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TMI Blog2021 (7) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... tava] Member (Technical) For the Appellant: Shri Ramji Srinivasan, Sr. Advocate with Ms. Anushree Kapadia, Ms. Poonam Mathur, Shri Shivkrit Rai and Ms. Rajshree Chaudhary, Advocates For the Respondents: Shri Krishnendu Datta, Sr. Advocate with Shri Abhishek Anand, Shri Kunal Godhwani, Advocates (R-4) Shri Pranay Nath Jha, Shri Shubham Gupta, Shri Aditya Parolia, Ms. Aditi Sinha and Shri Akshay Srivastava, Advocates (R-1, 2 & 3) JUDGMENT A.I.S. Cheema, J.: 1. These Appeals arise out of Corporate Insolvency Resolution Process (CIRP in short) which was initiated against "Sandhya Prakash Ltd."- the Corporate Debtor of which Mr. Devendra Padamchand Jain was Resolution Professional. The Corporate Debtor is now in Liquidation and Mr. Devendra Padamchand Jain is now the Liquidator of the Corporate Debtor. J.M. Financial Asset Reconstruction Company Ltd. has been asserting rights on the basis of being part of Committee of Creditors (CoC in short) and Financial Creditor of the Corporate Debtor. 2. These Appeals have been heard together. We will take up (A) Company Appeal (AT) (Ins.) No. 1219 of 2019 with Company Appeal (AT) (Ins.) No. 1327 of 2019 together for discussion and then we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that they have paid consideration of Rs. 2,17,00,000/- in March, 2012 and they were Financial Creditors. They sought to be included in CoC as Financial Creditors and sought execution of Sale deed of the Unit concerned. J.M. Financial claims that CoC opposed the I.A. No. 327 of 2018 claiming that there was no registered Sale deed or valid allotment of the Unit in AURA Mall. The land and the Mall was under mortgage by Corporate Debtor in favour of HUDCO and Dena Bank as per Agreement dated 04.04.2008 where the ex-management had agreed that they will not sell, transfer, mortgage, charge, pledge etc. any of the properties as long as they are indebted to HUDCO. Thus it was claimed that the Agreement as claimed could not have been executed. J.M Financial claims that on 18.09.2019, Adjudicating Authority passed Impugned Order in I.A. 327 of 2018 in C.P. (IB) No. 113/NCLT/AHM/2017 holding that Dr. Tandon and others were not Financial Creditors; that their claim was barred by Limitation and that litigation was pending before Competent Court and that their claim was pre-mature. However, the Impugned Order directed Resolution Professional/now Liquidator to refund the amount purported to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears for running Game Zone and M/s. H. M. Leisure assured the Appellants payment of Rs. 50 per. Sq. ft. per month as minimum monthly guaranteed return as per Annexure A- 6 (Page 202). These Appellants claim that the Agreement to sell (In short ATS) was signed under Committed Return Plan and in view of the same the Corporate Debtor was to pay a total of Rs. 87,17,810/- to these Appellants as guaranteed monthly return from 01.01.2013 to 13.11.2016. However, the Corporate Debtor paid assured returns only till February, 2015 to an extent of Rs. 17,50,000/- of which particulars are given in the Appeal Para 7(ix). These Appellants have further claimed in their Appeal that in spite of Notice when the Corporate Debtor did not respond they initiated proceedings (as per Annexure A-10) in RERA (Real Estate Regulatory Authority, Bhopal) on 17th May, 2017 and sought execution of Sale-deed. The Corporate Debtor in RERA contrary to the Audited Balance-sheet of 2012-13 took a stand that the money was allegedly a deposit and investment and that the signatory of ATS was not authorized. However, Mr. Amresh Pandya who had signed the Agreement to sell (ATS) for the Corporate Debtor addressed letter to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Professional asked Appellants to show no objection of HUDCO and Dena Bank and copy of the registered Agreement to sell. The Appellants claim that they qualified as allottees under Section 5 (8) but the Resolution Professional sent e-mail Annexure A-23 that considering the recent amendment with regard to the definition of financial creditor the Resolution Professional will give final conclusion by 2nd August, 2018. On 3rd August, 2018 however Resolution Professional claimed that as the matter was already under litigation on the basis of simple Agreement to sell, Dr. Tandon and others could not establish to be allottees and sought registered Agreement to sell supported by document showing person who signed the agreement for Corporate Debtor was authorized. He also sought No Objection Certificate from the lenders as the property was already mortgaged. He also sought from Appellants allotment letter from the Corporate Debtor. Resolution Professional also claimed that the matter was under litigation before RERA. Dr. Tandon and others have further claimed that after correspondence the Resolution Professional said that he would not be able to adjudicate their claim. The Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement to sell had no power or Board Resolution that authorized him. It is stated that Dr. Tandon and others could not submit copy of registered agreement of sale and No Objection Certificate from HUDCO and Dena Bank or allotment letter issued by Corporate Debtor. Thus it is claimed that Dr. Tandon and others could not show that they were real estate allottees. It is also claimed that the alleged agreement of sale is dated 31st March, 2012 and thus the claim was time-barred. 