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TMI Blog2021 (7) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 6,51,36,981/- on account of Maintenance Security Deposits and accrued interest thereon. iii. That the Apartment Owners entered into Flat Buyer's Agreements with Corporate Debtor from 2004 onwards for purchase of flats in a multi-stored group housing complex in the name and style of Vipul Greens situated at Sohna Road, Sector-48, Gurgaon, Haryana. There are total 644 number of flats in the Vipul Greens Complex, out of which many apartment owners are members of VGRWA. iv. That Clause 4(b) of the Flat Buyer's Agreement enabled Corporate Debtor to collect maintenance security deposit @ ₹ 50/- per sq.ft. of the super area of each flat. Pursuant to the said clause, Corporate Debtor has collected an amount of ₹ 6,51,36,981/- from the Apartment Owners under the head of Maintenance Security Deposit. v. That various Deeds of Declaration were executed by the Land Owner under the Haryana Apartment Ownership Act, 1983. The details of the Deed of Declarations are enumerated here in below: vi. That between 2007 to 2016, many of whom are members of VGRWA entered into a Maintenance Services Agreement with Corporate Debtor and Vipul Facility Manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrary, irrational and illegal demands as precondition for handing over of Vipul Greens Complex to VGRWA despite the directive of Office DTCP dated 21.02.2013 wherein it was clearly directed that handover of condominiums should not be delayed by the colonizers. Some of the demands are as follows: a. Execution of Handing Over and Taking Over Agreement( HOTO ), a condition put up by Corporate Debtor to circumvent the directives of DTCP and solely for the purpose of delaying the hand over and thus the corpus of maintenance security deposit. b. The said letter further threatened VGRWA and its officers to execute HOTO as according to them it is the only legally and amicably possible knowing fully well that hand over could not have been delayed putting arbitrary conditions like above. c. Corporate Debtor threatened VGRWA to stop the services provided by the vendors. xi. That VGRWA vide letter dated 01.04.2018 expressed its anguish and surprise over the letter dated 31.03.2018 issued by Corporate Debtor over a sudden change of stance. VGRWA further went on record to state that while on 27.03.2018, Corporate Debtor had written to various agencies providing services to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said amount is reasonable. But no amount is released by them. xvii. That a meeting was held on 22.11.2018 between office bearers of VGRWA and senior employees of Corporate Debtor wherein CEO of Corporate Debtor expressed that they are in financial stress and hence not in the position to commit any payment schedule. It is also a matter of record and accordingly mentioned in minutes of the aforesaid meeting that some of the flat owners, even after the handover on 01.04.2018, erroneously continued to pay to Corporate Debtor the Common Area Maintenance charges and electricity bills. An amount of ₹ 25,31,045/- was paid by some Residents to the Corporate Debtor until November, 2018 and the same is still lying with them till date in spite of the assurance by the Corporate Debtor. The same was intimated to the Corporate Debtor vide Letters dated 25.10.2018 and 30.11.2018. xviii. That Corporate Debtor sent a letter dated 27.11.2018 in pursuance if the Minutes of Meeting held between representatives of VGRWA and the Corporate Debtor giving its 'No Objection' to VGRWA for undertaking facade work at Vipul Greens Complex. This signified the awareness and consent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner that neither any agreement has been entered into between the Petitioner and the respondent Company nor any amount has been paid/transferred by the Petitioner to the Respondent Company. v. That the amount as being claimed by the Petitioner is not a financial debt within the purview of Section 5(8) of the Code as neither the amount attracts interest nor the same has been disbursed against the consideration for the time value of money. vi. That the Respondent Company has developed a multi-storied group housing complex in the name and style of Vipul Greens and there are as many as 644 flats in the instant housing complex. vii. That, the Petitioner is a self-proclaimed residents Welfare association of Vipul Greens claiming itself to be acting for and on behalf of the 'residents of Vipul Greens'. It is pertinent to note that the Petitioner has only approximately 300 flats as its members out of the total 644 fiats of Vipul Greens. viii. That, the allottee(s) flat owner(s) had entered into Flat Buyer's Agreement with the Respondent Company at the time of allotment of their respective flat in Vipul Greens. The relevant clauses of the Flat Buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver and Taking Over Agreement ( HOTO ) with the Petitioner so as to protect the interest of the flat owners of Vipul Greens. The aforesaid HOTO agreement is still pending and has not been executed by the Petitioner till date on one pretext or the other. xiii. That, as the