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TMI Blog2023 (1) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be noticed is that Manpreet Singh Chaddha, who was Director and has resigned before filing Section 10 Application has been transposed as Financial Creditor in Section 10 Application. It is also relevant to note that Harmandeep Singh Kandhari, who was also Director since 07.06.2011 is also shown as Financial Creditor. The financial debt of Manpreet Singh Chaddha has also been shown in Section 10 Application. The resignation of Directors few months before filing of Section 10 Application especially Manpreet Singh Chaddha, who was Director from day 1 and claiming dues as Financial Creditor in Section 10 Application fully proves the malicious intention of the Corporate Debtor. There is no doubt that 90% amount from the Homebuyers were received, which is claimed to be Rs.1400 crores and the Appellant has left most of the Project unfinished, depriving possession thereof to Homebuyers speaks for itself. The allegations made by the Homebuyers that amount has been siphoned by the Appellant finds credence by the sequence of events, which took place in the present case. When finding recorded by the Adjudicating Authority is that Section 10 Application has been initiated fraudul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocates for Wave Homebuyers Association. Mr. Rakesh Taneja, Advocate JUDGMENT ASHOK BHUSHAN, J. This Appeal by a Corporate Debtor - Wave Megacity Centre Private Limited ( Wave Megacity ) has been filed challenging the order dated 06.06.2022 passed by National Company Law Tribunal, New Delhi, Principal Bench allowing IA No.2026 of 2021 and IA No.2378 of 2021 filed under Section 65 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code ) and dismissing Company Petition No. (IB) No.197(PB)/2021 filed by Appellant under Section 10 of the Code. 2. Brief facts of the case necessary to be noted for deciding this Appeal are: (i) A Lease Deed dated 02.09.2011 was signed between Noida Authority and Wave Megacity Ltd. in respect of Plot No.CC-001, admeasuring 618,952.75 sq. mtrs. situated at Sector 25A and Sector 32, NOIDA for a period of 90 years. Wave Megacity paid payment of 10% of the total consideration, i.e., Rs.662.29 Crores. Wave Megacity was to pay the balance premium of 90% in staggered manner as indicated in the Lease Deed. Wave Megacity could not complete the construction of the Project and failed to repay the remaining 90% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Government of Uttar Pradesh vide Appeal, dated 31.07.2020. The State Government issued an order dated 17.11.2020 directing the Noida Authority to take a decision regarding its dues. Pursuant to the letter dated 17.11.2020, fresh demand notice dated 24.12.2020 was issued, demanding an amount of Rs.2519,33,47,546/-. The demand made by Noida Authority was also challenged by means of writ petition before Allahabad High Court by Wave Megacity Centre Homebuyers Association, which petition is claimed to be still pending. (vii) The Corporate Debtor filed an Application under Section 10 of the Code dated 25.03.2021 praying for initiation of Corporate Insolvency Resolution Process ( CIRP ) against the Corporate Debtor on the ground of default on the part of the Corporate Debtor. (viii) On 05.04.2021, the Adjudicating Authority passed following order: Mr. Chaudhary, Ld. Sr. Counsel undertakes to serve the copy to the financial creditor, the association of the home buyers and other creditors and also to ROC and Income Tax Department. List on 03.05.2021. (ix) In the CP (IB) No.197(PB)/2021 filed by the Corporate Debtor, several Intervention Applications were filed includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejecting Section 10 Application filed by the Corporate Debtor, which was filed on the ground of default of the Corporate Debtor in paying the dues of Noida Authority and the pre-conditions as mentioned in Section 10 of the Code, having been fulfilled, Section 10 Application ought to have been admitted. It is submitted that debts of the Noida Authority have been reflected in the Books of account of the Appellant and is also proved by the demand notices dated 26.02.2022 and notices issued thereafter. The Adjudicating Authority has nowhere examined the very existence of debt and default in the impugned order. The pendency of any criminal investigation against the Corporate Debtor has no bearing on Section 10 petition. Further, pendency of litigations against the Corporate Debtor in different Forums do not have any adverse effect on maintainability of Section 10 Application. The very purpose of Code is to protect and preserve the valuation/ assets