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TMI Blog2023 (12) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2021 has registered proceedings against the Corporate Debtor. A show cause notice dated 09.09.2021 was issued to the promoter of the project Aakriti Aquacity under Section 7 of the 2016 RERA Act as to why allottees should not be refunded deposit amount and compensation need to be paid and why action cannot be taken to revoke the registration of the project Aquacity for non-compliance of the Orders. Reply was submitted by the Corporate Debtor in October, 2021. Investigation Report from Financial Advisor was also obtained which report mentioned that the amount received by the promoter has not been deposited in the prescribed bank account and order dated 28th January, 2022 was passed by RERA against the Corporate Debtor and its Directors Mr. Raju Soni and Mr. Hemant Kumar Soni. In view of the sequence and events of the facts which took place and various proceedings drawn by RERA much prior to issuance of notice under Section 8 of the Code by the Operational Creditor, it is satisfied that Appeal filed by the RERA cannot be thrown out on the ground of locus. The RERA held to be aggrieved person within the meaning of Section 61 of the Code - the question has to be answered in affirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor on account of non-discharge of Barter Component by the Corporate Debtor. At best, the Applicant was entitled for claiming allotment of units as per the Barter Agreement between the parties for which it was open for the Operational Creditor to take such remedy as permissible. However, Section 9 Application was clearly not maintainable, the Adjudicating Authority committed error in admitting Section 9 Application without adverting to the real nature of the transaction between the parties, which is the very basis of the Section 9 Application, the Order of the Adjudicating Authority just is unsustainable. The Order dated 05th August, 2022 admitting Section 9 Application set aside - appeal allowed. - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Abhijeet Sinha, Mr. Aditya Shukla, Ms. Heena Kochar, Mr. Anuj Tiwari, Mr. Swankit Nanda, Mr. Prakhar Shukla, Advocates For the Respondent : Mr. Krishnendu Datta, Sr. Advocate, Mr. Ashish Verma, Mr. Rahul Gupta, Ms. Salonee Keshwani, Advocates for R-1 Mr. Aditya Gauri, Mr. Amar Vivek, Advocates for RP Mr. Keshav Sharma, Mr. Gulshan Vardhan, Mr. Mohit Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Component against the advertising was to the paid and the Barter Component was to be utilized in form of allotment of units which were required to be transferred in favour of the Operational Creditor. (ii) The RERA received various complaints from allottees of the Corporate Debtor, which complaints were entertained and various orders related to different projects were passed in the year 2020-21 directing the Corporate Debtor to refund the amount along with compensation to various complainants. RERA also passed an order on 18.08.2021 under Section 35 of the RERA Act, 2016 to investigate about the diversion of funds from the designated account. Notice was also issued to the Promoter as to why the registration of the real estate project may not be cancelled. An order dated 08.01.2022 was passed by the RERA observing that the Corporate Debtor has diverted funds from the project and failed to maintain the same in designated separate account. Vide order dated 08.01.2022, the registration of the real estate project Aakriti Aquacity was also revoked. (iii) The order passed by the RERA was challenged by the Corporate Debtor before RERA Appellate Authority, which directed the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Operational Creditor came for hearing before the Adjudicating Authority on 05.05.2022, on which date the Adjudicating Authority directed the matter to be listed for final arguments on 07.07.2022. The Operational Creditor filed an early hearing application in the Company Petition, on which application the matter was posted for 17.06.2022, which was again adjourned to 07.07.2022. On 07.07.2022, the matter was heard by the Adjudicating Authority and order was reserved. (x) In the Company Petition, the Corporate Debtor filed an affidavit in reply where it expressed its inability to make the payment of the Operational Creditor. The Corporate Debtor also expressed its willingness to pay admitted Principal Amount of Rs.5,25,89,000/-. The Adjudicating Authority noticing that the Demand Notice was sent which was not replied by the Corporate Debtor and the Corporate Debtor having admitted the debt to the extent of Rs.5,25,89,000/- admitted Section9 application and imposed moratorium under Section 14(1) of the I B Code. Aggrieved by the order dated 05.08.2022, these two Appeal have been filed. 