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TMI Blog2024 (12) TMI 1315X X X X Extracts X X X X X X X X Extracts X X X X ..... rst Information Report or complaints against Financial Creditors. Any Status Report submitted in such criminal proceedings can have no bearing on proceedings, which was taken by Financial Creditors in a class under Section 7. Reliance on Status Report submitted by Appellant(s) in a criminal proceeding can have no bearing while deciding Section 7 Application. The said Status Report is not an evidence on which it can be pronounced that threshold of 100 allottees was not complete in filing of Section 7 Application. Thus, the submission raised by the Appellant(s) that threshold of 100 is not complete has no legs to stand and has to be rejected. Existence of debt and default on the part of the Corporate Debtors in delivering the units within 36 months with grace period of 12 months or not - HELD THAT:- The unit holders have been waiting for their units for last more than a decade and the amount, was paid in the year 2012 by the allottees, the Appellant cannot be absolved by permitting them to deposit the amount with meagre interest, which was received in the year 2012. The findings recorded by the Adjudicating Authority regarding debt and default and Application filed by the Corporate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This Tribunal affirmed the judgment of the Adjudicating Authority rejecting Section 7 Application. The above judgment does not in any manner help the Appellant in the facts of the present case. Conclusion - The present is a case of clear default of Appellant in not completing the Project and handing over the units within the time - The challenge in the Appeal is order of the Adjudicating Authority passed in Section 7 Application, which was initiated by allottees of the Corporate Debtors, there are no sufficient ground to interfere with the order passed by Adjudicating Authority under Section 7. It is not for this Tribunal to consider the mode and manner for completion of the Project at this stage. The steps shall be taken by Resolution Professional for completion of the Project in accordance with insolvency resolution process as per the IBC and Regulations. There are no good ground to interfere with the impugned order - In result, the Appeal is dismissed. - [ Justice Ashok Bhushan ] Chairperson and [ Arun Baroka ] Member ( Technical ) For the Appellant : Dr. U.K. Chaudhary, Sr. Advocate with Mr. Mansymer, Mr. Praney , Advocates For the Respondents : Mr. Deep Bisht with Mr. N.K. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious Collaboration Agreement was also cancelled on 27.07.2017. The developer Mist Direct Sales Pvt. Ltd. informed the allottees that the Project shall now be constructed by Mist Direct Sales Pvt. Ltd. and all liabilities and responsibilities have been undertaken by the Mist Direct Sales Pvt. Ltd. (iii) In the year 2019, complaints were filed before the Uttar Pradesh Real Estate Regulatory Authority ( UP RERA ) and UP RERA issued show-cause notice to Mist Direct Sales Pvt. Ltd. (hereinafter referred to as the Developer ). There being certain dispute with regard to part of land, which was allotted to Anand Infoedge Pvt. Ltd. a Writ Petition No.15503 of 2019 was filed by the land owning Company before the Allahabad High Court. On 07.12.2019, the UP RERA deregistered the Project against which an Appeal was filed before the Appellate Tribunal, Lucknow. UP RERA Appellate Tribunal also disposed of the Appeal of the Developer, against which order an Appeal has also been filed in the Allahabad High Court, which is claimed to be pending. (iv) The allottees of the Project Festival City filed Section 7 Applications, jointly against three developers namely (1) Anand Infoedge Pvt. Ltd.; (2) M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that proceedings under Section 340 CrPC read with Section 195(1)(b) of the CrPC be initiated against the Petitioners. Prayer was also made to impose penalty on the Petitioners under Section 65 of the IBC. In the Application objections regarding swearing of the affidavit with regard to at least six Applicants was also raised. It was pleaded that affidavits of allottees were notarized in August/ September 2021 and the Petition under Section 7 was filed in October 2021. It was alleged that fraud was played by the allottees on the Court. All the Applications came to be heard by the Adjudicating Authority and by a detailed order dated 05.01.2024, all the Application were dismissed. Mist Direct Sales aggrieved by the order dated 05.01.2024 passed by Adjudicating Authority, filed an Appeal before this Appellate Tribunal, being Company Appeal (AT) (Ins.) No.96 of 2024, which Appeal was also heard and dismissed by this Tribunal on 29.01.2024. (vii) Certain Intervention Petition P/11/2024 and Intervention Petition P/12/2024 were filed in Section 7 proceedings by M/s Disire Retail Pvt. Ltd. and three Ors. and M/s. Grand Developers Pvt. Ltd. claiming that they are holders of several units. