Ansal Housing & Construction Ltd vs Samyak Projects Private Ltd.

PER SH. AVINASH K. SRIVASTAVA, HON’BLE MEMBER, TECHNICAL

This is an application, filed on 20.08.2018 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC,2016), r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, (Adjudicating Authority Rules), for initiating the Corporate Resolution Process (CIRP), declaring moratorium and for appointment of Interim Resolution Process (IRP), against the Corporate Debtor viz., M/s Samyak Projects Private Limited, Corporate Debtor, hereinafter referred as ‘CD’ for default in repayment of Rs. 35,64,03,784/- (Rupees Thirty Five Crore Sixty Four Lakh Three Thousand Seven Hundred and Eighty Four Only/-) as on 31.07.2018.

The Financial Creditor (FC) was incorporated on 22.10.1983 under the Companies Act, 1956, having registered office at 606, 6th Floor, Indra Prakash, 21, Barakhamba Road, NEW DELHI — 110001.

The CD was incorporated on 13.01.2007 under the Companies Act, 1956 (Now, Companies Act, 2013) having CIN U452OODL2OO7PTC157831, registered office at 111, 1" floor, Antriksh Bhawan, 22, K. G. MARG New Delhi — 110001. The CD is engaged in the business of real estate development/ construction business and was developing a project named “Ansal’s Hub 83-II” at Sector 83, Gurgaon, Haryana, in collaboration with the Applicant.

On 27.03.2014, an amount of Rs.25 Crores was advanced as loan by the FC to the CD by way of executing Inter Corporate Deposit (ICD) Agreement. The said loan was for a fixed term of 24 months bearing interest payable @ 24% per annum/ compounded monthly. Further, the amount advanced by the FC was secured against receivables of the CD from following projects-

a. Ansal Heights’92, Gurgaon

b. Ansal Heights’86, Gurgaon

c. Ansal HUB’83, Gurgaon

d. Ansal Bou1evard’83-II, Gurgaon

Simultaneously, with the execution of the ICD Agreement dated 27.03.2014, the Corporate Debtor issued 15 post-dated cheques for the purpose of discharging its liability to repay the principal amount of Rs.25 Crores. The inter Corporate Deposit Agreement dated 27.03.2014 has been annexed as Annexure P-3.

FC further submits that CD failed to discharge its obligation for repayment of loan. CD requested for replacement of three post-dated cheques dated 15.11.2014, 15.12.2014 & 15.01.2015 of Rs. Two Crores each vide letter dated 10.03.2015 with three cheques of Rs.Two Crores each all dated 10.03.2015. Copy of letter dated 10.03.2015 issued by CD for substitution/replacement of post dated cheques has been annexed as Annexure-P-4

FC further submits that out of the 15 post dated cheques issued by the Corporate Debtor, 7 (seven) cheques were realized, including the three replaced cheques. Corporate Debtor made a payment of Rupees 14.5 Crores (Rupees Fourteen Crore Fifty Lakhs Only/-) to the applicant in discharge of its liability, but thereafter hasn't made any further payment after 02.05.2015. Certified copies of bank statements of Applicant annexed till the last payment made by the CD has been annexed as Annexure-P-7.

It is the submission of FC that on 15.10.2016, the CD in unequivocal admission of its liability towards the FC, deposited a sum of Rs.43,26,857/-towards TDS against the interest payable liability of Rs.4,32,68,570/- under the ICD Agreement for FY 2015- 16 and issued TDS certificate. Copies of the TDS certificate issued by the Corporate Debtor for FY 2014- 15 and 2015-16 has been annexed as Annexure-P-6.

To prove the existence of Financial Debt and the amount and date of default, FC has annexed the complete ledger account showing all the accounting entries of receipts and payments in respect of the said Inter Corporate Deposit Agreement dated 27.03.20 14, copies of TDS certificates issued by the CD to the FC for financial year 2014-15 and 2015- 16, certified copies of Bank statement reflecting entries of payment and receipts in respect of agreement dated 27.03.2014 (Annexure P-7) and Copy of Audited Accounts of Corporate Debtor for the financial year 2016-17 as filed by the Corporate Debtor on the website of Ministry of Corporate Affairs (Annexure- P-8). It is submitted by FC that the said Accounts show that the money borrowed by the Corporate Debtor as a Secured Borrowing in the Note related to Borrowings.

FC in his submissions submitted that, the Corporate Debtor failed to discharge its full financial obligation under the ICD Agreement dated 27.03.2014, which was agreed to be liquidated within a period of 24 months. FC submitted that as on 31.07.2018 an amount of Rs. 35,64,03,784/- is due and payable. The default occurred on 15.05.2015, however claim continued to be recognized by Corporate Debtor by virtue of the admission in audited balance sheet of the Corporate Debtor.

