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2020 (10) TMI 737 - Tri - Insolvency and BankruptcyCIRP process - Orders/directions to treat the applicants as 'Financial Creditor' - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 readwith Rule 11 of the NCLT Rules, 2016 - HELD THAT - It is an admitted fact of the parties that the applicants had entered into an agreement with the Corporate Debtor on 17.05.2011 and on the basis of that agreement the developer will get 55 per cent whereas the owner's share was 45 per cent and as per the agreement, the land shall be under the possession and control of the applicants but thereafter a subsequent agreement was executed on 18.03.2013 and according to the supplementary agreement in terms of Clauses 8, 9 10, new terms and conditions were fixed and the terms and conditions - From the perusal, it appears that by subsequent agreement, both the Applicants are allotted 9 flats each and as per terms and conditions, a separate letter of allotment is issued and on the basis of that the applicants claimed themselves to be the Financial Creditors. Mere plain reading of the provisions shows that a Financial Creditor is a person to whom a financial debt is owned and includes a person to whom a debt is legally assigned or transferred. The applicants claimed themselves to be Financial Creditors because according to him a financial debt is owned by the Corporate Debtor. The plain reading of Section 5(8) shows that a financial debt means a debt along with interest which disbursed against the consideration of time value and money and includes any of the Clause (a to i) under Section 5(8) of IBC, 2016. Mere plain reading of the Clause 21 of the Supplementary Collaboration Agreement shows that both the applicants/owners and the developer/Corporate Debtor shall execute and register the sale deed and the other documents in respect of the flat, car parking etc. in favour of the intending purchaser therefore, when we shall read this Clause along with the definition of Promoter then we are of the considered view that the applicants are not the Financial Creditors rather they are the promoters along with developer hence, on the basis of allotment of flats in terms of the Supplementary Collaboration Agreement, in our view, the applicants cannot be treated as Financial Creditors and the allotment letter cannot come under the definition of financial debt - there are no force in the contention raised on behalf of the applicants that in view of the allotment letters issued in their favour regarding the allotment of 9 flats, they are entitled to claim before the RP as a Financial Creditor and they are also entitled to be included as a member of CoC as Financial Creditor. The applicants are not liable to be considered as a Financial Creditor - the prayer to declare them as Financial Creditors is hereby rejected. So far, the second contention of the applicants, that if they are not considered as Financial Creditor then the RP may be directed to handover the possession of the apartments of the land is concerned, in our opinion, since the applicants have entered into a Supplementary Collaboration Agreement with the developer who has developed the real estate project on the land of the applicants and against whom the CIRP has been initiated, therefore, they are also the promoter of the said project hence, they are not entitled to get the land back. Therefore, this prayer of the applicants is also rejected. Application dismissed.
Issues Involved:
1. Determination of whether the applicants qualify as 'Financial Creditors' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. 2. Determination of whether the applicants qualify as 'Promoters' under Section 2(zk) of the Real Estate (Regulation and Development) Act, 2016. 3. Consideration of the applicants' request for possession of the apartments or land if not deemed 'Financial Creditors'. Detailed Analysis: Issue 1: Determination of whether the applicants qualify as 'Financial Creditors' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. The applicants filed applications under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking to be treated as 'Financial Creditors'. They argued that they are allottees in a real estate project developed by the Corporate Debtor and thus fall under the definition of 'Financial Creditor' as per Section 5(8)(f) of the Code. They relied on the definition of 'allottee' under Section 2(d) of the Real Estate (Regulation and Development) Act, 2016. The Resolution Professional (RP) countered that the applicants do not qualify as 'allottees' but as 'promoters' under Section 2(zk) of the Real Estate (Regulation and Development) Act, 2016. The RP cited the Supreme Court's ruling in Pioneer Urban Land Infrastructure Limited and Anr. Vs. Union of India & Ors., which clarified that real estate allottees are those who make payments to the corporate debtor for services rendered, which was not the case here. The Tribunal noted that the applicants had entered into agreements with the Corporate Debtor, which included provisions for sharing the built-up area and receiving flats in return for their land. The Tribunal emphasized that for a debt to be considered a 'financial debt,' it must involve the disbursement of money against the consideration for the time value of money. In this case, no money was disbursed by the applicants to the Corporate Debtor; instead, they received flats in exchange for their land. The Tribunal concluded that the applicants do not meet the criteria for 'Financial Creditors' as per Section 5(8) of the Code. Issue 2: Determination of whether the applicants qualify as 'Promoters' under Section 2(zk) of the Real Estate (Regulation and Development) Act, 2016. The RP argued that the applicants qualify as 'promoters' under Section 2(zk) of the Real Estate (Regulation and Development) Act, 2016. The Tribunal examined the definitions and found that the applicants retained possession and control of the land and received a non-refundable security deposit from the Corporate Debtor. The Tribunal also referred to Clause 21 of the Supplementary Collaboration Agreement, which stated that both the applicants and the Corporate Debtor would execute and register sale deeds and other documents in favor of the intending purchasers. The Tribunal concluded that the applicants fall under the definition of 'promoters' as they were involved in the development of the project and retained significant control over the land and the project. Therefore, the applicants cannot be considered 'Financial Creditors' but are 'promoters' along with the Corporate Debtor. Issue 3: Consideration of the applicants' request for possession of the apartments or land if not deemed 'Financial Creditors'. The applicants requested that if they are not considered 'Financial Creditors,' the RP should be directed to hand over possession of the apartments or land. The Tribunal rejected this request, stating that since the applicants are 'promoters' of the project and the Corporate Debtor is undergoing the Corporate Insolvency Resolution Process (CIRP), they are not entitled to reclaim the land or receive possession of the apartments. Conclusion: The Tribunal dismissed both applications, CA-938 and CA-956, concluding that the applicants do not qualify as 'Financial Creditors' and are instead 'promoters' under the Real Estate (Regulation and Development) Act, 2016. Consequently, their request for possession of the apartments or land was also denied. The interim order dated 25.09.2019, which directed the Committee of Creditors (CoC) not to proceed, was vacated, and the CoC was directed to act as per the provisions of the law.
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