of the Corporate Debtor. Only few handful of the allottees had filed objections opposing the Application, whereas majority of the Homebuyers would have benefited from the initiation of the CIRP. Even if, any dispute is pending with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Urban Planning and Development Act, 1973 vide order dated 17.11.2020, the Noida Authority revised the payment and final demand notice was issued on 24.12.2020. The final demand notice being dated 24.12.2020, which is during the prohibited period as per Section 10A, no Application under Section 10 could have been filed by the Appellant. The proceedings under Section 10 being proceeding in rem, both Financial Creditor and Operational Creditor can object to the very admission of the Application. The Noida Authority has filed detailed objection before the Adjudicating Authority, opposing admission of Section 10 Application. Section 10 Application was filed by the Appellant prematurely since the Appellant had not exhausted the remedy available to it under Section 41 of the Uttar Pradesh Urban Planning and Development Act, 1973 and Section 12 of the Uttar Pradesh Industrial Development Act, 1976. Default alleged by the Wave Megacity was not genuine and the same is motivated by fraud. Noida Authority is proper and necessary party to the proceeding. Noida Authority vide IA No.4270 of 2021 has raised objection to the maintainability of the Section 10 Application. Noida Authority has also fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the insolvency of the Corporate Debtor, rather the same was filed with intent to save the Appellant from its responsibilities, liabilities and prosecution. The Adjudicating Authority has rightly allowed the Applications filed under Section 65 of the Code by the Homebuyers and rejected the Section 10 Application, which does not warrant any interference by this Appellate Tribunal. 7. We have considered the submission of the Learned Counsel for the parties and have perused the records. 8. The challenge in the present Appeal is the order passed by the Adjudicating Authority allowing Applications filed under Section 65 and consequently rejecting Section 10 Application. The subject matter of the Appeal is thus, challenge to order allowing Section 65 Applications. We, thus, need to consider as to whether there were sufficient ground for allowing Section 65 Applications by the Adjudicating Authority. 9. As noted above, two Section 65 Applications were filed by the Homebuyers. First by Rakesh Taneja and Ors. and second by Anshu Saran and Ors. Before we come to the respective submission of the Counsel for the parties raised in this Appeal, we need to notice the pleadings made in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending satisfaction and the application u/s 10 IBC is an attempt to escape those Judgments and jeopardise the interests of the aggrieved homebuyers besides trying to evade/delay criminal prosecution. That one of the said erstwhile founding Directors being Manpreet Singh Chadha (DIN 00032276) since 7.6.11 has been transposed as Financial Creditor in the present petition. That the applicants most respectfully submit that the said changes in the board of the Company have been made just before the filing of the captioned petition on 11Jan21 with malafide intention in so far as all the other stakeholders are concerned including the homebuyers. Furthermore, this is a fact which has been conveniently concealed by the petitioner from this Hon'ble Tribunal and warrants immediate and urgent attention as this would reflect to the malicious intent of the petitioner. x) That the most mischievous and fraudulent action on the part the Company is an attempt at transposition of the said founding director of the Company Manpreet Singh Chadha (DIN 00032276) since 7.6.2011 (the day the Company was incorporated), as a Financial Creditor to whom the Company allegedly owes over Rs.530 crores, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncity Hitech Infrastructures Pvt. Ltd.; (ix) Sh. Harmandeep Singh Khandari; (x) Durga Enterprises Pvt. Ltd.; (xi) Isthmus Industries Pvt. Ltd.; (xii) National synthetics Ltd; and (xiii) Home buyers and commercial property buyers/ allottees as per the list annexed herewith as Annexure 22 . 