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TMI Blog2024 (12) TMI 1315X X X X Extracts X X X X X X X X Extracts X X X X ..... vocates for R - 2 to 4 For the Appellants : Mr. Arvind Nayar, Sr. Advocate with Mr. Lokesh Bhola, Mr. Akshay, Ms. Sanjana Manchanda, Advocates For the Respondents : Mr. Deep Bisht with Mr. N.K. Sharma, Advocates for R1/IRP Mr. Sahil Sethi, Mr. Samriddh Bindal and Mr. Vikash Kumar, Advocates for R - 2 to 4 For the Appellant : Mr. Vikas Nautyal , Advocate For the Respondents : Mr. Deep Bisht with Mr. N.K. Sharma, Advocates for R1 / IRP Mr. Sahil Sethi, Mr. Samriddh Bindal and Mr. Vikash Kumar, Advocates for R- 2 to 4 JUDGMENT ASHOK BHUSHAN, J. These three Appeal(s) by the Suspended Directors of three Corporate Debtors ("CDs") have been filed challenging the same order dated 19.07.2024 passed by National Company Law Tribunal, Court VI, New Delhi in admitting Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC") filed by the Financial Creditors in a class and rejecting IA Nos.293 and 2497 of 2024 filed by the Corporate Debtor - M/s Mist Direct Sales Pvt. Ltd. 2. Brief facts of the case necessary to be noticed for deciding the Appeal(s) are: (i) By Lease Deed dated 21.08.2008, New Okhla Industrial Development Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allottees, is not fulfilled, hence, the Application under Section 7 deserves to be rejected. Further, objection was that the joint application against three CDs is not maintainable. There were various other objections raised by the three CDs, who were Respondent Nos.1, 2 and 3 in Section 7 Application. (v) The Adjudicating Authority heard the joint company petition and the objections raised by three CDs and by order dated 21.10.2022 held that company petition is maintainable and directed the matter to be listed for hearing on 10.11.2022. Aggrieved by the order dated 21.10.2022 passed by Adjudicating Authority in Section 7 Application, all the three CDs filed Appeal(s). The Company Appeal (AT) (Ins.) No.1506 of 2022 filed by Anand Infoedge Pvt. Ltd.; Company Appeal (AT) (Ins.) No.1478 of 2022 was filed by Mist Direct Sales Pvt. Ltd.; and Company Appeal (AT) (Ins.) No.127 of 2023 by Mist Avenue Pvt. Ltd. All the three Appeal(s) came to be heard by this Tribunal and by a detailed judgment dated 17.11.2023, all the Appeal(s) were dismissed, upholding order of Adjudicating Authority that Section 7 Application filed by the allottees is maintainable. Challenging order of this Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Hon'ble Supreme Court, which Appeal was dismissed as withdrawn on 29.01.2024. (ix) Another IA was filed being IA No.1808 of 2024 in Section 7 petition by M/s Dheeraj Sharma and Ors. praying for certain reliefs and raising objection to Section 7 petition, which Application was also dismissed in limine on 02.05.2024. (x) The order passed by Adjudicating Authority in Intervention Petitions on 27.02.2024 in P/12/2024 was also challenged by filing Appeal, i.e. Company Appeal (AT) (Ins.) No.899 of 2024 by Grand Developers Pvt. Ltd., which was dismissed by this Tribunal on 15.05.2024. (xi) The Adjudicating Authority proceeded to hear Section 7 Petition. Developer also filed a criminal complaint against the Financial Creditors in a class on 04.01.2024 alleging false, forged and fabricated affidavits filed before the Tribunal, on which complaint an FIR No.102/2024 was registered on 21.03.2024 under Section 420/467/471 and 34 of the Indian Penal Code. On 24.01.2024, Developer filed an IA No.293 of 2024 seeking direction from the Tribunal to enable the Developer to settle amicably the dispute between the Appellant and the Financial Creditors. Developer offered to refund 70% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal(s). 4. Dr. U.K. Chaudhary, learned Senior Counsel appearing for the Mist Developer submits that among affidavits, which were filed along with Section 7 Application, some were forged and fabricated. An FIR No.102/2024 was also registered on a complaint filed by the Developer. A Status Report has also been filed in the FIR that 20 affidavits in the Application are forged affidavits. It is submitted that threshold of minimum 100 allottees or 10% has not been fulfilled in Section 7 Application, hence, it deserves to be rejected, there being total units of 1500. It is further submitted that Company Petition under Section 230 has also been filed by the Developer before the NCLT. It is submitted that objective of IBC is not to send a Company to CIRP, rather to resolve it. There are 1500 homebuyers and only 115 have initiated CIRP. It is submitted that Appellant was restrained by force majeure in carrying out the Project. It is submitted that Appellant has given three options for resolution by an affidavit, which need to be accepted. 