2019 (10) TMI 1294 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to repay its debt - financial debt - existence of debt and default - HELD THAT - There is existence of financial debt as made available by FC namely, the home buyer/Applicant herein and in view of non delivery of the possession of the time prescribed under the Agreement as entered into between the as non- refund of the amount paid, there is an existence of default as defined under Section 3(12) of IBC, 2016, and in the circumstances the Application is admitted and the Corporate Insolvency Resolution Process (CIRP) stands initiated in relation to the CD - Since the Applicant has proposed the name of Mr.Sunil Prakash Sharma as the IRP, he is appointed as the IRP. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Whether the Applicant qualifies as a Financial Creditor (FC).
2. Existence of financial debt and default.
3. Technical objections raised by the Corporate Debtor (CD).
4. Solvency of the CD.
5. Delay in possession and related disputes.
6. Applicability of previous judgments and legal precedents.
7. Jurisdiction and concurrent proceedings in other forums.

Issue-wise Detailed Analysis:

1. Whether the Applicant qualifies as a Financial Creditor (FC):
The Applicant, a home buyer, filed the petition against the Respondent/Corporate Debtor (CD) in the capacity of a Financial Creditor. The Tribunal referenced the Supreme Court's judgment in Pioneer Urban Land and Infrastructure Limited & Anr., which clarified that home buyers are to be considered as Financial Creditors irrespective of the presence of an assured return clause in the agreement.

2. Existence of financial debt and default:
The Applicant's claim arises from a Flat Buyer Agreement executed on 3.8.2012 for the purchase of a flat. The agreed project price was ?54,16,250/-, with ?44,10,987/- already paid by the Applicant. The CD was required to deliver possession by December 2014, but failed to do so even after a delay of more than three years. The Tribunal found that there was a financial debt and default as defined under Section 3(12) of IBC, 2016, due to non-delivery of possession and non-refund of the amount paid.

3. Technical objections raised by the Corporate Debtor (CD):
The CD argued that the amount paid by the Applicant was ?46,56,752/- instead of ?44,10,784/- and that the petition should be dismissed due to this discrepancy. The Tribunal overruled this technical objection, noting that the Applicant's error was on the lower side and did not detract from the case.

4. Solvency of the CD:
The CD contended that it is solvent and has several projects underway. However, the Tribunal stated that solvency is not a material criterion under the IBC, 2016, which focuses on the existence of a default in relation to the financial debt. The CD failed to produce documents to establish its solvency.

5. Delay in possession and related disputes:
The CD admitted that possession would be given by June 2019, but failed to deliver. The UP RERA had ordered the CD to hand over possession by September 2019 and pay compensation for the delay. The Tribunal found that the CD had delayed possession and had not complied with its obligations under the agreement.

6. Applicability of previous judgments and legal precedents:
The CD relied on previous NCLAT judgments, arguing that the amounts paid by the Applicant did not constitute financial debt. The Tribunal referenced the Supreme Court's judgment in Pioneer Urban Land and Infrastructure Limited & Anr., which overruled these contentions and affirmed that home buyers are Financial Creditors. The Tribunal dismissed the CD's legal objections based on these precedents.

7. Jurisdiction and concurrent proceedings in other forums:
The CD argued that the Applicant had approached other forums, including the Consumer Redressal Forum and RERA. The Tribunal noted that the Consumer Forum complaint was dismissed due to lack of pecuniary jurisdiction, not on merits. The Supreme Court's judgment in Pioneer Urban Land and Infrastructure Limited & Anr. clarified that home buyers could seek remedies under the Consumer Protection Act, RERA, and IBC, 2016 concurrently.

Conclusion:
The Tribunal admitted the application, initiating the Corporate Insolvency Resolution Process (CIRP) against the CD. Mr. Sunil Prakash Sharma was appointed as the Interim Resolution Professional (IRP). A moratorium was imposed on the CD, suspending the Board of Directors and restricting certain actions as per Section 14 of the IBC, 2016. The application was disposed of with these directions.