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TMI Blog2023 (3) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... found in the order of the Appellate Tribunal contained in order dated 04.02.2020, thereby there was no case of the Appellant therein to set aside the order dated 20.08.2019 - This Appellate Tribunal, taking the support of the ratio as laid down by the Hon ble Supreme Court of India in the case of COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ], regarding economic experimentation, took on challenge for finding new dynamic solution and laid down for the first time the concept of Reverse CIRP along with other aspect related to the case in Para Nos. 13, 15, 20, 21, 25, 26, 29, 30 31 of (04.02.2020) as discussed in preceding paragraphs. Similarly, Section 14 of the I B Code, 2016, is explicit and without any ambiguity which prescribes that once CIRP has been admitted, the entire Corporate Debtor is placed under management of the IRP who shall conduct day to day affairs of the Corporate Debtor and moratorium automatically find its place. The balance has been placed on the rights and obligations of various stakeholder during this calm period as per Section 14 of the I B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process needing such clarification. This Appellate Tribunal will like to amplify that above clarification is on specific request of the Appellant in present appeal and cannot be treated as general guidance or interpretation regarding moratorium on the Corporate Debtor - moratorium on Corporate Debtor as a whole is a normal, basic and fundamental law as laid down in Section 14 of the I B Code, 2016 and need to be read accordingly. Application disposed off. - I.A. No. 1987 of 2020, 2187, 2513 of 2021 & 3239 of 2022 IN Company Appeal (AT) (Ins.) No. 926 of 2019 - - - Dated:- 24-3-2023 - [Justice Rakesh Kumar Jain] Member (Judicial) And [Naresh Salecha] Member (Technical) For the Appellant : Mr. Manoj Kumar, Advocate in I.A. No. 2187 of 2021 For the Respondent : None for Respondent. JUDGMENT NARESH SALECHA, MEMBER (TECHNICAL) The Present Interlocutory Application bearing I.A. No. 2187 of 2021 has been filed by the Applicant seeking clarification/ direction arising out of this Appellate Tribunal order dated 04.02.2020 passed in CA (AT) (Ins.) No. 926 of 2019 in the matter of Flat Buyers Association Winter Hills- 77, Gurgaon vs. Umang Realtech Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -301, 3rd Floor in the real estate project Monsoon Breeze II , Sector 78, Gurugram, Haryana, which is also been developed by the same Corporate Debtor i.e Umang Realtech Pvt. Ltd. . The Applicant brings out that this Appellate Tribunal gave directions holding inter-alia that the CIRP is limited to a particular project i.e. Winter Hills-77 as per approved plan and not to other projects having different approved plans and therefore as per the Applicant , the role of IRP/ Respondent should be confined only with respect to project Winter Hills-77 instead of whole company of the Corporate Debtor . 8. The Appellant brought out that he entered into Builder Buyer s Agreement on 26.09.2014 with the Corporate Debtor for completion and handling over his booked apartment on or before 29.06.2018. However, on failure to handover the said apartment, the Applicant filed a complaint bearing Complaint No. 274 of 2018 before Haryana Real Estate Regulatory Authority, Gurgaon (HARERA) . The HARERA vide its order dated 10.01.2019 directed the Corporate debtor to refund entire amount of Rs. 49,47,725/- along with interest @10.75% per annum. It is the case of Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Reverse CIRP . The Appellant further submits that in the same order while disposing off the Appeal , this Appellate Tribunal did not mention anything about moratorium on the Corporate Debtor and as such the intent of the order is to restrict the moratorium to the project Winter Hills-77 . 12. It is further case of the Appellant that since introduction of Reverse CIRP , the role of IRP/ Respondent has been truncated and restricted only to oversee completion of the project Winter Hills-77 of the Corporate Debtor . The Appellant also submits that the role of the IRP is not to take over the affairs of the management of the Corporate Debtor and therefore the IRP/ Respondent needs to be confined to only project Winter Hills-77 as contained in the order of this Appellate Tribunal dated 04.02.2022. The Appellant has alleged that the IRP/ Respondent illegally and with wrong interpretation of the law is holding on the other projects and not allowing the legal rights of the Appellant . 13. It is the also the case of the Appellant that the intent of I B Code, 2016 is Resolution and to put back the Corporate debtor on the wheels in order to prote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or . 15. It is the case of the Appellant that CIRP and moratorium are two different concepts and the Appellate Tribunal gave its order only for the CIRP and not on aspect of moratorium of the Corporate Debtor . The Appellant brought out that the moratorium declared under Section 14 of the I B Code, 2016 is consequent to commencement of CIRP and is declared after admission of application for CIRP . Therefore, under I B Code, 2016, there is no provision to place the Corporate Debtor under moratorium without CIRP of the projects. The Appellant also submitted that once resolution/ liquidation take place arising out of CIRP , the moratorium gets lifted following due process of law. 16. It is contention of the Appellant that the agreement between the FBA of Winter Hills- 77 (Allottees/ Homebuyers/Association of Financial Creditors) and one of the Promoter Uppal Housing Pvt. Ltd. , the status of Uppal Housing Pvt. Ltd. is more of a Resolution Applicant . The Appellant further submitted that undertaking by the Uppal Housing Pvt. Ltd. to clear dues of JM Financial Credit Solutions Ltd. and others with regard to Winter Hill-77 project, further c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IRP/ Respondent emphasised that in the order dated 04.02.2020, this Appellate Tribunal clearly restricted the scope of CIRP only to project Winter Hills-77 of the Corporate Debtor and stated that the CIRP shall not be applicable on other projects of the Corporate Debtor . The IRP/ Respondent further emphasised that this Appellate Tribunal gave its order very carefully and did not alter mechanism already in place regarding moratorium of the Corporate Debtor . 