CD submits that the FC and CD, both being in the business of construction and development, have various running accounts for several other residential/commercial projects as well where both the parties have agreed to collaborate. CD further submits that both parties had entered into four collaboration (Joint Venture Agreements) )agreements in the years 2011 and 2013 for four different projects namely:

CD further submits that for making payment towards purchase of land for development of Project Ansal Hub’83- II, an advance of Rs. 25 crores were given by the Applicant to the Respondent basis the ICD dated 27.04.2014.

CD further submits that the ICD was secured against the receivable from the projects falling to the share of the CD on account of projects being developed by the FC in collaboration with the CD. Under Clause 4 of the ICD, the CD had assigned the share of receivables of the CD from the Projects in favor of the FC and the FC had the absolute right to adjust the receivables from the Projects forming part of the receivable of the CD against the ICD installments in case the CD committed default in servicing repayment of loan amount of ICD as per the agreed schedule.

Further, 15 postdated cheques dated from September 2014 to November 2015 were provided by the Respondent to the Applicant for repayment of the ICD. Out of the said 15 cheques, 3 were replaced on 10.03.2015 and ultimately 7 cheques totally to Rs. 13 Crores were realized by the Applicant. Further, payments were made through demand drafts and bank transfers by the Respondent; however, the rest of the cheques were never encashed by the Applicant for reasons best known to them even though they were available with the Applicant as security.

CD further submits that no notice for default has been raised by the Applicant till date. On the other hand payments have been made by the Applicant/FC to the Respondent after the alleged default as per the ICD. In Fact, the Applicant has been disbursing and making payments to the Respondent from the years 2015 to 2017. Copies of the Bank statements reflecting the aforesaid payments made by the Applicant/FC to the Respondent/CD are annexed as Annexure-4(colly). CD further submitted that If there was any amount that was due and payable by the Respondent to the Applicant, then there was no necessity for the Applicant to disburse the said payments to the Respondent. It belies logic and prudence.

CD submits that there is a dispute between the Applicant and the Respondent, arbitration proceedings with regard to the said Projects are currently pending adjudication before Retd. Justice A.K. Sikri wherein claims worth Rs. 10,148 Crores have been claimed by the Respondent against the Applicant before the Ld. Arbitrator.

Further, CD submitted that the amount that was jointly invested in land cannot be termed as financial debt. For this proposition, CD relied on the judgment of Mukesh N. Desai Vs. Piyush Patel and Ors. (Company Appeal (AT) (Ins) No. 789 of 2020 wherein it was held that “the amount invested in the land cannot be said to be a ‘Financial Debt’ as defined under Section 5(8) Code.” Further CD relied upon the judgement of Samyak Projects Private Limited Vs. Ansal Housing Limited (Company Appeal (AT) (Ins) No. 384 of 2022 wherin Hon’ble Appellate Tribunal held that:

Applicant/FC in its rejoinder submitted the argument that what is the justification available with the CD for deducting and consequently depositing TDS of an amount of Rs. 43,26,857/-. Further, Applicant/FC submits that the said joint venture agreement(s) are completely independent commercial understanding and has no direct and/or indirect relation with the ICD agreement. It is submitted that the loan advanced under the ICD agreement was meant/agreed to be repaid within a period of 24 months. Further, it is submitted by the Applicant/FC in his rejoinder that the ‘future receivables’ of the borrowers under the collaboration(joint venture agreement) agreement was just a security under the ICD with an optional right with the lender to adjust the same against the ICD agreement.

Further, it is the submission of Applicant/FC that the lender cannot be compelled to wait and/or be compelled to exercise its option especially when it was unequivocally agreed in the ICD agreement that the entire liability shall be liquidated by the borrowers/CD in 24 months.

We have heard the parties at length, perused the documents, written submissions, reply and rejoinder filed by the parties. The main controversy in the instant case at hand is the interpretation of the Inter Corporate Deposit Agreement (ICD) entered between the parties. We have perused the ICD as well as the joint venture agreements entered between the Applicant/FC and Respondent CD in the years 2011 and 2013. It is not disputed that both the applicant and Corporate debtor are in the business of construction and real estate.

