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TMI Blog2021 (4) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows: (1) M/s. Skylark Ithaca Buyers Welfare Association (herein after referred to as 'Petitioner/Financial Creditor') is an Association, registered under the provisions of Karnataka Societies Registration Act, 1950 on 04.04.2019 having Identification No. DRB3/SOR/9/2019-2020. It comprises of more than 250 Members. Its registered office is at No. 202, Falcon Nest, 01st Cross, Kaggaasandra, Bengaluru Zone 3, Mahadevapura Hoodi, Bengaluru 560093. (2) M/s. Ithaca Estates India Private Limited ('Respondent/Corporate Debtor') was incorporated on 23.01.2013, having CIN: U45205KA2013PTC067632 and its Nominal/Authorized Share Capital is Rs. 5,00,000/- and Paid-Up Capital of Rs. 1,00,000/-. (3) The Corporate Debtor was incorporated as a wholly owned subsidiary of M/s. Skylark Mansions Private Limited (SMPL), and a special purpose vehicle and contractor of SMPL to execute the development of a project named 'Skylark Ithaca' situated at Sy. No. 24/4, 24/585, 24/6 of Kodigehalli and Sy. No. 28, 29 and 30/1 of Kurudusonnenahalli Village, Bangalore East Taluk, Benga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wners for sharing of right, title and interests in the land provided for the Project. Subsequently, SMPL and the Corporate Debtor entered into an assignment deed dated March 12, 2013, authorising Corporate Debtor to construct the Project. The Project was required to be constructed and developed by Corporate Debtor, for and on behalf of, and under the directions of SMPL, as a contractor. Each of the Members of the Financial Creditor had entered into Sale Agreement and Construction Agreement with the Corporate Debtor and SMPL, for the purpose of purchase of flats/apartments, of varying sizes, to be constructed in the Project (the said Sale Agreement and Construction Agreement is hereinafter referred to as the "Tripartite Buyer Agreement'). (7) As per terms of the Tripartite Buyer Agreement, the Financial Creditors had paid consideration for the sale of flats in the project to Corporate Debtor and SMPL, jointly, as per the details provided in the calculation sheet attached as Annexure A5 herein aggregating to Rs. 127,44,38,369/- (Rupees One Hundred and Twenty-Seven Crores Forty-Four Lakhs Thirty-Eight Thousand Three Hundred and Sixty-Nine only). Thus, the rights, title and inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - which was admitted by Tribunal on February 7, 2020 and the corporate insolvency resolution process was commenced in relation to SMPL. The Financial Creditor herein seeks leave of the Hon'ble Tribunal to rely on the documents filed in C.P. (IB) No. 389/BB/2019. Pursuant to the said order, Mrs. Ramanathan Bhuvaneshwari was appointed as IRP for CIRP in relation to SMPL. Accordingly, SMPL through its Resolution Professional has been arrayed as Proforma Respondent to this application. The IRP issued public notice inviting claims from various creditors on February 21, 2020. The Committee of Creditors ("CoC") for the CIRP was constituted on March 11, 2020 and the first CoC meeting was held on March 17, 2020. (10) The documents shared by the insolvency resolution process in first meeting of the CoC, with respect to the accounts of the Corporate Debtor, inter alia, demonstrated that a sum of Rs. 113,01,51,436/- has been advanced by the Corporate Debtor to SMPL for the purpose of facilitating the acquisition of the land from landowners and obtaining approvals from various authorities. Further, in addition to the fact that SMPL has a development rights, title and interest over the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consortium. (k) The representatives of SMPL were regularly interacting with the Financial Creditors for addressing various issues related to the completion of the Project. SMPL along with the Financial Creditors had held multiple meetings and further communications between them took place vide emails dated November 25, 2017 and April 9, 2019. (l) Therefore, it is a fit case for initiating a group insolvency against the Corporate Debtor along with SMPL Section 10A of the Code is not attracted in the present petition/application as the default by the Corporate Debtor and SMPL had taken place in 2017 and 2018, when it was required to hand over the flats to the buyers. (12) SMPL has filed an appeal bearing number Comp. App. (AT) (Ins.) No. 647 of 2020 for setting aside the Order dated February 7, 2020, which is pending adjudication. (13) As per terms of the Tripartite Buyer Agreement, the Financial Creditor had paid consideration for the sale of flats in the project to Corporate Debtor and SMPL, jointly, as per the details provided in the calculation sheet aggregating to Rs. 127,44,38,369/- Tripartite Buyer Agreement signed by various allot tees in relation to the Project with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d without any proof and is a disputed fact, which itself makes the application of the financial creditors non-maintainable. Further, the averment that the Respondent Company IEPL is a group company of Skylark Mansions