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2021 (8) TMI 545 - AT - Insolvency and BankruptcyMaintainability of petition - Service of Notice - compliance of Rule 38 of NCLT Rules, 2016 - Allottee is a speculative investor or not - Whether the transaction between the Allottee and the Corporate Debtor is clarified to be treated as Financial Debt under Section 5(8) of the Code? - HELD THAT - In the instant case, it is needed to be seen if the allottee has entered into any lucrative Agreement based on the facts of this case. The clauses of the Agreement clearly stipulate that there is a buy-back Agreement, there is an assured return of 25% per annum at the end of 24 months or at the issuance of the final LTC by the Competent Authority (whichever is earlier). Right from the date of receipt of the booking amount from the Applicant, the word investment is consistently used. It is also stated that in consideration for the investment, the Company has agreed to earmark a unit in the project, give an assured return of 25% per annum and at the end of 24 months which is the minimum period of investment, it is also stated that the return assured would be given through the re-sale of apartment only. In Clauses 2(f) (g) of the Agreement, the Home Buyer herein is given a choice to retain the apartment or to sell the earmarked unit. In a regular Builder Buyer Agreement, the Home Buyer does not have this option of exercising his choice of taking or not taking the possession of the subject unit. In a normal Builder Buyer Agreement if the Buyer does not accept the possession, the EMD is forfeited. In this case, the Buyer gets his money plus 25% assured return even if he chooses not to retain the apartment. This Agreement is only a camouflage of actually financing the construction of the flat. Though the Respondent has denied that the Respondent s son had entered into a Settlement Agreement with the Corporate Debtor for return of the principal amount, it is noted that the Learned Counsel on instructions has submitted that they are ready to settle the matter and return the principal amount - the Order of Admission under Section 7 is set aside. Appeal allowed.
Issues Involved:
1. Service of Notice 2. Speculative Investor Allegation 3. Financial Debt Classification 4. Settlement Agreement Detailed Analysis: 1. Service of Notice: The primary issue addressed was whether the service of notice was properly effected on the Corporate Debtor. The Adjudicating Authority noted that a Demand Notice dated 01.02.2019 was sent via Speed Post and email. The postal service returned the envelope with the endorsement "the Addressee refuses to accept," and the email did not bounce back. The Corporate Debtor's argument that the email was not received was deemed untenable. The Tribunal confirmed that the service of notice complied with Rule 38 of NCLT Rules, 2016, which allows service by post or email and does not necessarily require a company seal on hand-delivered notices. 2. Speculative Investor Allegation: The Corporate Debtor argued that the Financial Creditor was a speculative investor, invoking the ratio of the Supreme Court in 'Pioneer Urban Land and Infrastructure Ltd. vs. Union of India'. The MoU between the parties included terms that suggested the transaction was an investment rather than a genuine purchase of a flat. Clauses 2(a), (c), (d), (f), and (g) of the MoU indicated an assured return of 25% per annum and a buy-back option, which are characteristics of a speculative investment. The Tribunal held that the Allottee sought to benefit from a "lucrative Agreement" and was therefore a speculative investor, aligning with the Supreme Court's decision in 'Pioneer Urban Land and Infrastructure Ltd.'. 3. Financial Debt Classification: The Tribunal examined whether the transaction qualified as a 'Financial Debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. The definition includes any amount raised under a transaction having the commercial effect of a borrowing. The Tribunal referenced the Supreme Court's interpretation in 'Pioneer Urban Land and Infrastructure Ltd.', which clarified that money disbursed against the consideration for time value of money qualifies as financial debt. The Tribunal concluded that the transaction in question did not meet this criterion, as it was more of an investment with assured returns rather than a genuine financial debt. 4. Settlement Agreement: The Corporate Debtor contended that a Settlement Agreement was entered into with the Financial Creditor's son, involving post-dated cheques amounting to ?25 Lakhs. The Financial Creditor denied any such agreement. Despite this, the Tribunal noted that the Corporate Debtor was willing to settle the matter by returning the principal amount, as per the terms of the Settlement Agreement. Conclusion: The Tribunal set aside the Order of Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016. It released the Corporate Debtor from all proceedings and allowed it to function independently through its Board of Directors. The IRP fees were directed to be borne by the Corporate Debtor. The appeal was allowed, and the Impugned Order was set aside with the aforementioned directions.
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