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TMI Blog2020 (11) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... nts or an agreement for buyback the apartments? - HELD THAT:- It is apparent that MOU is an irrevocable contract and the Respondent No. 1 is duty bound for execution of buy back. There is a provision in the event of failure of the Respondent No. 2 to complete the buy back by the end of 12 month. On completion of all buy back of apartments by the Respondent No. 2, the Respondent No. 1 have no right, claim interest in the apartments. As per clause 8 of the MOU, the Respondent No. 2 ensures the Respondent No. 1 that in the event of dishonor of any cheques (one cheque of ₹ 65 lacs and another cheque of ₹ 35 lacs), the Respondent No. 1 shall take possession of the apartments on the basis of MOU and no possession letter or any further act or deed would be required. The Respondent No. 1 shall be free to sell/deal with the same in any manner and no demand shall be payable by the Respondent No. 1. Thus, we hold that the MOU is an agreement to buyback the apartments. Whether the Respondent No. 1 is a genuine allottee or a speculative investor? - HELD THAT:- The allottee has made attempt to get back the amount of ₹ 1,00,00,000/- by way of this coercive measure i.e. u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... named Gayatri Life was made infavour of the Financial Creditor at an agreed consideration of ₹ 1,03,78,521/-and as part payment an amount of ₹ 35 lacs was paid at the time of the signing of the Agreement. The construction likely to complete within a period of 12 months from the date of execution of the agreement i.e. by April, 2017. There was a compulsory buyback provision in the agreement which stipulates that upon the expiry of 12 months, the Corporate Debtor was to return ₹ 35 lacs paid by the Financial Creditor and also an additional payment of ₹ 65 lacs as premium. For the same, the Corporate Debtor issued two postdated cheques in favour of the Financial Creditor. In the Agreement, there was a condition that on the expiry of the period contained in the said Agreement, the Financial Creditor inquired from the Corporate Debtor whether it intends to allot the said apartments to the Financial Creditor or he intends to exercise the compulsory buyback. The Corporate Debtor exclaimed his interest to buyback the said apartments from the Financial Creditor. Accordingly, in view buy back the said cheques were deposited for encashment but both the cheques were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Senior Counsel for the Appellant raised a question of law and submitted that Section 7 of the I B Code as amended in terms of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 enforced w.e.f 28.12.2019 added proviso to Section 7, sub-Section 1 before the explanation providing a threshold limit for initiation of CIRP at the instance of allottees under a Real Estate Project providing that an Application shall be filed jointly by not less than 100 allottees or not less than 10% of total number of such allottees under the same Real Estate Project, whichever is less. In the light of this Amendment, the Application by only one allottee i.e. Respondent No. 1 (Financial Creditor) is not maintainable. It is further submitted that this Appellate Tribunal in its recent Judgment in Sh. Sushil Ansal Vs. Ashok Tripathi Ors. in Company Appeal (AT) (Ins) No. 452 of 2020 held that an Application at the instance of a single allottee or by a group of allottees failing short of the prescribed threshold limit would not be maintainable. The Ordinance was introduced because allottees were filing the Application for CIRP with malicious intent and to abuse the process. This fact has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal debt disbursed is ₹ 1,02,50,000/- whereas, admittedly only ₹ 35 lacs were paid to the Corporate Debtor. Thus, the Application itself defective. Therefore, the impugned order is liable to be set aside. 9. Learned Senior Counsel for the Appellant further submitted that the MOU dated 06.04.2016 between the Respondent No. 1 and 2 an is irrevocable contract that they shall compulsorily buy back the apartments at the end of the term of MOU and Respondent No. 1 is duty bound for execution of this buyback and Respondent No. 2 shall refund the amount plus premium of ₹ 1,00,00,000/- to Respondent No. 1. Therefore, the Respondent No. 1 cannot be considered as a Financial Creditor for alleged claim of ₹ 1,02,50,000/- as a Financial Debt against the Respondent No. 2 (Corporate Debtor). Thus, there is no relationship between the Respondent No. 1 and 2 as a Financial Creditor and Corporate Debtor. Therefore, the Application itself under Section 7 of the I B Code, is not maintainable. However, Learned Adjudicating Authority erroneously admitted the Application. 