Pvt. Ltd., hereinafter referred to as "SMPL" against which the order dated 07.02.2020 directing initiation of CIRP was passed in CP (IB) No. 389/BB/2019 and the same being under challenge and pending adjudication before the NCLAT thus now the same issue cannot be adjudicated by this forum also. Further, it is relevant to mention that the answering Respondent herein was not made a party to the said proceedings despite the fact that it is independently handling the project "Skylark Ithaca" in its own rights rather it was wrongly filed against SMPL with which the Applicant association has no privity of contract and the answering deponent has already raised this averment before the NCLAT where the matter is pending adjudication. (3) That this Respondent was incorporated as a separate body corporate on 23.01.2013 having Corporate Identity No. U45205KA2013PTC067632. That prior to incorporation of the answering Respondent, SMPL (Proforma Respondent) had entered into Joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the Respondent. RERA registration also shows that the project belongs to the Respondents. (6) That the Respondent Company is fully solvent company and has the capability to execute and deliver the project. The information memorandum circulated by the RP in the 2nd CoC of SMPL clearly shows that the project 'Skylark Ithaca" has a surplus cash flow of 296.93 Crores after completion of the project and it can be completed if little time is given to the Respondent Company. In Vodafone International Case (2012) 6 SCC 613, it was held that despite exercise of control by the holding company, the subsidiary-company has a separate legal existence. In Bacha F Guzdar case reported in AIR 1955 SC 74, the Hon'ble Supreme Court held that the shareholder of a company does not acquire interest in the assets of a company and he only has a right to participate in the profits of the company, whenever declared. (7) The allot tees of the answering Respondent are not financial creditors qua the Proforma Respondent. The Project was constructed and developed by the answering Respondent in its individual capacity and without any involvement of the Proforma Respondent. The Financial Credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount outstanding from the home buyers is 204.95 crores. It further provides that further estimated project cost is Rs. 370.12 crores whereas the total Funds available in the project to complete the construction is Rs. 667.05 crores. As such, surplus available from sale of flats amounts to Rs. 296.93 Crores. Therefore, without an iota of doubt, that the Corporate Debtor is in a position to complete the construction of the project at the earliest. (10) Ithaca Estates Private Limited inherited the right to develop and sell the Project Ithaca, independent of any involvement of Skylark Mansion. Private Limited, its holding company. Ithaca Estates Private Limited advertised to the Homebuyers sans any involvement of its holding company. The consideration amount was received by the Ithaca Estates Private Limited and not its Holding Company. Skylark Mansion Private Limited had no involvement in the construction and the development of Project Ithaca, Ithaca Estates Private Limited acted as an independent entity and not for and on behalf of Skylark Mansion Private Limited. Ithaca Estates Private Limited entered into Sale Agreement and Construction Agreement with each of the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds liquidation. Merely because there exists a default which has been occasioned on account of delay in payment by the financial creditors themselves, the Corporate Debtor should not be shoved into CIRP. The instant Application is an abuse of the process of law. 4. The Proforma Respondent has filed Reply on 22.02.2021, by inter alia contending as follows: (1) Ithaca Estates Pvt. Ltd. (IEPL) is a 100% subsidiary of the holding Company Skylark Mansions Pvt. Ltd. (SMPL) and the Directors of SMPL and IEPL are the very same individuals and are also the promoter Directors of both the Companies. SMPL is the deemed owner of the land, by virtue of power of Attorney Holder with respect to the project land on which the project Skylark Ithaca is constructed by its subsidiary Company IEPL. SMPL has also entered into Joint Development Agreement with the land owners for construction of the flats in the project Skylark Ithaca undertaken by its subsidiary Company IEPL. All the approvals for the project are obtained in the name of holding Company SMPL with respect to the project Skylark Ithaca. (2) As per the books of IEPL, there is no other project accounted except the project Skylark Ithaca a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia stating as follows: (1) The Financial Creditor herein is the association comprising of 455 home buyers, who had purchased apartments under 'Skylark Ithaca' Project and cumulatively disbursed Rs. 432,76,03,097/- for the purchase. The Corporate Debtor ('CD') & Proforma Respondent failed to provide possession of the apartments to the buyers as per the timelines set out in respective Agreements and therefore committed default under Section 