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TMI Blog2021 (8) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the return assured would be given through the re-sale of apartment only. In Clauses 2(f) (g) of the Agreement, the Home Buyer herein is given a choice to retain the apartment or to sell the earmarked unit. In a regular Builder Buyer Agreement, the Home Buyer does not have this option of exercising his choice of taking or not taking the possession of the subject unit. In a normal Builder Buyer Agreement if the Buyer does not accept the possession, the EMD is forfeited. In this case, the Buyer gets his money plus 25% assured return even if he chooses not to retain the apartment. This Agreement is only a camouflage of actually financing the construction of the flat. Though the Respondent has denied that the Respondent s son had entered into a Settlement Agreement with the Corporate Debtor for return of the principal amount, it is noted that the Learned Counsel on instructions has submitted that they are ready to settle the matter and return the principal amount - the Order of Admission under Section 7 is set aside. Appeal allowed. - COMPANY APPEAL (AT) (INSOLVENCY) No. 1020 of 2019 - - - Dated:- 12-8-2021 - [Justice Anant Bijay Singh] Member (Judicial) And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consideration for purchase of a residential apartment. Though, a considerably long period has lapsed, even the principal amount has not been repaid by the Corporate Debtor as per the Memorandum of Understanding. It is, therefore, evident that the Corporate Debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees One Lakh. Thus, the application warrants admission as it is complete in all respects. 3. Submissions of the Learned Counsel for the Appellant/ Corporate Debtor : Learned Counsel appearing for the Corporate Debtor strenuously argued that the Impugned Order was passed Ex-Parte. No Affidavit of Service was filed by the first Respondent as on 10.05.2019, their clerk filed an Affidavit on 14.05.2019 stating that the Service of Affidavit was by hand and email on 07.05.2019. Thereafter on 15.05.2019, the Corporate Debtor was proceeded Ex-Parte noting that though the report does not bear the stamp/seal of the Corporate Debtor , the email annexed to the Affidavit of Service shows that the Corporate Debtor has been served . It is denied that any such email was received by the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld made till 07.07.2017. Despite several reminders, the Corporate Debtor did not return the amount of ₹ 25 Lakhs, which was paid towards part consideration of the said flat, alongwith assured return of 25% per annum. The Financial Creditor issued a Demand Notice on 01.02.2019 through Speed Post and email demanding a sum of ₹ 47,31,164.38/- which is inclusive of the principal and the interest amounts. The Notice returned with a postal endorsement the Addressee refuses to accept , but the email did not bounce back. The Financial Creditor filed an Application under Section 7, the advance copy of which was also sent through courier to the Corporate Debtor . Subsequently, the Adjudicating Authority issued a Notice on 02.05.2019 to the Corporate Debtor with a direction to file Affidavit of Service and the case was re-notified on 10.05.2019. In compliance of the Order, a complete Paper Book was served on the Corporate Debtor by hand on 07.05.2019. The person receiving the Petition did not put a stamp of the Company. The service was also affected through email on 07.05.2019. The case was adjourned to 15.05.2019 and the Adjudicating Authority based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Adjudicating Authority we do not see any grounds in the contention of the Learned Counsel appearing for the Corporate Debtor that there was no Company seal and stamp on the Notice delivered by hand and therefore Notice was not properly effected. We also observed that the Demand Notice issued prior to filing of the Section 7 Application had returned with the postal endorsement refused to accept . 7. Rule 38 of NCLT Rules, 2016, reads as follows: 38. Service of Notices and Processes.- (1) Any notice or process to be issued by the Tribunal may be served by post or at the e-mail address as provided in the petition or application or in the reply; (2) The notice or process if to be served physically may be served in any one of the following modes as may be directed by the Tribunal;- (a) by hand delivery through a process server or respective authorized representative; (b) by registered post or speed post with acknowledgement due; or (c) service by the party himself. (3) Where a notice issued by the Tribunal is served by the party himself by hand delivery, he shall file with the Registrar or such other person duly authorized by the Registrar in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option was exercised by the Respondent No. 1. (f) The Applicant shall, at the end of 24 Months or the issuance of the final LTC by the Competent Authority, whichever is earlier, exercise in writing the option of either selling the Earmarked Units or can choose to retain the same. (g) In the event if the Applicant, chooses to retain the apartment, then there will be no obligation on the part of the Company to return the investment along with the assured return and he will adhere to the payment plan given by the company. 11. Whether the transaction between the Allottee and the Corporate Debtor is clarified to be treated as Financial Debt under Section 5(8) of the Code. Relevant Provisions: 12. Section 5(7) of the Code defines a Financial Creditor :- (7) 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; 13. Section 5(8) of the Code defines the Financial Debt in the following terms:- (8) financial debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out money, commonly from a fund or in settlement of a debt or account payable. 2. The money so paid; an amount of money given for a particular purpose. 71. In the present context, it is clear that the expression disburse would refer to the payment of installments by the allottee to the real estate developer for the particular purpose of funding the real estate project in which the allottee is to be allotted a flat/apartment. The expression disbursed refers to money which has been paid against consideration for the time value of money . In short, the disbursal must be money and must be against consideration for the time value of money , meaning thereby, the fact that such money is now no longer with the lender, but is with the borrower, who then utilizes the money (Emphasis in bold supplied) 15. This Tribunal in Subha Sharma Vs. Mansi Brar Fernandes Ors. decided on 17.11.2020 in Company Appeal (AT) (Insolvency) No. 83 of 2020 while dealing with a similar issue has placed reliance on the ratio of Pioneer Urban Land and Infrastructure Ltd. (Supra) and also the Rules framed by Andaman and Nicobar Islands Real Estate (Regulation and Development) (Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued a Notice on 01.02.2019 seeking the refund of the entire amount together with interest at 25% per annum, from 08.07.2015 till 31.01.2019 amounting to ₹ 47,31,164.38/-. The assured rate of interest offered at 25% per annum indicates that the Allottee had invested, seeking interest in the form of high assured returns. The Hon ble Supreme Court in Para 50 of Pioneer Urban Land and Infrastructure Ltd. (Supra) has held as follows:- 50. .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/real estate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually financing the construction of the flat. Hence, we hold that the Home Buyer sought to benefit from this lucrative Agreement and is squarely covered by the ratio of the Hon ble Supreme Court in Pioneer Urban Land and Infrastructure Ltd. (Supra). The I B Proceedings is not a recovery proceeding and we place reliance on the ratio of the decision of this Tribunal in Binani Industries Limited Vs. Bank of Baroda Anr. Company Appeal (AT) (Insolvency) No. 82 of 2018 wherein it is observed that the IBC is not a recovery proceeding. In fact, the I B Code prohibits and discourages recovery in several ways. 19. Though the Respondent has denied that the Respondent s son had entered into a Settlement Agreement with the Corporate Debtor for return of the principal amount, we note that the Learned Counsel on instructions has submitted that they are ready to settle the matter and return the principal amount. 20. For all the aforenoted reasons, the Order of Admission under Section 7 is set aside. The Corporate Debtor is released from all the rigours of law and is allowed to function independently through its Board of Directors with immediate effect. Keeping in view the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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