11. It is also relevant to note that Harmandeep Singh Kandhari, who was also Director since 07.06.2011 is also shown as Financial Creditor. The financial debt of Manpreet Singh Chaddha has also been shown in Section 10 Application. The resignation of Directors few months before filing of Section 10 Application especially Manpreet Singh Chaddha, who was Director from day 1 and claiming dues as Financial Creditor in Section 10 Application fully proves the malicious intention of the Corporate Debtor. There is no doubt that 90% amount from the Homebuyers were received, which is claimed to be Rs.1400 crores and the Appellant has left most of the Project unfinished, depriving possession thereof to Homebuyers speaks for itself. The allegations made by the Homebuyers that amount has been siphoned by the Appellant finds credence by the seq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 285 2,53,93,33,863.44 Amount in Crores 253.93 12. The First Information Report registered by EOW being FIR No.63 of 2021 was filed in August 2020 that is much before filing of Section 10 Application, which has also been noticed by the Adjudicating Authority in paragraph 22 of the impugned order. The facts brought on record and sequence of events indicate that dominant purpose and object of filing Section 10 Application was to save the Corporate Debtor from liabilities, responsibilities and prosecution. As per the pleadings, the possession of the units to the Homebuyers were to be handed over by 2016 and 90% of the amount from all the Homebuyers were realised before 2016. Filing of the Application under Section 10 took place in March 2021, which indicate that Application was filed with malicious purpose other than resolution of the Corporate Debtor. The Adjudicating Authority has categorically returned a finding that in the garb of IBC proceedings, the Corporate Debtor has attempted to play fraud on its stakeholders. In paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in Prime Minister s Relief fund within 15 days from today. 13. The learned Counsel for the Appellant has strenuously contended that present is a case where default on the part of the Appellant in payment of dues of the Noida Authority has been fully proved and when debt and default is proved, Section 10 Application ought to have been admitted. The learned Counsel for the Appellant has relied on judgment of this Tribunal 2017 SCC OnLine NCLAT 566 Unigreen Global Pvt. Ltd. vs. Punjab National Bank and Ors. Reliance has been placed on paragraphs 20, 22 and 23 where following has been laid down: 20. Under both Section 7 and Section 10, the two factors are common i.e. the debt is due and there is a default. Sub-section (4) of Section 7 is similar to that of sub-section (4) of Section 10. Therefore we, hold that the law laid down by the Hon ble Supreme Court in Innoventive Industries Ltd. (Supra) is applicable for Section 10 also, wherein the Hon ble Supreme Court observed as 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 recti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Adjudicating Authority may impose upon a such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees. (2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees. 15. When finding recorded by the Adjudicating Authority is that Section 10 Application has been initiated fraudulently and maliciously, even if there is debt and default, the Adjudicating Authority is not obliged to admit Section 10 Application. Section 10 and Section 65, which are part of the same statutory scheme needs to be read together to give effect to the legislative scheme of the Code. In event CIRP is initiated by a corporate applicant fraudulently with malicious intent for any purpose other than the resolution of insolvency, holding it that it is obligatory for the Adjudicating Authority to admit Section 10 Application, will be contrary to the statutory scheme under Section 65. In event conditions under Section 65 are fulfilled, Section 10 Application can be rejected, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation. - For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020. 18. The Application under Section 10 itself gives the details of Demand Notices issued by NOIDA Authority in Column 8, Part III of the Application, which is to the following effect: 8. List of documents attached to this application in order to prove the existence of financial/ operational debt and the amount in default Operational Creditor: Copies of demand notices and reminders dated 26.02.2022, 18.03.2020, 11.05.2020, 18.05.2020, 17.07.2020, 31.07.2020, 19.08.2020, 24.12.2022 and 11.02.2021 from the Noida Authority to the Corporate Debtor, along with the typed English translation are annexed as Annexure 12 (Colly.) . 19. The first demand, which has been referred to in the Application is dated 26.02.2020. The second demand notice is 18.03.2020. Both these notices were prior to 25.03.2020 as provided in Section 10A. It is, thus, clear that default was committed prior to 25.03.2020. As per the Lease Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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