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TMI Blog2023 (11) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Adjudicating Authority (National Company Law Tribunal), New Delhi, Bench-VI, by which order the Adjudicating Authority held Application under Section 7 filed by Mr. Nitin Batra and Others, Respondents herein under Section 7 of the IBC as maintainable. Aggrieved by the said order, these three Appeals have been filed by the Appellants who were Respondents in Section 7 Application filed by the allottees of a Real Estate Project. 2. Brief facts of the case necessary to be noticed for deciding these Appeals are:- 2.1. The Appellant in Company Appeal (AT) (Insolvency) No. 1506 of 2022 i.e. 'Anand Infoedge Pvt. Ltd.' was allotted land measuring 100,980 sq. mtrs. bearing Plot No.1, Sector 143 Noida by the New Okhla Industrial Development Authority by Lease Deed dated 21.08.2008. 'Anand Infoedge Pvt. Ltd.' was given possession on 28.08.2008. 'Anand Infoedge Pvt. Ltd.', the lessee of the land entered into Collaboration Agreement with 'M/s. Mist Avenue Private Limited', the Appellant in Company Appeal (AT) (Insolvency) No. 1478 of 2022 (hereinafter referred to as "Mist Avenue") w.e.f. 26.10.2012 for development of the project land. 'Mist Avenue', who under the Collaboration Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist Direct', hence, the Applicants (allottees) have no right to raise any objections against 'Mist Avenue'. The RERA registration permission to construct and other rights and obligations are solely with 'Mist Direct' and not with 'Mist Avenue', hence, the application under Section 7 was not maintainable. It was contended on behalf of 'Mist Direct' that their application as initially stated to have been filed by 143 allottees/ Financial Creditors. Applicants have numbered joint allottees separate Financial Creditor so as to increase the number of Financial Creditors. In fact, the application was filed only by allottees of 115 units. It was pleaded that five allottees have settled their claims, hence, due to extinguishment of outstanding claim they are not Financial Creditors. It was further pleaded that 11 claims were barred by Section 10A and could not have been filed or entertained. Large number of claims of Appellants were barred by limitation. One claimant Mr. Yarmohammad was disqualified since he has not made the entire payment. The threshold as prescribed under Section 7 of the IBC being not fulfilled, application was not maintainable and deserves to be rejected. Date of defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he companies as three companies which do not pass any test mentioned by this Appellate Tribunal in case of "Radico Khaitan Ltd. vs. BT & FC Pvt. Ltd.- Company Appeal (AT) (Ins.) No.919 of 2020" 5. Shri Krishnendu Dutta, Learned Senior Counsel appearing for 'Mist Direct' submits that the application filed by allottees did not fulfil the threshold as prescribed under Section 7. Application was not filed by 100 allottees although there were 115 unit holders who have filed the application but the claims of large number of applicants was not valid claim nor they could have been part of the application. Shri Krishnendu Dutta elaborating his submission submits that the claims of 18 applicants were barred by limitation whereas claims of 11 allottees were barred by under Section 10A since default has occurred during 10A period. Claims of eight allottees were settled, hence, could not be part of application. Claims of three allottees were premature. In view of the above number of allottees who could not have joined the application, the threshold of 100 of allottees was not fulfilled and the application was liable to be dismissed on this ground alone. It is submitted that the Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in "Manish Kumar vs. Union of India & Anr.- 2021 SCC OnLine SC 30" and submits that the issue has been settled. 8. We have considered the submissions of the Counsel for the parties and perused the record. 9. Three main questions which arise for consideration in this Appeal are:- (i) Whether the joint application under Section 7 against 'Anand Infoedge Pvt. Ltd.', 'Mist Avenue' and 'Mist Direct' is maintainable? Three Respondents- Appellants herein being separate corporate entities. (ii) Whether Section 7 Application filed by the allottees fulfils the threshold as prescribed under the IBC? (iii) Whether while scrutinizing the claims of each applicants of joint application filed under Section 7, it has to be established that the financial debt exist against each applicant in which default has been committed and the claim of the applicants is not barred by limitation and applicants fulfil all eligibility of valid allottee who is entitled to file Section 7 application? Question No.(i) 10. For answering Question No.(i), we need to first notice the nature of transaction entered between the allottees and the three Appellants who are Respondents to Section 7 Application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d project, as per specifications agreed separately in writing, the share of the parties in the built up space (the said buildings) will be as follows: OWNER: 15% (Fifteen Percent) Developer: 85% (Eighty Five Percent) The Developer is however solely authorized for Sale of the entire project area including Owner's share of15% share of built up space in its exclusive discretion. All contracts entered into by the Developer in this regard will be binding on the Owner. This Collaboration agreement will not be treated as a partnership between the Owner and the Developer." 