2. We have heard Shri Abhijeet Sinha, learned counsel for the Appellant appearing in Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, the order dated 05.08.2022 shall remain stayed. 4. In Company Appeal (AT) (Ins) No. 1172-1173 of 2022 reply has been filed both by the Operational Creditor and the Corporate Debtor. In Company Appeal (AT) (Ins) No. 1321 of 2022 reply has been filed by the IRP to which rejoinder has also been filed. 5. Shri Abhijeet Sinha, learned counsel appearing for the RERA, Appellant in Company Appeal (AT) (Ins) No. 1172-1173 of 2022 submits that application filed under Section 9 by the Operational Creditor was an application filed in collusion with the Corporate Debtor so that Corporate Debtor may wriggle out from its obligation as imposed by various orders passed by RERA under 2016 Act. It is submitted that the Appellant is a Statutory Authority constituted under 2016 Act which is bound to protect and preserve rights of allottees. It is submitted that very basis of Section 9 application i.e. Barter Agreement has already been declared as unfair practices by RERA by its order dated 12.05.2022. It is submitted that there was no operational debt due against the Corporate Debtor on basis of which application under Section 9 could have been maintained by the Operational Creditor. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion advanced by Shri Abhijeet Sinha, learned counsel appearing for RERA. It is further submitted the Appellant who are homebuyers of the real estate project plotted by Corporate Debtor have paid the amount to the Corporate Debtor between years 2010-2014 which amounts were siphoned off by the Corporate Debtor and possession of respective units was never given to the homebuyers. On the complaints filed before the NCDRC, orders were passed for refund of amount along with 9% interest. Aggrieved by part of the order by which interest was directed from the date of possession, Appeals were filed being Civil Appeals No. CA 7872/2021 and CA 402/2022, in which appeals the Hon ble Supreme Court has issued notices. In the Civil Appeals, the Corporate Debtor appeared before the Hon ble Supreme Court and sought adjournment to place the repayment plan, however, during the said period the Company Petition was got collusively filed by the Corporate Debtor through Operational Creditor, which was admitted on 05.08.2022. It is submitted that the Appellant is aggrieved by the order since by initiation of the CIRP, Appellant homebuyers shall neither get their amount back nor shall be able to receive pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.2022 passed in Company Appeal (AT) (Ins.) No. 1172-1173 of 2022. I.A. No. 760 of 2023 has also been filed by the IRP. I.A. No. 83-84 of 2023 has been filed by one Vishwa Bandhu Sharma seeking impleadment in Company Appeal (AT) (Ins.) No. 1172-1173 of 2022. Applicant Vishwa Bandhu Sharma claims to be allottee/homebuyer in project Aakriti Aqua City. 11. We have considered the submissions of learned counsel for the parties as well as learned counsel appearing in different I.As, as noted above and perused the record. From the submissions of learned counsel for the parties following questions arise for consideration in these appeals : 1. Whether Real Estate Regulatory Authority has locus to file Company Appeal (AT) (Ins.) No. 1172-1173 of 2022 challenging the order dated 05.08.2022 under Section 61 of the I B Code? 2. Whether Aquacity Consumer and Societies Welfare Society, Appellant in Company Appeal (AT) (Ins.) No. 1321 of 2022 has locus to file Appeal within the meaning of Section 61 of the I B Code? 3. Whether the Corporate Debtor owed operational debt to the Operational Creditor on the basis of Barter Agreements and consequent invoices to enable the Operational Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is apparent from the fact that the Corporate Debtor admitted its debt in its affidavit of Reply and did not contest the proceedings. Several Orders were passed by RERA against the Corporate Debtor including the investigation under Section 35 of the RERA Act, 2016 and direction to deposit amount of Rs. 81 Crores in the designated account, the corporate debtor to save itself from various proceedings sought protection under the moratorium. The further case of the Appellant is that there is no operational debt on basis of which Section 9 Proceeding can be initiated. The RERA is thus aggrieved not by consequence of the moratorium but is questioning the very initiation of Section 9 proceeding which according to the Appellant is not in accord with the provisions of the Code. The Ground is that there being no operational debt and D.B. Corporation Limited being not operational creditor within meaning of IBC, the Adjudicating Authority committed jurisdictional error in admitting Section 9 Application. 16. The RERA has been constituted under Section 20 of the Real Estate Regulation and Development Act, 2016 to exercise the powers conferred on it or assigned to it under the Act. