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TMI Blog2019 (8) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the revised definition, any amount raised from an allottee under a real estate project is deemed to be an amount having the commercial effect of a borrowing and thus is covered by the definition of 'Financial Debt' under the Code. Definition of 'Financial Debt' has been amended to specifically include dues of home buyers i.e. Real Estate (Residential). The amendment also recognizes home buyers as Financial Creditor . Accordingly, the home buyers can initiate Corporate Insolvency Resolution Process against defaulting builder or developer, as Financial Creditor in terms of Explanation to Section 5(8)(f) of the Code with effect from 06.06.2018. Therefore, the submission made to the contrary by respondent would not require any serious consideration. It is true that the proceedings under the Code are not in the nature of recovery. In the present application the Financial Creditor is seeking initiation of Corporate Insolvency Resolution Process by making prayer that all the Financial Creditor, Operational Creditor and others may raise their claims and if Corporate Financial Restructuring is possible then within the stipulated period it may be explored failing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a obtained from the official website of Registrar of Companies. Since the registered office of the respondent corporate debtor is in Delhi, this Tribunal being Adjudicating Authority has territorial jurisdiction in respect of respondent corporate debtor as per the provisions of sub-section (1) of Section 60 of the Code. 3. The 'Financial Creditor'-Petitioners has proposed the name of Resolution Professional, Shri Manish Kumar Gupta having his office at 404, 4th Floor, Laxmideep Building, 9, Laxmi Nagar, District Centre, Vikas Marg, Near V3S Mall, New Delhi -110092, email id- [email protected]. He has registration No. IBBI/IPA-001/IP-P00225/2017-18/10424. A written communication sent by him in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has also been placed on record (Annexure-I). There is a declaration made by him that no disciplinary proceedings are pending against him in Insolvency and Bankruptcy Board of India or ICAI. In addition, further necessary disclosures have been made by Mr. Manish Kumar Gupta, as per the requirement of the IBBI Regulations. Accordingly, he satisfies the requirement of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,01,25,734/- towards principal amount along with interest @ 18% per annum from the date of payment within 15 days from the date of receipt of the notice but all in vain. 7. It is claimed that the Respondent is liable to pay an amount of ₹ 1,04,36,134/- (Rupees One Crore Four Lakhs Thirty-Six Thousand One Hundred and Thirty-Four Only) to the petitioner. 8. Learned counsel for the Corporate Debtor has opposed the admission of the application and has advanced the following arguments: - (i) The real intent and spirit of the legislature in bringing about the special act namely the Real Estate Regulation Act, 2016 was to include home-buyers in the list of creditors, should any Company go into insolvency process so that they could get their monies back in case the resolution process failed and liquidation was the only recourse left. (ii) The present application is not maintainable under Section 7 of the Code because there is no wilful default on the part of the Corporate debtor in terms of section 3(12) of the Code. It is submitted that as per clause 7.2 of the agreement, the Corporate Debtor was entitled to reasonable extension of time if the delay caused was due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent into caving into his undue and unlawful demands. (viii) The registration of the Project with RERA (Real Estate Regulation Act, 2016), would deem the timelines under the Buyer's Agreement to be extended/modified in consonance with the revised timelines mentioned under the undertaking given to the authority under RERA. 9. A rejoinder to the reply has been filed by the Financial Creditor dated 24.10.2019 reiterating the submissions made in the application and controverting the assertions in the reply. 10. Before embarking upon the legal issues, we deem it appropriate to first refer to the material clauses of the agreement. According to clause 7.1 of the agreement the Corporate Debtor had undertaken to complete the construction and apply for the completion certificate by 31st December 2015. A grace period of six months to apply and obtain the completion certificate/occupation certificate has also been stipulated. It is further postulated by clause 7.9 of the agreement that in case the Corporate Debtor defaulted in compliance of clause 7.1 regarding construction and possession, then the Financial Creditor-allottee is entitled to payment of compensation for delay @ & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, there is a fundamental breach of the terms of the contract by not delivering the possession within the reasonable period. It cannot be argued by the Corporate Debtor that although I undertake to perform the contract but his liability is excluded if he fails to do so. The principles of fundamental breach have been laid down in Section 39 of the Indian Contract Act, 1872 which have been examined in details in chapters V and VI of the book titled as 'Control of Exclusion Clauses in England and India' by M.M. Kumar. Therefore, we are of the view that by no terms or clauses of the Apartment buyer's agreement the obligation to deliver possession of the apartment within reasonable period could be excluded and the argument advanced on behalf of the Corporate Debtor is hereby rejected. The amount in fact become payable on 31.12.2015 plus grace period of six months and; a maximum period of further one year could be granted. The possession should have been offered by June, 2016 and therefore, the principal amount along with compensation and interest becomes payable. 13. In the context of aforesaid discussion, it may now be necessary to examine the provisions of Section 7(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mention that on 04.03.2013 an Apartment buyer agreement was executed between the Petitioners Corporate Debtor whereby the petitioners were allotted residential apartment bearing No. 1503, 14th Floor, Tower.-G having a Super Built up area of 180.230 sq. metres under the aforesaid project of the Corporate Debtor. In the light of the said agreement, the petitioners have paid the total amount of ₹ 1,01,25,734/- to the Corporate Debtor which is almost the total sale consideration. According to the terms of the agreement, the Corporate Debtor was to handover physical possession of the aforesaid unit to the petitioners by 30th June, 2016 inclusive of grace period of six months. The petitioner is thus covered by the expression 'Financial Creditor' as has been used in the amended definition of Section 5(8) (f) of the Code and the explanation appended thereto. In that regard we draw support from the observations made by Hon'ble the Appellate Tribunal in the case of Rajendra Kumar Saxena V. Earth Gracia Buildcon Pvt. Ltd. passed in Appeal (AT) (Insolvency) No. 187/2018 wherein it has been held as under: By the Insolvency and Bankruptcy Code (Amendment) Ordinance, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to pay. The same is required to be remedied. Therefore, it cannot be concluded that the filing of the present petition would amount to recovery of the debts by the Financial Creditor. 20. As a sequel to the aforesaid discussion and the material placed on record it is confirmed that applicant-financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of a residential apartment. Though a considerable long period has lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor as per the provision of the Apartment Buyer's Agreement. It is accordingly held that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Thus, the application warrant admission as it is complete in all respects. 21. Accordingly, in terms of Section 7(5) (a) of the Code, the present application is admitted. 22. Shri Manish Kumar Gupta, Office No. 404, 4th Floor, Laxmideep Building, 9, Laxmi Nagar, District Centre, Vikas MARG, Near V3S Mall, New Delhi-110092 and email id [email protected], Registration No. IBBI/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w best practices and principles of fairness which are to apply at various stages of Corporate Insolvency Resolution Process. His conduct should be above board independent; and he should work with utmost integrity and honesty. It is further made clear that all the personnel connected with the Corporate Debtor, erstwhile directors, promoters or any other person associated with the Management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the affairs of the Corporate Debtor. In case there is any violation committed by the ex-management or any tainted/illegal transaction by ex-directors or anyone else the Interim Resolution Professional/Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order. The Interim Resolution Professional/Resolution Professional shall be under a duty to protect and preserve the value of the property of the 'Corporate Debtor' as a part of its obligation imposed by Section 20 of the Code and perform all his functions stric ..... 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