2020 (2) TMI 193 - AT - Insolvency and Bankruptcy

Maintainability of application - non transfer of Interest Bearing Maintenance Security Deposit - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Corporate Debtor entitlement to retain the one-time maintenance and liability towards electricity etc. and individual liability against the resident - HELD THAT - The Adjudicating Authority is only required to see whether the application under Section 7 has been filed by 100 allottees, who are members of RWA or a 10% of the allottees who are members of the allottees to maintain it. The Adjudicating Authority is required to take into consideration only the Form-1 and the enclosure therein but find out the default, if any and to proceed in accordance with law. Before the admission of the application under Section 7, the Adjudicating Authority has no jurisdiction to direct the Corporate Debtor to deposit any amount to certain corpus or with regard to maintenance which may not be a subject matter of application under Section 7. Case remanded to the Adjudicating Authority to decide the matter in accordance with law taking into consideration the fact whether the claim, as made, comes within the meaning of financial debt as defined under Section 5(8) and on the basis of Form-1 as filed by the Applicant and not on the basis of any pleading by one or other parties - appeal allowed.

Summary

Issues:
1. Challenge to the order passed by the Adjudicating Authority regarding maintenance amount outstanding.
2. Non-transfer of 'Interest Bearing Maintenance Security Deposit' (IBMS) by the Corporate Debtor.
3. Contradictory affidavits filed by the Corporate Debtor.
4. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
5. Interpretation of the provisions of the Insolvency and Bankruptcy Code.
6. Jurisdiction of the Adjudicating Authority in directing the Corporate Debtor to deposit amounts.

Analysis:
1. The Appellate Tribunal dealt with a challenge to an order passed by the Adjudicating Authority regarding the maintenance amount outstanding in a case where the Corporate Debtor, an Infrastructure Company, was asked to provide details of outstanding liabilities related to 384 allottees who are members of the Residents Welfare Association (RWA). The order also addressed the issue of retaining one-time maintenance and individual liabilities against residents, emphasizing that liabilities cannot be offset against deposits of other residents.

2. The Record showed that the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was filed due to the non-transfer of the 'Interest Bearing Maintenance Security Deposit' (IBMS) by the Corporate Debtor. The Adjudicating Authority directed the Corporate Debtor to provide detailed information on the maintenance amount outstanding for allottees who are members of the RWA and those not in default.

3. The Respondent alleged that the Corporate Debtor's actions were dilatory and contradictory affidavits were filed, escalating the amount improperly. The Adjudicating Authority was directed to consider only the Form-1 and its enclosures to determine any default and proceed in accordance with the law.

4. The Tribunal referred to the provisions of the Insolvency and Bankruptcy Code, emphasizing that the Adjudicating Authority should focus on whether the claim falls within the definition of 'financial debt' as per Section 5(8) and consider the Form-1 filed by the Applicant. The jurisdiction of the Adjudicating Authority to direct the Corporate Debtor to deposit amounts unrelated to the application under Section 7 was clarified.

5. The Tribunal set aside the impugned order and remitted the case to the Adjudicating Authority to decide the matter in accordance with the law, considering the recent amendments in the Insolvency and Bankruptcy Code. The Adjudicating Authority was instructed to determine the debt's legality and existence of a default based on the Form-1 and the new provisions.

6. The decision highlighted that the Adjudicating Authority should not delve into facts beyond its jurisdiction and those requiring determination by a Court of Competent Jurisdiction. The appeal was allowed with specific observations and directions, emphasizing adherence to legal procedures and definitions under the Code.