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TMI Blog2025 (4) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... ENT ( Hybrid Mode ) [ Per : Arun Baroka, Member ( Technical ) ] The present appeal is being filed by the Appellant-Shailendra Agarwal (Suspended Director of M/S NHA Infrabuild Pvt. Ltd) before this Tribunal under section 61 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), being aggrieved by the order dated 31.01.2025 passed in the I.A. No. 250 of 2024 in Company Petition (IB) No. 11/ALD/2024 by the NCLT, Allahabad Bench, Prayagraj (AA-Adjudicating Authority), whereby the AA has allowed the Company Petition preferred by Respondent No. 1-22 and admitted the Respondent No.23-M/s NHA Infrabuild Pvt. Ltd into Corporate Insolvency Resolution Process (CIRP). Brief facts: 2. The facts relevant for deciding the appeal are captured as follows: 20.09.2011 A Tripartite Agreement was executed among Maa Mansa Devi Sahkari Awas Samiti Ltd. (landowner), Nikhil Home Associates (developer/constructor), and Nikhil Homes Pvt. Ltd. (marketing company). All Builder-Buyer Agreements executed with the allottees were jointly signed by these three entities. 2012 Corporate Debtor-Nikhil Home Associates, Nikhil Homes Pvt. Ltd and Maa Mansa Devi Sahkari Awas Samiti Ltd. launched a housing projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculated again after obtaining necessary documents from both the parties. 30.06.2022 Acknowledgement under Balance Sheet of Corporate Debtor. 06.08.2022 Nikhil Home Associates was registered as a company in terms of Section 366 of the Companies Act, 2013. 24.12.2022 UP RERA vide public notice cancelled the registration of Project of Corporate Debtor. 12.01.2024 Company Petition bearing C.P. No. 11 of 2024 was filed by the Answering Respondent before Ld. Adjudicating Authority u/s 7 of the IBC seeking initiation of CIRP against the CD. 04.05.2024 Aggrieved by this, the CD filed an I.A-250/2024, seeking the dismissal of Company petition bearing CP (IB)-11/ALD/2024. 31.01.2025 Adjudicating Authority dismissed the I.A. No. 250 of 2024 in Company Petition (IB) no. 11/ALD/2024 and allowed company Petition (IB) NO. 11/ALD/2024. Submissions of the Appellant: 3. Adjudicating Authority erroneously admitted the Company Petition and initiated the CIRP without considering the factual and legal contentions raised by the Appellant. 4. The Respondents claim default was dated 10.12.2015 in respect of Nikhil Park Royale housing project launched in 2012 at Agra whereas the Company Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners, all of them have been repaid in part, save and except Original Petitioner No. 18, 19, 20, and 22. Thus, the Original Petitioners by no means fulfil the threshold prescribed under Section 7 of IBC. 6. Furthermore, serious allegations of fraud and misrepresentation were raised against certain Respondents, including forgery of signatures on allotment letters and concealment of material information which was fortified by forensic reports brought on record. 7. Further, perusal of the Company Petition itself shows that at Original Petitioners are speculative investors which is evident from the following facts: a. Nandini Garg individually has 8 units in her name, which makes it clear that such units have been taken as a speculative investor and nothing else; and b. Harsh Mittal and Ruchi Mittal have four flats in their name which makes it clear that such units have been taken as a speculative investor and nothing else; and c. Vandana Garg and Vikas Garg forged and fabricated documents to claim the status of the allottee- and Original Petitioners colluded with them to file the Company Petition with the sole motive of extorting money from the Corporate Debtor; and d. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of limitation from the perspective of issue of recovery certificate in terms of provisions of the Recovery of debits and Bankruptcy Act, 1993 was examined. 13. It is also contended by the Respondents that Company Petition satisfies the threshold requirements. It is claimed that in the present case, the total number of units in the project is 247, and the Answering Respondent collectively hold 34 allotted units, thereby meeting the statutory threshold. The Appellant's objection regarding the eligibility of certain allottees is without merit as the Answering Respondent satisfy the threshold requirement under Section 7(1) of the Code. 14. Respondent vehemently denies the claim of forgery and claims that the Adjudicating Authority under Code does not have the jurisdiction to adjudicate allegations of forgery, as held by this Hon'ble Appellate Tribunal in Shelendra Kumar Sharma v. DSC Ltd. (2019 SCC OnLine NCLAT 1274). The Respondnet also relies upon the judgment of the Hon'ble Supreme Court in Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019) 8 SCC 416. 15. It is further submitted that the Appellant has made misleading statements by alleging that cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its execution on 06.08.2022. However, such conversion does not absolve the Corporate Debtor of its pre-existing liabilities, debts, or contractual obligations. Accordingly, all financial liabilities and obligations incurred by M/s Nikhil Associates before its conversion remain binding on M/s NHA Infrabuild Private Limited. The Corporate Debtor cannot evade its pre-existing commitments by merely undergoing a change in its legal structure. The principles enshrined in Section 369 reaffirm that the entity continues to bear the same financial and contractual responsibilities, and the present proceedings must be adjudicated considering the continuity of obligations post-conversion. 20. Respondents contends that they have been due to non-delivery of possession of homes and refunds since 2011. The present case pertains to a long-standing failure of the Corporate Debtor to fulfil its contractual obligations towards the allottees. The project was initiated in the year 2011, yet till date, possession of the flats has not been handed over, nor has any refund been provided to the allottees. As a result, the allottees have suffered for over a decade due to the inaction and default of the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability. 