20. The IRP/ Respondent clarified that plain reading of Section 14 of the I B Code, 2016 makes it clear that all assets liabilities of the Corporate Debtor are covered under moratorium and not assets liabilities of the specific project as claimed by the Appellant . 21. The IRP/ Respondent argued that the conjoint reading of two concerned orders i.e. this Appellate Tribunal order dated 04.02.2020 along with the Adjudicating Authority order dated 20.08.2019, clearly establishes that the CIRP has been restricted to only Winter Hills-77 project, however, moratorium will be against the Corporate Debtor as a whole. The IRP/ Respondent mentioned that the intent of this Appellate Tribunal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uing. 25. The IRP/ Respondent emphasised that there is no scope for any amendments or modifications or clarifications on this Appellant Tribunal order dated 04.02.2020 which is crystal clear. The IRP/ Respondent submitted that following spirit of the order dated 04.02.2020 of this Appellate Tribunal the IRP/ Respondent, has given all opportunities for completion of project Winter Hills-77 and he has been overseen receivables, disbursements and progress of the project as per timelines agreed between the Corporate Debtor and the Appellant . The IRP/Respondent submitted that in its order, this Appellate Tribunal did not give any direction to the contrary as contained in the Adjudicating Authority dated 20.08.2019 with reference to aspects of moratorium. The IRP/ Respondent submitted that in the wisdom of this Appellate Tribunal , an experimentation was allowed for Reverse CIRP only for one project without touching other projects of the Corporate Debtor and without altering impact of moratorium on the Corporate Debtor and therefore by no way, any intent exist, based on this Appellate Tribunal order dated 04.02.2020 to restrict the scope functioning of the IRP/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te debtor before the Adjudicating Authority when a default has occurred. [Provided that for the financial creditors, referred to in clauses (a) and (b) of subsection (6A) of section 21, an application for initiation corporate insolvency resolution process against the corporate debtor shall be filed jointly by 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: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less: Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first or second provisos and has not been admitted by the Adjudicating Authority before the commence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsolvency resolution process shall commence from the date of admission of the application under sub-section (5). (7) The Adjudicating Authority shall communicate- (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be. 14. Moratorium. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. (emphasis supplied) 30. This Appellate Tribunal has also carefully gone through the order dated 20.08.2019 passed by the Adjudicating Authority and relevant paras read as under:- 21. Accordingly, in terms of Section 7(5) (a) of the Code, the present application is admitted. 24. We also declare moratorium in terms of Section 14 of the Code. A necessary consequence of the moratorium flows from the provisions of Section 14 (1) (a), (b), (c) (d) and thus the following prohibitions are imposed which must be followed by all and sundry: (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Flat Buyers Association of Winter Hill 77 Gurgaon also accepted the aforesaid proposal. It is informed that JM Financial Credit Solutions Ltd one of the financial institution has also agreed to cooperate in terms of agreement with the condition that they will get 30% of the amount paid by the allottees at the time of the registration of the flat/apartment. 15. Uppal Housing Pvt. Ltd.' invested certain amount as an outsider Financial Creditor and as Promoter cooperating with the Interim Resolution Professional, having expertee of real estate project, so we asked it to give time frame for completion of the flats/apartments of the project and time frame for providing common area facilities like Swimming Pool, Club House etc. as per the agreement. They were directed to provide a chart showing the amount as due from different allottees and default, if any, committed by allottee(s). The progress report has also been taken on record. Following facts have been highlighted by Uppal Housing Pvt. Ltd., which is also accepted and endorsed by Mr. Manish Kr. Gupta, Interim Resolution Professional, who is present and always remain present in person. (i) There are 706 nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the construction work and essential services like electricity, water fit-outs would be completed within a period of 3 more months. Swimming Pool and playgrounds are structurally ready and will be functional once enough allottees start actually residing in their respective flats. Further, Club House would be completed within a period of 4 months. (vii) The Corporate Debtor has already applied for water connection and are in process of applying electricity connection. The Corporate Debtor is following up with the statutory authority(ies) so that water and electricity connections provided expeditiously. (viii) The Corporate Debtor has already installed two lifts each in every tower. Lifts would be functional as per the requirement of the allottees. (ix) It is submitted that Air condition, Kitchen, Wardrobes, fans, Chimney, Geyser would be installed in the respective flats before the allottees actually starts residing in their respective flats. Approximately 40-42% allottees have taken possession without the fit-outs and they will do necessary fit-outs on their own. Such allottees have made payment to the Corporate Debtor