2023 (9) TMI 240 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Threshold limit of default for admission of application - inclusion of interest for arriving at a claim - Financial debt or not - interest for the delay in registering the Sale Deed for the Mortgaged Plots - sale agreements do not provide for any interest - HELD THAT - This Tribunal is of the considered view that the 1st Respondent is a Financial Creditor and the amount paid by the Allottee is a Financial Debt as defined under Section 5(8) of the Code and held by the Hon ble Apex Court in the matter of Pioneer Urban Land and Infrastructure Limited and Ors. Vs. Union of India (UOI) and Ors. 2019 (8) TMI 532 - SUPREME COURT where it was held that The Amendment Act to the Code does not infringe Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution of India. Further, interpreting the Explanation added to Section 5(8)(f) of the Code, the Court further held that allottees/homebuyers were included in the main provision, i.e. Section 5(8)(f) with effect from the inception of the Code. The advances given by Property buyers to real estate developer will be considered as a borrowing and such amounts raised from allottees falls within the scope of Section 5(8)(f) of the Code - Contention of the Learned Senior Counsel that the allottee is a speculative investor is unsustainable keeping in view that the interest payable as per Clause 3 of the Agreement of Sale is conditional to not obtaining the approval of HMDA. Whether the interest was rightly added to the 1st Respondent to the Claim amount to fall within the threshold amount of Rs. 1,00,00,000/-? - HELD THAT - The amount mentioned in CMA 296/2021 cannot be equated to the Claim amount in the Section 7 Petition as the prayer in the Civil Suit was for specific performance, whereas, the amount claimed in the instant Petition is for the amounts due and payable to the 1st Respondent, as the amounts fall within the definition of Financial Debt , as defined under Section 5 (8) (f) of the Code. It is an admitted fact that the Final HMDA Approval was obtained only in January 2019 and till April 2019, neither were the plots registered nor the amounts refunded - the quantum of interest comes into play as per the clauses of the Agreement of Sale entered into between the Parties. Therefore, this Tribunal do not see any merit in the argument of the Learned Counsel for the Appellant that interest should not be added and that the amount does not meet the threshold limit. This Tribunal is conscious of the fact that Liquidation proceedings have been initiated against the Corporate Debtor. Further, this Tribunal does not find any substantial grounds to challenge to the admission of the Section 7 Petition of the Code. Appeal dismissed.

Summary

Issues Involved:
1. Whether the 1st Respondent is a Financial Creditor.
2. Whether interest accrued can be added to the principal amount and claimed as 'Financial Debt' in this Section 7 Petition.

Summary:

Issue 1: Whether the 1st Respondent is a Financial Creditor

The Appellant contended that the 1st Respondent is a speculative investor and not a genuine homebuyer. The Appellant cited judgments including 'Nidhi Rekhan Vs. Samyak Projects Pvt. Ltd.' and 'Ankit Goyal Vs. Sunitha Agarwal & Ors.' to support this claim. However, the Tribunal found these cases distinguishable. The Tribunal noted that the assured interest in the present case was conditional upon the failure to obtain HMDA approval, unlike the assured returns in the cited cases. Therefore, the Tribunal concluded that the 1st Respondent is a 'Financial Creditor' and the amount paid qualifies as 'Financial Debt' under Section 5(8) of the Insolvency and Bankruptcy Code (IBC). The Tribunal referred to the Supreme Court's judgment in 'Pioneer Urban Land and Infrastructure Limited and Ors. Vs. Union of India (UOI) and Ors.' to support this conclusion.

Issue 2: Whether interest accrued can be added to the principal amount and claimed as 'Financial Debt'

The Tribunal examined Clause 3 of the Agreement of Sale, which stipulated that if HMDA approval was not obtained within three months, the vendor would repay the amount with an interest of 24% per annum. The Tribunal found that the final HMDA approval was obtained only in January 2019, and the plots were not registered nor the amounts refunded until after a cheating case was filed. The Tribunal held that the interest calculation was in accordance with the Agreement of Sale and that the amount claimed met the threshold limit under the IBC. The Tribunal dismissed the Appellant's argument that interest should not be added to the principal amount.

Conclusion:

The Tribunal dismissed the appeal, affirming that the 1st Respondent is a Financial Creditor and that the interest accrued can be added to the principal amount, thereby meeting the threshold limit for a Section 7 Petition under the IBC. The Tribunal found no substantial grounds to challenge the admission of the Section 7 Petition and noted that liquidation proceedings had already been initiated against the Corporate Debtor. The connected pending IA No. 319/2022 was also closed.