27. The Appellant has placed reliance on the judgements of Hon'ble Supreme Court in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal, Civil Appeal No. 323 OF 2021 and also Asset Reconstruction Company India Limited Vs Uniworth Textiles Limited CA(AT) (Ins) No. 991 of 2020 of this Appellate Tribunal. The relevant extracts of the judgement of Hon'ble Supreme Court are as follows: "14. Several judgments of this Court have indicated that an entry made in the books of accounts, including the balance sheet, can amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act. ... 16. An exhaustive judgment of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115 ["Bengal Silk Mills"] held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt as follows: ... Importantly, this judgment holds that though the filing of a balance sheet is by compulsion of law, the acknowledgement of a debt is not necessarily so. In fact, it is not uncommon to have an entry in a balance sheet with notes annexed to or forming par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caveats, if any, which impact the intended acknowledgements or genuine denial of liability on part of the Corporate Debtor. While doing this examination, it may be worthwhile to look into the overall eco system of such transactions which may help in understanding the impact on limitation period based on such acknowledgements." [emphasis supplied] Both the above noted judgements uphold the view that that entries in the Balance Sheet may amount to an acknowledgement of debt for the purpose of extending limitation under Section 18 of the Limitation Act and therefore don't help the cause of the Appellant. 28. In the present case, we don't find any caveats while acknowledging the amounts due to the Allottees in statement of accounts placed on record. We, therefore, find that these judgements don't help the case of the Appellant but rather support the argument for extending the limitation basis acknowledgement in the Balance Sheet. 29. We also note that the limitation period under the Limitation Act, 1963, is governed by Section 22, which provides that in the case of a continuing breach, limitation runs afresh with each successive instance of default. The Corporate Debtor's failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is not claimed and which does not flow from the facts and the cause of action alleged in the plaint. (iii) A factual issue cannot be raised or considered for the first time in a second appeal." .... 17. In the absence of a claim by plaintiffs based on an easementary right, the first defendant did not have an opportunity to demonstrate that the plaintiffs had no easementary right. In the absence of pleadings and an opportunity to the first defendant to deny such claim, the High Court could not have converted a suit for title into a suit for enforcement of an easementary right. The first appellate court had recorded a finding of fact that plaintiffs had not made out title. The High Court in second appeal did not disturb the said finding. As no question of law arose for consideration, the High Court ought to have dismissed the second appeal. Even if the High Court felt that a case for easement was made out, at best liberty could have been reserved to the plaintiffs to file a separate suit for easement. But the High court could not, in a second appeal, while rejecting the plea of the plaintiffs that they were owners of the suit property, grant the relief of injunction in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practice to make a formal application under Section 5 of the Limitation Act, 1963, in order to enable the Court or Tribunal to weigh the sufficiency of the cause for the inability of the appellant/applicant to approach the Court/Tribunal within the time prescribed by limitation, there is no bar to exercise by the Court/Tribunal of its discretion to condone delay, in the absence of a formal application." [emphasis supplied] 33. We find that all these points were duly considered by the Learned Adjudicating Authority, which recorded that the Company Petition was filed within the limitation period in its impugned order. The Adjudicating Authority gave its finding that the Company petition is well within the limitation, the relevant extract is as follows: "...As the outstanding deposits from the Applicant Financial Creditors against the flats booked by them have been acknowledged by the Respondent Corporate Debtor in its Balance Sheet as recently as up to 30.06.2022, the present Application filed on 19.01.2024 is found to have been filed within limitation period even as per section 18 of the Limitation Act, 1961. In view of our above findings, we hold that the present Application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allottees, whichever is lower. In the present case, the total number of units in the project is 247, and the Answering Respondent collectively hold 34 allotted units, thereby meeting the statutory threshold. The Corporate Debtor's contention that certain allotment letters are forged is not borne out of the material placed on record and appears is misconceived. Thus we find that the Appellant's objection regarding the eligibility of certain allottees is without merit and the Respondent satisfies the threshold requirement under Section 7(1) of the Code. The Adjudicating Authority has also noted that "the refunds claimed to have been paid to the applicants could not be fully established by the Corporate Debtor as the deposit amounts paid by them have been shown as outstanding in the balance sheet of the Corporate Debtor as on 30.06.2022 filed in MCA portal". 39. The Appellant has also contended that homebuyers who have obtained Recovery Certificates ("RC") or decrees under the RERA Act are no longer allottees and, therefore, cannot be considered as Financial Creditors for the purpose of filing an application under Section 7 of the Code. In support of this contention, reliance has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehensive mechanism for collective resolution when the default is significant and affects multiple creditors. This judgment very well supports the arguments of the Respondents. 