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2020 (3) TMI 159 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute - Whether the Petitioner is a Financial Creditor of the Respondent? - HELD THAT - Financial debt defined under section 5(8) of the Code means a debt along with interest disbursed against the consideration for the time value of money and inter alia includes any amount raised under any other transactions including any forward sale or purchase agreement, having the commercial effect of borrowing. Any amount raised for an allottee under a Real Estate Project shall be deemed to be an amount having the commercial effect of borrowing. The expression 'allottee' and 'Real Estate Project' shall be construed as under the Real Estate (Regulations and Development) Act 2016 - The term 'Real Estate Project' defined under section 2 (zn) of the said Act provides that it would mean the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartments, as the case maybe, for the purpose of selling all or some of the said apartments or plots or buildings, as the case maybe, and includes the common areas, the development works, all improvements and structures thereon and all easement, rights and appurtenances belonging thereto. In 2005, the Respondent had entered into an agreement with M/s Salarpuria Properties (Private) Limited for construction of residential apartments over its properties. It subsequently entered into an agreement on 15.03.2007, with the Petitioner for allotment of 10 flats/apartments in the developed project. Accordingly the development so carried out would come within the definition of Real Estate Project indicted above. The Petitioner would thus be an allottee in respect of 10 (ten) apartments the Respondent had agreed to sell. The amount raised for the forward sale would accordingly come within the definition of a financial debt provided under section 5 (8) (f) of the Code. It satisfies the requirement of being a financial creditor and that is what this Authority needs to consider - issue is answered in the affirmative. Whether the Petition is maintainable? - Whether the Respondent defaulted in payment of financial debt? - HELD THAT - The Petitioner having not paid the full amount as agreed under the agreement, dated 15.03.2007, could not expect the Respondent to execute and deliver possession of all the flats agreed thereunder. In view of the non-payment of the agreed balance amount the Respondent under letter, dated 18.07.2018, recalled the allotment letter, dated 26.12.2017, and terminated the agreement, dated 15.03.2007. The Petitioner having not adhered to the terms of the agreement cannot claim that the Respondent owed a financial debt to it and squarely was in default in payment of the debt. In the instant case as already indicated no default of financial debt can be said to have occurred as far as the Respondent is concerned - issue is accordingly answered in the negative. In view of the foregoing findings the Company Petition at the instance of the Petitioner cannot be allowed and the same is liable to be rejected. The Petitioner is not entitled to any relief in this forum. Petition dismissed.
Issues Involved:
1. Whether the Petition is maintainable? 2. Whether the Petitioner is a Financial Creditor of the Respondent? 3. Whether the Respondent defaulted in payment of financial debt? 4. To what relief the Petitioner is entitled? Issue-wise Detailed Analysis: ISSUE No. II: This issue is taken up first as it is vital for the decision. A Financial Creditor under Section 5(7) of the Insolvency and Bankruptcy Code 2016 (the Code) is someone to whom a financial debt is owed, including a person to whom such debt is legally assigned or transferred. Financial debt, as defined under Section 5(8) of the Code, includes any amount raised under transactions having the commercial effect of borrowing, such as forward sale or purchase agreements. The Petitioner entered into an agreement with the Respondent on 15.03.2007 for the allotment of 10 flats/apartments, which qualifies as a Real Estate Project under the Real Estate (Regulations and Development) Act 2016. Thus, the Petitioner is an allottee, and the amount raised for the forward sale is considered a financial debt. The Hon'ble Apex Court in Pioneer Urban Land & Infrastructure Ltd. v. Union of India confirmed this interpretation. Therefore, the Petitioner is a Financial Creditor under Section 5(7) of the Code. The Respondent's contention that the Petitioner does not qualify as a consumer and hence not a financial creditor is irrelevant, as the Petitioner meets the criteria of a financial creditor. Issue No. II is answered in the affirmative. ISSUE NO(S). I & III: These issues are interlinked and addressed together. The relationship between the Petitioner and the Respondent began with an agreement on 15.03.2007 for the sale of 10 flats for ?2,52,50,000, with an advance payment of ?55,00,000. The Petitioner was to pay the balance within one year, irrespective of the Respondent obtaining necessary permissions. The Respondent received permissions between 07.07.2012 and 09.08.2017 and executed sale deeds for two apartments in 2018. Despite these developments, the Petitioner did not pay the full balance amount within the stipulated one year, paying only ?1,91,00,000 in total. Due to the non-payment, the Respondent canceled the allotment and terminated the agreement on 18.07.2018. Consequently, the Petitioner cannot claim a financial debt default by the Respondent. The Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank Ltd. stated that the Adjudicating Authority must see evidence of default. In this case, no default occurred. Issue No. III is answered in the negative, and Issue No. I is also answered in the negative. Issue No. IV: Given the findings on the previous issues, the Company Petition by the Petitioner cannot be allowed and is liable to be rejected. The Petitioner is not entitled to any relief in this forum. ORDER: The Petition is rejected on contest. The observations made herein shall not affect any other proceedings for enforcement or realization of reciprocal dues before other competent fora. No order as to costs.
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