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2021 (7) TMI 1125 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Homebuyers/flatowners - Financial Creditors - existence of debt and dispute or not - HELD THAT - The petitioner is representing the members of 300 flat owners, out of total 644 flats and as per the requirement of Section 7 of IBC, 2016 proviso, an application needs to be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent of the total number of such creditors in the same class whichever is less. Since, the petitioner is representing 300 flat buyers, the petitioner is a registered Association duly elected by the 300 flat buyers and there is a resolution of the Association, which authorizes the petitioner to pursue the matter, the petitioner has fulfilled the minimum requirement for filing an application under the amended Section 7 of IBC, 2016. On plain reading of the definitions, it is found that the 'debt' means a liability or obligation in respect of a claim, which is due from any person and includes a financial debt and operational debt. And the 'financial debt is a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes the amount paid under either of the clauses from (a) to (i) of Section 5 of the IBC, and the person who paid the money and to whom such debt has been legally assigned or transferred to is known as 'Financial Creditor'. It is an admitted fact that as per the clause (D) of the agreement at page 176 of the paper book, on the balance of 75% of the deposit, the developer shall pay annually interest at the rate of State Bank of India's rate for three years' term deposit and interest shall be paid from the date of providing maintenance services i.e., 01.05.2007 or from the date deposits are made by owner(s), whichever is later - In view of this clause of the agreement, when we consider the definition of 'financial debt', it is seen that money was borrowed against the payment of interest and that amount was raised from the allottees under a real estate project - the amount raised by the corporate debtor comes under the definition of financial debt' and the petitioner, who is representing the 300 flat buyers of that project, is the 'financial creditor' in terms of Section 5 (7) of IBC 2016. It is admitted by the Corporate Debtor in its reply that the maintenance is being carried out by the petitioner Association, w.e.f. 01.04.2018. Therefore, as per the agreement clause, the Corporate Debtor was bound to refund the amount, the day when the Association was formed. Since it is admitted by the Corporate Debtor that the Association has been carrying out the maintenance work w.e.f. 01.04.2018, therefore, the date of default is 01.04.2018 - It is seen in the part-TV of the application that the date of default is shown as 01.04.2018 and the total amount of default including interest is indicated of ₹ 10,80,77,619/-. The present application is filed on 26.02.2019, hence it is within the limitation period. Thus, there is a financial debt paid by the flat buyers, who are represented through the Registered Association and that amount has not been refunded by the Corporate Debtor as yet, therefore, there is a default in making the payments of debt amount - the applicant has succeeded in establishing that there Is a financial debt and Corporate Debtor is in default in making the payment of that financial debt, the application is complete - application admitted - moratorium declared.
Issues Involved:
1. Whether the petitioner qualifies as a financial creditor under the Insolvency & Bankruptcy Code, 2016. 2. Whether the maintenance security deposit qualifies as a financial debt. 3. Whether the petition satisfies the requirements of Section 7 of the Insolvency & Bankruptcy Code, 2016, including the amendments. 4. Whether the Corporate Debtor is in default of the financial debt. 5. Whether the application is maintainable in terms of the procedural requirements under the Code. Issue-wise Detailed Analysis: 1. Whether the petitioner qualifies as a financial creditor under the Insolvency & Bankruptcy Code, 2016: The petitioner, a registered welfare association representing 300 flat owners out of 644, claims to act on behalf of these residents for the recovery of maintenance security deposits. The petitioner asserts its status as a financial creditor under Section 5(7) of the Code, arguing that the amount claimed qualifies as a financial debt under Section 5(8) of the Code. The Tribunal found that the petitioner meets the minimum requirement for filing an application under the amended Section 7 of the Code, as it represents more than 100 creditors or 10% of the total creditors in the same class. 2. Whether the maintenance security deposit qualifies as a financial debt: The petitioner contends that the maintenance security deposit, which includes an interest-bearing component, qualifies as a financial debt. The Tribunal referred to the Maintenance Services Agreement, which specifies that 75% of the deposit is interest-bearing. The Tribunal concluded that the amount raised by the Corporate Debtor from the allottees under a real estate project qualifies as a financial debt, as it involves consideration for the time value of money. 3. Whether the petition satisfies the requirements of Section 7 of the Insolvency & Bankruptcy Code, 2016, including the amendments: The Tribunal examined whether the petition meets the criteria set forth in the amended Section 7 of the Code, which requires an application to be filed by at least 100 creditors or 10% of the total creditors in the same class. The Tribunal found that the petitioner, representing 300 flat owners, fulfills this requirement. Additionally, the Tribunal noted that the application was complete and that there were no disciplinary proceedings pending against the proposed Interim Resolution Professional (IRP). 4. Whether the Corporate Debtor is in default of the financial debt: The petitioner argued that the Corporate Debtor defaulted on the financial debt by failing to refund the maintenance security deposit upon the formation of the association and the handover of maintenance responsibilities on 01.04.2018. The Tribunal found that the Corporate Debtor was obligated to refund the deposit on the date of default and that the Corporate Debtor's failure to do so constituted a default. The Tribunal also noted that the Corporate Debtor's claims of outstanding dues from some flat owners were not substantiated with sufficient evidence. 5. Whether the application is maintainable in terms of the procedural requirements under the Code: The Tribunal considered the procedural requirements for filing an application under Section 7 of the Code, including the need for a complete application and the absence of pending disciplinary proceedings against the proposed IRP. The Tribunal found that the petitioner had satisfied these requirements, and the application was therefore maintainable. Conclusion: The Tribunal concluded that the petitioner qualifies as a financial creditor, the maintenance security deposit qualifies as a financial debt, and the Corporate Debtor is in default. The application met the procedural requirements of Section 7 of the Code. Consequently, the Tribunal admitted the application, initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, and appointed an Interim Resolution Professional (IRP).
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