2020 (3) TMI 1054 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - It is true that the proceedings under the Code are not in the nature of recovery. In the present application the financial creditor is seeking initiation of corporate insolvency resolution process by making prayer that all the financial creditors, operational creditors and other stakeholders may raise their claims and if corporate financial restructuring is possible then within the stipulated period it may be explored failing which the due process of law is to take its course. Therefore, by initiation of corporate insolvency resolution process the financial creditor is only highlighting the default committed by the corporate debtor with respect to its inability to pay. The same is required to be remedied. Therefore, it cannot be concluded that the filing of the present application would amount to recovery of the debts by the financial creditor. The applicant-financial creditor had disbursed the money to the corporate debtor as consideration for purchase of a residential unit. Though a considerable long period has lapsed and the said possession of unit is not handed over, it is accordingly held that corporate debtor has committed default. The outstanding financial debt 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. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of corporate insolvency resolution process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default in delivering possession of the residential unit by the corporate debtor.
3. Entitlement to refund and compensation for delay.
4. Defense by the corporate debtor citing force majeure and other factors.
5. Appointment of an interim resolution professional (IRP) and related procedural directions.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The application was filed by a home buyer as a financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of CIRP against the corporate debtor, M/s. Golden Peacock Residence P. Ltd. The tribunal noted that the applicant had made substantial payments towards the purchase of a residential unit, and despite the lapse of the agreed timeline, the possession had not been delivered. The tribunal confirmed that the applicant, being a financial creditor, could invoke CIRP in case of default in repayment of financial debt.

2. Default in Delivering Possession:
The tribunal observed that the corporate debtor had failed to deliver the possession of the residential unit within the stipulated period as per the flat buyer's agreement. The possession was to be handed over by February 25, 2016, with a grace period extending to July 26, 2016. The tribunal found that there was an inordinate delay of more than three years, and the corporate debtor had not provided any valid reasons for the delay under force majeure clauses. The tribunal held that the corporate debtor had fundamentally breached the terms of the contract.

3. Entitlement to Refund and Compensation:
The tribunal noted that the applicant was entitled to a refund of the amount paid along with compensation for the delay as per the terms of the flat buyer's agreement. The relevant clauses stipulated a compensation of ?10 per square foot per month for the first six months of delay, ?20 per square foot per month for the next six months, and ?30 per square foot per month for any delay thereafter. The tribunal directed that the principal amount along with the agreed compensation and penalty for delay must be refunded to the applicant.

4. Defense by the Corporate Debtor:
The corporate debtor opposed the application, arguing that the delay was due to force majeure factors, including disputes with the contractor and pending arbitration. The corporate debtor also cited an application pending before RERA Haryana for regularization. Additionally, the corporate debtor contended that the applicant had not paid the full consideration amount and that PNB Housing Finance Ltd. should step into the shoes of the borrower in case of default. The tribunal rejected these defenses, noting that the corporate debtor had not established any valid force majeure reasons and that the amount paid by the applicant exceeded the statutory limit required to trigger CIRP.

5. Appointment of Interim Resolution Professional (IRP) and Procedural Directions:
The tribunal appointed Mr. Jitesh Gupta as the interim resolution professional (IRP) and directed him to make a public announcement regarding the admission of the application within three days. The tribunal also declared a moratorium as per Section 14(1) of the Code, prohibiting certain actions against the corporate debtor. The IRP was instructed to perform his functions as per the relevant sections of the Code, and the financial creditor was directed to deposit ?2 lakhs with the IRP to cover expenses. The ex-management was ordered to provide all necessary documents and information to the IRP within one week, failing which coercive steps would follow.

Conclusion:
The tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and initiated the CIRP against the corporate debtor. The tribunal found that the corporate debtor had committed a default by failing to deliver possession of the residential unit and directed the refund of the principal amount along with compensation for the delay. The tribunal also appointed an IRP and issued various procedural directions to ensure compliance with the Code.