2019 (3) TMI 196 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - default in repayment of the outstanding financial debt - HELD THAT - As a sequel to the discussion and the material placed on record it is confirmed that applicant-financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of a residential flat. Though a considerable long period has lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor as per the provision of the Flat Buyer s Agreement. It is accordingly held that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Thus, the application warrant admission as it is complete in all respects. Accordingly, in terms of Section 7 (5) (a) of the Code, the present application is admitted.

Summary

Issues Involved:

1. Jurisdiction and Territorial Authority.
2. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Financial Creditor's Claims and Delays in Possession.
4. Arguments by the Corporate Debtor.
5. Determination of Default and Financial Debt.
6. Applicability of the Real Estate Regulation Act, 2016.
7. Admission of the Application and Appointment of Interim Resolution Professional.
8. Declaration of Moratorium.

Issue-wise Detailed Analysis:

1. Jurisdiction and Territorial Authority:
The Tribunal confirmed its territorial jurisdiction over the respondent corporate debtor, EMAAR MGF Land Limited, as its registered office is situated in New Delhi, falling under the Tribunal's purview as per Section 60(1) of the Insolvency and Bankruptcy Code, 2016.

2. Compliance with Section 7 of the Insolvency and Bankruptcy Code, 2016:
The petitioner, claiming to be a 'financial creditor', filed the application under Section 7 of the Code, along with necessary documentation and proposed the name of Resolution Professional, Shri Manoj Kumar Anand. The Tribunal found that the application met the requirements of Section 7(3)(b) of the Code, including the absence of any disciplinary proceedings against the proposed Resolution Professional.

3. Financial Creditor's Claims and Delays in Possession:
The petitioner purchased a flat under the "Palm Gardens" project and paid ?88,49,036/- out of the total consideration. Despite the agreement stipulating possession within 36 months (plus a 3-month grace period), the possession was not handed over, leading to a legal notice demanding possession or refund with interest. The Tribunal noted the inordinate delay in possession, which extended beyond a reasonable period.

4. Arguments by the Corporate Debtor:
The Corporate Debtor opposed the application on several grounds, including reciprocal promises in the Buyer’s Agreement, the intent of RERA to protect homebuyers, the absence of debt due under Section 3(11) of the Code, alleged payment defaults by the petitioner, and the assertion that possession was not the essence of the contract. The Tribunal rejected these arguments, emphasizing the fundamental breach of not delivering possession within a reasonable period.

5. Determination of Default and Financial Debt:
The Tribunal highlighted the default in delivering possession and the failure to pay compensation as per the agreement. The Tribunal referred to the amended Section 5(8)(f) of the Code, which includes homebuyers as 'financial creditors', thus recognizing the petitioner’s claim as a financial debt. The Tribunal found the application complete and confirmed the occurrence of default.

6. Applicability of the Real Estate Regulation Act, 2016:
The Tribunal noted that the Real Estate Regulation Act, 2016, and the amendment to Section 5(8)(f) of the Code, effective from 06.06.2018, recognized homebuyers as financial creditors. This inclusion allowed homebuyers to initiate Corporate Insolvency Resolution Process against defaulting builders, which applied to the petitioner’s case.

7. Admission of the Application and Appointment of Interim Resolution Professional:
The Tribunal admitted the application under Section 7(5)(a) of the Code, appointed Shri Manoj Kumar Anand as the Interim Resolution Professional, and directed him to make a public announcement regarding the admission. The Tribunal also directed the Financial Creditor to deposit ?2 lacs with the Interim Resolution Professional for expenses.

8. Declaration of Moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, imposing prohibitions on suits, transfers, encumbrances, and recovery actions against the corporate debtor. The moratorium aimed to facilitate the Corporate Insolvency Resolution Process and protect the corporate debtor's assets.

Conclusion:
The Tribunal confirmed the petitioner as a financial creditor, recognized the default by the corporate debtor, and admitted the application for initiating the Corporate Insolvency Resolution Process. The Tribunal appointed an Interim Resolution Professional and declared a moratorium to ensure the orderly resolution of the corporate debtor's insolvency.