11. By the Collaboration Agreement, developer was authorised to develop the building and entitled to sell or recover 85% of the units constructed and was also entitled to sell the balance 15% of the units belonging to 'Anand Infoedge Pvt. Ltd.' on their behalf. 'Mist Avenue' in pursuance of the Development Agreement has allotted different units to the allottees who are Respondents herein. Copy of one Builder Buyers' Agreement has brought on record by the Appellant along with the additional documents filed on 03.02.2023. Builder Buyer Agreement entered between 'Mist Avenue' and one allottee Mr. Gaurav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing charges in this regard shall be recovered from the allottee(s)." 12. The first Collaboration Agreement was cancelled by 'Anand Infoedge Pvt. Ltd.' vide cancellation deed dated 27.07.2017 entered between 'Anand Infoedge Pvt. Ltd.' and 'Mist Avenue'. The Cancellation Agreement provided that second party has handed over the possession of the project land back to the first party on "AS IS WHERE IS WHAT EVER THERE IS" basis along with all material/ equipment etc. lying at the site. On the same day i.e. on 27.07.2017, Collaboration Agreement was entered between 'Anand Infoedge Pvt. Ltd.', 'Mist Direct' and 'Mist Avenue'. 'Mist Avenue' which by Second Collaboration Agreement has granted development construction right and development of project to 'Mist Direct'. Agreement also contemplates execution of General Power of Attorney i.e. 'Mist Direct' revenue share was provided in clause 3.1 which is to the following effect:- "3. REVENUE SHARE 3.1. In consideration of the grant/transfer/assignment of the Development Rights by Owner to the Developer, and the Developer undertaking the Project under the terms of the Development Agreement, it has been agreed between Owner and the Devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the outset we wish to thank you all for your support and patronage with which the Festival City' (Project) is coming up inspite of various challenges/delays caused in obtaining various permissions and approvals (since obtained by the Company). We were monitoring the progress of the Project closely with an intention to expedite the same to ensure delivering of your Unit(s) as early as possible inspite of the many speed breakers/disturbances. We found that there was need for strengthening the process. If necessary reorganizing the Project implementation plan. We are happy to inform you that erstwhile Management for various reasons ultimately we decided to bring us as new and efficient implementing partner so that our esteemed buyers may be delivered their Units as early as possible. Accordingly, the arrangements of Anand Infoedge Private Ltd. ('AIPL') with earlier collaborator (Mist Avenue Private Ltd) were cancelled in entirety and a new arrangement was entered with us on 27th July 2017. We have now taken charge of the project for early implementation. Our esteemed allottees/buyers shall be provided the Services in best possible manner. We wish to inform you ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed units, all are necessary ingredients of any resolution which may help the allottees to receive their units, in absence of any of the appellants in Corporate Insolvency Resolution Process, Resolution of project and revival of the Resolution of project is impossible. 17. We need to look into some decided cases which have been cited by both the parties in support of their submissions. We may first notice Judgment in C.A.(AT) Ins. No. 155 of 2018, Mamatha Vs. AMB Infrabuild Pvt. Ltd. & Ors. The above case was a case where an application was filed under Section 7 by a Real Estate Allottee, against two corporate debtors were impleaded in the Application, Application was rejected by the Adjudicating Authority. In the Application AMB Infrabuild Pvt. Ltd. who was owner of the land and Earth Galleria Pvt. Ltd. who was developer, both were impleaded as Corporate Debtor No. 1 and 2. Collaboration Agreement was entered between both the Respondents i.e. owner of the land and developer to develop the project. This Tribunal noticed the facts of the case and made following observations and conclusions in paragraph 11,12,13 and 14: "11. The 'Collaboration Agreement' dated 3rd May, 2013 reached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g applications stand disposed of." 19. Next Judgment relied by Learned Counsel for the Respondents is Judgment of this Tribunal in C.A.(AT) Ins. No. 377 of 2019, Edelweiss Asset Reconstruction Company Ltd. Vs. Sachet Infrastructure Pv.t Ltd. The above was also a case of an Infrastructure Company. The principal borrower was Adel Landmarks Ltd. Corporate Guarantee was given by different corporate guarantees for securing the loan, separate applications were filed under Section 7 of the Code. Application against the principal borrower under Section 7 was admitted by the Adjudicating Authority and when the question arose regarding applications under Section filed against the principal guarantors this Tribunal in paragraph 9 noted the case of the Appellant : "9. According to the Appellant, the nine 'Corporate Debtors', as referred to above, are the landholders who in concert with 'Adel Landmarks Limited' ('Principal Borrower') decided to develop the total area by constructing Infrastructure for the allottees. The Agreements were signed between 'Adel Landmarks Limited' and nine 'Corporate Debtors' aforesaid for such development and for the said reason, 'Principal Borrower' had availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes Pvt. Ltd.' and appoint the 'Resolution Professional' of 'Adel Landmarks Limited'- (Developer) ('Principal Borrower') as common 'Resolution Professional' to ensure that the 'Corporate Insolvency Resolution Process' against 'Adel Landmarks Limited'- ('Corporate Debtor') proceed jointly and 'Information Memorandum' is prepared in a manner that the 'Residential Plotted Colony' at village Palwal at Sectors 8 & 9 in terms of the License No. 46 of 2009 and License No. 53 of 2009, is completed in one go by initiating a consolidated 'Resolution Plan(s)' for total development." 