TMI Blog2020 (11) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Corporate Debtor has committed default in not completing the Construction of the flat in time and handing over possession of the same in terms of Agreement? - Whether Financial Creditor/Home Buyer committed default in making payment of the instalments as per 'ABA' under construction link Plan? - HELD THAT:- Based on the admission of the Corporate Debtor, it is clear that till 22nd November 2018, flooring and finishing work of the Apartment was still going on. The Appellant has annexed the copy of a letter dated 29th October 2019 by which the concerned authorities granted permission for the occupation of the said building. The Corporate Debtor had applied for issuance of Occupation Certificate on 03rd July 2019, which was granted on 29th October 2019. From facts of this case, it is evident that the corporate debtor has failed to honour its promise in completing the Project and handing over possession in time as per terms of the Agreement. Therefore due to non-payment of an instalment on account of delay in Construction cannot be treated as default committed by the Allottee - the Corporate Debtor had committed default in not completing the construction work of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2020 - [ Justice Venugopal M. ] Member ( Judicia l) , [ V. P. Singh ] Member ( Technical ) And [ Shreesha Merla ] Member ( Technical ) For the Appellant : Mr Saurabh Kalia, Ms Bina Gupta, Ms Sheena Taqui and Mr Shashi Shekhar, Advocates For the Respondent : Mr Neeraj Malhotra, Sr Advocate alongwith Mr Lokesh Bhola and Mr Sanchit Gawri, Advocates for R-1 2. Mr Jugraj Singh Bedi, IRP JUDGMENT [ Per ; V. P. Singh , Member ( T ) ] This Appeal emanates from the Order dated 28th November 2019 passed by the Adjudicating Authority/National Company Law Tribunal, Delhi Bench, Delhi in Company Petition (I.B.) No. 1722/ND/2018, whereby the Adjudicating Authority has admitted the Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'I B Code'). The Parties are represented by their original status in the Company Petition for the sake of convenience. 2. The brief facts of the case are as follows: The Corporate Debtor is a builder of High-end Project in the name of Krish Provence in Gurgaon wherein booking of Flat No. C-1101, Tower-C, Floor-11 admeasuring 5800 sq. ft. for a total sale consideration of ₹ 3,80,10,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds that the Project is at the final stage and ready for habitation. The Respondent No.1 2 herein have committed default in making payment of instalments. After the cancellation of the Allotment dated 26th June 2015, the Respondent No.1 has filed the petition under Section 7 of the Code. 9. The Respondent No.1/Home Buyer/Financial Creditor submits that as per Agreement dated 07th August 2012, possession was to be handed over within 36 months from the date of commencement of the Construction or execution of the Agreement, whichever is later. After expiry of the said period, the Corporate Debtor was entitled to a grace period of 180 days for obtaining the Occupation Certificate from the concerned Authority. As per Agreement, possession of the flat was to be handed over to the Respondent No.1/Financial Creditor by the first week of February 2016. However, the said unit of Respondent No.1 and 2, as well as Tower-C was not ready for possession till 28th November 2018, when the internal finishing was still going on. Despite the assurances, the Appellant failed to deliver the possession of the said unit to the Respondents. Therefore, the Respondents/Financial Creditor had filed the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant cannot be accepted because the date of default for financial creditor cannot be a date when the Respondent No.1 2 stopped paying the instalments. Admittedly, in this case, possession was to be handed over latest by 07th February 2016. There is nothing on record to show that the Corporate Debtor has ever offered possession of the flat and that the occupation certificate was applied for within the stipulated time of handing over possession. When the Corporate Debtor failed to complete the Construction and could not deliver the possession, the default was committed. The petition is filed within three years from the date, when possession was scheduled to be delivered. Thus, it is clear that the objection of the Appellant regarding limitation is not sustainable. Issue No 1 2; 16. The Allottee/Financial Creditor contends that the Corporate Debtor has committed default in not completing the Construction of the flat in time and handing over possession of that in terms of Agreement. Per contra, the corporate debtor pleaded that Financial Creditor/Home Buyer committed default in making payment of the instalments, as per Agreement under construction link Plan. Thus, the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e place before NCLT by trigger-happy allottees who would be able to ignite the process of removal of the management of the real estate project and/or lead the corporate debtor to its death. (emphasis supplied) 18. Based on the law laid down by Hon'ble Supreme Court in the above case, it is clear that once the prima-facie case is made out by the home buyer, the burden shifts on the Promoters/Real Estate Developer to point out in the reply that the Allottee is itself a defaulter. 19. The Appellant further pleaded that it has been calling the Respondents to collect the refund amount vide letter dated 05th March 2019 and its reminder dated 04th April 2019. The Appellant drew our attention on the order sheet of this Appellate Tribunal dated 18th December 2019, wherein it is recorded that the Appellant brought cheques amounting to ₹ 1.51 crores shows the intention of the Appellant to settle . It is further submitted that vide letter dated 04th January 2020 the Appellant again offered the same Amount, which was rejected by the Respondent vide its letter dated 04th January 2020. 20. The Appellant/Corporate Debtor further pleaded that the Occupation Certificate ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 58,93,394/- (including the previous demand) 12.12.2014 14.01.2015 Not paid The demand was for commencing of internal furnishing. 