TMI Blog2022 (3) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... very root of the maintainability of Section 7 application. The issue of non-satisfaction of statutory provision of third proviso to section 7(1) was not considered adequately and dealt with in the Impugned Order, we set it aside and remand the case to the Adjudicating Authority to consider the objection about maintainability as required under third proviso of Section 7(1) and any other objection/issues raised by the parties and pass a speaking order regarding admission/rejection of the section 7 application. The appeal is disposed of. - Company Appeal (AT) (Ins.) No. 939 of 2021 - - - Dated:- 7-3-2022 - (Justice Ashok Bhushan) Chairperson And (Dr. Alok Srivastava) Member (Technical) For the Appellant : Shri Arun Kathpalia and Mr. Krishnendu Datta, Sr. Advocates with Mr. Abhijeet Sinha and Mr. Anuj Tiwari, Advocates. For the Respondents : Mr. Vikas Mehta, Mr. Piyush Agarwal, Ms. Kritika Sethi, Ms. Shrivalli Kajaria, Mr. Adith Nair, Advocates for R 1. Mr. Agam H. Maloo, Advocate for R 2. JUDGMENT (Through Virtual Mode) [Per.: Dr. Alok Srivastava, Member (Technical)] This appeal has been filed under section 61 of the Insolvency and Bankruptc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal amount of ₹ 3.50 crores which was paid by M/s Abhiyan Developers Pvt. Ltd. towards booking of the flats, which was subsequently converted into a loan, has become outstanding and owing to certain contingencies the corporate debtor has not been able to repay the said amount with interest as communicated in its earlier letter dated 8.7.2016. The corporate debtor also promised to repay the amount along with cumulative interest. Later again, through a letter dated 31.3.2018, the Corporate Debtor intimated M/s Abhiyan Developers Pvt. Ltd. that the sum of ₹ 3.50 crores received by it during the period 2009 2010 shall be made good along with 15% cumulative interest compounded quarterly from the date of such investment till the date of actual repayment and sought time to repay back the above-mentioned amount. 4. The Appellant has stated that since the amount due from the Corporate Debtor was not repaid, Respondent No. 1 filed a section 7 application against the Corporate Debtor, which was admitted vide the Impugned Order and CIRP was initiated against the Corporate Debtor. 5. We heard the arguments advanced by the Learned Senior Counsel/Counsel for the parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such an arrangement did not change the nature of the agreement qua which the said flats were allotted to the Respondent and booking amount deposited. He has further referred to financial account statements dated 31.3.2015, 31.3.2016, 29.3.2017, 8.7.2016, 30.9.2017 and 31.3.2018 (all financial account statements attached from pg. 112-121 of the Appeal Paperbook) to point out that these account statements do not show any interest amount as there was never any question of paying interest since the deposited amount of ₹ 3.50 crores was just a deposit against booking of flats and not a loan amount. In support of the argument that the said amount deposited by Respondent No. 1 was not a loan, he has pointed out that the note given in the balance sheet for the year ending 31 March 2021 (attached at page 28 of Rejoinder to Reply of Respondent No. 1) wherein it is recorded that a capital advance of ₹ 3.50 crore was earlier given to the corporate debtor for purchase of property and had been converted into loan, but interest on outstanding loan has not been provided in books as the matter was sub-judice. The Learned Senior Counsel has claimed that there is no other case than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability on cancellation of flat has been transferred to Abhiyan Developer s loan account. He has also referred to letter dated 8.7.2016(attached at page 119 of the appeal paper book)to claim that the Corporate Debtor has agreed to repay the principal amount along with mutually agreed interest/compensation and thus all the ingredients viz. disbursement and time value of money, that are required for the existence of a financial loan are present. He has also referred to letter of corporate debtor dated 30.9.2017 wherein it is mentioned that the principal amount paid towards booking of flats was subsequently converted into a loan account, which is also evidenced in letter dated 31.3.2018 (attached at page 121 of Appeal Paperbook). 