HOTO agreement was pending at the end of the Petitioner and as the Petitioner was putting pressure upon the Respondent Company to transfer the administration, xiv. Therefore, it was decided that from 01.04.2018 the administration of the Vipul Greens shall be taken over by the petitioner. It was further agreed that the Respondent Company shall continue to be engaged with the affairs of the Vipul Greens till the time HOTO agreement is executed between the parties. It is precisely for this reason that the respondent Company has written to various agencies involved with the Vipul Greens that from 01.04.2018 administration shall be looked after by the Petitioner and all the communications/correspondence for the site issues and payment etc. shall be made to the Petitioner from April, 2018 onwards. xv. That, pending the execution of HOTO Agreement, and considering the pressure being put by the Petitioner u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Vipul Greens to pay the respective amount payable towards Value Added -Tax as demanded by the government authorities. xxii. That, total amount of INR 50,72,651/- is outstanding and due and payable by the flat owners of Vipul Greens to the Respondent Company towards the Haryana Value Added Tax. xxiii. That, in terms of Clause 8 read with Clause 8(b) of the Flat Buyer's Agreement the flat owners are under mandate to pay the outstanding amount towards the Haryana Value Added Tax, which has not been paid and is lying outstanding. xxiv. That the aforesaid outstanding amount due and payable to the Respondent Company is to be adjusted against the Maintenance Security deposit as per the clause agreement executed between the flat owners and the Respondent Company. xxv. That in terms of Clause 4(b) of the Flat Buyer's Agreement the accounts are to be settled before the handing over/transfer of the corpus amount of maintenance security deposit to the society, which in the present case is Petitioner as per their claim. That, till the time the accounts are not settled/reconciled no amount is liable to be transferred from the Maintenance Security Deposit of the fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucturing of the repayment of Maintenance Security Deposit to Petitioner. vi. That the Petitioner is/was never in a position of putting any sort of pressure upon Respondent Company but was actually time and again requesting the respondent Company to hand over the administration of Vipul Greens condominium along with Maintenance Security Deposit which rightfully belongs to Petitioner. The signing of Deed of Indemnity was another ploy on part of the Respondent Company to delay the process of handover since the Petitioner was constantly persisting with its legal demand. vii. It is further stated that the alleged amount of ₹ 8,05,56,962/- is exorbitantly high pitched penalty calculated at the rate of about 750% per month on the pending maintenance charges, if any. viii. That the alleged demand letters and reminders are nothing but again forged and fabricated documents created only with a view to defeat the rightful claim of Petitioner. Although the para under reply talks about various e-mails being sent to flat owners of Vipul Greens Condominium but not even a single one has been annexed herewith. ix. That neither any amount is due nor payable by any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the Financial Creditor itself, and the default is to arise only after fulfilling the obligations on part of the Financial Creditor and only then the amount is said to become due and payable. And in the matter at hand the Petitioner has failed to fulfill its obligations and therefore, the instant Petition filed Under Section 7 of the Code is liable to be rejected. 6. The Petitioner/Financial Creditor has further filed a counter affidavit dt. 13.09.2019, which is nothing but repetition of the facts mentioned in petition and rejoinder except the following: i. That the contents of Supplementary Affidavit dated 20.08.2019 are patently false, frivolous and contrary to not only the records, but also to Respondent Company and its Authorized Representative's own knowledge and Petitioner Association hereby reserves its right to initiate appropriate legal proceedings against the Respondent Company and its Authorized Representative Sh. Rakesh Sharma for their said misadventure. ii. That it is denied that Petitioner Association ever took over the possession of the Maintenance Services of Vipul Greens Condominium forcibly from Respondent Company. iii. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the FBA. As per Clause 16 (Entire Agreement) of the MSA, the MSA revokes and supersedes all previous discussions/correspondences and agreements between the parties covering the matters covered in this agreement whether written, oral or implied which makes it imperative that clause 2(D) of the MSA supersedes clause 4(b) of FBA. iii. It is further contended, out of the total Security Deposit, the Corporate Debtor is entitled to adjust the Working Capital Loan that too only against default in payment of maintenance bills by individual apartment owners on one-to-one basis. Section 5(8)(a) of the Code, the present debt is a 'Financial Debt' which means and include 'money borrowed against payment of interest', and includes any amount raised under any transaction which has commercial effect of a borrowing. Therefore, default has occurred at the behest of the Corporate Debtor as no payment has been made to the Petitioner against the balance Security Deposit of ₹ 4,88,52,736/- being Interest-bearing Deposit along with accrued interest thereon as well as balance unadjusted amount of the Working Capital Loan. iv. In addition to the above, the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Debt against which default has been committed by the Corporate Debtor as it has failed to transfer the same to the Petitioner at the time of handover of maintenance of the complex. v. It is further contended that the Petitioner RWA is duly competent in terms of the provisions of the Haryana Apartment Ownership Act, 1983 to act on behalf its members i.e. the apartment owners and furthermore, the Petitioner is the assignee of the Security Deposit as per Clause 2D and Clause 5 of the MSA and as such is financial Creditor to the Corporate Debtor in terms of Section 5(7) of the Code which includes a person to whom financial debt has been legally assigned or transferred. Thus, the nature of debt (as submitted above) owed to the Petitioner is a financial debt and as such the Petitioner herein is a financial creditor in terms of the Code. vi. It is further contended, in terms of Section 3(12) of the Code, default means non-payment of debt whether whole or any part, which occurred on part of the Corporate Debtor on 01.04.2018 when the condominium of the maintenance operations of the common services, facilities and equipment in the Complex was handed over to the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on account of such default. x. It is further contended, the Petitioner that the total amount of claim at time of-filing the present petition is ₹ 10,80,77,619/- which has now reached to ₹ 13,85,49,940/- as on 31.03.2021 against which the Corporate Debtor, in its Reply dated 22.04.2019, stated unpaid maintenance charges of ₹ 8,05,56,962/-. Pertinently, this amount was all-inclusive total amount . xi. It is further contended, post hearing on 16.07.2019, the Corporate Debtor filed another affidavit dated 20.08.2019 and increased the amount of unpaid maintenance charges to ₹ 15,43,86,151/-. The Corporate Debtor inflated this amount by adding Exorbitant interest of ₹ 4,67,10,561/- and penalty of ₹ 8,66,14,184/- so as to save itself from the consequence of the Code. For example, for an unpaid outstanding maintenance charge of ₹ 63/- from an apartment owner, the Corporate Debtor has levied penalty of ₹ 2,07,532/-. xii. It is further contended, considering contradictory submissions of the Corporate Debtor and unjustified interest and penalty being claimed by the Corporate Debtor, this Tribunal in its order dated 15.11.2019 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid amount itself, being more than ₹ 1,00,000/-, is sufficient to initiate CIRP against the Corporate Debtor. 8. The Respondent/Corporate Debtor has filed its written submissions and has stated almost same statement as stated in their reply and additional affidavit except the following: i. That the application under Section 7 of the Code can only be filed by a Financial Creditor either by itself or jointly with other Financial Creditors. In the present case, the present Application has been filed by an Association (VGRWA/Applicant) in a representative capacity of the Flat buyers/Home buyers, which Is not permissible under the Code. Placed reliance on the Supreme Court Judgment in Civil Appeal Nos. 8337-8338 of 2017 M/S. Innoventive Industries Ltd. Versus ICICI Bank Anr. ii. It is further contended, the Hon'ble National Company Law Appellate Tribunal, in the same matter, in an appeal being Company Appeal (AT) (Insolvency) No. 21/2020, filed by the suspended director, vide its Order dated 8.1.2020 remitted the case to the Hon'ble NCLT to decide whether the Application filed by the Applicant under Section 7 of the Code i.e. the present Application fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application has been filed by the Applicant claiming the maintenance security deposit of all 644 flat buyers for an amount of ₹ 6,51,36,981/-, however, later on the Applicant filed an affidavit dated 14.10.2019 stating that all the Flat buyers are not the member of the Association and stated that the members of Association are in default and the amount of ₹ 2.77 Crs. is payable. 9. We have heard the Ld. Counsels for the petitioner and respondent and perused the averments made in the application, reply and rejoinder and additional reply filed by the respective parties as well as the written submissions filed by the respective parties. 