13. Having heard parties in these two Appeals and having gone through the records, we now refer to the Impugned Order dated 18th September, 2019 passed by the Adjudicating Authority. The Impugned Order shows that the Adjudicating Authority referred to the prayers made by Dr. Tandon and others to treat them as Financial Creditors and to make them part of CoC and direct execution of sale-deed in their favour. The Adjudicating Authority considered the prayer of Resolution Professional whether Dr. Tandon and others could be treated as Financial Creditors in view of the amendment which had then been brought about under Section 5(8)(f) of IBC. Adjudicating Authority discussed the case which was put by Dr. Tandon an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority observed that shop was already built up and money paid as advance towards sale consideration could not be termed as financing to builder/developer to complete projects and thus it did not have the commercial effect of borrowing. The Impugned Order then refers to excerpts form Law Committee Report and repeated that it was disputed agreement of sale. Then observations were made with regard to the matter pending before RERA and that some facts were disputed there. Impugned Order further shows that the Adjudicating Authority treated the claim as barred by Limitation as it relied on agreement of sale executed on 31st March, 2012 and that 3 years period was already over. Having said so, the Adjudicating Authority observed that Dr. Tandon and others were not financial creditors and there was no commercial effect of borrowing. Reference was then made to Judgment in the matter of "Chitra Sharma Vs. Union of India & Ors." and that Hon'ble Supreme Court of India had invoked extraordinary powers under Article 142 of the Constitution of India in that matter. Adjudicating Authority then took up on itself that it had to do complete justice in the matter and expected to act in ai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shop was already built up Adjudicating Authority concluded that money paid could not be said to be towards financing to Builder/Developer to complete the project. In Company Appeal (AT) (Ins.) No. 1327 of 2019, Dr. Tandon and others have pointed out as to how the Adjudicating Authority itself was earlier required to pass orders against the erstwhile management for not providing record to the Resolution Professional/CoC. The Appeal Paragraph 7 (xxxi) may be reproduced: "7.(xxxi) In fact, the Adjudicating Authority itself took note of the conduct of the promoters (directors) in interim order dated November 28, 2018 in IA 183 of 2018, by stating that - "Notwithstanding, the above we are constrained to observe that despite the moratorium period is already over and liquidation of the Corporate Debtor (RP) is going on but, erstwhile management did not provide relevant record to the RP and CoC which prima facie attracts the penal provision amounting to the breach of the Insolvency and Bankruptcy Code, therefore, before this court to take serious view the Respondents are legally expected to ensure for providing of all material record of the company to the RP and CoC." Thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty Act, 1882, to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 or as evidence of any collateral transaction not required to be effected by registered instrument]." If the above proviso is seen and the amendment in IBC- Section 5(8) is seen, amounts raised from allottees under a Real Estate Project is deemed to have commercial effect of borrowing. Explanation below Section 5(8)(f) links us to definition of "allottee" under Real Estate (Regulation and Development) Act, 2016, which reads as under: (d) "allottee" in relation to a real estate project, means the person to whom a plot, apartment or buildings, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent;" "Allotment" could be by various modes, including an "otherwise" document like "Agreement to Sell" which may be eclipsed under Registration Act for no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted accordingly. 