24. The Appellant contended that the Respondents are defaulters; thus, the Corporate Debtor was constrained to cancel their Allotment vide letter dated 26th June 2015 by making a final call upon the Respondents. 25. In reply to the above allegations, the Respondent No.1 and 2 submitted that the Corporate Debtor miserably failed to complete the Construction of the said Project as per the timeline envisaged in the said Agreement 'ABA', and the said Project is yet not complete. It is submitted that for the same reason, further payment was not made by the Respondent No.1 and 2. The Respondent No.1 and 2 had already paid a substantial amount to the tune of ₹ 2,75,55,186/- way back in the year 2013, and the same was brought to the knowledge of the Corporate Debtor vide its reply dated 28th July 2015. 26. It is evident that ₹ 2,75,55,186/- was paid out of the total sale consideration of ₹ 3,80,10,000/- (Rupees Three Crore Eighty Lakhs Ten Thousand only). De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est whatsoever from the Respondents on the said delayed payments. Besides the same, even till 25th October 2018, the ledger entries do not depict any interest charged on the delayed payments. The Respondents pleaded that since the possession could not be handed over on the Schedule; therefore, interest was not being charged from the Allottee/Home Buyer. 31. Based on the ratio of the judgement of Hon'ble Supreme Court in Pioneer's Urban Land Infrastructure (supra) the Appellants submits that from the facts of this case it is evident that default is on the part of Applicant/Financial Creditor and not on the part of the Appellant/Corporate Debtor. Thus Application filed U/S 7 of the Code should be dismissed. The action should further be taken U/S 65 of the Code against the allottee/financial creditor. 32. In the Pioneer Urban Land Infrastructure case, Hon'ble Supreme Court has observed that Real Estate Developers are, in substance, persons who avail finance from the allottees who then fund the real estate development project. Once a prima facie case is made out by an allottee in an Application under Section 7, the burden shifts on the promoter/real estate developer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dated 05th November 2018, that while most builders have abandoned the projects or stopped work, but he is completing the Project which is at its final stage, where everything is in place, and the flooring and finishing work are underway. This may be one of the reason, as to why the Allottee stopped the payment of Instalment to the Corporate Debtor. We cannot deny from the fact that in many of the Real Estate Projects, the builders have either left the Project abandoned or had stopped the work and a general sense of insecurity has developed among allottees home buyers. From facts of this case, it is evident that the corporate debtor has failed to honour its promise in completing the Project and handing over possession in time as per terms of the Agreement. Therefore due to non-payment of an instalment on account of delay in Construction cannot be treated as default committed by the Allottee. 35. From the reply of the Corporate Debtor dated 22nd November 2018, it appears that till submission of a response, work of flooring and finishing was undergoing. It is also clear that the Corporate Debtor applied for occupation certificate only in July 2019. It is evident that Application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion process has been invoked fraudulently, with malicious intent, for any purpose other than the resolution or Insolvency. 35. The Real Estate developer may do so by pointing out, for example, that the Allottee who has knocked at the doors of the NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/ apartment. The Developer can also point out that in a Real Estate market which is falling, the Allottee does not, in fact, want to go ahead with its obligation to take possession of the flat/Apartment under RERA, but wants to jump ship and really get back, by way of this coercive measure, monies already paid by it. 36. From the aforesaid findings, it is clear that the Adjudicating Authority (National Company Law Tribunal) before admitting a case can find out whether the Application filed by trigger-happy allottees who would be able to ignite the process of removal of the management of the Real Estate project and/ or lead the 'Corporate Debtor' to its death. 37. It has come to our notice that in a large number of cases, in the language of the Hon'ble Supreme Court, the allottees are speculative investor and not a pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e National Green Tribunal for which the 'Corporate Debtor' cannot be blamed if there is a delay in non-completion. 44. All the facts aforesaid clearly show that the 1st and 2nd Respondents, in spite of offer of flat, wanted refund of the Amount with more interest and refused to take the actual Amount in terms of Agreement. 45. The aforesaid facts also make it clear that the 1st and 2nd Respondents filed the Application under Section 7, fraudulently with malicious intent for the purpose other than for the resolution or liquidation and they knocked at the doors of the Adjudicating Authority for refund of money and not for the Flat/ premises and thereby wanted to jump ship and really get back the Amount, by way of coercive measure (Refer the decision of the Hon'ble Supreme Court in Pioneer Urban Land and Infrastructure Limited Anr. ). 46. Apart from the fact that the 'Corporate Debtor' has offered the possession of flat on 15thNovember, 2016 and obtained completion certificate immediate thereafter. Therefore, delay in granting approval by the Competent Authority cannot be taken into consideration to hold that the 'Corporate Debtor' default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;Insolvency and Bankruptcy Code, 2016' by published in the Gazette of India extraordinary Part II- Section 1 dated 28th December, 2019. 