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2020 (11) TMI 356 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor committed default in not completing the Construction of the flat in time and handing over possession of the same in terms of Agreement - Financial Creditor/Home Buyer committed default in making payment of the instalments or not - Time Limitation. Time Limitation - HELD THAT - There is nothing on record to show that the Corporate Debtor has ever offered possession of the flat and that the occupation certificate was applied for within the stipulated time of handing over possession. When the Corporate Debtor failed to complete the Construction and could not deliver the possession, the default was committed. The petition is filed within three years from the date, when possession was scheduled to be delivered. Thus, it is clear that the objection of the Appellant regarding limitation is not sustainable. Whether the Corporate Debtor has committed default in not completing the Construction of the flat in time and handing over possession of the same in terms of Agreement? - Whether Financial Creditor/Home Buyer committed default in making payment of the instalments as per 'ABA' under construction link Plan? - HELD THAT - Based on the admission of the Corporate Debtor, it is clear that till 22nd November 2018, flooring and finishing work of the Apartment was still going on. The Appellant has annexed the copy of a letter dated 29th October 2019 by which the concerned authorities granted permission for the occupation of the said building. The Corporate Debtor had applied for issuance of Occupation Certificate on 03rd July 2019, which was granted on 29th October 2019. From facts of this case, it is evident that the corporate debtor has failed to honour its promise in completing the Project and handing over possession in time as per terms of the Agreement. Therefore due to non-payment of an instalment on account of delay in Construction cannot be treated as default committed by the Allottee - the Corporate Debtor had committed default in not completing the construction work of the flat in time and failed to deliver the possession on the stipulated date as per Agreement. The Corporate Debtor himself has admitted in its reply to notice dated 15th November 2018, that unlike most builders who have abandoned the Project and stopped the work, it is completing the Project which is at the final stage where flooring and finishing work is underway. It is also evident that flat was to be delivered by 2nd week of February 2016, but the Corporate Debtor failed to honour its promise and could not deliver the flat in time. The Appellant admits the overall situation prevailing everywhere; therefore, in such a situation, there would have been reasonable apprehension in the mind of Allottee that building may not be completed. Therefore, the possibility cannot be ruled out that in the circumstances stated above the Allottee might have stopped further payment after 2013. It is also on record that in 20th December 2016 the Corporate Debtor raised a demand of VAT charges of ₹ 3,00,615/, which was paid by the Allottee. The Corporate Debtor had not placed any record to show as to when the internal finishing and flooring work started. Mandatory condition of issuing Notice through speed post or courier to the Allottee, at every stage of Construction as per Agreement has not been followed. Therefore in terms of Clauses 2.17 2.18 of the Agreement, it cannot be said that the Allottee/Financial Creditor has committed default in paying the instalments when due. It is undisputed that flat was to be delivered latest by 2nd week of February 2016, but construction work was still going on in the year 2018. Whether the Application U/S 7 of the Code is filed fraudulently with malicious intent for the purposes other than for the Resolution of Insolvency or liquidation, as defined under Section 65 of the I B Code, 2016? - HELD THAT - The Appellant /Real Estate Developer has failed to prove that Allottee is a speculative Investor and is not genuinely interested in purchasing the flat/Apartment and has initiated proceeding under the Code to pressurise the Corporate Debtor. Thus there are no justification to invoke Section 65 of the I B Code against the Allottee. The Order of Adjudicating Authority in admitting the petition filed U/S 7 of the Code needs no interference - Appeal dismissed.
Issues Involved:
1. Whether the Corporate Debtor has committed default in not completing the construction of the flat in time and handing over possession of the same in terms of the Agreement? 2. Whether Financial Creditor/Home Buyer committed default in making payment of the instalments as per the Apartment Buyer Agreement (ABA) under the construction link Plan? 3. Whether the Application under Section 7 of the Insolvency and Bankruptcy Code (I&B Code) is filed fraudulently with malicious intent for purposes other than for the resolution of insolvency or liquidation, as defined under Section 65 of the I&B Code, 2016? 4. Whether the Application is barred by limitation? Detailed Analysis: Issue No. 1: Default by Corporate Debtor in Construction and Possession The Corporate Debtor was obligated to complete the construction and hand over possession of the flat by February 2016, including a grace period. However, the flat was not ready for possession even by November 2018. The Adjudicating Authority observed that the Corporate Debtor failed to honor the commitment in terms of the Agreement, and there was no proof of extension of time by the concerned Authority. Thus, the Corporate Debtor's default was established. Issue No. 2: Default by Financial Creditor/Home Buyer The Corporate Debtor argued that the Financial Creditor/Home Buyer defaulted in making timely payments as per the construction-linked plan. The Financial Creditor countered that payments were stopped due to the Corporate Debtor's failure to complete the project on time. The Tribunal noted that the Financial Creditor had paid a substantial amount (?2,75,55,186/- out of ?3,80,10,000/-) by 2013 and that the project was delayed. The Tribunal found that the Financial Creditor's non-payment was justified due to the Corporate Debtor's non-performance. Issue No. 3: Fraudulent and Malicious Intent under Section 65 The Corporate Debtor contended that the Application under Section 7 was filed with malicious intent to pressurize the Corporate Debtor. The Tribunal referred to the Supreme Court's judgment in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, which allows the real estate developer to argue that the insolvency process was invoked fraudulently. However, the Tribunal found no evidence to suggest that the Financial Creditor was a speculative investor or had malicious intent. The Tribunal concluded that the Financial Creditor genuinely sought possession of the flat and not merely a refund. Issue No. 4: Limitation The Corporate Debtor argued that the default occurred when the Financial Creditor stopped paying instalments, which was before the enforcement of the I&B Code. The Tribunal rejected this argument, stating that the date of default for the Financial Creditor was when the possession was to be handed over (February 2016). The petition was filed within three years from this date, making it within the limitation period. Conclusion: The Tribunal upheld the Adjudicating Authority's decision to admit the petition filed under Section 7 of the I&B Code. The Corporate Debtor failed to complete the construction and hand over possession in time, justifying the Financial Creditor's non-payment. The Application was not barred by limitation and was not filed with malicious intent. The appeal was dismissed, and no costs were imposed.
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