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The Adjudicating Authority by an order dated 25.05.2024 granted opportunity to the parties to settle. When the matter came for consideration before the Adjudicating Authority on 28.05.2024, counsel for the Financial Creditors reported that no settlement between the parties could take place. The Adjudicating Authority thereafter on 29.05.2024 reserved the order on IA No.2497 of 2024. The Adjudicating Authority by the impugned order dated 19.07.2024 admitted Section 7 Application and rejected IA No.2497 of 2024 and IA No.293 of 2024. (xiii) Aggrieved by the aforesaid order of the Adjudicating Authority, these Appeal(s) have been filed. Company Appeal (AT) (Ins.) No.1422 of 2024 has been filed by Suspended Director of Mist Direct Sales Pvt. Ltd. Company Appeal (AT) (Ins.) No.1434 of 2024 has been filed by Suspended Director of Anand Infoedge Pvt. Ltd. and Company Appeal (AT) (Ins.) No.1573 of 2024 has been filed by Suspended Director of Mist Avenue Pvt. Ltd. 3. We have heard Dr. U.K. Chaudhary, learned Senior Counsel appearing for Appellant in Company Appeal (AT) (Ins.) No.1422 of 2024; Shri Arvind Nayar, learned Senior Counsel appearing for Appellant in Company Appeal (AT) (Ins. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2017 and the Mist Avenue has no liability or responsibility. 7. Shri Sahil Sethi, learned Counsel appearing for Financial Creditors opposing the submission of learned Counsel for the Appellant(s) submits that present is a case where Company Petition was filed by the Financial Creditors in a class in the year 2021 and for last three years, the Corporate Debtors by one or other means have been trying to scuttle and derail the disposal of Section 7 Application. The Corporate Debtors objected to the maintainability of Section 7 Application on various grounds, which grounds were considered and finally rejected by the Adjudicating Authority vide order dated 21.10.2022. Challenge to set aside the said order was also repelled by this Tribunal vide order dated 17.11.2023. The Corporate Debtors also filed an Appeal in the Hon ble Supreme Court of India and the Hon ble Supreme Court of India also dismissed the Appeal on 11.12.2023 and has held the issue regarding maintainability of Section 7 Application treated to have become final for NCLT and NCLAT and the Hon ble Supreme Court of India also directed the NCLT to decide the Application within two months. Even after the said order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chaudhary, learned Senior Counsel submits that no pleadings have been filed by the Respondents and the threshold issue has never been decided. Out of 115 affidavit of the Financial Creditors, 20 affidavits are forged and fabricated, hence, threshold limit is not fulfilled. Section 230 proceedings has not yet been decided. In rejoinder, Shri Arvind Nayar, learned Senior Counsel submits that Writ Petition filed in the Allahabad High Court is pending. There is no finding regarding debt and default qua the land owning Company. The land owning Company filed a suit in 2017 against Noida, which is pending. 10. We have considered the submissions of learned Counsel for the parties and have perused the records. 11. The challenge in these Appeal(s) is to an order admitting Section 7 Application filed by Financial Creditors in a class. Section 7 Application was filed on behalf of 115 unit holders through their Authorized Representative. The first submission, which has been raised by learned Counsel for the Appellant challenging the order of admission is that threshold of 100 allottees is not fulfilled. The argument advanced by learned Counsel for the Appellant is that Financial Creditors have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2023, all arguments attacking the threshold was examined and repelled. Against the order passed by this Tribunal dated 17.11.2023, Civil Appeal No.7958-7959 of 2023 was filed, in which Appeal the Hon ble Supreme Court took the view that issue of maintainability stand concluded by the order dated 17.11.2023 insofar as the NCLT and NCLAT is concerned. The Hon ble Supreme Court further held that since Applications under Section 7 is pending over two years, NCLT to take up the Application and decide and dispose of within two months. The order of the Hon ble Supreme Court dated 11.12.2023 is as follows: 1 The impugned order of the National Company Law Appellate Tribunal1 dated 17 November 2023 is admittedly only at the stage where the maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code 2016 was questioned. The application under Section 7 is still awaiting a hearing on merits, though it is common ground that nearly two years have gone by in the interregnum. Hence, we are not inclined to entertain these proceedings at the present stage. 2 After the application under Section 7 is heard and disposed of on merits, should it become necessary to do so, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder as this Tribunal may deem fit and proper in the interest of justice. 14. The contents of the Application were also noticed by the Adjudicating Authority in order dated 05.01.2024, which were allegations that false and fabricated affidavits were filed. The said submission have been noted in paragraph 3 of the order, which is as follows: 3. The brief facts as averred by the Applicant for filing the present Application are as follows: i. That the present application is being filed by and on behalf of the Respondent No. 3, seeking dismissal of the present Company Petition on the ground that the Applicants/Financial Creditors have played fraud upon this Adjudicating Authority in view of filing of false affidavits in an endeavor to comply with the provisions of Section 7 IBC by applicants. ii. That vide IA No.4121/2023 and 4122/2023, the Respondent No. 3 (Applicant herein) had brought to notice of this Adjudicating Authority that at least 6 (six) applicants/financial creditors to the knowledge of the Respondent No. 3 out of total 143 Applicants/Financial Creditors as mentioned in the Memo of