5. It is submitted by Shri Arvind Nayar, learned Senior Counsel appearing for land owning Company that there was dispute regarding title of some Khasra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 was another attempt to delay the disposal of Section 7 Application, which Application has been subsequently dismissed by the NCLT on 19.07.2024. The FIR No.102/2024 and Status Report are wholly irrelevant to decide Section 7 Application, where debt and default has to be looked into. The debt and default being fully proved, Section 7 Application ought to have been admitted, which could not be admitted on account of various dilatory tactics adopted by the Corporate Debtors. It is submitted that offer of the Corporate Debtors made in the end to pay the principal amount with some interest has been considered and rejected by the Financial Creditors in class. The principal amounts were paid in the year 2012 and refund of the principal amount with some meagre amount, which amount to interest @ 1-2% per annum was considered and rejected by Financial Creditors in a class, which is recorded in the order of the Adjudicating Authority. The Financial Creditors in a class do want the insolvency proceedings to commence, so that they may be able to get the units. It is submitted that there is no error in order of the Adjudicating Authority. It is further submitted by Financial Creditors that CAG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial Creditors Ajay Khajuria, who made a declaration that affidavit filed in his name before the Tribunal is forged and the same has not been signed by him and there is a visible difference in signatures. Reference to FIR No.102/2024 dated 21.03.2024 has also been made. The submission is that Investigation Officer ("IO") has filed a Status Report dated 01.05.2024 stating that 20 affidavits are forged and fabricated and further investigation is going on. Hence, in view of the said Status Report, 20 affidavits being forged and fabricated, it is only 95 Applicant/ allottees, who can be said to have filed the Application. Hence, threshold limit under Section 7 is not met and the Application was not liable to be admitted. 12. We have noticed above that in Section 7 Application objections were raised by the Corporate Debtors regarding non-fulfillment of threshold. The said objection was noticed in the order dated 21.10.2022 passed by the Adjudicating Authority. All the above objections were noticed and dealt by Adjudicating Authority in paragraph 9, 10 and 11 of the order. The argument raised by the Appellant on non-fulfillment of threshold was considered and rejected by the Adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e National Company Law Tribunal and NCLAT is concerned. 3 Since the application under Section 7 is pending for over two years, we request the NCLT to take up the application at the earliest possible date and to endeavour an expeditious disposal within two months. 4 Subject to the aforesaid, the Civil Appeals are dismissed. 5 Pending application, if any, stands disposed of." 13. We have also noticed above that several IAs were filed by the Corporate Debtors before the Adjudicating Authority being IA Nos.5400 of 2023, 4121 of 2023, 4122 of 2023 and 4312 of 2023, where Corporate Debtors had prayed for initiation of proceedings under Section 340 of CrPC read with Section 195(1)(b) and dismiss petition under Section 7 on the ground of playing fraud on the Tribunal. It is useful to notice the prayers made in one of the Application, which has been noted in paragraph 1 of the order dated 05.01.2024, which are as follows: "(a) Pass necessary orders and directions, thereby dismissing the present Company Petition filed under Section 7 of IBC by the Applicants/Financial Creditors on the ground of playing fraud on this Tribunal; (b) Initiate proceeding u/s Section 340 r/w section 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davits were notarised. Further, it has come to the knowledge of the respondent herein that another applicant named Ajay Khajuria (Applicant No.106 as per the memo of parties in the company petition) has provided a declaration that the affidavit filed before Adjudicating Authority in the present matter has not been signed by him and there is a visible difference in signatures. iii. That the Applicants/ Financial Creditors have initiated the proceeding before this Adjudicating Authority fraudulently and with malicious intent and the Adjudicating Authority has power within Section 65 of the Code to impose penalty upon such person. iv. That affidavit of one of the Applicants, i.e. Mr. Ajay Khajuria has been forged and declaration to that effect has been given by such Applicant. v. That the affidavits are false and not notarized." 