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient grounds. In paragraph 15 of the Judgment, following has been observed: 15. This Tribunal thus has clearly held that initiation of proceeding under IBC cannot be nullified by any order passed by SEBI. Thus, the proceedings initiated by SEBI by order dated 29.02.2016 and the Recovery Certificate issued thereunder and steps taken by the SEBI cannot be a ground to oppose the initiation of proceedings under Section 7 of IBC 21. It is relevant to notice the observations in paragraph 15 as quoted above were observations of the Court on merits of the Appeal. In the above judgment, this Tribunal has not laid down that SEBI has no locus to file the Appeal in fact it was not even contended before the Tribunal that SEBI is not aggrieved person against the Order of initiation of CIRP Process. The above judgment thus does not help the Appellant in support of submission that RERA has no locus to file the Appeal. 22. Another judgment relied on by Learned Counsel for the Operational Creditor is Company Appeal (AT) Ins. No. 103 of 2023, Insolvency and Bankruptcy Board of India Vs. GTL Infrastructure Ors. where IBBI filed an appeal challenging the order of the Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enforcement of the RERA Act qua the Corporate Debtor hence the Judgment of this Tribunal in the case of IBBI (supra) is clearly distinguishable. 24. We may also notice certain orders passed by RERA before initiation of Section 9 Proceedings by the Operational Creditor before the Adjudicating Authority. RERA on various complaints received from the allottees in the year 2021 has registered proceedings against the Corporate Debtor. A show cause notice dated 09.09.2021 was issued to the promoter of the project Aakriti Aquacity under Section 7 of the 2016 RERA Act as to why allottees should not be refunded deposit amount and compensation need to be paid and why action cannot be taken to revoke the registration of the project Aquacity for non-compliance of the Orders. Reply was submitted by the Corporate Debtor in October, 2021. Investigation Report from Financial Advisor was also obtained which report mentioned that the amount received by the promoter has not been deposited in the prescribed bank account and order dated 28th January, 2022 was passed by RERA against the Corporate Debtor and its Directors Mr. Raju Soni and Mr. Hemant Kumar Soni. Further, the Adjudicating Authority iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right of sub section 61 of section 38, Rs.60 lakh on the appellant in exercise and Rs. 350 Lakhs A penalty of 350 lakhs is imposed. 46. Revocation of registration of the project in question due to non-compliance of rule 18 and noncompliance of rule 18 after the date of coming into force of rule 5 read ln section 4 (2) of section (1) (D) of the Act of registration) is also ordered to be done. 47. In the case under consideration on the point of diversion of funds received from the allottees. Since the serious doubts remain in the investigation so far, it is necessary that a thorough scrutiny of the financial records of the promoter be continued. This lS also necessary because funds will be required to complete the remaining work of the project and this amount can be obtained from those sources in which the amount received from the allottees has been diverted promoter. Therefore, by Mr. the Milind Waikar, Financial Adviser, Authority will continue its investigation with regard to the financial accounts of the Promoter and the Promoter will continue to provide him with the records and information sought by him. Shri Milind Waikar, Financial Adviser will keep the Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2022 has filed the Appeal. It is not even contended by the Respondent that Appellant Aquacity Consumer and Social Welfare Society is not an aggrieved person. Appellant being association of the home-buyers of Real Estate Project who has already initiated proceedings for direction of the interest of the home-buyers is aggrieved person within the meaning of Section 61 of the Code and the Appeal filed by the Appellant cannot be dismissed on the ground of locus. 