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TMI Blog2021 (10) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... 7PTC169675. Its registered office is at B 102, Mayur Ma Krupa Shimpoli Road, Borivali (West), Mumbai - 400092. Therefore, this Bench has jurisdiction to deal with this petition. Facts of the Case 3. The Applicant has filled this current petition due to default on the part of the Corporate Debtor provided herein as follows: A. Failure to abide by the terms of the Letter of Allotment dated 31 July 2015 bearing Flat No. 1601 and Flat No. 1604 respectively; B. Failure to register the building "Wing - E" of the project called "Imperial Heights" under the Real Estate (Development & Regulation) Act, 2016; C. Failure to construct the building "Wing - E" thereby leading to frustration of the contract (i.e. Letter of Allotment); D. Violated Section 3 of the Real Estate (Regulations and Development) Act, 2016 by taking an advance monies (i.e. 84% of total purchase consideration for Flat No. 1601 and 50% of total purchase consideration for Flat No. 1604) from the Petitioners for Imperial Height - Wing "E" and simultaneously registering only Wing "A" and Wing "B" of the Imperial Heights and not registering and/or intimating about the present allotments issued by the Respondents eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a separate project namely Imperial Heights - Phase II under 'C' Wing under Real Estate (Regulation and Development) Act, 2016. 8. Due to the failure of the Corporate Debtor to register the project and to commence construction of the project, the Petitioners have acquired a residential flat at Andheri and thereafter requested the Corporate Debtor to repay the amounts received under the aforesaid Letters of Allotments so as to enable the Petitioners to make the payment of purchase consideration for the flat purchased at Andheri. 9. The Petitioner Submits that it is well settled that, once a contract is frustrated then under Section 65 of the Contract Act, principal of restitution applies and consideration received must be repaid. The Corporate Debtor, based on aforesaid understanding, initially agreed to repay the entire amount along with interest and accordingly paid an amount of Rs. 4,75,000/- on 15.07.2017 vide Cheque no. 275470 drawn on Bank of India in favour of Petitioner No.2. The Bank Certificate, issued by Bank of India, evidencing the payment is received by the Petitioner from Corporate Debtor is annexed as "EXHIBIT - B1" in the Petition. 10. The Petitioner submits th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere pleased to dismiss the aforesaid Appeals/Petitions thereby retaining the Order dated 25 February 2019. Submissions on Maintainability by the Petitioner: 14. The Petitioners state that the Corporate Debtor have, in express terms, admitted that the present Petitioners are the only two buyers who remain outstanding in respect of 'Wing E'. In view of the said statement, and thus the Petitioners comply with the threshold limit of 10%. In-fact, the Petitioners are 100% allottees in the project 'Wing E' pursuant to the Judgement, dated 19.01.2021, passed in the case of Manish Kumar V/s Union of India by the Hon'ble Supreme Court of India. 15. The Petitioner submits that U/s 3 of the Real Estate (Regulations and Development) Act, 2016, "no promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under the Act". In view of the above, the Corporate Debtor has violated the aforesaid Section 3 by accepting the advance monies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration of the project under Section 3 of the Real Estate (Regulation and Development) Act, 2016 and ii. the construction of the Wing E has till date not commenced. Due to the said breaches and/or failure of registration and construction of 'Wing E', the Corporate Debtors are liable to repay the amounts under Section 55, 56 and 72 of the Indian Contract Act, 1872. 21. The Petitioner further submits that under the purview of Section 46 of the Indian Contract Act, 1872, if the time for performance of the contract is not specified, the same has to be performed within a reasonable time. In the present case, a period of 6 years was given to the Corporate Debtor to perform their part of the contract. Till date the Corporate Debtor have failed to commence construction and/or register the project with the RERA Authorities. Therefore, the non-performance of the contract amounts to breach of the contract and the Petitioner have incurred loss of the amount as paid by the, and the same shall be repaid to them under Section 55 of the Indian Contract Act, 1872. 22. The petitioner submits that Under Section 3 of RERA, 2016, the Respondents were required to register the ongoing project within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind the legislative value judgment that the allottees, who must join the application under the impugned provisos, must be related to the same real estate project. The connection with the same real estate project is crucial to the determination of the critical mass, which Legislature has in mind, as a part of its scheme, to streamline the working of the Code. If it is to embrace the total number of allottees of all projects, which a Promoter of a real estate project, may be having, in one sense, it will make the task of the applicant himself, more cumbersome. It becomes a sword, which will cut both ways. This is for the reason that the complaints, relating to different projects, may be different. With regard to one project of a Promoter of real estate project, maybe, in the advanced stage, the allottees in a particular project, may not have much of a complaint. The complaint, in relation to yet another project, may be more serious. If the complaint in respect of the latter, attracts the attention of a critical mass of allottees, and the proposed applicant is part of that project in the said project, then, it may be easier for the allottees to fulfil the statutory mantra in the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. The delay and laches also results in frustration of contracts and therefore the above contract has ceased to be binding. The contract stands frustrated. 