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2021 (10) TMI 1178 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors/Homebuyers - existence of debt and dispute or not - HELD THAT - In order to attract the provisions of IBC, a homebuyer must qualify as an Allotee under the Section 2 (d) of the RERA Act. As the Wing E itself was not complete and registered, thus, the provision of RERA Act shall not apply to the Petitioner in this case as was held by Hon ble Bombay High Court s in MACROTECH DEVELOPERS LIMITED (EARLIER KNOWN AS LODHA DEVELOPERS LTD.) VERSUS THE STATE OF MAHARASHTRA, SANJAY PHULWARIA, PAROMITA PHULWARIA 2021 (3) TMI 1266 - BOMBAY HIGH COURT where it was held that it is apparent that the Act cannot have any retrospective operation and will only apply to those projects which have been completed and registered either prior to commencement of the Act or in the case of ongoing projects, the project or a phase thereof have been completed and received the occupancy certificate/part occupancy certificate within the window of three months from the date of commencement of Section (3) of the Act. The petitioner has failed to provide substantial proof of his intent to take possession of the flat. Merely, showing receipts of the transaction amount could not be considered as a surety that the person shall necessarily take possession of the Flat/Apartment, even if that person is considered as an allotee. The relief as sought by the Petitioner under the provisions of the Indian Contract Act, 1872 are to be presented in front of appropriate Authority as it falls out of the scope of this court - Petition under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against Akshar Shanti Realtors Private Limited, the Respondent, is Rejected.
Issues Involved:
1. Failure to abide by the terms of the Letter of Allotment. 2. Failure to register the building under the Real Estate (Development & Regulation) Act, 2016. 3. Failure to construct the building, leading to frustration of the contract. 4. Violation of Section 3 of the Real Estate (Regulations and Development) Act, 2016. 5. Failure to repay the debt amounts under the Indian Contract Act, 1872. 6. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. Detailed Analysis: 1. Failure to Abide by the Terms of the Letter of Allotment: The Petitioners alleged that the Corporate Debtor failed to abide by the terms of the Letter of Allotment dated 31 July 2015 for Flats No. 1601 and 1604. The Petitioners paid substantial amounts towards these flats, which were acknowledged by the Corporate Debtor. Despite assurances, the construction of the building did not commence, leading to frustration of the contract. 2. Failure to Register the Building under the Real Estate (Development & Regulation) Act, 2016: The Corporate Debtor registered only Wing ‘A’ and Wing ‘B’ of the project under RERA but failed to register Wing ‘E’, where the Petitioners' flats were located. This non-registration was in violation of Section 3 of the RERA, 2016, which mandates registration before any sale or offer for sale. 3. Failure to Construct the Building, Leading to Frustration of the Contract: The Corporate Debtor's failure to commence construction of Wing ‘E’ led to the frustration of the contract. The Petitioners argued that under Section 65 of the Contract Act, the consideration received must be repaid once a contract is frustrated. The Corporate Debtor initially agreed to repay the amount but later refused, leading to a breach of contract. 4. Violation of Section 3 of the Real Estate (Regulations and Development) Act, 2016: The Corporate Debtor violated Section 3 of the RERA by accepting advance monies from the Petitioners without registering Wing ‘E’. This act was illegal and attracted penal actions under Section 59 of RERA, 2016. 5. Failure to Repay the Debt Amounts under the Indian Contract Act, 1872: The Petitioners claimed that the Corporate Debtor failed to repay the debt amounts of ?88,02,792/- despite receiving a demand notice under Section 8 of the IBC. The non-performance of the contract and non-repayment constituted a breach under Sections 55, 56, and 73 of the Indian Contract Act, 1872. 6. Maintainability of the Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016: The Corporate Debtor argued that the Petitioners did not meet the threshold prescribed under the IBC for financial creditors who are allottees under a real estate project. The Petitioners contended they were 100% allottees in Wing ‘E’ and thus met the threshold. However, the Tribunal found that since Wing ‘E’ was not registered under RERA, the Petitioners could not be considered allottees under the IBC. The Tribunal also noted that the Petitioners failed to provide substantial proof of their intent to take possession of the flats, suggesting they might be speculative investors. Conclusion: The Tribunal concluded that the Petitioners did not qualify as allottees under the RERA and thus failed to meet the threshold required to initiate a CIRP under Section 7 of the IBC. The petition was rejected, and the relief sought under the Indian Contract Act, 1872, was deemed outside the scope of the Tribunal. Order: The Petition bearing CP (IB) 1726/MB/C-II/2017 filed by the Petitioners under Section 7 of the IBC for initiating CIRP against the Corporate Debtor was rejected.
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