2018 (3) TMI 1266 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - exintence of eligible debt - cancellation of allotment of shop - failure to handover the possession of shop - construction has not been commenced - Held that - the present claim falls within the purview of contractual liability requiring investigation and not a simplicitor financial debt . It is pertinent to note here that Claims of home buyers and claims arising out of complex financial instruments preferred before IRP under the Regulations are treated as different category claims, distinct and separate from claims of financial and operational creditors. Such home buyers and contractual claimants on suo moto cancellation of their respective contracts cannot come within purview of financial creditor. Neither the present claim can be termed as a financial debt nor do the applicants come within the meaning of financial creditor. Accordingly, the present application filed under Section 7 of the Code stands dismissed as not maintainable.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal
2. Allegations of forum shopping
3. Applicability of res judicata
4. Existence of a dispute
5. Definition of "Financial Creditor" and "Financial Debt"
6. Default in payment and contractual obligations

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its jurisdiction over the case as the respondent company, J.B.K. Developers Private Limited, has its registered office in Delhi, making the Tribunal the appropriate Adjudicating Authority under Section 60(1) of the Insolvency and Bankruptcy Code, 2016 (the Code).

2. Allegations of Forum Shopping:
The respondent alleged that the applicants were engaged in forum shopping by filing consumer complaints and the present application under the Code. The Tribunal dismissed this allegation, stating that the pendency of proceedings under the Consumer Protection Act does not bar the initiation of insolvency proceedings under the Code due to the overriding effect of Section 238 of the Code.

3. Applicability of Res Judicata:
The respondent contended that the application should be dismissed based on res judicata, as the applicants had previously filed a petition under Section 9 of the Code, which was dismissed. The Tribunal clarified that the present application pertains to a different subject matter (shop No. F4) and is filed under Section 7 of the Code, making it a distinguishable case. Therefore, the principle of res judicata does not apply.

4. Existence of a Dispute:
The respondent argued that the existence of consumer cases indicated a dispute, making the provisions of the Code inapplicable. The Tribunal noted that the present application was filed under Section 7, where the existence of a dispute is irrelevant as long as the debt is due and payable. Variance in the claim of interest was also deemed insignificant.

5. Definition of "Financial Creditor" and "Financial Debt":
The core issue was whether the applicants qualify as "Financial Creditors" and if the claimed amount constitutes a "Financial Debt" under Sections 5(7) and 5(8) of the Code. The Tribunal examined the definitions and concluded that a financial debt must be disbursed against the consideration for time value of money. The applicants' claim was based on the cancellation of an allotment and a demand for refund with interest, which does not qualify as a financial debt.

6. Default in Payment and Contractual Obligations:
The Tribunal found no default in the payment of the annual assured returns as per the terms of the allotment letter. The applicants failed to specify any default in the assured returns. The claim arose from the cancellation of the allotment and demanded the return of the principal amount with interest, which required adjudication of contractual obligations. The Tribunal emphasized that such claims fall within the purview of contractual liability and not a simple financial debt.

Conclusion:
The Tribunal concluded that the applicants do not qualify as financial creditors and the present claim does not constitute a financial debt. Consequently, the application filed under Section 7 of the Code was dismissed as not maintainable. The Tribunal clarified that this order should not prejudice the applicants' rights before any other forum.