10. It is also submitted on behalf of the Appellant that the Respondent No. 1 (Financial Creditor) is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Supreme Court in the case of Darshan Singh Vs. Rampal Singh, 1992 Suppl. (1) SCC 191.There will be no prejudice caused to the Respondent No. 2 (Corporate Debtor) when the Application is modified at appellate stage. 12. Learned Counsel for the Respondent No. 1 submitted that the buyback agreement is similar to the standard home buyers agreement except buyback clause which ensures to the benefit of the Builder/Corporate Debtor. If the builder exercises the buyback right and makes payment thereunder then right of allottee to possession/transfer of flats extinguishes. In the instant case neither possession of flats have been delivered nor payment made by the Respondent No. 2 (Corporate Debtor) and postdated cheques were dishonored. Learned Adjudicating Authority has rightly held that as per the amended definition of Section 5 (8) (f) amount raised from an allottee under a Real Estate Project shall be deemed to be a Financial Debt. Therefore, the Respondent No. 1 is Financial Creditor and Respondent No. 2 is Corporate Debtor. 13. After hearing Learned Counsel for the parties, following issues arise for our consideration: - i. Whether in view of the I B Code (Ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of the insolvency and bankruptcy code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission. 16. After this Amendment, an Application for initiating CIRP against the Corporate Debtor by the allottees under a Real Estate Project is required to be filed jointly by not less than 100 of such allottees or not less than 10% of the total number of such allottees under the same Real Estate Project. Provision has been made in respect of pending Application filed by the allottees, where same has not been admitted to Insolvency Resolution, for garnering support of the requisite majority to meet the threshold limit within 30 days of the commencement of the Amending Act, failing which such Application(s) shall be deemed to be withdrawn before admission. 17. Admittedly on 28.12.2019 when the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is obtained prior to the date of Amendment occupies the field as of now. Thus, we hold that there is no effect of the I B Code, Amendment Ordinance 2019 which was replaced by the I B Code Amendment Act, 2020, on the present Application under Section 7 of the I B Code. Therefore, it is not required to be considered whether in the light of the aforesaid Amendment whether the Respondent No. 1 has modified the Application under Section 7 of the I B Code, or not. Issue No. 2. A. Incorrect Particulars mentioned in the Application 20. The Respondent No. 1 has filed the Application which is in Form 1 (Sub Rule I of Rule IV) for appreciating the argument of the parties, the extract of the Application is as under:- Part-IV Particulars of Financial Debt 1. Total amount of debt granted dates(s) of disbursement: T ota l Debt: ₹ 1,02,50,000/- S. No. Cheque No. Dated Amount 1. Cheques issued by Corporate Debtor in favour of Mrs. Mansi BrarFernandes (Financial Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, the date of the its creation, its estimated value as per the creditor Not Applicable. 2. . 21. The Respondent No. 1 (Financial Creditor) in Part IV in serial No. 1 of the Application is required to mention particulars of Financial Debt i.e. total amount of debt granted and dates of the disbursement. The Respondent No. 1 has actually granted debt ₹ 35,00,000/-to the Respondent No. 2. Which is not mentioned. However, erroneously the amount of postdated cheques and interest shown. In serial No. 2 the Respondent No. 1 is required to mention the date on which the default occurred. However, no such date is mentioned. (Please see above extract of the Application) 22. In Part V in Serial No. 1 the Respondent No. 1 mentioned not applicable instead of she should have been mentioned the particulars of security i.e. postdated cheques which were handed over by the Respondent No. 2 at the time of signing of MOU. Thus, incorrect particulars are mentioned in the Application. Date of default, is crucial date for calculating the period of limitation. 23. We have considered overall facts of this case and of the firm view that the Respondent No. 1 has deliberately me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, as the case may be, in accordance with the terms of agreement for sale or due to discontinuance of his business as a developer on account of suspension or revocation of his registration under the provisions of this Act or the rules or regulations made thereunder. (5) The allottee shall be entitled to have the necessary documents and plans, including that of common areas, after handing over the physical possession of the apartment or plot or building as the case may be, by the promoter. (6) Every allottee, who has entered into an agreement for sale to take an apartment, plot or building as the case may be, under section 13, shall be responsible to make necessary payments in the manner and within the time as specified in the said agreement