41. The Respondents have also placed their reliance on the judgements of the Hon'ble Supreme Court in Kotak Mahindra Bank (supra) Civil Appeal No. 689 of 2021, decided on 30.05.2022 wherein the court had examined the question of limitation from the perspective of issue of recovery certificate. The relevant observation of Hon'ble Supreme Court in Kotak Mahindra Bank Ltd. V. A. Balakrishnan Kotak Mahindra Bank (supra) is as under:- "... 26. It could thus be seen that this Court in the case of Dena Bank (supra) in paragraphs 136 and 141, has in unequivocal terms held that once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of recovery is also issued authorizing the creditor to realize its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the Recovery Certificate. It has further been held that issuance of a certificate of recovery in favour of the financial credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is filed under Section 7, 9 or 10 of the Code without any malicious or fraudulent intent, then also such a petition can be rejected by the Adjudicating Authority on the ground that the intent of the Applicant/Petitioner was not resolution for Corporate Insolvency Resolution Process. As the proceedings under IBC are summary in nature, it is difficult to determine the intent of the Applicant filing an application under Section 7, 9 or 10 of the Code unless shown explicitly by way of documentary evidence. This situation may arise in specific instances where a petition is filed under IBC specifically with a fraudulent or malicious intent." [ emphasis supplied ] The proceedings under the Code are summary in nature, and the burden of proving fraudulent intent lies upon the party alleging it. In the present case, the Appellant has failed to produce any cogent evidence to support its allegations. The mere assertion that the applicants are engaging in forum shopping or that some allotments are disputed does not meet the rigorous standard required to invoke Section 65 of the Code. Moreover, even if certain allottees are excluded, the number of remaining applicants still satisfies the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates before its conversion remain binding on M/s NHA Infrabuild Private Limited. The Corporate Debtor cannot evade its pre-existing commitments by merely undergoing a change in its legal structure. The principles enshrined in Section 369 reaffirm that the entity continues to bear the same financial and contractual responsibilities, and the present proceedings must be adjudicated considering the continuity of obligations post-conversion. 46. From the materials on record, we find the Applicants are genuine allottees who have not received the possession of their flats and the default by the Corporate Debtor remains unaddressed. The burden of proving fraudulent intent lies with the Appellant and mere assertions by the Appellant cannot be used to invoke penal action under Section 65 of the IBC. We do not find any material evidence on record to suggest any malicious and fraudulent intent on the part of the Applicants - Homebuyers. The Adjudicating Authority has noted that the claims of the Appellant in I.A. No. 250 of 2024 in its order, which was filed under Section 60(5)(a) and (c) read with Section 65 of the Code. It has given its at paras 53-54, which is extracted as follows: ".... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas taken by the Corporate Debtor have not been found to be maintainable as we have already given our findings in this order. In our considered view, such pleas taken by the Corporate Debtor are not indicative of any fraud or malicious Intent at the part of the Applicants on initiation of Section 7 Application. Only in respect of two allotees, it was claimed that the allotment letters were forged and criminal cases are filed against them and full amounts were refunded to them along with two more allottees but even if these four allottees are removed from the list of the Applicants the total remaining allotted units would be 30 in respect of balance 18 Applicants, which is still more than the threshold limit of 25 as discussed above, and hence the present petition would still remain maintainable, though these allegations have already been countered by the Financial Creditors as already have been discussed in this order." [ emphasis supplied ] 47. Based on these findings, AA has come to the conclusion that the application is not fraudulent and not filed with any malicious intent as it cannot be substantiated with documentary evidence to show such a fraud and malicious intent. We d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant's reliance on Vashdeo R Bhojwani Vs. Abhyudaya Co-Operative Bank Ltd. and Anr., Civil Appeal No. 11020 of 2018, is also misplaced as it dealt with a financial creditor's claim based on a Recovery Certificate, where the Court held that limitation under Article 137 begins from the date of default and rejected the argument of a continuing wrong. In the case cited, there was no allottee under the Code and in contrast, the present case concerns an allottee, where the nature of default, statutory protections, and limitation principles differ significantly. The rights of an allottee under the Code cannot be equated with those of a financial creditor in a loan default scenario. Therefore, reliance on this judgment is misplaced. 51. Having gone through the materials on record, and looking at the sequence of events, we don't find the arguments of the Appellant convincing that several of the original Petitioners had either received refunds or settled their claims in various ways. This has also not been appropriately replied by the Appellant, even though there are claims by the Appellants that there are some original petitioners who have engaged in fraudulent practices including docume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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