19. It was also error on the part of the Adjudicating Authority to state that agreement of sale was dated 31st March, 2012 and thus the claim was time22 Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 barred. The contents of the Agreement to sell have terms like handing over the possession to vendee and signing of tripartite agreement between vendor, vendee and M/s. H.M. Leisure for a term of 9 years against what Dr. Tandon and others was towards assured returns. In the facts of the matter, when it is not shown that the Real Estate Developer has handed over the possession and brought into force or complied with other parts of the agreement, it cannot be said that the claims being made by the Dr. Tandon and others were timebarred. 20. Coming back to the Impugned Order we do find that the Adjudicating Authority could not have given directions as seen in Para 7 (xii) reproduced above to refund the amounts to Dr. Tandon and others. That would be against the provisions of IBC either in stage of the CIRP or at the stage of Liquidation. 21. Whether or not Corporate Debtor could have ultimately executed Sale Deed is not relevant in the facts of case read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor paid monthly rent/licence fees/assured return to Appellant No. 1 till 27.06.2016 and then stopped paying the same. Appellant No. 1 claimed that he filed claim on 25.09.2017 as Operational Creditor on advice of Respondent No. 2 although the Appellant No. 1 was a Financial Creditor as Corporate Debtor was aware that not being Financial Institution it could not accept deposit from public and concept of leasing the space upon payment and then taking the same space back on lease for assured monthly return was a means of raising finance. Thus Appellant No. 1 claimed that Appellant No. 1 was Financial Creditor. The Appellant claims that Appellant filed I.A. 481 of 2019 (copy of the same is at Annexure A-4) before Adjudicating Authority to be considered as Financial Creditor. However, without deciding the I.A 479 of 2019 Adjudicating Authority passed orders of Liquidation. 24. In the common Appeal, Appellant No. 2 Monika Sehgal claims that the Corporate Debtor signed Letter of Intent with Appellant No. 2 with regard to commercial space No. S-10 in Food Court. The document of "LoI" is pointed at Annexure A-5. Appellant No. 2 claims that advance of Rs. 2,28,150/- was paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 3 also as Financial Creditor. This Appellant also claims that without deciding the I.A. 479 of 2019 (Annexure A-9) filed by this Appellant, the Liquidation Order was passed. 26. Although these Appellants claim that I.As filed by them were not decided and the Order of Liquidation came to be passed. The Respondents have pointed out that all concerned I.As i.e. I.A. 481 of 2019, I.A. 483 of 2019 and I.A. 471 of 2019 have already been disposed by the Adjudicating Authority referring to the Order of Liquidation and directing the Applicants to file Application before the Liquidator as per rules. We have gone through the claims made by these Appellants. Appellant Nos. 1 and 3 claimed to have registered lease deed in their favour executed in 2011 and both of them then claimed that subsequently they executed lease deed in favour of the Corporate Debtor for the same space for which they had entered into lease deed by other documents of leave and licence executed in 2013. Appellant Nos. 1 and 3 claimed that the said documents of leave and licence were in the nature of assured returns. Their claims appear to be in the nature of claiming rent. These Appellants have tried to draw parity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 passed by Adjudicating Authority the claim was not considered and e-mail was sent on 05th July, 2018 that the claim will be considered as per provisions of IBC; that Appellant again filed I.A. 486/2018 and then Resolution Professional sent e-mail dated 14th January, 2019 Annexure A-8 informing that the claim of the Appellant was admitted. Thus harassment is claimed. 30. With such and other averments against the Resolution Professional- (now Liquidator), the Appeal claims that the CIRP was not properly conducted and thus the Liquidation Order is required to be set aside. The Respondent- Liquidator has argued and filed written-submissions Diary No. 24144 justifying actions taken by the Resolution Professional (now Liquidator) and has mentioned that the Appellant made complaint on similar grounds with the IBBI in which the Liquidator has filed Reply and the Appellant cannot reagitate the said issue before this Appellate Tribunal. The Liquidator has justified the actions taken and answered the averments made with regard to not publishing expression of interest in Form-B referring to the amendments and their timing in that regard to justify his step. 31. Impugned Order shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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