10. In the course of hearing, Ld. Counsel for the petitioner and respondent have referred to the facts and law as mentioned in the written submissions. Therefore, it is needless to repeat the same. 11. On the basis of averments made in the application, reply, rejoinder and additional reply filed by the respective parties as well as written submissions filed by the respective parties, it is seen that the following are the admitted facts:- i. That the petitioner is the registered welfare association of M/s. Vipul Greens Residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said facts, we consider the claim of the petitioner. The corporate Debtor has also filed an additional written submissions and enclosed the order dated 08.01.2020 passed by Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 21 of 2020 in the matter of Vipul Limited Vs. M/s. Vipul Greens Residents Welfare Association and submitted that the Corporate Debtor had challenged the order dated 15.11.2019 passed by this Adjudicating Authority and the Hon'ble NCLAT has set aside the order dated 15.11.2019 and remitted the case to the Adjudicating Authority with a direction to decide the matter in accordance with law, taking into consideration the fact whether the claim, as made, comes within the meaning of 'financial debt' as defined under Section 5(8) and on the basis of Form-1 as filed by the applicant and not on the basis of pleading by one or other parties. 14. We have perused the order passed by the Hon'ble NCLAT in that appeal (supra) and the relevant portions of the order are quoted below:- 9. In view of the aforesaid insertion of provisions under explanation below Section 7, the Adjudicating Authority is only required to see whether the application under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in our considered view, the petitioner has fulfilled the minimum requirement for filing an application under the amended Section 7 of IBC, 2016. 17. Since the Hon'ble NCLAT in the Company Appeal (AT) (Insolvency) No. 21 of 2020 in the matter of Vipul Limited Vs. M/s. Vipul Greens Residents Welfare Association in para 07 referred to the decision of the Hon'ble Supreme Court in the matter of Innoventive Industries Ltd. v. ICICI Bank-, we would like to refer to the relevant para of that decision as below:- 7. In Innoventive Industries Ltd. v. ICICI Bank- , the Hon'ble Supreme Court has already held as to how an application under Section 7 can be decided and the fact is to be noticed. The Hon'ble Supreme Court also observed that what objection can be raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt , which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; Section 5 (7) of IBC : Financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; 20. On plain reading of the definitions referred Supra, we find 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anupam Tiwari' (Resolution Professional for M/s. Jain Mfg. (India) Pvt. Ltd. Anr. wherein it is held that the 3rd Respondent therein 'BVN Traders' is a 'Financial Creditor' within the meaning of Section 5(7) of the Code and the debt in question is a 'financial debt' within the meaning of Section 5(8) of the Code. 40. It is the plea of the Appellant that the 'I B' Code statutorily acknowledges a deposit as a form of financial debt and further that there was no denial of the fact that the amounts being with the 'Corporate Debtor' as well as of the request to arrange funds for withdrawal. In this connection, it is the stand of the Appellant that Appellant's son Vijesh Gupta sent an e-mail to Rahul Chowdhary requesting the 'Corporate Debtor' to arrange withdrawal of ₹ 20 lacs as four persons in his family (including the Appellant) had total deposits of around ₹ 70 lacs and they had a requirement of ₹ 20 lacs and thereafter he sent reminder, e-mails on 11.12.2013, 17.12.2018, 20.12.2018 and 24.12.2018 and that on 27.12.2018, Rahul Chaudhary replied that by stating that it was not possible at that moment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/Petitioner (u/s 7 of the Code), to admit the same and to proceed further in the manner known to law and in accordance with law. 22. Now in the light of the decision (Supra), we consider the case in hand. We notice that 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. 23. In view of this clause of the agreement, when we consider the definition of 'financial debt' referred (supra), 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. Hence, we are of the considered view that 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity Deposit of ₹ 2,77,93,782/- plus interest accrued thereon but it has defaulted in payment of this amount to the Petitioner, which is sufficient to initiate CIR Process against the Corporate Debtor. 29. So, considering these submissions, we are unable to accept the contention of the respondent that after adjusting the amounts shown in the Annexure R-II there are no outstanding dues, which are payable by the Corporate Debtor to the Financial Creditor. 30. Hence, for the reasons discussed above, we are of the considered view that 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. And in view of the decision of the Hon'ble Supreme Court in the matter of Innoventive Industries Ltd. v. ICICI Bank -, the moment, the applicant satisfies the Adjudicating Authority that there is Financial Debt or there is any default of payment, application is complete under Sub Section 2 of Section 7 and there is no disciplinary proceeding pending against the proposed IRP, the Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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