28. We thus answer Question No. II in affirmative holding that Aquacity Consumer and Social Welfare Society has a locus to file an Appeal under Section 61 of the Code against the Order dated 05th August, 2022. Question No. III 29. Before we enter into the rival submissions of Learned Counsel for the parties, we may first notice the particulars of the operational debt as given in Part-IV of the Section 9 Application filed under Form-5. It is the case of the Operational Creditor that the Corporate Debtor entered into various Barter Agreements with the Operational Creditor which Barter Agreements were enclosed with the Section 9 Application. It is useful to extract Part-IV of the Application which is as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor shall pay partly in the form of cash/cheque (hereinafter referred as Cash Component ) and partly in the form of transfer/sale of units (hereinafter referred as Barter Component ) to the Operational Creditor. That, in compliance of the aforementioned agreements, the Operational Creditor has duly provided the agreed advertisement services to the Corporate Debtor from time to time and the Corporate Debtor has duly paid the cash component to the Operational Creditor but failed to transfer/sale the units (barter component) as agreed between the parties That, out of the total barter component value for 41 units aggregating to Rs.ll,73,36,000/- (Rupees Eleven Crore Seventy Three Thirty Six Thousand), the commitment for 22 units aggregating to Rs. Rs.6,47,47,000/- (Rupees Six Crore Forty Seven Lakhs and Forty-Seven Thousand) was only discharged by the Corporate Debtor and were handed over to the Operational Creditor beyond the agreed time period. The remaining 19 units aggregating to Rs. 5,25,89,000/- (Rupees Five Crore Twenty Five Lakh Eighty Nine Thousand) are still not handover to the Operational Creditor. That, the Operational Creditor has provided advertiseme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be given by the Corporate Debtor as per Barter Agreement dated 02.06.2016. (Computation of outstanding amount due from Corporate Debtor is enclosed herewith and marked as (Annexure A-9). 30. As per Barter Agreement in lieu of the advertisement services provided by the Operational Creditor the Corporate Debtor had to pay partly in the form of cash and partly in the form of transfer sale of units to the Operational Creditor. It has been further submitted that cash component has been paid fully but the corporate debtor had failed to transfer sale of the units (Barter Component as agreed between the parties). 31. Barter has been defined in Law Lexicon, by P Ramanatha Aiyer to the following effect: Barter. To exchange one commodity for another. (Tomlin) Barter is exchange of wares for wares. (Terms de la Ley; Cowell) Also the thing given in exchange. The exchange of goods and/or services without the intervention of money. 32. Along with the Section 9 Application, invoice pertaining to Barter Component were annexed aggregating to Rs. 11,74,22,441/-. It was further submitted that Corporate Debtor failed to deliver the possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of term. The Owner Advertiser agrees to consume the deliverables according to the specified time lines mentioned in Schedule I. 34. Article 3 deals with invoices and payments. Clause 3.1 and 3.2, 3.3, and 3.4 are as follows: 3.1 Upon the release of an advertisement of the Owner Advertiser/Affiliate, DBCL shall raise its invoice ( Invoice ) to the Owner Advertiser for an amount calculated on the basis of rates mentioned in Schedule I. 3.2 The Parties hereby agree and undertake that the billing of the Cash Component and Barter Component will be done separately. 3.3 The parties agree that the Owner Advertiser shall make payment of the invoices with respect to Cash Component of the dealat the time of signing this Agreement. The Owner Advertiser agrees and undertakes that it will comply with provisions of the GST Act. 3.4 The Parties hereby agree and undertake that 100% ( Utilised Amount ) of every Invoice raised by DBCL with respect to Barter Component shall be set off against the Total Consideration of the Said Unit payable by DBCL to the Owner Advertiser 35. Clause 4.1 deals with sale of the said unit which is as follows: 4.1 The Owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in Rs) 13,75,000 11,75,000 Total Agreed Spend for 23 Months (Term) 25,50,000/- *GST Included in the above amount The Owner Advertiser should ensure to consume the deliverables according to the specified timelines mentioned in Schedule I *Above rates are inclusive of GST 38. From the pleadings in Part-IV of the Section 9 Application as noted above, it is clear that Application has been filed by the Operational Creditor on the foundation that the Corporate Debtor although had discharged the cash component but barter component has not been discharged and out of Barter Component of Rs. 11,73,36,000/- commitment for 22 Units aggregating to Rs. 6,47,47,000 were discharged and remaining 19 units aggregating to Rs. 5,25,89,000/- are still not handed over to the Operational Creditor which pleadings have already been extracted above in Part-IV. 39. Now question to be answered is as to whether there was any operational debt due on the corporate debtor for which Section 9 Application could be initiated by the Operational Creditor as per the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiving the payment from the Corporate Debtor is a condition precedent for initiating Section 9 Application. 