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TMI Blog2024 (4) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... AT) (Insolvency) No. 309 of 2024 This Appeal by Financial Creditor of the Corporate Debtor-Parsvnath Landmark Developers Ltd. (Respondent herein) has been filed challenging order dated 17.10.2023 passed by National Company Law Tribunal, New Delhi, Principal Bench rejecting Section 7 Application filed by the Appellant on the ground of non-compliance of Section 7, sub-section (1), 2nd Proviso. 2. Brief facts of the case necessary to be noticed for deciding the Appeal are: (i) The Respondent developed a Project 'La Tropicana Khyber Pass Delhi'. The Appellant made payment to the Respondent in the year 2007-2012 towards 4 units, which was allotted in favour of the Appellants by Respondent. (ii) On 11.02.2019, the Appellant filed petition being CP No.IB- 443(PB)/2019 titled as Rahul Gyanchandani & Ors. vs. Parsvnath Landmark Developers Pvt. Ltd. & Ors. under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code"), in which direction was issued by the Adjudicating Authority to comply with the changed provisions under Section 7, second amendment ordinance. The Appellant withdraw the Application on 03.01.2020. (iii) As the developer failed to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... da" (SUPRA) applies to the issue arising in the present petition regarding maintainability. We are bound by the view taken by the Hon'ble Supreme Court in the matter of "Vishal Chelani & Ors. Vs. Debashis Nanda", we have no option but to reject the petition as not maintainable; ordered accordingly. It is made clear that the present order will not stand in the way of the Petitioners to avail such remedies as are available to them in accordance with law." Aggrieved by the above order, this Appeal has been filed by the Appellants. 3. The learned Counsel for the Appellants challenging the impugned order submits that Adjudicating Authority committed error in not adverting to the provisions of Section 3, sub-section (10) of the Code. It is submitted that Section 3, sub-section (10), itself makes it clear that decree-holder is class of Financial Creditor. It is submitted that Section 18 read with Section 2(d) of the RERA Act, 2016 makes it clear that person, who is granted refund of entire amount paid to the promoter for allotment of a real estate unit, does not remain allottee as the refund order is preconditioned by withdrawal from the Project. It is submitted that the Appellant are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, "allottee" and "real estate project" shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);] (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clause (a) to (h) of this clause;" 7. By Explanation to Section 5(8), expression 'allottee' has the same meaning as assigned to it under Clause (d) of Section 2 of RERA Act, 2016. Section 2(d) of RERA Act, is as follows: "2(d) "allottee" in relation to a rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for refund has not been complied with, hence the Appellants continued to be allottee within the meaning of the Code and the RERA Act, 2016. 10. The submission that Appellants are no more allottees and their category has been converted as a Decree Holder as referred in Section 3, sub-section (10) also need to be considered. Section 3, sub-section (10) as quoted by us in preceding paragraph, defines the 'creditor', which includes Financial Creditor, Operational Creditor, Secured Creditor, Unsecured Creditor or a Decree Holder. Application under Section 7 can be filed only by Financial Creditors. A Decree Holder unless it is a Financial Creditor cannot institute Application under Section 7. We may notice the judgment of the Hon'ble Supreme Court in "Kotak Mahindra Bank Ltd. Vs. A. Balakrishnan & Anr - (2022) 9 SCC 186", in which case Kotak Mahindra Bank assignee of Financial Creditor has filed Section 7 Application, relying on Recovery Certificate dated 07.06.2017 and 20.10.2017 issued by Debts Recovery Tribunal against the borrower entities. The Application under Section 7 was filed on 05.10.2018 by the Kotak Mahindra Bank Ltd., which Application was admitted by Adjudicating Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t." 12. In paragraphs 53, 54, and 55, the Hon'ble Supreme Court held that liability in respect of 'claim' arising out of a recovery certificate would be a "financial debt". Paragraphs 53, 54 and 55 of the judgment are as follows : "53. Applying these principles to clause (8) of Section 5 IBC, it could clearly be seen that the words "means a debt along with interest, if any, which is disbursed against the consideration for the time value of money" are followed by the words "and includes". Thereafter various Categories (a) to (i) have been mentioned. It is clear that by employing the words "and includes", the legislature has only given instances, which could be included in the term "financial debt". However, the list is not exhaustive but inclusive. The legislative intent could not have been to exclude a liability in respect of a "claim" arising out of a recovery certificate from the definition of the term "financial debt", when such a liability in respect of a "claim" simpliciter would be included in the definition of the term "financial debt". 