15. The Adjudicating Authority considered all objections in the Application, including the Application filed by Ajay Khajuria, who has filed the Application for withdrawal of his claim from Section 7 Application. The Application was rejected by Adjudicating Authority. In paragraphs 11 and 12, the Adjudicating Authority made following observations: "11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate criminal proceedings against the Financial Creditors in a class, cannot be bypassed by the Appellant(s) by filing First Information Report or complaints against Financial Creditors. Any Status Report submitted in such criminal proceedings can have no bearing on proceedings, which was taken by Financial Creditors in a class under Section 7. Reliance on Status Report submitted by Appellant(s) in a criminal proceeding can have no bearing while deciding Section 7 Application. The said Status Report is not an evidence on which it can be pronounced that threshold of 100 allottees was not complete in filing of Section 7 Application. We, thus, are of the view that submission raised by the Appellant(s) that threshold of 100 is not complete has no legs to stand and has to be rejected. 19. The Adjudicating Authority has returned a finding that there was debt and default on the part of the Corporate Debtors in delivering the units within 36 months with grace period of 12 months. It is also relevant to notice that in the year 2024, attempts made by Corporate Debtors failed to scuttle and derail the proceedings in Section 7 Application, IAs 293 of 2024 and 2497 of 2024 were filed se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondents, i.e. Financial Creditors in a class specifically submitted that the Financial Creditors are not agreeable to accept the amount, which was offered to be deposited by the Appellant. The unit holders have been waiting for their units for last more than a decade and the amount, was paid in the year 2012 by the allottees, the Appellant cannot be absolved by permitting them to deposit the amount with meagre interest, which was received in the year 2012. The findings recorded by the Adjudicating Authority regarding debt and default and Application filed by the Corporate Debtors itself being IA Nos. 293 and 2497 of 2024 proves beyond doubt that debt and default is admitted on the part of the Corporate Debtor. In Section 7 Application, the Adjudicating Authority has rightly placed reliance on M. Suresh Kumar Reddy v. Canara Bank - (2023) 8 SCC 387, where the Hon'ble Supreme Court in paragraphs 11 and 12 has laid down following : "11. Thus, once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7. "Default" is defined under subsection (12) of Section 3 IBC which reads thus: 3. Def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining to certain plots, which are in the midst of the Projects, with regard to which there are dispute between Noida and Greater Noida. Learned Counsel for the Financial Creditors in a class has submitted that with regard to construction of Project Phase-1, there was no issue pertaining to the land of Phase-1 Project, which could have very well be constructed. Civil Suit has been filed before the District Court Gautam Budh Nagar in the year 2017 and the Writ Petition No.1553/2019 has been filed before the Allahabad high Court in the year 2019. Other Writ Petitions filed by Sammiti were in the year 2019 and 2020. The Project was launched in the year 2012, in which year the amounts were collected from the allottees. Litigation which commenced in the year 2019 and 2020, cannot be a ground to absolve the Corporate Debtor from its responsibility and obligation to complete the Project within the time as contemplated in the Builder Buyers Agreement with the allottees. The fact that litigations are pending with regard to two of the Khasras, which is also included in the Project land, cannot be a ground to absolve the Corporate Debtor from its obligation, nor that can be a reason for not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfoedge Pvt. Ltd., Collaboration Agreement in favour of Mist Avenue and the second Collaboration Agreement dated 27.07.2017 executed in favour of Mist Direct Sales Pvt. Ltd. In paragraphs 15 and 16 of the judgment, following was observed: "15. When we take a holistic view of the matter, it is clear that all three Appellants had joined hands to develop the project. Present is a case of Real Estate Project and the project cannot be successfully developed by any one of the Appellants who were Respondents in Section 7 application. Under the Collaboration Agreement, 'Anand Infoedge Pvt. Ltd.' and developers have undertaken several responsibilities towards the allottees. The construction of Real Estate Project will not be achieved in event joint insolvency is not initiated against all the three Corporate Debtors who are Appellants before us, the allottees will put to severe loss and hardship. CIRP in the Real Estate Project has different contours and ramification. It is also on the record that at a time when 2nd Collaboration Agreement was entered between 'Anand Infoedge Pvt. Ltd.'and 'Mist Direct', 'Anand Infoedge Pvt. Ltd.' has 99.99% shareholding in 'Mist Direct'. All three companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction to have taken place