2020 (1) TMI 808 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor committed default in making repayment - Section 7 of Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT - It can be said that the Applicants have not been able to establish a prime facie case of being a financial creditor and trigger Section 7 of the IBC as allottee in the real estate project as there was no default on the part of the Respondent to deliver the said flat as on 01.02.2019, when the applicants chose to seek refund of amounts paid to the Respondent. But the said flat was promptly offered for delivery on 07.06.2019 and there was a deemed extension of time due to force majeure, and granting of stay by the court for the period of six months, which caused a delay in construction of tower -3, which delayed the construction of the firefighting ram and common podium common to all the towers T-1 to T-6. Petition dismissed.

Summary

Issues Involved:
1. Default in handing over possession of the flat.
2. Application of force majeure clause.
3. Entitlement to refund and liquidated damages.
4. Determination of financial debt and default under the Insolvency and Bankruptcy Code (IBC).

Issue-wise Detailed Analysis:

1. Default in handing over possession of the flat:
The Petitioners sought the initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor for failing to hand over possession of a flat by the agreed date, which was 31.01.2019, including a six-month grace period. The Corporate Debtor argued that the delay was due to an injunction/stay order by the City Civil Court, Mumbai, which was vacated on 20.11.2017, causing a delay in the construction of the fire fighting ramp and podium common to all towers.

2. Application of force majeure clause:
Clause 15 of the agreement provided for a six-month grace period and further reasonable extensions due to force majeure events. The Corporate Debtor cited the stay order as a force majeure event, which delayed the construction. The Tribunal noted that the stay order caused a delay in construction, thus justifying the application of the force majeure clause and an automatic extension of time for handing over the flat.

3. Entitlement to refund and liquidated damages:
The Petitioners claimed a refund of the amounts paid along with interest and liquidated damages under Clause 15 (iii) of the agreement, which stipulated a refund if the possession was not handed over by the stipulated date. However, the Tribunal found that the delay was justified under the force majeure clause, and the Corporate Debtor had offered possession on 07.06.2019, within the extended timeframe recorded on the Maha RERA website.

4. Determination of financial debt and default under the Insolvency and Bankruptcy Code (IBC):
The Corporate Debtor argued that there was no default of financial debt as defined under the IBC, and the Petitioners were speculative investors seeking to coerce the Corporate Debtor. The Tribunal referred to the Supreme Court judgment in Pioneer Urban Land & Infrastructure Ltd. v. Union of India, which emphasized that the burden shifts to the promoter to prove that the allottee is a defaulter or a speculative investor. The Tribunal concluded that the Petitioners failed to establish a prima facie case of being financial creditors and triggering Section 7 of the IBC, as the delay was justified under the force majeure clause and the flat was offered for possession within the extended timeframe.

Conclusion:
The Tribunal dismissed the petition, concluding that the Corporate Debtor had not defaulted on delivering the flat within the extended timeframe due to the justified delay under the force majeure clause. The Petitioners were not entitled to a refund and liquidated damages as claimed.