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TMI Blog2020 (2) TMI 1409X X X X Extracts X X X X X X X X Extracts X X X X ..... frastructure, is to be transferred in their favour ( Unsecured Creditors ) and not to the Secured Creditors such as Financial Institutions/ Banks/ NBFCs - Normally, the Banks/ Financial Institutions/ NBFCs also would not like to take the flats/ apartments in lieu of the money disbursed by them. On the other hand, the unsecured creditors have a right over the assets of the Corporate Debtor i.e. flats/ apartment, assets of the Company. In most cases, the Committee of Creditors take haircut . The Resolution Applicants satisfy them most of the time with lesser amount than the amount as determined. In the case of allottees (Financial Creditors), there cannot be a haircut of assets/ flats/ apartment. In Corporate Insolvency Resolution Process against a real estate, if allottees (Financial Creditors) or Financial Institutions/Banks (Other Financial Creditors) or Operational Creditors of one project initiated Corporate Insolvency Resolution Process against the Corporate Debtor (real estate company), it is confined to the particular project, it cannot affect any other project(s) of the same real estate company (Corporate Debtor) in other places where separate plan(s) are approved by differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess as in normal course is followed in a Corporate Insolvency Resolution Process, we are of the view, that a Reverse Corporate Insolvency Resolution Process can be followed in the cases of real estate infrastructure companies in the interest of the allottees and survival of the real estate companies and to ensure completion of projects which provides employment to large number of unorganized workmen. The Uppal Housing Pvt. Ltd. Intervenor (One of the Promoter) is directed to cooperate with the Interim Resolution Professional and disburse amount (apart from the amount already disbursed) from outside as Lender (financial creditor) not as Promoter to ensure that the project is completed with the time frame given by it. The disbursement of amount which has been made by Uppal Housing Pvt. Ltd. and the amount as will be generated from dues of the Allottees (Financial Creditors) during the Corporate Insolvency Resolution should be deposited in the account of the Company (Corporate Debtor) to keep the Company a going concern. The amount can be utilized only by issuance of cheque signed by the authorised person of the Company (Corporate Debtor) with counter signature by the Interim Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77, Gurgaon' and now the original applicants 'Mrs. Rachna Singh' and 'Mr. Ajay Singh' (Allottees) though want Corporate Insolvency Resolution Process for resolution but do not want approval of any plan of a third party (Resolution Applicant). FACTS OF THE CASE: 2. Mrs. Rachna Singh and Mr. Ajay Singh (Allottees) - Financial Creditors moved application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code') for initiation of Corporate Insolvency Resolution Process of 'M/s Umang Realtech Pvt. Ltd.' (Corporate Debtor), a real estate company constructing flats/ apartments for allottees. The Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi by impugned order dated 20th August, 2019 admitted the application and directed the Financial Creditor(s) to deposit a sum of ₹ 2 Lakhs with the Interim Resolution Professional to meet out the expenses for performing functions assigning to him. As per the I&B Code, after initiation of the Corporate Insolvency Resolution Process it is duty of the Interim Resolution Professional/ Resolution Professional to keep the company a going concern. In the case of a real estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution of amounts between different classes of creditors. 5. In "Pioneer Urban Land and Infrastructure Limited & Anr. v. Union of India & Ors. ", the Hon'ble Supreme Court upheld the Explanation below Section 5(8) (f) to hold that allottees (Homebuyers) of Infrastructure Company are 'Financial Creditors'. It further observed that RERA is in addition to and not in derogation of the provisions of any other law for the time being in force, also makes it clear that the remedies under RERA to allottees were intended to be additional and not exclusive remedies. Therefore, provisions of the Code would apply in addition to RERA. 6. The following are the problems which have now cropped up. There is a difference in Form B and Form C for submission of proof claims by the Operational Creditors and the Financial Creditors. Prior to the Notification dated 27thNovember, 2019, Form B which is for submission of proof of claims by Operational Creditors before the Interim Resolution Professional, did not have any column for details of any security held by them, unlike Form C which had such a separate column. The inclusion of this column vide the aforesaid notification acknowledges the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieu of the money disbursed by them. On the other hand, the 'unsecured creditors' have a right over the assets of the Corporate Debtor i.e. flats/ apartment, assets of the Company. 11. In most cases, the Committee of Creditors take 'haircut'. The Resolution Applicants satisfy them most of the time with lesser amount than the amount as determined. In the case of allottees (Financial Creditors), there cannot be a haircut of assets/ flats/ apartment. The law is to be explained now again in a reverse way. REVERSE CORPORATE INSOLVENCY RESOLUTION PROCESS: 12. In "Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. (2019 SCC OnLine SC 1478)", Hon'ble Supreme Court observed as follows: "90. In Swiss Ribbons (supra) this Court was at pains to point out, referring, inter alia, to various American decisions in paras 17 to 24, that the legislature must be given free play in the joints when it comes to economic legislation. Apart from the presumption of constitutionality which arises in such cases, the legislative judgment in economic choices must be given a certain degree of deference by the courts. In para 120 of the said judgment, this Court held: "120. