Authority that there is default in not offering possession by the Corpora....
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....ats have taken financial assistance for making payment of the consideration and for last more than five years they are waiting for their units to be handed over. The project is not in habitable condition. The Corporate Debtor has neglected the units and failed to make endeavours to complete the construction in order to qualify enough to obtain the Occupation Certificate. The possession of the units is still not delivered, even after more than five years from 22.01.2020 on which date possession was to be offered to the allottees. Even if, allowance of 89 days is granted to the Appellant during which construction was halted and given a grace period of further six months, the default is continuing and when default is continuing in nature, Appellant cannot be heard to say that since there was no default on 22.01.2020, application under Section 7 deserve to be rejected. The threshold of the allottees was fully complete, even after settlement with few allottees, there were 142 members who fulfil the minimum threshold. The submission of the Appellant that allottees have defaulted in payment of their instalment, it is submitted that some of the unitholders has paid 100% of their considerat....
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....unitholders will get small units of 310 sq ft and more. All the applicants were allotted different units in different towers. There is no dispute between the parties that the four years' period under which construction was to be completed and units to be handed over to the unit holders commenced on 22.01.2016 on which date environmental clearance was granted. As noted above, issue that the Applicants (Respondent herein) who had filed application under Section 7 fulfil the necessary threshold being more than 100 allottees is not being questioned. We, thus, need to proceed on the premise that Section 7 application was filed by the Applicants who fulfil the threshold as provided under Section 7 proviso. 10. The submission which has been pressed by learned counsel for the Appellant is that there was no default on the part of the Corporate Debtor so as to initiate insolvency resolution process against the Corporate Debtor. The submission which has been pressed by learned counsel for the Appellant is that as per the Flat Buyer's Agreement entered between the Corporate Debtor and the unitholders period of 48 months under which the Corporate Debtor has to offer the possession was subjec....
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....ees making timely payment of instalments. The submission of the Appellant is that details of 89 days during which construction was halted along with relevant orders was produced before the Adjudicating Authority. It is submitted that in event 89 days period is extended, the default shall fall within the period prohibited under Section 10A. It is well settled principle of construction of contract that all clauses of the contract has to be given a harmonious construction and parties' intent need to be find out from the clauses of the contract. 13. Two clauses i.e. 3.1 and 3.5 of the Flat Buyer's Agreement are relevant. We need to first take up the submission of timely payment of instalments by the allottees, which according to Appellant was not done by the Respondents. A chart showing default on the part of 56 allottees out of 171 allottees has been referred to by learned counsel for the Appellant, according to which there are more than Rs. 1 Lakh dues of 27 allottees. 14. The present is a case where it is the submission of the Appellant that all applicants who have filed Section 7 application are in default. Learned counsel for the Appellant during submission has referred to 5....
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....an application under Section 7, provided that they are financial creditors and there is a default in a sum of Rs 1 crore even if the said amount is owed to none of the applicants but to any another financial creditor. This position has not undergone any change even with the insertion of the provisos. In other words, even though the provisos require that in the case of a real estate project, being conducted by a corporate debtor, an application can be filed by either one hundred allottees or allottees constituting one-tenth of the allottees, whichever is less, if they are able to establish a default in regard to a financial creditor and it is not necessary that there must be default qua any of the applicants. We have taken an extreme example to illustrate how the Code can possibly be worked. 171. In practice, it may be unlikely, however, that persons would come together as applicants under the Code, if they are real estate allottees, particularly knowing what the admission of application under Section 7 entails, and the destiny of an application which has reached the stage of compulsory winding up under Section 33. However, taking a more likely example viz. of the corporate....
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....se 3.1 and 3.5 together, period of 48 months has been contemplated for handing over possession subject to only force majeure and payment of instalments. No case of force majeure except halting of construction for 89 days has been contended, which falls in the expression 'intervention of statutory authorities'. Clause 3.5 does not stand any fetter in handing over possessing or receipt of Occupation Certificate. 18. We now need to notice Affidavit dated 22.08.2022 which was filed by the Corporate Debtor before the Adjudicating Authority where status of project has been given. According to own case of the Corporate Debtor out of total 15 Towers only Tower 1 and 2 are fully complete and rest 13 Towers were yet to be completed. In Para 9, a detailed chart outlining the status of project has been given. In Para 10 of the Affidavit following has been stated: "10. In view of the ongoing work and continuous measures being taken by the CD to complete the project timely, the said project is endeavoured to be completed by June 2023. However, till date total No. of 452 units have been offered for possession. Copies of photographs reflecting the status of the project/towers is annexe....
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....e project is not complete and Appellant seeks leave of the Court to proceed with the construction of the project under the supervision of the IRP. In the application, it has been submitted that Appellant is negotiating with one M/s Raveneek Homes for joint development of concerned land. It is useful to notice that a reply has been filed by the Resolution Professional in IA No.6177 of 2024 where the Resolution Professional has stated that HRERA registration has already expired in November, 2020 and further there is dispute with Directorate of Town and Country Planning, Haryana (DTCP) on renewal of licence and the Corporate Debtor has filed a Writ Petition. It was further pleaded that the Corporate Debtor claim to offered possession without obtaining Completion Certificate/ Occupation Certificate and also without having basic amenities. It is useful to extract Para 5(a) and (b) of the reply, which is as follows: "a. The contents of para 8(a) are denied in toto. It is denied that Resolution Professional placed any negative agenda for discontinuance of construction before CoC. The same is evident from the notice, agenda and explanatory statement to 2nd CoC meeting. Copy of not....
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....anding over possession to the homebuyers. 23. All the above facts which have been brought along with the Affidavit by the Appellant either before the Adjudicating Authority as well as before this Tribunal can be looked into to come to the conclusion as to whether the Corporate Debtor needs resolution under CIRP. 24. We may also notice the judgment of this Tribunal in "Shailendra Agarwal vs. Asit Upadhyaya & Ors., Company Appeal (AT) (Ins.) No.327 of 2025" decided on 23.04.2025 where it was observed that not handing possession by the Corporate Debtor to the allottees is a continuing default committed by the Corporate Debtor. The above was a case also where Section 7 application was filed by the allottees alleging default on the part of the Corporate Debtor in handing over possession and refunding the amount to the allottees. It is useful to notice following observations in Para 31 of the judgment: "31. ......It also mentions that the act of non- handing of possession on the part of the corporate debtor resulted in default on the part of the corporate debtor and since the possession of the units has not been handed over till day, it resulted in continuing default/recur....
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....oter to permit them to carry on the construction. 27. It is submitted that the present is a case where the Corporate Debtor is to be resolved by CIRP process only and the resolution plan has to be obtained as per the CIRP process. It is submitted that in view of the interim order passed by this Tribunal directing the Resolution Professional not to issue Form G on 02.07.02024 further steps are not yet been taken and this Court may direct the Resolution Professional to issue Form G and obtain a compliant resolution plan for resolution of the Corporate Debtor. 28. We having noticed the facts present in Section 7 application, affidavit filed before the Adjudicating Authority and this Tribunal and application filed before this Tribunal in the present appeal, we come to the conclusion that project 'Basera' is still incomplete and no case has been made out to permit the Promoter to complete the project. The Adjudicating Authority having already initiated the CIRP process by admitting Section 7 application, the Corporate Debtor needs to be resolved in accordance with the process prescribed in the I&B Code and CIRP Regulations, 2016. 29. In facts of the present case, specially the ....