On perusal of all the agreements entered between the parties, we find that before the application under section 7 was filed, there are various projects with which both the parties are associated having their respective shares. At this juncture, we may like to cite a relevant judgement in the matter of Phoenix ARC Private Limited versus Spade financial Services Limited and Ors. (2021) 3 Supreme Court Cases 475 by Hon’ble Apex Court wherein it was held that:

It may not be out of place to note that there may be variety of real estate development contracts under different names which can be entered upon which may have a component in the nature of a loan. For example Collaboration Agreement, Joint Development Agreement, Inter Corporate Deposit Agreement, the purpose of which is the mutual binding legal relationship in exchange of consideration. It is a settled law that investment in any project or company per se does not come under the purview of financial debt as understood under the Code. What has to be seen is the real intention between the parties. Parties have rigorously contended regarding the encashing of cheques, non payments, bank statements etc. First question which is to be considered here is - whether the mutual arrangement entered between the parties on mutually agreeable conditions is covered under the definition of “financial debt” under the Code or not? It seems that the ICD read with Joint Venture Agreements entered upon is in nature of commercial business transactions wherein the loan was advanced in order to pay money to the owners of land being mutually developed by Applicant and Corproate Debtor namely Ansal Hub’ 83 etc. This is evident from the recitals of the ICD Agreement, relevant portion of which is extracted below:

In the Joint Development Agreements entered into between the Applicant and the Respondent for the four projects (see, para 11 ibid), there is a particular percentage of sale realisations from sale of areas to be developed/constructed which both the parties intended to share between them. As an illustration in the JVA for ANSAL HUB 83-II, Gurgaon, the share percentage is extracted below (page no 27 of the reply filed by CD):

On perusal of the Inter Corporate Deposit Agreement(ICD) entered between the parties, we find a similar clause of receivables which both the parties mutually agreed. Relevant portion from the ICD is extracted below:

On perusal of the ICD together with Joint Venture Agreement entered into between the parties, we do not find any force in the contention of the Applicant that the said joint Venture agreement(s) are completely independent commercial understanding and has no direct and/or indirect relation with the ICD agreement. In fact, we note that JVAs are executed prior to ICD i.e in the year 2011 itself wherein first party (Respondent/CD) collaborated with Developer (Applicant/FC) to develop the project. On perusing the recitals of ‘JVA’, it is found that it is the CD who made an offer to Applicant (Developer) to develop the project and also to market and sell the same as the Applicant (Developer) has an excellent track record of development of various real estate development projects of large sizes. Further, it is the CD who had made substantial investment by way of payment to the owners for acquiring rights for development of the proposed group housing scheme. Relevant portion of the JVA is extracted below:

Further, on perusal of ICD, we noted that it is the borrower(Respondent) who had approached the lender for grant of an inter corporate deposit of 25 crores rupees for the payment to the land owners pertaining to land purchased by borrower in Sector 83, Gurgaon for development of project Ansal Hub 83 II, Gurgaon. In consideration, lender (Applicant) was given a security against receivables falling to the share of borrower. (See, Para 16, 18 (ibid)).

Considering all these facts, we may infer without doubt that it is the mutual business understanding of both the parties and the payment of the price for land by Applicant to Respondent preceded by the offer given by the Respondent to Applicant for development owing to their expertise are linked events in a collaboration and (Applicant) Developer vide “ICD” further lent money to Respondent for paying to the land owners only. It is difficult to hold that both the agreements have nothing in common or that these are independent. In our considered opinion, both JVAs and ICD are linked together for the development of projects.

Further it is found in the bank statements produced by the CD that the Applicant had disbursed money in the years 2015 to 2017 and the same is taken on record. The question arises here is that when the Respondent had defaulted in the year 2015 itself, why the Applicant was disbursing money to CD? We may therefore infer that both the parties are working together for the development of real estate projects.

From a careful reading of the terms and conditions of the various agreements i.e. JDA and ICD agreement, it seems that the real intention of the parties is to enter into arrangement/collaboration wherein both are interested in the development of the project and both are sharing benefits of the same in a particular ratio. CD relied upon the judgement by Hon’ble NCLAT in Appeal (AT)(Ins) 384 of 2022 wherein Hon’ble NCLAT dismissed the Appeal, upholding the order of dismissal by Adjudicating Autority in CP(IB)/249/2019. Relevant portion of the Order of the Adjudicating Authority is extracted below:

This reasoning applies to the facts of the present case as well.

For the aforementioned reasons, we are of the opinion that the said contract is in nature of joint development of projects , rather than a loan agreement simpliciter. Both parties are more particularly involved in the development/construction of said project whereas as per the definition of Sec 5(8) “financial debt” means “a debt alongwith interest (if any) which is disbursed against the consideration for the time value of money.” In our opinion, the ICD agreement cannot be read alone and is not covered in the definition of Financial Debt rather the parties appear to have entered into an agreement with a different motive i.e. development of the project and sharing the proceeds therefrom. There is no case to hold that it is a case of admitted debt and default. No case is made out under the code. Parties may pursue the matter to seek appropriate remedy as per law.

We find no merit in this case for Admission under Section 7 as “financial Creditor”. The CP(IB)/ 1043(PB)/2018 is DISMISSED.

In the light of above order, all pending application i.e., CA-292/2019, CA-1043/2019, CA-1718/2019, IA-2736/2021 stand disposed of. File be consigned to the record.