2021 (11) TMI 608 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repaymnet of its dues - Financial Creditors - existence of debt and dispute or not - Jurisdiction - time limitation - HELD THAT - The date of default as per the application, is in the year 2019. The present application is filed on 20.06.2020. Hence, the application is within in the period and is not barred by limitation. Jurisdiction - HELD THAT - The registered office of the Corporate Debtor is situated at Delhi and therefore this tribunal has jurisdiction to entertain and try this application. It is observed that the Claim of the Financial Creditor in the present application arises out of the MoUs executed in 2010-2012, with respect to Assured Monthly investment return to be received from the Corporate Debtor and the monthly rent received by the Corporate Debtor and paid to the Financial Creditor for their respective office space unit leased to OFCSPC Worldwide Pvt. Ltd. As per the averments mentioned by the Financial Creditor the default has occurred since the Corporate Debtor has not paid the Assured Investment return from January 2019. The application stands admitted in terms of Section 7 of IBC, 2016 - Moratorium declared.

Issues Involved:
1. Non-payment of assured investment returns.
2. Rent-free lease period of six months.
3. Execution of the Lease Deed without obtaining the Occupation Certificate.
4. Execution of the Lease Deed without taking proper security deposit.
5. Execution of the lease with one-sided terms favoring the Lessee.
6. Raising illegal and arbitrary demands from the Applicants.
7. Threshold limit for initiating CIRP proceedings.
8. Allegation of speculative investment by the Applicants.

Issue-wise Detailed Analysis:

1. Non-payment of Assured Investment Returns:
The Applicants, who are financial creditors, claimed that the Corporate Debtor failed to pay the assured investment returns from January 2019. They had purchased commercial office spaces under a scheme guaranteeing returns and entered into Memoranda of Understanding (MoUs) with the Corporate Debtor. The Corporate Debtor argued that they had paid assured returns until the units were leased out on 30.09.2019. The Tribunal observed that the Corporate Debtor did not provide bank statements or other documents to prove payment of the assured returns since January 2019.

2. Rent-free Lease Period of Six Months:
The Applicants contended that the Corporate Debtor leased the office spaces to OFCSPC Worldwide Private Limited with a detrimental six-month rent-free period, violating the terms of the MoUs. The Corporate Debtor justified this period as a market practice and stated that the lease terms were within their authority. The Tribunal noted that the rent commencement date was after six months from the lease commencement date, which was not in the Applicants' interest.

3. Execution of the Lease Deed Without Obtaining the Occupation Certificate:
The Applicants argued that the lease deed was executed without obtaining the necessary Occupation Certificate. The Corporate Debtor countered that the Occupation Certificate for the project was obtained on 28.01.2020, and possession was offered to the Applicants on 17.10.2020. The Tribunal did not find specific evidence from the Corporate Debtor proving the lease was executed post obtaining the certificate.

4. Execution of the Lease Deed Without Taking Proper Security Deposit:
The Applicants claimed that the Corporate Debtor executed the lease without taking an adequate security deposit. The Corporate Debtor did not specifically address this issue in their submissions. The Tribunal did not provide a detailed analysis on this point.

5. Execution of the Lease with One-sided Terms Favoring the Lessee:
The Applicants alleged that the lease terms were one-sided and favored the Lessee. The Corporate Debtor argued that the terms were standard and within their authority to negotiate. The Tribunal observed that the terms, including the six-month rent-free period, were indeed not favorable to the Applicants.

6. Raising Illegal and Arbitrary Demands from the Applicants:
The Applicants stated that the Corporate Debtor raised arbitrary demands, including charges not due as per the MoUs. The Corporate Debtor claimed these charges were legitimate and arose due to the Applicants not taking possession of their units. The Tribunal found that the demands raised by the Corporate Debtor were not substantiated with clear evidence.

7. Threshold Limit for Initiating CIRP Proceedings:
The Corporate Debtor argued that the application did not meet the threshold limit of ?1 crore for initiating CIRP proceedings. The Applicants contended that their combined claims exceeded this limit. The Tribunal noted that the application was filed by 40 allottees, constituting more than 10% of the total allottees, thus meeting the threshold requirement.

8. Allegation of Speculative Investment by the Applicants:
The Corporate Debtor alleged that the Applicants were speculative investors seeking to profit from market changes rather than taking possession of their units. The Tribunal referred to the Supreme Court's judgment in Pioneer Urban Land and Infrastructure Ltd. vs. Union of India, emphasizing that the Code is not a debt recovery mechanism and should not be misused by speculative investors. However, the Tribunal found that the Applicants had a legitimate claim based on the non-payment of assured returns.

Conclusion:
The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, as the Corporate Debtor failed to pay the assured investment returns, and the application met the threshold limit. The Tribunal appointed Mr. Gaurav Katiyar as the Interim Resolution Professional (IRP) and directed the commencement of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The moratorium under Section 14 of the Code was imposed, prohibiting certain actions against the Corporate Debtor during the CIRP period. The Tribunal emphasized that the application was complete, and there were no disciplinary proceedings against the proposed IRP.

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