22. The above two judgments clearly support the submission of the Respondents that consolidated Insolvency Resolution Process can be initiated against one or more Corporate Debtors who have come together to develop a project. 23. Mr. Abhijeet Sinha, Learned Counsel appearing for the Appellant- Anand Infoedge Pvt. Ltd. has relied on the Judgment of this Tribunal in Radico Khaitan Ltd. Vs. BT&FC Pvt. Ltd. & Ors., C.A.(AT) Ins. No. 919 of 2020. Mr. Sinha submits that this Tribunal relying on the order of the Adjudicating Authority in State Bank of India Vs. Videocon Industries Ltd. laid down that for consolidating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being controlled and managed by the same group of promoters. Mere change in the shareholding of the Respondent No. 3 Company will not save the Respondent No. 1 Company since the conspectus of facts it is evident that Respondent No. 3 Company was created by the Respondent No. 1 Company only as a face for the project Festival City, whereas the ultimate beneficiary is the Respondent No. 1 Company only as in the Second Collaboration Agreement, the Respondent No. 3 Company was authorized to take all appropriate actions as well as it was made obliged to incur costs in relation to the project and also responsible for developing strategy of marketing and such other decisions regarding the marketing, branding, pricing, sales and all other decisions stated to be decided with mutual consent. However, Respondent No. 3 company has not been given any power to sell units under the project to any third party without the consent of Respondent No. 1 Company, which clearly established the relation of the principal and agent between the parties." 25. We are in agreement with the view expressed by the Adjudicating Authority that Section 7 Application filed against all the three appellants together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Process against the corporate debtor shall be filed jointly by not less than 100 of such allottees under the same real estate project or not less than 10 % of the total number of such allottees under the same real estate whichever is less. The present is a case where all the allottees that is applicants under Section 7 were allottees of same real estate project that is Festival City which project was being developed on Plot No. 1, Sector 139, NOIDA of land allotted to Anand Infoedge Pvt. Ltd. by lease deed dated 21st August, 2008 on land admeasuring 1,00,980 sq. m. 28. The challenge which has been mounted by Mr. Krishnendu Datta, Learned Sr. Counsel appearing for Mist Avenue Pvt. Ltd. is the threshold as required under sub-section 1 of Section 7, 2nd Proviso i.e. Application be filed by minimum 100 allottees is not fulfilled in the present case. Mr. Dutta appearing for Mist Direct Sales Pvt. Ltd. i.e. Second Collaborator during his submission has contended that there were only 115 units allotted to the Applicants although applicants were 143. It is submitted that there were several claims of allottees which could not have been treated to be valid claims. Claims of those al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Learned Counsel for the allottees refuting the submissions submitted that the requirement of Section 7, 2nd Proviso as now explained by the Hon'ble Supreme Court as has been held in 2021 5 SCC 1, Manish Kumar Vs. Union of India and Anr. is that Applicants who prove that there is default of debt of Rs. 1 Crores, it is not necessary that all the applicants should have default of Rs. 1 Crore each or all the applicants should have come up within the period of limitation and fulfilled all necessary ingredients for filing an application under Section 7 of the Code. Submission of Learned Counsel for the allottees is that if default of Rs. 1 Crore towards any of the allottees is fulfilled, all applicants need not prove that default exists by them. It is further held by Hon'ble Supreme Court that if default qua few allottees is of Rs. 1 Crore and within limitation, it is not necessary that all applicants who were joint in the application should have claims within limitation. 