51. In Section 7 of the principal Act, in sub-section (1), before the Explanation, the following provisos have been inserted:─ Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent of the total number of such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccupation Certificate is applied in July 2019, which is about after four years from the promised date of possession. b) In the matter of Navin Raheja, the default occurred after the completion of the Project and after receiving Occupation Certificate. However, in the present case, the completion certificate was not received up to the filing of Section 7 Application. c) In Navin Raheja case, Allottee had refused to take possession despite the same being offered by the developer time and again. However, in the present case, the offer of possession has not been made to date by the Appellant. On the other hand, the Appellant contends that the unit allotted to Respondent No.1 and 2 have already been cancelled and sold to the third party. d) In Navin Raheja case the Developer had offered possession to the Allottee even before the Adjudicating Authority, which was refused by the Allottee. However, in the present matter, the Appellant had not made any offer of possession. e) In the matter of Navin Raheja case, the Developer has even offered to refund the consideration amount. But, the Allottee just to realise higher interest on refund amount, refused to accept the refund amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the possibility cannot be ruled out that in the circumstances stated above the Allottee might have stopped further payment after 2013. It is also on record that in 20th December 2016 the Corporate Debtor raised a demand of VAT charges of ₹ 3,00,615/, which was paid by the Allottee. 44. The Learned Counsel for the Allottee placed reliance on the Agreement Apartment Buyers Agreement . The relevant clauses of the Agreement are as under: 2.10 In case the Seller is unable to deliver the Apartment to the Purchaser(s) because of the reason of absolute deletion of the Apartment/tower/floor on account of reduction in the overall number of units or floors in the Project, due to any regulatory/legal reasons or reasons beyond the control of the Seller, no claim, monetary or otherwise, shall be raised by the Purchaser(s) or shall not be accepted by the Seller but however, the payments made towards the Sale Consideration received from the Purchaser(s) will be refunded to the Purchaser(s) in full along with an interest rate of 12% (twelve percent) per annum, and no other compensation of any nature whatsoever shall be payable by the Seller to the Purchaser(s). 2.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd deduction of brokerage paid by the Seller with respect to the Allotment of the Apartment to the Purchaser(s), if any. Any monetary benefits given by the Seller to the Purchaser(s) under any of the schemes floated by the Seller from time to time shall also be taken into account for calculating the Non-refundable Amount e.g. scheme allowing discounts for all the customers making timely payments; Notice of Offer of Possession shall mean a written notice given by the Seller offering to the Purchaser(s) to take over the physical possession of the Apartment within thirty (30) days from the date of such Notice on payment of such charges as may be found due and payable by the Purchaser(s) to the Seller; The Relevant part of the Agreement which deals with the consequences of default of payment under Construction linked plan, as per Annexure-D of the Agreement, which is given as under for ready reference: 2.17 In case, the Purchaser(s) has opted for a construction linked payment plan as mentioned in the Annexure D, the Seller shall send call/demand notices for instalments on commencement of the respective stages of Construction at the address of the Purchaser(s) available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost or courier to the Allottee, at every stage of Construction as per Agreement has not been followed. Therefore in terms of Clauses 2.17 2.18 of the Agreement, it cannot be said that the Allottee/Financial Creditor has committed default in paying the instalments when due. It is undisputed that flat was to be delivered latest by 2nd week of February 2016, but construction work was still going on in the year 2018. Justification for Invoking Sec 65 of the Code 45. The Learned Counsel for the Corporate Debtor emphasised for the action against the Allottee under Section 65 of the Code. It is contended that Hon ble Supreme Court in Pioneer s Urban Land Infrastructure case has specified that Section 65 shifts the responsibility on the Corporate Debtor to furnish details of default. Hon ble Supreme Court in case of Pioneer s case held that; Under Section 65 of the Code, the real estate developer can also point out that the insolvency resolution process under the Code has been invoked fraudulently, with malicious intent, or for any purpose other than the resolution of Insolvency. The Allottee does not, in fact, want to go ahead with its obligation to take possession of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be less than one lakh rupees, but may extend to one crore rupees. (2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees. 48. Thus, it is clear that the Code provides stringent action U/S 65 against the person who initiates proceeding under the Code fraudulently or with malicious intent, for the purpose other than the resolution of Insolvency or liquidation under the Code. To levy a penalty under Section 65 of the Code, a prima facie opinion is required to be arrived at that a person has filed the petition for initiation of proceedings fraudulently or with malicious intent. No penalty can be saddled either under Section 65(1) or (2) of the Code without recording an opinion that a prima facie case is established to suggest that a person fraudulently or with malicious intent for the purpose other than the resolution of Insolvency or Liquidation or with an intent to defraud any person has filed the Application. 49. Coming to the facts of this case, we find that the App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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