54. In any case, we have already discussed hereinabove that the trigger point for initiation of CIRP is default of claim. "Default" i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Homebuyers. The RP informed the Appellants that they should file their claims in Form-C as a Financial Creditor. The Appellants filed an Application before the Adjudicating Authority, claiming that they should be treated as Homebuyers and they be permitted to file claim in Form-CA, which Application was rejected. It is useful to note paragraph-7 of the order of this Tribunal in Company Appeal (AT) (Insolvency) No.991 of 2022 filed by Vishal Chelani & Ors. vs. Debashis Nanda Resolution Professional Bulland Buildtech Pvt. Ltd., where order of Adjudicating Authority was noticed, which is as follows: "7. The said application was contested by the RP before the Tribunal in which the Tribunal has taken the following view:- "We are unable to accept the contention of the applicants that they may be permitted to file a claim in Form-CA and direction be given to the RP to consider the claim in Form-CA. In our considered view, once the Ld. UPRERA has passed a decree directing the Corporate Debtor to refund the amount and in pursuant of that, all the applicants had submitted their claim in Form C, which were duly considered by the respondent/ R.P, and only on the ground that the entire cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal. It is submitted that as per scheme of the Act and the 'Regulations' the Appellant after obtaining a decree from the UPRERA regarding refund of their amount, invested for the purpose of purchase of the flat, shall fall within the definition of a Financial Creditor and not in a class of creditor for the purpose of putting up their claim as such before the RP. 12. It is further submitted that the Hon'ble Supreme Court in the same decision in the case of Kotak Mahindra (Supra) has decided that in case the Recovery Certificate is issued, the holder of the Recovery Certificate would be a Financial Creditor. He has referred to the Para 84 of the said decision which is reproduced as under :- "84. To conclude, we hold that a liability in respect of a claim arising out of a Recovery Certificate would be a "financial debt" within the meaning of clause (8) of Section 5 of the IBC. Consequently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, the holder of such certificate would be entitled to initiate CIRP, if initiated within a period of three years from the date of issuance of the Recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the aforesaid discussion, we do not find any merit in the present appeal and the same is hereby dismissed. No cost." 15. Against the dismissal of their Appeal, Visahl Chelani & Ors. filed an Appeal before the Hon'ble Supreme Court being Civil Appeal No.3806 of 2023. The Hon'ble Supreme Court in the aforesaid case noticed the rival submissions of the parties. The RP before the Hon'ble Supreme Court reiterated its view that the Appellants were only 'Financial Creditor' and not 'creditors' of a class. The learned Counsel for the Appellants before the Hon'ble Supreme Court relied on judgment of NCLT, Mumbai Bench-IV in Mr. Natwal Agrawal (HUF) vs. Ms. Ssaksh Developers & Builders Pvt. Ltd. The arguments of the Appellants have been noted in paragraph 3 of the judgment, which is as follows: "3. Mr. Abhimanyu Bhandari learned counsel argued that having regard to the definition of financial debt [Section 5(8)(f)] which was amended in 2018 after which home buyer allottees in real estate projects also fell within the broad description of financial creditors, a distinction cannot be made between one set of such home buyer allottees and another. He relies upon a decision of the NCLT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RERA Act." 17. The Hon'ble Supreme Court after noticing the amendment of 2018 in sub-section 8(f) of Section 5, laid down following in paragraph-6, which is as follows: "6. It is thus evident that with the introduction of the explanation home buyers and allottees of real estate projects were included in the class of "financial creditors" - because financial debt is owed to them. On a plain reading of Section 5 (8)(f) no distinction is per se made out between different classes of financial creditors for the purposes of drawing a resolution plan. Consequently, the reasoning of the Mumbai Bench of NCLT "Mr. Natwar Agrawal(HUF)" is correct in the opinion of this Court." 18. The view of RP was disapproved by the Hon'ble Supreme Court and it was held that when underlying claim of an aggrieved party specifically in the form of a Court order or decree, that does not alter or disturb the status of the converted party. Following was held in paragraphs 8 and 9 of the judgment: "8. The Resolution Professional's view appears to be that once an allottee seeks remedies under RERA, and opts for return of money in terms of the order made in her favour, it is not open for her to be treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants even after order of the RERA, directing for refund by the Corporate Debtor, continued to be allottees and they have filed Section 7 Application as Financial Creditor of the Corporate Debtor. They are mandatorily required to comply with Section 7, sub-section (1), 2nd Proviso. In paragraph 8 of the judgment of the Hon'ble Supreme Court, distinction sought to be made by the RP between the Decree Holder and Homebuyers, who do not have order of RERA, was held to be artificial. Thus, Homebuyers, whether they have an order or Decree from the RERA or who do not have any Decree or order from RERA, belong to same category of allottees and no distinction can be made on the said ground.
20. We, thus, are of the considered opinion that Appellants are 'allottees' within the meaning of the Code and as a Financial Creditor, when they have filed the Application under Section 7, they were required to comply with Section 7, sub-section (1), 2nd Proviso and Adjudicating Authority did not commit any error in rejecting their Application due to non-compliance of Section 7, sub-section (1), 2nd Proviso. There is no merit in the Appeal, the Appeal is dismissed. No order as to costs. X X X X Extracts X X X X X X X X Extracts X X X X
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