42. Learned Counsel for the Appellant Mr. Abhijeet Sinha has contended that the Operational Debt in the present case cannot arise from Barter Agreement where under the Agreement what was agreed between the parties was allotment of units and allotment and sale of units in lieu of the Barter Component. The payment of unpaid operational debt relates to payment of money when we look into the pleading of the operational creditor, it is clear that what is pleaded is that non-discharge of Barter Component under which component the operational creditor was entitled for allotment of units and sale of the units. According to the own case of the Operational Creditor against the total Barter Component of Rs. 11,74,22,441/- which related to 41 units only commitment of 22 units have been discharged and commitment for remaining 19 units have not been handed over to the Operational Creditor, non-handing over of the 19 units against the Barter Component cannot lead to operational debt nor as per the agreement between the parties Operational Creditor can start asking for cash component of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of money. The dissenting financial creditor, ICICI Bank, is thoroughly dissatisfied with such a prescription whereby its dues shall be satisfied by a mode other than direct payment in cash. On the other hand, the IRP, the resolution applicant and even the assenting financial creditor would assert that such a prescription satisfies all the essential requirements of Section 30(2)(b) and Regulation 38(1)(b). Both these provisions essentially use the expressions payment ; the amount to be paid ; the amount payable ; and shall be paid . ICICI Bank asserts that these expressions refer only to the payment in monetary terms, whereas the submissions are countered with the assertions that the term payment is with reference to discharge of obligation and that could be brought about by any of the methods permissible in law and not necessarily by way of payment in terms of money alone. This takes us to the principles of interpretation and assigning appropriate meaning to the expressions used. 44. The expression payment as occurring in Section 30(2) was explained by the Hon ble Supreme Court and it was held that the expression amount payable referring only to sum of money and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code, the expression payment is clearly descriptive of the action of discharge of obligation and at the same time, is also prescriptive of the mode of undertaking such an action. And, that action could only be of handing over the quantum of money, or allowing the recovery of such money by enforcement of security interest, as per the entitlement of the dissenting financial creditor. 45. Hon ble Supreme Court had also occasion to refer Section 8 of the IBC which was held to be also a provision for money transfer and not by other mode. In paragraph 166.5, following has been laid down: 166.5. The other submissions and counters with reference to the phraseology of Section 8 of the Code do not require much dilation because, the said provision essentially relates to the dues of an operational debtor and the steps envisaged before commencement of insolvency resolution process. Nevertheless, payment for the purpose of the said provision is also of money transfer; and not by any other mode. 46. The Hon ble Supreme Court has also occasion to use expression Barter . In paragraph 167 of the Judgment while reiterating its view that expression payment occurring in Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he units and non-allotment of the units against the Barter Component cannot make the DB Corporation Limited as an Operational Creditor nor any payment of money can be claimed by the Operational Creditor as against non-discharge of Barter Component as per the agreement between the parties themselves as noted above. 49. We thus are satisfied that there was no operational debt due on the corporate debtor on which operational creditor can claim payment of money from the corporate debtor to enable it to issue a demand notice under Section 8 or to file Section 9 Application before the Adjudicating Authority. We thus are satisfied that entire initiation of proceedings under Section 9 by the Operational Creditor is contrary to the scheme of IBC and no payment of money was due on the corporate debtor on basis of which unpaid dues any proceedings under Section 9 can be initiated. 50. We thus answer Question No. III in following manner: i. On the basis of Barter Agreement and consequent invoices, non-discharge of Barter Component by the Corporate Debtor shall not lead to any operational debt on basis of which payment of money can be demanded by the Operational Creditor from the Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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