2022 (3) TMI 363 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - real estate allottee - third proviso in section 7(1) of the IBC after the enactment of the amendment to IBC on 28.12.2019 - HELD THAT - The third proviso to Section 7 (1) of IBC which lays down that if the applicant does not modify his application to comply with the requirements of the first or second proviso within 30 days of the commencement of the said Amendment Act to IBC, which came into effect on 28.12.2019, the application shall be deemed to be withdrawn before its admission. This statutory provision is quite clear and makes it obligatory on the part of their real estate allottee to modify his application in accordance with the first and second proviso of Section 7 (1). As facts of the case, and the arguments advanced by the parties, show that it was not done by the real estate allottee/applicant. This is a basic infirmity which strikes at the very root of the maintainability of Section 7 application. The issue of non-satisfaction of statutory provision of third proviso to section 7(1) was not considered adequately and dealt with in the Impugned Order, we set it aside and remand the case to the Adjudicating Authority to consider the objection about maintainability as required under third proviso of Section 7(1) and any other objection/issues raised by the parties and pass a speaking order regarding admission/rejection of the section 7 application. The appeal is disposed of.

Issues Involved:
1. Maintainability of the Section 7 application under the Insolvency and Bankruptcy Code (IBC) due to non-compliance with the third proviso of Section 7(1).
2. Nature of the amount deposited by Respondent No. 1—whether it was a loan or an interest-free deposit for booking flats.
3. Alleged malicious intent of Respondent No. 1 in filing the Section 7 application.
4. Adjudication of debt and default based on the evidence provided.

Issue-wise Detailed Analysis:

1. Maintainability of the Section 7 Application:
The primary issue was whether the Section 7 application filed by Respondent No. 1 was maintainable under the IBC. The appellant argued that Respondent No. 1 should have filed the application jointly with 10% of the total allottees, as required under the third proviso to Section 7(1) of the IBC, which was not done. The amendment to Section 7(1) came into effect on 28.12.2019, and the application should have been modified within 30 days to comply with the new requirements. The Adjudicating Authority noted the submissions but did not adequately address this issue in its findings. The Tribunal emphasized that the third proviso mandates that if an application is not modified to comply with the requirements within 30 days of the amendment, it shall be deemed withdrawn before its admission. This statutory provision was not followed by Respondent No. 1, making the application fundamentally infirm.

2. Nature of the Amount Deposited:
The appellant contended that the amount of ?3.50 crore paid by Respondent No. 1 was an interest-free deposit for booking flats, not a loan. The agreement dated 15.3.2011 and subsequent letters indicated that the amount was initially a deposit for booking flats. Due to delays in obtaining necessary approvals, the deposited amount was temporarily converted into a loan. The appellant argued that this conversion did not change the nature of the agreement. The financial account statements did not show any interest amount, supporting the claim that the deposited amount was not a loan. The Tribunal noted that the amount was transferred to a loan account temporarily and would have been transferred back as a booking amount upon completion of the project. Thus, the amount was not a loan that would earn interest but a deposit for booking flats.

3. Alleged Malicious Intent:
The appellant argued that Respondent No. 1 filed the application with malicious intent, seeking a high interest on the principal amount, and thus the matter should be dealt with under Section 65 of the IBC. The Tribunal, however, did not find evidence of malicious intent on the part of Respondent No. 1 and deemed the argument irrelevant to the case at hand.

4. Adjudication of Debt and Default:
The Adjudicating Authority acknowledged the existence of debt and default based on the documents provided, including letters dated 31.03.2015 and 08.07.2016. These documents indicated that the amount was transferred to a loan account and that there was a default in repayment. However, the Tribunal emphasized that the fundamental issue of maintainability due to non-compliance with the third proviso to Section 7(1) needed to be addressed first.

Conclusion:
The Tribunal set aside the Impugned Order and remanded the case to the Adjudicating Authority to consider the objection about maintainability under the third proviso of Section 7(1) and any other objections/issues raised by the parties. The Adjudicating Authority was directed to pass a speaking order regarding the admission or rejection of the Section 7 application. The appeal was disposed of with no order as to costs.

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