10. The Ld. Counsel for Respondent No. 1 has further argued that the Resolution Professional has accepted a provisional claim of approximately ₹ 20crore, whereas the Appellant agrees to pay only approximately ₹ 12 crore. Regarding the applicable rate of interest, he has claimed that while the rate of interest stated by him is based on the rate of interest stated by the corporate debtor in its various letters, it is not an issue to be adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that while he had argued before the Adjudicating Authority the deficiency in the section 7 application on the basis of the real estate allottee not satisfying the third proviso to Section 7(1) and it was noticed in the impugned order, the Adjudicating Authority has not dealt with this issue in the findings. We find that the Adjudicating Authority has noted the submissions on behalf of corporate debtor in the Impugned Order in the following manner:- 14. In order to establish that the Corporate Debtor is entitled to file the Petition, the Corporate Debtor relies on the Applicant s submission in Paragraph 5b at Pg. 4 of Applicant s Affidavit in Rejoinder that it is an allottee within the meaning of Section 2(d) of the Real Estate (Regulation and Development) Act, 2016 and therefore is a financial creditor who is owed a financial debt as per provisions of Section 5(7) read with Section 5(8)(f) of the IB Code 2016. This Affidavit was filed on 2nd December 2019. The Corporate Debtor submits that as a result of amendment which came into effect from 28th December 2019 into the Insolvency and Bankruptcy Code, 2016 as per provision of Section 5(7) read with Section 5(8)(f), the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the defence put forth by the Corporate Debtor that the Financial Creditor is an allottee in a real estate project is merely a red herring. The reference to Pioneer Urban Land and Infrastructure Limited v. Union of India is entirely misplaced since, these judgments deal with the rights and obligations of an allottee in a real estate project. As stated above, the CD has admitted converting the advance amount into a loan payable and the CD has admitted that the flats will not be handed over and the allotment of flats in favour of the FC stands cancelled. 32. We have heard the arguments of Financial creditor and Corporate Debtor and perused the records. 33. From the face of all the arguments advanced by the Applicant, it is clear that there exist a Debt and Default. The documents relied upon namely letter dated 31.03.2015 annexed as Annexure F is a substantial proof that Debt is there when the Applicants amount was transferred to loan account and subsequently Default is clearly attributable from letter dated 08.07.2016 Annexed as Annexure H . 16. It is claimed by the Learned Counsel for Respondent No. 1 that Respondent No. 1 initially came in the proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g advantage of the fact that he is a real estate allottee and which has not been admitted by the Adjudicating Authority before the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020 (which is 28.12.2019), such applications shall be modified to comply with the requirements of the first or second provisos within 30 days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission. The second proviso of section 7(1) lays down that for financial creditors who are allottees under a real estate project, an application 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 percent of the total number of such allottees under the same real estate project, whichever is less. The application for initiating CIRP against the Corporate Debtor has to be filed jointly by not less than 100 of such Creditors in the same class or not less than 10% of the total number of such creditors in the same class, whichever is less. 18. We have noticed that Respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting standards, and the same amount would have been transferred back as booking amount for flats upon completion and handing over possession of the flats. 20. The Learned Senior Counsel of Appellant has cited the judgment of Hon ble Supreme Court in the Manish Kumar v. Union of India [2021 SCC Online SC 30] to emphasize that since the Hon ble Apex Court has upheld the constitutional validity of amendment to Section 7 which introduced, inter alia, the three provisos whereby special conditions were added for real estate allottees to qualify as financial creditor under the IBC, the necessary stipulation ought to have been followed which has not been done in the present case. He has further pointed out that in the case of Mrs. Rajshree Vora Ms. Prachi Vora Vs Makwana Properties Private Limited [C.P. No. 3398/IBC/MB/2019] NCLT Mumbai dismissed the section 7 application on the ground that the applicant, who was an allottee and had applied singly for initiation of CIRP against the Corporate Debtor, did not meet the benchmark of a joint filling by 100 allottee or not less than 10% of number of allottee. We note that both these judgments support the contention of the Appellant. 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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