2021 (5) TMI 582 - Tri - Insolvency and Bankruptcy

Initiation of CIRP - Petitioner are Homebuyers - Petitioner does not meet the minimum threshold of 10% of Financial Creditors of the same class - existence of debt and dispute or not - Respondent charged higher price of the changed apartment than the earlier one, which was not accepted by the Applicants and hence no agreement was signed for the same. - RERA directed the Corporate Debtor to refund the amount of ₹ 21,94,222/- with interest @ 9% per annum - The Corporate Debtor failed to comply with the order passed by the K-RERA HELD THAT - As per the insolvency and Bankruptcy Code, (Amendment) Ordinance, 2019 dated 28.12.2019 the financial creditors who are homebuyers of Real Estate Project can file a petition under section 7 of the Code, 2016, jointly only if there are 100 of such homebuyers or if they are 10% of total homebuyers whichever is less. However, in the instant petition, only 2 Homebuyers have filed the case which neither amounts to 10% of the total class of financial creditors or 100 Financial Creditors and therefore this petition cannot be entertained. In the instant case, the Petitioners have already obtained order from the relevant forum under the RERA Act and the same can be executed before relevant forum. A case under the Code, 2016 is not made out as the petition is clearly an attempt to substitute the recovery mechanism and amounts to forum shopping. Further, since the Petitioner does not meet the minimum threshold of 10% of Financial Creditors of the same class, the petition fails and deserves to be dismissed. Petition dismissed.

Summary

Issues:
1. Whether the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 filed by the homebuyers against the developer for default in possession and financial debt is maintainable.
2. Whether the petition can be entertained when the homebuyers do not meet the minimum threshold requirement of 100 homebuyers or 10% of the total homebuyers as per the Amendment Ordinance of 2019.
3. Whether the petition amounts to forum shopping and is an attempt to substitute the recovery mechanism.
4. Whether a decree holder can initiate Corporate Insolvency Resolution Process (CIRP) against a corporate debtor for execution of a decree obtained from another forum.

Analysis:
1. The petition was filed by the homebuyers against the developer under section 7 of the Insolvency and Bankruptcy Code, 2016 for default in possession and financial debt. The petitioners claimed a default of financial debt amounting to ?39,81,993. The homebuyers had initially approached the Karnataka RERA and obtained an order directing the developer to refund the amount paid with interest. The developer failed to comply with the RERA order, leading to the filing of the insolvency petition.

2. The Respondent argued that as per the Amendment Ordinance of 2019, a minimum of 100 homebuyers or 10% of the total homebuyers in a project must jointly file a petition to initiate CIRP against a developer. Since only two homebuyers filed the petition, it did not meet the threshold requirement. The Tribunal held that the petition could not be entertained due to the failure to meet the minimum threshold of financial creditors.

3. The Tribunal emphasized that the Code cannot be invoked for mere recovery of outstanding amounts but should be used for justified reasons. It noted that the petitioners had already obtained an order from the RERA, and seeking relief under the Code would amount to forum shopping and substituting the recovery mechanism. The Tribunal cited the decision in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited to support its stance.

4. The Tribunal further clarified that a decree holder, though covered under the definition of a creditor, cannot initiate CIRP against a corporate debtor solely for the execution of a decree obtained from another forum. Citing the case of Sushil Ansal Vs. Ashok Tripathi & Ors., the Tribunal held that a decree holder seeking execution of a decree cannot file a petition under section 7 of the IBC. The Tribunal highlighted that allowing such petitions would defeat the purpose of the threshold requirement set for homebuyers under the Code.

In conclusion, the Tribunal dismissed the petition (C.P. (IB) No. 49/BB/2020) as it did not meet the minimum threshold requirement and was deemed an attempt to execute a decree obtained from another forum, which is not permissible under the Insolvency and Bankruptcy Code. The dismissal, however, does not prevent the petitioners from seeking redressal through other available legal remedies.