Parties have filed false affidavits. Further, vide IA No. 4312/2023, the Respondent herein h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal of claims by some of the Applicants. All such objections were considered on merits and were rejected. The prayer of the Appellant(s) to initiate proceedings under Section 340 CrPC was also rejected. The learned Counsel for the Appellant has also placed reliance on FIR registered against some of the Financial Creditors being FIR No.102/2024. The fact is that after the Application filed by the Corporate Debtors in Section 7 Application, making various allegations to reject Section 7 Application, including filing of forged and fabricated affidavits having been rejected, the Corporate Debtor thereafter filed a FIR alleging forgery and fabrication of the affidavits. Reliance has been placed by learned Counsel for the Appellant on some Status Report submitted in the said criminal proceedings, in which Status Report submitted by IO, it was stated that 20 affidavits are forged and fabricated. 18. Before the Adjudicating Authority, reliance on the FIR and the Status Report submitted therein, was also pressed. The Adjudicating Authority has rightly not placed any reliance on the Status Report in a criminal proceedings initiated by Corporate Debtors against Financial Creditors in a class. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that they were willing to consider improvement of their offer to the Financial Creditors for settlement of the matter and for this purpose they wish to hold the meeting between the parties and their Counsels. In view of the above, this Tribunal had granted time to the parties and fixed the matter for 28.05.2024. We have heard Ld. Counsels for both the parties. It transpires that the parties have not come to any settlement in this regard. The Financial Creditors have submitted that the offer was too low, as it was marginally over the principal amount (1%- 2% interest p.a.). From the records, it appears that most of the bookings were made in the year 2012, and approximately 12 years have passed without any possession being offered to any of the allottees. Furthermore, this Adjudicating Authority cannot direct the parties to settle. The offer has already been rejected. Therefore, in view of the same, the applications IA/1808/2024 IA/1860/2024 are dismissed. 20. When the present Appeal (Company Appeal (AT) (Ins.) No.1422 of 2024) was taken, learned Counsel for the Appellant offered to deposit the amount of Rs.22,10,43,647/-. Noticing the aforesaid submission of the Appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een refuted and rejected by learned Counsel appearing for the Financial Creditors in a class. It is submitted that the Appellant having not completed the Project within the time allowed and registration of the Project having already been cancelled, Financial Creditors in a class have no confidence that Corporate Debtors shall be able to complete the Project. Hence, only route open for completion of the Project and handing over the units to the Financial Creditors in a class is through insolvency resolution process, which this Court may direct to be completed in accordance with law. 23. Learned Counsel for the Developer as well as learned Counsel for land owning Company have submitted that there being dispute regarding title of Noida and Greater Noida, the Project, could not proceed. It is submitted that in the Projects land there are Khasra Nos.877 and 888, which are registered in the name of Sammiti and there being dispute of title, Developer was unable to carry on with the Project. It is further submitted that Writ Petition has already been filed in the Allahabad High Court with regard to land dispute and Civil Suit No.662/2017 has also been initiated before the Ld. District Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in (Retd.) vs. Tripathi Hospital Pvt. Ltd. Ors. Company Appeal (AT) (Ins.) No.655 of 2020. The Hon ble Supreme Court in Ajuj Jain s case has laid down the conditions, which need to be fulfilled for declaring a creditor as a Financial Creditor. It is submitted that Corporate Debtor, who does not owe a financial debt, cannot become its Financial Creditor for the purpose of Part II of the IBC. The present is a case where joint CIRP commenced against all the three Corporate Debtors, i.e., Anand Infoedge Pvt. Ltd. land owning Company, Developer and erstwhile Developer Mist Avenue. One of the objections raised by the Corporate Debtors was regarding maintainability of the joint application against the three Corporate Debtors, which objection was rejected by Adjudicating Authority vide order dated 21.10.2022, against which Company Appeal (AT) (Ins.) No.1506 of 2022 was filed, where again the objection was raised that joint petition under Section 7 is not maintainable against three Corporate Debtors. This Tribunal while deciding Company Appeal (AT) (Ins.) No.1506 of 2022 has examined the question. One of the questions, i.e. Question No.(i) was: (i) Whether the joint application under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allottees have been allotted 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. 