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2019 (9) TMI 26 - Tri - Insolvency and BankruptcyMaintainability of petition - Initiation of CIRP - Default in repayment of Debt - extension of time to complete the project - Section 89 of RERA - Section 7 of the Insolvency Bankruptcy Code, 2016, read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT - It is settled principle of law that wherever time is the essence of a contract in such types of construction contracts, the builder is required to adhere to the date of delivery mentioned in the builder-buyer agreement despite the presence of similar reservations in the contract. The Corporate Debtor has proceeded on incorrect premise of Section 89 of RERA. The provisions of RERA cannot override the non-obstante clause laid down under Section 238 of IBC. It is a settled principle of law that a non-obstante clause has effect only in case of a conflict between two statutes. It is submitted that RERA and IBC work in two different fields, while the former has been enacted with a view to regulate and promote the real estate sector while ensuring the protection of consumer interest; the latter seeks to consolidate the law relating to insolvency and bankruptcy and ensure resolution of insolvency of corporate persons, firms and individuals in a time bound manner. Thus, there is no question of a conflict between the two enactments and both will have an overriding effect in the fields exclusively assigned to them. Petition admitted - moratorium declared.
Issues Involved:
1. Triggering of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016. 2. Non-delivery of possession and refund of amounts paid by homebuyers. 3. Applicability and precedence of RERA over IBC. 4. Admission of financial debt and default. 5. Compliance with procedural requirements under IBC. Detailed Analysis: Issue 1: Triggering of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016 The application was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016, by financial creditors who are also homebuyers, seeking to initiate CIRP against the Corporate Debtor, M/s Today Homes Noida Private Limited. The Tribunal noted that the application was complete and satisfied the requirements under Section 7(2) of the Code and Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Issue 2: Non-delivery of possession and refund of amounts paid by homebuyers The financial creditors entered into a Flat Buyers Agreement with the Corporate Debtor and paid almost 90% of the purchase value of the flats. Despite this, the Corporate Debtor failed to deliver possession of the flats or refund the amounts paid. The Tribunal observed that the Corporate Debtor had admitted the receipt of payments and the failure to deliver possession within the stipulated time, thereby acknowledging the existence of a financial debt and default. Issue 3: Applicability and precedence of RERA over IBC The Corporate Debtor argued that the application was not maintainable due to the provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA), which granted an extended timeline for project completion. However, the Tribunal held that Section 238 of the IBC, which contains a non-obstante clause, overrides RERA. The Tribunal emphasized that IBC and RERA operate in different fields, and the provisions of IBC would prevail in case of any inconsistency. Issue 4: Admission of financial debt and default The Tribunal referred to the Supreme Court's observations in "Innovative Industries Ltd v. ICICI Bank" and "Chitra Sharma & Ors V. Union of India & Ors," which clarified that amounts raised from allottees under real estate projects are deemed to be financial debts. The Tribunal found that the Corporate Debtor had committed a clear default by failing to deliver possession within the agreed timeline, thus justifying the initiation of CIRP. Issue 5: Compliance with procedural requirements under IBC The Tribunal confirmed that the application met all procedural requirements under Section 7 of the Code. The financial creditors provided overwhelming evidence of default, specified the name of the resolution professional, and annexed the necessary consent in Form 2. The Tribunal appointed Mr. Rabindra Kumar Mintri as the Interim Resolution Professional (IRP) and directed the IRP to make a public announcement and declare a moratorium as per Section 14 of the Code. Conclusion: The Tribunal admitted the application for initiating CIRP against the Corporate Debtor and appointed an IRP. A moratorium was declared, prohibiting suits, asset transfers, security interest enforcement, and property recovery actions against the Corporate Debtor. The Tribunal directed the financial creditors to deposit a sum with the IRP for expenses and emphasized the IRP's duty to protect and preserve the value of the Corporate Debtor's property.
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