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has progressed and a number of allottees including 'Rachna Singh' and 'Ajay Singh' have already taken possession of their respective flats and sale deed(s) have been registered in their favour. 15. 'Uppal Housing Pvt. Ltd.' invested certain amount as an outsider Financial Creditor and as Promoter cooperating with the Interim Resolution Professional, having expertee of real estate project, so we asked it to give time frame for completion of the flats/apartments of the project and time frame for providing common area facilities like Swimming Pool, Club House etc. as per the agreement. They were directed to provide a chart showing the amount as due from different allottes and default, if any, committed by allottee(s). The progress report has also been taken on record. Following facts have been highlighted by 'Uppal Housing Pvt. Ltd.', which is also accepted and endorsed by Mr. Manish Kr. Gupta, Interim Resolution Professional, who is present and always remain present in person. (i) There are 706 number of flats/apartments in Winter Hills - 77, Gurgaon project. Out of 706 flats/apartments, 624 flats/apartments have been booked/agreed to be sold which includes 3 bookings done duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be functional once enough allottees start actually residing in their respective flats. Further, Club House would be completed within a period of 4 months. (vii) The Corporate Debtor has already applied for water connection and are in process of applying electricity connection. The Corporate Debtor is following up with the statutory authority(ies) so that water and electricity connections provided expeditiously. (viii) The Corporate Debtor has already installed two lifts each in every tower. Lifts would be functional as per the requirement of the allottees. (ix) It is submitted that Air condition, Kitchen, Wardrobes, fans, Chimney, Geyser would be installed in the respective flats before the allottees actually starts residing in their respective flats. Approximately 40-42% allottees have taken possession without the fit-outs and they will do necessary fit-outs on their own. Such allottees have made payment to the Corporate Debtor after deducting the cost of the fit-outs. The Corporate Debtor would provide necessary fit-outs in rest of the flats expeditiously and the entire work would be completed within 4-5 months depending upon fund follow and delivery of necessary materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors), financial institutions (financial creditors, operational creditors are different for such separate project. Therefore, all the asset of the company (Corporate Debtor) are not to be maximized. The asset of the company (Corporate Debtor - real estate) of that particular project is to be maximized for balancing the creditors such as allottees, financial institutions and operational creditors of that particular project. Corporate Insolvency Resolution Process should be project basis, as per approved plan by the Competent Authority. Any other allottees (financial creditors) or financial institutions/ banks (other financial creditors) or operational creditors of other project cannot file a claim before the Interim Resolution Professional of other project and such claim cannot be entertained. So, we hold that Corporate Insolvency Resolution Process against a real estate company (Corporate Debtor) is limited to a project as per approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans approved. For example - in this case the Winter Hill - 77 Gurgaon Project of the 'Corporate Debtor' has been place of Corporate Insol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement and the applicable RERA Rules and Regulations, not be entitled to any relief including payment of compensation and/or refund, entailing a dismissal of the said application. At this stage also, it is important to point out, in answer to the arguments made by the Petitioners, that under Section 65 of the Code, the real estate developer can also point out that the insolvency resolution process under the Code has been invoked fraudulently, with malicious intent, or for any purpose other than the resolution of insolvency. This the real estate developer may do by pointing out, for example, that the allottee who has knocked at the doors of the NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment. They can also point out that in a real estate market which is falling, the allottee does not, in fact, want to go ahead with its obligation to take possession of the flat/apartment under RERA, but wants to jump ship and really get back, by way of this coercive measure, monies already paid by it. Given the above, it is clear that it is very difficult to accede to the Petitioners' contention that a wholly one-sided and futile heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by 30th July, 2020. The Financial Institutions/ Banks should be paid simultaneously. The allottees are directed to deposit their balance amount and pay 90% without penal interest, if not deposited, by 15th March, 2020. The Allottees in whose favour possession has been offered and clearance has been given by the competent authority are bound to pay the cost for registration and directed to deposit registration cost to get the flats/apartments registered after paying all the balance amount in terms of the agreement. 28. Common area such as Swimming Pool, Club House etc. as per the agreement, be also completed by 30th August, 2020. The allottees are allowed to form 'Residents Welfare Association' and get it registered to empower them to claim the common areas. 29. All these processes should be completed by 30th August, 2020. If it completed, the Corporate Insolvency Resolution Process be closed after intimating it to the Adjudicating Authority (National Company Law Tribunal). The resolution cost including fee of the Interim Resolution Professional will be borne by the Promoter. Only after getting the certificate of completion from the Interim Resolution Professional/ Resolution Prof ..... 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