26. All the three Corporate Debtors had joined hands to develop the Project. The Corporate Debtors being closely connected with the construction and implementation of the Project, it is not open for the land owning Company to say that there is no financial debt. We, thus, do not find any substance in submission of the learned Counsel for the Appellant that there being no privity of contract between the land owning Company and the allottees, there is no liability on the land owning Company towards the Project. Learned Counsel for land owning Company has placed reliance on the judgment of this Tribunal in Gp. Capt Atul Jain (Retd.) vs. Tripathi Hospital Pvt. Ltd. Ors. Company Appeal (AT) (Ins.) No.655 of 2020. In the above case in Section 7 Application, the Applicant has not made any payment to the Corporate Debtor Tripathi Hospital Pvt. Ltd., but the amount was paid to D.K. Chaturvedi and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court observed that Promoter be permitted to build the Project. The Hon ble Supreme Court in paragraph 22, 23 and 24 had made following observations: 22. Taking into consideration the salient features of the undertaking given on affidavit by the Promoter, Shri Kashi Nath Shukla and the fact that there are only seven out of the 452 home-buyers, who opposed the Settlement Plan, we find that it will rather be in the interest of the home-buyers that the appellant/promoter is permitted to complete the project as undertaken by him. It is pertinent to note that he has agreed that the cost of the flat will not be escalated. He has also given the time line within which the project would be completed. Not only this, but he has also undertaken to refund the amount paid by the seven objectors, if they so desire. He has further agreed that there shall be a team of 5 persons, 2 from the home buyer s side and 2 from the management side and that the entire process shall be monitored by the IRP. 23. We find that there is every possibility that if the CIRP is permitted, the cost that the home-buyers will have to pay, would be much higher, inasmuch as the offer made by the resolution applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that Appellant(s) are desirous for completion of the Project, who are also supported by several allottees, who have filed application for intervention in these Appeal(s). 31. One of the submissions, which has been advanced by learned Counsel for the Appellant is that due to force majeure the Project could not be completed. The Adjudicating Authority in the impugned order has noticed the submission raised by the learned Counsel for the Appellant with respect to force majeure, which argument was considered by the Adjudicating Authority in paragraphs 30 to 34. The discussion of Adjudicating Authority on the said argument in paragraphs 30 to 34 are as follows: 30. The Counsels for the Corporate Debtors have argued that due to Force Majeure project could not be completed. Force Majeure reasons cited are defective land title and cancellation of registration of the project by UPRERA. Hon ble Supreme Court in the matter of Energy Watchdog v. CERC, (2017) 14 SCC 80 has held that a party can rely on a force majeure clause only if it shows that reasonable steps have been taken to avoid the effect of the force majeure event. In this context it would be worthwhile to peruse the relevant po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and failure to comply with directions of the NOIDA. The reason in respect of defective land has already been dealt with earlier. Thus, the defence related to force majeure is only an afterthought and not tenable. 31. Besides, even if the CD was of the view that the project could not be completed for reasons beyond their control, they should have communicated this to the allottees and refunded their deposited amounts. On the contrary, M/s Mist Direct Sales (CD No. 3) itself sent a letter in December 2017 to the allottees/ Financial Creditors, which mentioned that M/s Mist Direct Sales has been monitoring the progress of the Project closely with an intention to expedite the construction to ensure delivery of the unit(s). Further it mentions that a new and efficient management, has been appointed for delivering the said project and accordingly, the earlier arrangement with Mist Avenue is terminated and a new management has entered with effect from 2017. The letter also mentions that M/s. Mist Direct Sales has also taken charge of the inventories already sold by the earlier company including the documents and the money paid by the allottees. The said letter does not anywhere ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The present is a case of clear default of Appellant in not completing the Project and handing over the units within the time. 33. Now, coming to the submission of the Appellant that large number of Intervenors are interested in completion of the Project by accepting one or other options submitted by the Appellant. The challenge in the Appeal is order of the Adjudicating Authority passed in Section 7 Application, which was initiated by allottees of the Corporate Debtors, we do not find any sufficient ground to interfere with the order passed by Adjudicating Authority under Section 7. It is not for this Tribunal to consider the mode and manner for completion of the Project at this stage. The steps shall be taken by Resolution Professional for completion of the Project in accordance with insolvency resolution process as per the IBC and Regulations. 34. In view of the foregoing discussions, we do not find any good ground to interfere with the impugned order. In result, the Appeal is dismissed. The amount deposited by the Appellant in Company Appeal (AT) (Ins.) No. 1422 of 2024 in pursuance of the interim order passed in the Appeal, be refunded to the Appellant. Consequently, pending IA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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