between the Appellant and the Corporate Debtor and the insolvency resolution can be triggered where there is a financial debt owed to a person. It was held that Appellant was not able to prove that he is a Financial Creditors. This Tribunal affirmed the judgment of the Adjudicating Authority rejecting Section 7 Application. The above judgment does not in any manner help the Appellant in the facts of the present case. 27. Reliance has been placed on two more judgments of this Tribunal namely - Pravesh Magoo vs. Iroe Grace Realtech Pvt. Ltd. - Company Appeal (AT) (Ins.) No.1141 of 2019. The above was a case where Adjudicating Authority has rejected Section 7 Application filed by a Financial Creditor. The Adjudicating Authority has rejected Section 7 Application on the ground that time for handing over the possession was there till 27.11.2019. Relevant facts have been noticed in paragraphs 5 and 6 of the judgment. In the Appeal before this Appellate Tribunal, this Tribunal also noted that letter for handing over possession was already issued to the Appellant. The dismissal of the Appeal and affirming rejection of Section 7 Application was in the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld honour the BBA signed by the previous management. 24. In that view of the matter, we are inclined to allow the present appeal. Accordingly, we pass the following order: A. The appeal is allowed. The impugned order dated 22nd November, 2021 passed by the National Company Law Appellate Tribunal, Principal Bench, New Delhi in I.A. No.1115 of 2020 in Company Appeal (AT) (Insolvency) No. 1507 of 2019 is quashed and set aside; B. The affidavit dated 27th December, 2021 filed by Shri Kashi Nath Shukla, the promoter of the respondent No.1 - Corporate Debtor is taken on record and treated to be an undertaking given to this Court; C. The appellant/promoter is permitted to complete the project as per the deliberations that took place in the Minutes of the Meeting dated 23rd October, 2021 and in accordance with the affidavit-cum-undertaking dated 27th December, 2021 of the Promoter, Shri Kashi Nath Shukla; D. The modification application being I.A. No.1115 of 2020 in Company Appeal (AT) (Insolvency) No. 1507 of 2019 before the NCLAT accordingly stands allowed. E. From the date of this order, the IRP shall submit quarterly reports to the National Company Law Appellate Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In proportion to the targeted completion date of the project, the progress of works of project is disappointing and at present work is stopped. The date of initiation of project has been given as 26.10.2012, this position of work in almost 7 years is very disappointing. The action of Promoter is a clear proof of misappropriation of hard earned money of allottees and violation of commitment of Promoter to complete the project within time and to provide them possession within the time limit decided in the contract executed with the allottees. Further the reasons for the cancellation given in the UP RERA order dated 07.12.2019 are as under: - After careful consideration of the complete factual position in the meeting, the Authority has concluded the following : 1) Promoter has not complied to any of the instructions out of the total 06 instructions mentioned in Authority's Order dated 11.07.2019. This act of him is a violation of Sections 4, 7 and 11 of the Act along with other relevant provisions of the Act and Manual. 2) As per Authority's Order dated 11.07.2019, Promoter M/s Mist Direct Sales Pvt Ltd was given time of 4 months under provisions of Section 7(3) of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs arose in the year 2016. Instead, the Corporate Debtors sought a vote of confidence from the allottees, asking them to trust in their ability to complete the project. 32. It is also notable that on the one hand CD No. 1 submitted that the Project cannot be completed due to reasons of 'force majeure', while on the other hand CD No. 3 has filed a petition u/s 230 of the Companies Act, 2013 seeking approval of a 'Scheme of Arrangement and Compromise' with the allottees to complete the project. 33. The Corporate Debtor No. 1, M/s Anand Infoedge, placed reliance on the judgment passed by the Hon'ble NCLAT in the matter of Navin Raheja vs. Shilpi Jain & Ors. [Company Appeal (AT) (Insolvency) No. 864 of 2019], wherein relief was given to the Corporate Debtor and the CIRP was set aside by the Hon'ble NCLAT. However, the same is distinguishable from the present facts and circumstances. In Navin Raheja (supra), the project was complete in all respects, possession was offered to the allottees, and the Corporate Debtor requested the allottees to comply with formalities regarding the possession of the unit. The only issue was that the Occupancy Certificate was not provided on time, which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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