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TMI Blog2019 (7) TMI 1847X X X X Extracts X X X X X X X X Extracts X X X X ..... Insolvency and Bankruptcy (Amendment) Ordinance, 2018 was to protect the interests of home buyers who make payments in advance for their purchase in the real estate project, as is evident from the Ordinance itself as well as the Report of the Insolvency Law Committee, March 2018 - The present transaction does not appear to be a transaction between a home buyer and developer/ builder and the sum paid for renewal of licenses does not appear to be money paid by the Applicants for their purchase in the real estate project. The Applicants have the right to employ their own experts to supervise the project and control the progress and quality of the project. The Respondent has to take consent of the Applicants before finalizing the drawing/ plans. The Applicants and the Respondent have a joint escrow account for the project which was could be controlled by the Applicants and the Applicants had the right to get the Respondent's accounts regarding the escrow account audited. All these factors show that the arrangement between the two parties was not so much of a home-buyer and builder as it was of a co-venturers or at the very least of an independent contractor and a person hiring a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cost and expenses and with its own resources on the said land. The Respondent also undertook to get the necessary sanctions, approvals and license at its own cost. In consideration, the Applicants agreed that the 60% of the complete project including super built up area, open spaces, terraces, basements, car parking spaces, common spaces etc along with the proportionate 60% share in the land underneath was proposed to be vested with the Respondent. e. As per Clause 8(a) of the Agreement, the Respondent was required to take all requisite steps to obtain necessary approvals/ sanctions within a period of eight months at its own cost. It is pertinent to mention herein that the Respondent has failed miserably in this regard so much so that the construction has not even begun till date on the said land. f. Clause 17 of the Agreement further provides the applicable service tax/ VAT relating to construction of the project and/or other taxes/ charges/ duties etc shall be paid by the Respondent. As per Clause 22 of the Agreement, all cost and expenses in obtaining the requisite permissions from various authorities i.e. Haryana Urban Development Authority, Fire Department, Director To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by e-mail at the e-mail id registered with the MCA. The speed post returned with the report 'no such person bar the given address'. No one appeared on behalf of the Respondent. The Respondent was proceeded ex-parte vide order dated 30.04.2019. 4. The issue which needs consideration in the present case is whether the claim made by the Applicant can be categorized as financial debt under Section 5(8) of the Code. The Applicant has contended that the claim is a financial debt under the explanation to sub-clause (f) of Section 5(8) of the Code as the Applicants are the allottees of the real estate project being developed by the Respondent. The Applicants have especially relied on the following clauses of the Agreement: 7. (a) That it has been agreed between the parties that upon handing over possession of the OWNERS' ALLOCATION to the OWNERS complete -in all respects including obtaining completion certificate, the DEVELOPER can sell/ lease out or transfer its share through registered deeds etc as it deems fits. Prior thereto the DEVELOPER can only enter into agreements of sale/ lease with prospective purchasers/ lessees. However, such contracts shall be entered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into agreements with the developer/ builder for share of total revenue generated from sale of apartments or share of the total area developed for sale are also to be classified as promoters under RERA. The same has been stated by the government of Goa in Circular No. 11/35/2017-DMA/ 3390(A) dated 13.02.2018. Thus, it can be concluded that landowners are not treated as allottees under RERA. In fact, they are included in the category of promoters i.e. on the same plane with the developer/ builder. Since the Code adopts the definition of allottee as found in RERA, this Tribunal will have to interpret the term in consonance with RERA, lest a situation arises where a landowner is treated as an allottee for the purposes of the Code and as a promoter for the purposes of RERA. Thus, the Applicants are not allottees and their claim is not a financial debt under Section 5(8)(f). 8. The intent behind introducing the explanation to Section 5(8)(0 also has to be noted. The amendment according to the Insolvency and Bankruptcy (Amendment) Ordinance, 2018 was to protect the interests of home buyers who make payments in advance for their purchase in the real estate project, as is evident from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement anyway. The owners are free to appoint their independent supervisors and architects to supervise the construction progress. The employees of the OWNERS shall have full right and authority to inspect the construction site at all times to come to supervise the construction and quality control of the project, without any objection/ hindrance by the DEVELOPER or its employees. 16. (a) That besides the payment of the refundable security deposit as referred above, the DEVELOPER shall also be pay/ reimburse to the OWNERS its share of EDC/IDC charges. THAT EDC/IDC charges pertaining to the DEVELOPER's share shall be reimbursed to the OWNERS as and when the same are collected by the DEVELOPER from its customers/ buyers. (b) That both parties shall be liable collect realize external development charges/ IDC to the extent of their allocation from prospective purchasers (if any). The non-payment of external development/ IDC charges by any prospective purchaser shall not afford adequate ground to any party to this contract to deny or repudiate its liability to make payment of its share of external development/ IDC charges. (c) That it is further agreed and u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment, sale, lease, transfer and/or otherwise (hereinafter referred to as the SALE PROCEEDS) shall be received and deposited in an Indian Rupees Escrow Account, to be opened/ created in the name of the said project , exclusively for the said project. However, the Owners are free and have full liberty to sell their share of 40% and take the realization to their own account of their choice and receive sale proceeds from their buyers at any time. It is hereby clarified that all the amounts in the said joint escrow account shall be utilized by the DEVELOPER for carrying out the construction of the Project and meeting out other expenses. That the DEVELOPER shall maintain a sufficient balance as mutually agreed from time to time in the said Joint Escrow Account for meeting out the construction costs. That the DEVELOPER undertakes not to use the said proceeds of the project for its own benefit or in any other projects, till such time the construction is fully completed in all respect whatsoever in terms of this Agreement. That for the purposes of the above clauses, the OWNERS shall be free to appoint their independent auditors to check and verify the books of Accounts of the DEVELOP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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