32. We first proceed to consider the submission of Mr. Dutta regarding question of limitation. Submission of Mr. Dutta is that all applicants who were joint in the application who have jointly filed Section 7 Applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of the Buyers Agreement subject to timely payment by the intending Allottee(s) of sale price, stamp duty and other charges due and payable according to the payment plan applicable to him or as demanded by the Company, failing which company shall pay Rs. 9 per sq. ft. per mohth delay charges for delayed period provided no force majeure prevails. The Company on obtaining certificate for occupation/completion and use from the competent authorities shall hand over the IT & IT enabled services shop (s) to the intending allottee(s) for his/her occupation and use and subject to the Intending Allottee(s) having complied with all the terms and conditions of the IT & IT enabled Services Shop (s) Buyers Agreement. In the event of his/her failure to take over and/or occupy and use the IT & IT Enabled Serices Shop(s) provision and/or finally allotted within 30 days from the date of intimation in writing by the Company, then the same shall lie at his/her risk and cost and the intending allottee(s) shall be liable to pay to the Company compensation @ Rs. 25/- per sq. ft. per month of the super area per month for the entire period of such delay. The compensation shall be a distinct charge in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety Ltd. Vs Mumbai Mahalaxmi Construction Pvt. Ltd. In the above case, the Hon'ble Supreme Court had occasion to examine the question of limitation with regard to complaint under Consumer Protection Act, 1986. Hon'ble Supreme Court had referred to Section 22 of the Limitation Act in the above case, Section 22 of the Limitation Act provides as follows: "22. Continuing breaches and torts.-In the case of a continuing breach of contract or in the case of a continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort, as the case may be, continues." 36. In paragraph 13 and 18 of the Judgment, following was laid down : 13. Section 22 of the Limitation Act 1963 5 provides for the computation of limitation in the case of a continuing breach of contract or tort. It provides that in case of a continuing breach of contract, a fresh period of limitation begins to run at every moment of time during which the breach continues. This Court in Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan elaborated on when a continuous cause of action arises. .... 18. A continuing wrong occurs when a party cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court after noticing the explanation to Section 7(1) and the definition of default under Section 3(12) held that the financial debt which is owed to any other financial creditors of the Corporate Debtor would suffice to make an application on the basis of that default. In paragraph 164, following has been laid down : "164. The Explanation makes it clear that a financial debt, which is owed to any other financial creditor of the corporate debtor would suffice to make an application on the basis that the default has occurred. Default has been defined in Section 3(12) of the Code as follows: " 3 ( 12 ) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be ; " 40. Hon'ble Supreme Court has also referred to earlier judgment of Hon'ble Supreme Court in Innoventive Industries Ltd. Vs. ICICI Bank Ltd., 2018 1 SCC 407, Hon'ble Supreme Court in Innoventive Industries (supra) had while considering Explanation to Section 7(1) held that the default in respect of a financial debt owed to any financial creditor of the Corporate Debtor it need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be." 41. In Manish Kumar, the Hon'ble Supreme Court had also occasion to consider the question of delay in filing the Application under Section 7 with regard to the Applicants. Hon'ble Supreme Court in Manish Kumar case held that litmus test on the anvil of which, the adjudicating authority will scrutinise the matter is only the existence of the default as defined under Section 4 of the Code. If the Financial Debt of Rs. 1 Crores has not been paid the doors are thrown open for the processes under the code, following was held in paragraph 168: "168. It is, therefore, clear that the requirement of the Code in regard to an application by a financial creditor does not mandate that the financial debt is owed to the applicant in terms of the Explanation. This is for the reason that apparently that the CIRP and which, if unsuccessful, is followed by the liquidation procedure is in all a proceeding, in rem. The Law Giver has envisaged in the Code, an action, merely for setting in motion the process initially. The litmus test on the anvil of which, the Adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 7(1), all that would be required is, to plead the default, no doubt, in the sum of Rs. 1 crore, which is not barred as the cause of action. In other words, if a law contemplates that the default in a sum of Rs.1 crore can be towards any financial creditor, even if he is not an applicant, the fact that the debt is barred as against some of the financial creditors, who are applicants, whereas, the application by some others, or even one who have moved jointly, fulfill the requirement of default, both in terms of the sum and it not being barred, the application would still lie." 44. From the ratio of the Judgment of Hon'ble Supreme Court in Manish Kumar, following conclusions are irresistible (i) In event the default of Rs. 1 Crore is made out against the Corporate Debtor it is not necessary that the default of Rs. 1 Crore should be qua of the applicants individually or separately if default of Rs. 1 Crore is made out qua any of the applicants or any other financial creditor who is not even part of the Application, application under Section 7 is maintainable. (ii) what is required to be proved under Section 7 is that the default of Rs. 1 Crore which is due on the Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X
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