3(12) of the Code and therefore, CIRP shall be initiated against both the Companies. (2) The CD has wrongly contended in its reply that the present application is not maintainable as CIRP has already been initiated against Proforma Respondent and the same is under challenge before Hon'ble NCLAT and the order being challenged before Hon'ble NCALT is the outcome of a separate Petition in CP (IB) No. 389/BB/2019, which shall not affect any orders to be passed by the Adjudicating Authority in this Petition. Further, a substantial portion of the amount which was paid by the Members of Financial Creditors to the CD, was transferred to Proforma Respondent as is clear from the financial statements of the CD. (3) The Homeb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the CIRP process to Project Skylark Ithaca by way of an interim order being of prima facie opinion that the home buyers, i.e., the Petitioners herein, are not financial creditors qua SMPL. As such, the Petitioners are bereft of locus to approach this Hon'ble NCLT seeking initiation of group insolvency when similar issues are pending adjudication before the Hon'ble NCLAT. (2) The concept of Group Insolvency is alien to the Code, as the same is not envisaged in it. The Code does not have any provision for initiation of group insolvency. As such, the Petition liable to be dismissed on this ground alone. The Petitioners are placing reliance on a misconceived sequence of events to argue that SMPL has represented to the home buyers that SMPL is also a party to the transaction. The same is utterly false. SMPL had entered into a Joint Development Agreement and other supplemental agreements with the original landowners of the said project. However, vide an Assignment Deed dated 12.03.2013, SMPL had assigned all its rights and obligations with regard to Project Skylark Ithaca to IEPL, the Respondent herein. It is vehemently averred that IEPL did not act as a contractor of SMPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Respondent herein) which was admitted by AA by an Order dated 7th February, 2020. Now the present Petition is filed by the same Association, however claiming 452 Home buyers by claiming default for an amount of more than Rs. 432 Cr. and it is filed U/s. 7 of Code R/w Section 60(5) of the Code for initiation of Group CIRP in respect of the Corporate Debtor along with said C.P.(IB) No. 389/BB/2019). 10. Since, the instant Petition is filed under Sections 7 and 60(5) of Code, it is more relevant to refer and extract Section 60(5) of the Code, which reads as under: "Section 60(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it shows, the Corporate Debtor is in a position to complete the project in question. The Respondent satisfies Cash-Flow Test as well as Balance Sheet Test. The Cash Flow test is to ascertain whether the Company is currently or in future able to pay its debts. The Balance Sheet test is to ascertain whether the value of the Company's assets is more than the number of its liabilities after taking into account as yet uncertain and future liabilities. The balance amount receivable by the Respondent from flat owners for Ithaca Phase 1 and Ithaca Phase 2 stated to be tune of amount of Rs. 204.95 Crores. However, since there is requisite cash flow in the Company, Respondent is solvent enough to complete the Project. Therefore, the Corporate Debtor, prima facie appears to be solvent Company, which cannot be subjected to insolvency proceedings and it should be given one more opportunity to fulfill its obligations to various Home Buyers, who have substantially contributed to get their flats. It is also relevant to point out here as detailed supra, the Project Skylark Ithaca consists of total 19 towers, out of which 11 towers are to be developed in Phase-I and 8 towers are to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration Act, 1960. The earlier Company Petition bearing CP (IB) No. 389/BB/2019 is filed by M/s. Skylark Ithaca Buyers Welfare Association represented by its Members totaling to 255 (names of whose have been given in the Petition Cause Title itself) and this Company Petition is filed against M/s. Skylark Mansions Private Limited. However, the instant Company Petition bearing CP (IB) No. 201/BB/2020 is filed by M/s. Skylark Ithaca Buyers Welfare Association and the list of Members are not furnished in the Cause Title of the Petition, but list was enclosed as Annexure-A5 to the Petition, wherein, names of 452 home buyers have been given. By perusal of the names of the home buyers furnished in both the lists, the names are common except some additional names were added in the instant Application. Therefore, the Petitioner failed to furnish its total Registered Number of Members and resorting to file the Applications by abusing the provisions of the Code. As per Law, an Application/Petition has to be filed comprehensively so as to take all available pleadings by impleading proper and necessary parties. For the reasons best known to the Petitioners/Financial Creditors, CP (IB) No. 389 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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