after deducting the cost of the fit-outs. The Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real estate) of that particular project is to be maximized for balancing the creditors such as allottees, financial institutions and operational creditors of that particular project. Corporate Insolvency Resolution Process should be project basis, as per approved plan by the Competent Authority. Any other allottees (financial creditors) or financial institutions/ banks (other financial creditors) or operational creditors of other project cannot file a claim before the Interim Resolution Professional of other project and such claim cannot be entertained. So, we hold that Corporate Insolvency Resolution Process against a real estate company (Corporate Debtor) is limited to a project as per approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans approved. For example in this case the Winter Hill 77 Gurgaon Project of the Corporate Debtor has been place of Corporate Insolvency Resolution Process. If the same real estate company (Corporate Debtor herein) has any other project in another town such as Delhi or Kerala or Mumbai, they cannot be clubbed together nor the asset of the Corporate Debtor (Company) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he unsold flats/apartments, by way of a Tripartite Agreement between the Purchaser, Interim Resolution Professional/ Resolution Professional and Promoter (Uppal Housing Pvt. Ltd.). The proceeds as may be generated from such sale should be utilized for completion of the project and payment to Financial Institutions/Banks and Operational Creditors. Once the project is completed, the Interim Resolution Professional will mover application before the Adjudicating Authority (National Company Law Tribunal) with the report of completion and ask for disposal of application under Section 7, Rachna Singh and Ajay Singh (Allotees Financial Creditors) having already occupied their flats. 31. However, if the Promoter fail to comply with the undertaking and fails to invest as financial creditor or do not cooperate with the Interim Resolution Professional/ Resolution Professional, the Adjudicating Authority (National Company Law Tribunal) will complete the Insolvency Resolution Process. The appeal stands disposed of with aforesaid observations and directions. (emphasis supplied) 32. The intent of Section 7 of the I Code, 2016 is pretty clear and the role of Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to complete such projects without involving the third party i.e. Resolution Applicant , albeit, under supervision of the IRP . 35. As observed in preceding paragraphs that, one of the Promoter i.e. Uppal Housing Pvt. Ltd./ Intervenor agreed in bringing finance but remaining outside the CIRP and perform the role of Financial Creditor/ Lender in order to assist that the Reverse CIRP become successful and allottees get the possession of the flat of Winter Hills-77 . It was also made clear that no third party intervention would take place during CIRP which amplify that no Prospective Resolution Applicant were to be invited and involved and freedom was given to the Corporate Debtor to complete the project by bringing suitable finances under overall supervision and control of the IRP . This Appellate Tribunal in its order dated 04.02.2020 also factored into the development that the original applicants moving Section 7 application before the Adjudicating Authority which resulted into CIRP of the Corporate Debtor , joined hands with the Appellants therein FBA and became its member and have taken possession of their flats and sale deeds which have also been reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RP to move an application before the Adjudicating Authority (NCLT) with the report of completion and asking for disposal of application under Section 7 of the I B Code, 2016. The appeal was disposed off accordingly with observations and directions discussed earlier. 40. The intent of order of this Appellate Tribunal dated 04.02.2020, therefore, seems to restrict the scope of the Reverse CIRP to only project Winter Hills-77 , whose two allottees, namely, Rachna Singh and Ajay Singh , filed an application asking for the CIRP of the Corporate Debtor and who not only got the possession of their flats but also received sale deeds and were able to get these registered in their favour. Thus, technically the grievances of the Original Applicants/ Movers of Section 7 application have been satisfied. It is also noted that in the Appeal filed before this Appellate Tribunal by the FBA in CA (AT) (Ins.) No. 926 of 2019, the request was made to set aside the order of the Adjudicating Authority revoking the CIRP and resultant moratorium on the Corporate Debtor . We have already noted and examined in details that the said Appeal CA (AT) (Ins.) No. 926 of 2019 was di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the concept of Reverse CIRP was also allowed to the specific project and without touching or commenting on other projects and assets of the Corporate Debtor and without any specific direction/observation regarding continuation of moratorium on other projects for the Corporate Debtor . 42. As regard the contention of the IRP/Respondent regarding adverse impact on other projects or even on Winter Hills-77 , in case of failure of the Reverse CIRP , this Appellate Tribunal notes that this aspect was suitably addressed in its earlier order dated 04.02.2020 in Para Nos. 21, 29 31, which have been discussed in the preceding paragraphs. Similarly, issue of ratio held by this Appellate Tribunal in one other similar case of Supertech Limited (Supra), about the CIRP and Moratorium , this Appellate Tribunal notes that the Reverse CIRP is rather an exception to normal rules and has to be decided carefully on specific and relevant facts of each case. In Supertech Limited case, the Promoter agreed to complete all projects under overall supervision of the IRP unlike in present case. 43. After careful perusal of this Appellate Tribunal s order dated 04.02.2020, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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