2021 (6) TMI 125 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Homebuyers of Real Estate Project - threshold limit not reached - existence of debt and dispute or not - HELD THAT - As per the Insolvency and Bankruptcy Code, (Amendment) Ordinance, 2019 dated 28.12.2019 the financial creditors who are homebuyers of Real Estate Project can file a petition under section 7 of the Code, 2016, jointly only if there are 100 of such homebuyers or if they are 10% of total homebuyers whichever is less. However, in the instant petition, only 2 Homebuyers have filed the petition which neither amounts to 10% of the total class of financial creditors or 100 Financial Creditors and therefore this petition cannot be entertained. In the instant case, the Petitioner has already obtained order from the relevant forum under the RERA Act and the same can be executed before relevant forum. A case under the Code, 2016 is not made out as the petition is clearly an attempt to substitute the recovery mechanism and amounts to forum shopping. Further, since the Petitioner does not meet the minimum threshold of 10% of Financial Creditors of the same class, the petition fails and deserves to be dismissed - the Petitioner has made out a case that it is before this Tribunal basically to seek execution of a decree passed by the Karnataka, RERA, Bengaluru. In the instant case the Petitioner is before this Tribunal mainly to execute its decree and hence would not be eligible to file a Petition for execution of the decree received from the Karnataka, RERA - if home buyers who obtain decrees from other fora also are permitted to file petitions under the IBC, that would defeat the purpose of the above referred amendment in section 7 of the Code laying down the threshold of 100 or 10% home buyers, whichever is less. The decision of the NCLT, Allahabad Bench in AJAY WALIA VERSUS M/S. SUNWORLD RESIDENCY PRIVATE LIMITED 2018 (7) TMI 2175 - NATIONAL COMPANY LAW TRIBUNAL, ALLAHABAD , supports the view that where the Allottee/Applicant has subrogated its rights in favour of a Bank by way of Tripartite Agreement, the liability to make payment to the Allottee cannot be saddled upon the Corporate Debtor and the Applicant cannot be treated as a Financial Creditor. Petition dismissed.

Summary

Issues:
- Initiation of Corporate Insolvency Resolution Process under section 7 of the Insolvency and Bankruptcy Code, 2016.
- Interpretation of agreements and schemes related to the purchase of an apartment.
- Non-compliance with orders and refund obligations by the Corporate Debtor.
- Objections raised by the Respondent regarding the petition.
- Legal standing of the Petitioner as a decree holder seeking execution.
- Application of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019.
- Dismissal of the petition and reasoning behind the decision.

Issue 1: Initiation of Corporate Insolvency Resolution Process
The Petitioner filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016 against the Respondent, claiming a default of financial debt. The debt amount was specified, and the petition detailed the agreements and schemes related to the purchase of an apartment, highlighting the default in payments and possession delays by the Corporate Debtor.

Issue 2: Interpretation of Agreements and Schemes
The agreements between the parties, including the 'agreement of sale' and 'agreement for construction,' along with a pre-EMI/Buyback scheme, formed the basis of the Petitioner's claim. The Petitioner cited various clauses and conditions from these agreements to support the claim of default and non-compliance by the Corporate Debtor.

Issue 3: Non-Compliance and Refund Obligations
The Respondent failed to comply with orders, including a directive from Karnataka RERA to refund a specific amount to the Petitioner. The Petitioner sought refund of contributions, loan amounts, and penalties as per the agreements and schemes, emphasizing the Corporate Debtor's persistent defaults and delays in payment.

Issue 4: Objections Raised by the Respondent
The Respondent raised objections, including the applicability of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, and the financial standing of the Petitioner as a speculative investor. The Respondent also highlighted clauses in agreements for arbitration and payment obligations to financial institutions, challenging the Petitioner's claims.

Issue 5: Legal Standing of the Petitioner as a Decree Holder
The Petitioner argued its legal standing as a decree holder seeking execution of the decree passed by Karnataka RERA. However, the Tribunal referenced previous judgments and legal provisions to clarify that a decree holder does not fall within the class of financial creditors eligible to initiate Corporate Insolvency Resolution Process under the Code.

Issue 6: Application of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019
The Tribunal noted the provisions of the Amendment Ordinance, 2019, which require a minimum number of homebuyers to jointly file a petition for initiating insolvency proceedings against a developer. In this case, the Petitioner did not meet the specified threshold, rendering the petition ineligible for consideration under the Code.

Issue 7: Dismissal of the Petition
Based on the analysis of the facts, agreements, objections, and legal precedents, the Tribunal dismissed the petition. The decision was grounded in the finding that the petition was an attempt to substitute the recovery mechanism and amounted to forum shopping. The Tribunal emphasized that the Petitioner could seek redress through other legal avenues but not under the Insolvency and Bankruptcy Code.