for sale and shall pay at the proper time and place, the share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent, and other charges, if any. (7) The allottee shall be liable to pay interest, at such rate as may be prescribed, for any delay in payment towards any amount or charges to be paid under sub-section (6). (8) The obligations of the allottee under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isionally allotted to the Respondent No. 1 for total a consideration of ₹ 1,03,78,521/- against the Respondent No. 1 paid total amount ₹ 35 lacs to the Respondent No. 2. There is no provision in the MOU that how the Respondent No. 1 shall pay remaining amount i.e. ₹ 68,78,500/-. No payment schedule has been mentioned. On the other hand, the Respondent No. 2 has delivered to the Respondent No. 1 (allottee) at the time of execution of the MOU two postdated cheques for ₹ 1,00,00,000/- 30. The Respondent No. 2 has not placed any document of demanding remaining cost of the apartments from the Respondent No. 1. Though, as per the Sub-Section 6 of Section 19 of the RERA, every allottee who has entered into an agreement for sale to take an apartment, plot or building, as the case may be, under Section 13, is responsible to make necessary payments in the manner and within the time as specified in the said agreement for sale. 31. As per clause 8 of the MOU, in the event of dishonor of any cheques the Respondent NO. 1 (Allottee) shall take possession of the apartments on the basis of this MOU. In the MOU, it is not provided when the Respondent No. 1 (allottee) sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The first party has delivered to the second party, in advance, at the time of execution of this Agreement postdated cheques for ₹ 1,00,00,000/- consideration amount to execute buyback. Details of cheques given by first party to the second party is as under:- S. No. Cheque No. Cheque Date Amount(Rs.) Drawn on 1. 016173 06.04.2017 65,00,000/- OBC Bank 2. 016174 06.04.2017 35,00,000/- OBC Bank 8. The cheques mentioned in para 7 above shall be encased on the date mentioned against each cheque, upon first presentation. In the event of dishonor of any cheque, the second party shall take possession of the Apartment on the basis of this MOU no possession letter or any further act or deed would be required to be done by it for taking over possession and the second party shall be free to sell/deal with the same in any manner and no demand shall be payable by second party by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine allottee or a speculative investor. 37. Now, it is to seen whether the Respondent No. 1 is a genuine allottee or a speculative investor. Hon ble Supreme Court in the case of Pioneer Urban Land Infrastructure Ltd.(Supra) noticed the Rules framed by Andaman and Nicobar Islands Real Estate (Regulation and Development) (General) Rules, 2016 which includes interest payable by promoter and allottee and the timelines for refund and observed: 57. It can thus be seen that just as information utilities provide the kind of information as to default that banks and financial institutions are provided under Sections 214 to 216 of the Code read with Regulations 25 and 27 of the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, allottees of real estate projects can come armed with the same kind of information, this time provided by the promoter or real estate developer itself, on the basis of which, prima facie at least, a default relating to amounts due and payable to the allottee is made out in an application under Section 7 of the Code. We may mention here that once this prima facie case is made out, the burden shifts on the promoter/r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eques for the aforesaid amount delivered to the Respondent No. 1 (allottee), these cheques on presentation were also dishonored. Thereafter, the Respondent No. 1 (allottee) has filed compliant under Section 138 of the Negotiable Instrument Act, against the Respondent No. 2 (Corporate Debtor). 40. Thus, the allottee has made attempt to get back the amount of ₹ 1,00,00,000/- by way of this coercive measure i.e. under Section 138 of the Negotiable Instrument Act. 41. In such circumstances, we are of the considered view that the Respondent No. 1 is a speculative investor and not a person who is genuinely interested in purchasing the apartments. Therefore, she cannot be termed as a allottee as per the explanation attached to clause (f) of Section 5(8) of the I B Code and the light of observations of the Hon ble Supreme Court in the case of Pioneer Urban Land Infrastructure Ltd. (Supra). The Respondent No. 1 is not a genuine allottee, therefore, the amount of ₹ 35 lacs paid to the Respondent No. 2 is not a Financial Debt and the Respondent No. 1 is not a Financial Creditor. We are unable to subscribe of the view of the Learned Adjudicating Authority that the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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