31. It is equally well-settled that once a contract is frustrated then under section 65 of the Contract Act, principle of restitution applies and the consideration received must be repaid. (refer to Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay, [1958] SCR 1122 : AIR 1958 SC 328, wherein it has been held that when a contract becomes void or frustrates, any person who has received any advantage under such agreement or contract is bound to restore it to the person from whom he had received it.) 48. In the light of the findings given above, it is, inter alia, held as under: (I) The respondent-company is liable to be wound up on the ground of its inability to pay its debt under section 433(e) of the Act for the following reasons: (a) The contract between the petitioner and the respondent-company stands frustrated under section 56 of the Contract Act and the respondent-company is liable to refund/restitute the amount received (b) Even otherwise, conditions of section 433(e) read with section 434 (1) (a) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt between the parties and that even if the Debt has arisen, it cannot be considered as one 'Financial Debt' under the IBC only on the basis of an alleged oral undertaking, which has still nit been proved in evidence. Moreover, the Letter of Allotment dated 31st July 2015 do not mention about the refund or interest. Perusal of allotment letters dated 31st July 2015 clearly shows that no date for handover of possession of the flats has been mentioned and therefore, no Default has arisen. 28. The Petitioners made vexatious statements alleging that they raised the demand notice dated 23rd November 2017 due to non-performance of the alleged "works contract". The Petitioners have referred to the allotment letters dated 31st July 2015 to be the alleged works contract The Respondent submits that a letter of allotment of a flat is not a works contract. 29. The Respondent submits that the Section 7 Petition preferred by the Petitioners is not maintainable as it does not meet the threshold prescribed under the IBC. The proviso to Section 7 of the IBC provides that, for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been registered. Further, it has been held that the Act is prospective in operation. Accordingly, it is apparent that the Act cannot have any retrospective operation and will only apply to those projects which have been completed and registered either prior to commencement of the Act or in the case of ongoing projects, the project or a phase thereof have been completed and received the occupancy certificate/part occupancy certificate within the window of three months from the date of commencement of Section (3) of the Act i.e. 1st May, 2017..." 32. Similarly, the MahaRERA in Laxmikant Kothari v. Propel Developers Pvt. Ltd., CC006000000196355, observed that the allottee's flat belonged to an unregistered wing of the developer's real estate project and, therefore, the allottee had no locus standi in respect of the said real estate project on account of the said wing being unregistered. Therefore, even under the RERA Act (and, consequently, under the IBC), the Petitioners cannot claim that they are 'allottees' and therefore falling within the definition of financial debt. 33. Respondent submits that the Petitioners in its submissions sought to contend that they are more than 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs., Company Appeal (AT) (Insolvency) No.864 of 2019, has observed that the Adjudicating Authority ought to discover whether a petition is being filed by trigger-happy allottees who would ignite the process of removal of the management of the real estate project and potentially lead the corporate debtor to its death. The NCLAT further observed that: "37...in a large number of cases in the language of the Hon'ble Supreme Court the allottees are speculative investor and not a person who is genuinely interested in purchasing a flat/ apartment. They do not 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." In such cases, the allottees would be liable for malicious prosecution. 36. Lastly, the Respondent submits that the Petitioners are not genuine allottees rather they simply seek a refund of the amount "invested" since they now want to invest in some other project. From a perusal of the aforementioned allotment letters, it is evident that the Petitioners were supposed to pay monies to the Respondent upon completion of certain slabs. Addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment Act. It is only in the event of conflict that the Code will prevail over the RERA. Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code. iii. Section 5(8)(f) as it originally appeared in the Code being a residuary provision, always subsumed within it allottees of flats/apartments. The explanation together with the deeming fiction added by the Amendment Act is only clarificatory of this position in law." 42. We have heard the arguments of Financial creditor and Corporate Debtor and perused the records. 43. In order to attract the provisions of IBC, a homebuyer must qualify as an 'Allotee' under the Section 2 (d) of the RERA Act. As the "Wing E" itself was not complete and registered, thus, the provision of RERA Act shall not apply to the Petitioner in this case as was held by Hon'ble Bombay High Court's in Macrotech Developers Ltd. v. State of Maharashtra &Ors.: "62. It is apparent from the said decision that this Court has held that the Act will only apply after the projec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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