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2020 (2) TMI 637

..... he Code along with Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, we are satisfied that a default has occurred and the application under sub-section 2 of Section 7 is complete. The IRP proposed does not have any disciplinary proceedings pending against him - this petition is admitted and Mr. Amit Agarwal is appointed as an Interim Resolution Professional. Application admitted - moratorium declared. - C.P. IB NO. 1565(PB) OF 2018 - 6-12-2019 - Chief Justice M.M. Kumar, President And S.K. Mohapatra, Technical Member P.K. Mittal, Ms. Tanya Goel and Ms. Shruti Choudhary, Advocates for the Petitioner. Jeetender Gupta and Pradeep Agarwal, Advs. for the Respondent. JUDGMENT M.M. Kumar, The Petitioner claiming to be 'Financial Creditor' has filed the instant petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') with a prayer to trigger the Corporate Insolvency Resolution Process in the matter of M/s. Crown Realtech Private Limited, who is stated to be the 'Corporate Debtor'. 2. The Petitioner is an allottee of a real estate project. He is ex facie financial creditor in terms of .....

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..... ally handed over to him. It was stipulated that in case the Respondent fails to hand over the possession of the unit, in that event the Petitioner would be entitled to treat the said agreement as terminated and to claim refund of the entire amount paid to the Respondent with interest @ 20.5% per annum.At this stage it would be profitable to read clause 6(d) of the said agreement which is as under: "6(d). The Developer has agreed to hand over Possession of the unit to the buyer on or before December 2012 with a grace period of three months, i.e. latest by 31st March, 2013. In case the Developer is unable to meet the said deadline, the Developer shall pay interest @20.5% P.A. compounded annually on the amount paid by the Buyer from 1st April, 2013 till the possession of the unit is actually handed over by the Developer to the Buyer, provided further that in case the Developer fails to deliver Possession of the unit even up to 30th September, 2013, in that event the Buyer shall be entitled to claim refund of the entire amount with interest @20.5% P.A. compounded annually from the date of payment till the date of refund together with a further sum equivalent to the amount paid by .....

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..... nt raised is based on the judgment rendered in Pioneer Urban Land & Infrastructure Ltd's. case (supra). According to the learned counsel once the project of the Corporate Debtor is registered with RERA under Section 4 then the principle of harmonious construction, as laid down in the Pioneer Urban Land & Infrastructure Ltd's. case (supra), has to be applied and the timeline i.e. May, 2020 given by Authorities under RERA has to be respected. (v) The Civil Structure of the said project is more or less complete and the project is complete to the tune of 80-85% with an investment of over ₹ 200 crores. To complete the project amount around ₹ 30 crores are required as of date. The Respondent has receivables of around ₹ 35 crores from the existing allottees and there is hardly any unsold inventory. (vi) The delay caused in the completion of the project was primarily on account of non-payment of the instalments by the majority of the allottees ranging between ₹ 30-35 crores, which is due and payable by them and which would be approx. ₹ 50 crores including interest to be paid by these allottees. (vii) The Respondent has already paid a sum of  .....

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..... ed. 13. As per the agreement dated 10.03.2011 the Financial Creditor was required to be given possession by December, 2012 plus grace period of three months. The aforesaid fact is clear from clause 6(d) of the agreement executed on 10.03.2011. A long period of more than eight years have gone by. There is no occupation certificate in sight and the present management is unable to perform its obligation in accordance with the builder-buyer agreement. It not unwarranted to infer that the Petitioner has lost faith in the Corporate Debtor. Therefore, the Financial Creditor would be well within his right to trigger the Corporate Insolvency Resolution Process because it was such a process alone that a new management may come in and perform it obligations as per law. In that regard pertinent observations in para 39 in Pioneer Urban Land & Infrastructure Ltd's. case (supra) inso far as applicable to the facts and circumstances of this case would read as under:- "39. It is also important to remember that the Code is not meant to be a debt recovery mechanism [see paragraph 28 of Swiss Ribbons (supra)]. It is a proceeding in rem which, after being triggered, goes completely outside .....

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..... phasis added) 14. Even otherwise a reasonable period of delay of six months to one year might be acceptable. However, the facts in the present case shows that the project is not complete. The principles of reasonableness are implied in such like cases. There is extraordinary delay of about 6 1/2 years in delivering the possession. In fact, there is a fundamental breach of the terms of the contract by not delivering the possession within the reasonable period even after expiry of stipulated time carved out in the agreement i.e. December, 2012 plus grace period of three months. The default has occurred because the payment made for the allotment of the said unit has the commercial effect of borrowing within the meaning of section 5(8)(f) of the Code. The amount in fact becomes due and payable on the completion of period by December, 2012 plus grace period of three months and; a maximum period of further one year could be granted. The possession should have been offered by March, 2014 and therefore, the principal amount along with compensation and interest becomes payable. 15. For Corporate Insolvency Resolution Process Part-II (chapter-I) has been carved out and in Section 5(8)(f) of .....

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..... ents and the Amendment Act is only clarificatory of the position of law. 16. As a matter of fact, the petitioner waited to the maximum time postulated in the agreement and the possession was not delivered till November, 2018 i.e. date of filing of the petition. 17. Even assuming that the aforesaid unit is complete to the tune of 80-85% with an investment of over ₹ 200 crores (as asserted by the respondent), the delay of almost 6 1/2years is a crucial factor. 18. If some homebuyers are satisfied with the breach of obligation then it cannot be a lawful ground to resist those who have vested right to invoke the provisions of section 7 of the Code. Such a course is wholly unwarranted and would not be sustainable in the eyes of law. 19. It is pertinent to mention that on account of stay order passed by Hon'ble the Supreme Court in Pioneer Urban Land & Infrastructure Ltd's.s case (supra) on 11.03.2019, hearing in this matter was deferred on various occasions. 20. We further find that the provisions of section 7(2) and section 7(5) of IBC have been complied with as discussed in detail in our order dated 27.11.2018 rendered in the case of ECL Finance Ltd. v. Digamber Buil .....

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