Anup Tripathi & Ors. vs M/s. Nandhini Hotels Pvt. Ltd.

i.) The Financial Creditors had made bookings in a Project being developed by the Corporate Debtor herein, namely, 'Prakruthi Solitaire' situated at Survey No. 11/2 and 130/5, Katha Nos.5284/5188/5195, Kammasandra Village, Anekal Taluk, Bangalore, Karnataka (hereinafter referred as the 'Project'). Thereafter, Construction Agreements were executed by and between the Financial Creditors and the Corporate Debtor. The Financial Creditors were allotted different Unit Numbers, the details of which are described in Annexure P-67. Furthermore, Agreements for Sale of undivided share of land were executed by and between the Corporate Debtor and the Financial Creditors. There were a total of 39 Applicants having been allotted 20 Units filing this application jointly, as reflected from Form-1.

ii.) The Financial Creditors were to make payments in terms of the payment plan annexed to the Agreements. The Financial Creditors have diligently been making timely payments. Some of the Financial Creditors in order to make timely payments to the Corporate Debtor had availed loan facility from various Banks / FIs. The Financial Creditors were under added financial constraint as apart from unilaterally making payments to the Corporate Debtor, the Financial Creditors were also burdened with the repayment of the availed loan.

iii.) As per Clauses 9 and 10 of the Construction Agreements, the Corporate Debtor was bound to deliver the possession of the Units between 30.06.2014 to 30.09.2014 inclusive of the three-month grace period. Despite the stipulated date of possession, the Corporate Debtor failed to hand over possession of the Units. The Corporate Debtor had given the Financial Creditors an undertaking, stating that they were liable to pay the EMI to the Financial Creditors against the loan availed by the Financial Creditors.

iv.) In view of the considerable delay in handing over the possession of the Units by the Corporate Debtor, the Financial Creditors terminated the Agreements with the Corporate Debtor and demanded refund of the entire principal amount paid along with the requisite interest. Despite multiple communications, the Corporate Debtor failed to return the amount to the Financial Creditors and the same can be evidenced from the Bank Statements of the Financial Creditors.

v.) The Corporate Debtor furnished an evasive reply to the notice sent by the Financial Creditors. The Corporate Debtor made several averments with regard to the non-compliance of the debt mentioned in the Notice. The Corporate Debtor failed to address any of the merits pointed out by the Financial Creditors in the notice furnished by them. The Corporate Debtor has sought to dodge its contractual liabilities and leave the Financial Creditors empty handed after enjoying an interest free loan for the past several years.

vi.) It is also stated that the Corporate Debtor is liable to refund the money with 10.25% p.a. simple interest in terms of Section 18 of the Real Estate (Regulation and Development) Act, 2016 read with Rule 16 of the Karnataka Real Estate (Regulation and Development) Rules, 2017 issued by the Govt. of Karnataka.

vii.) It is stated that the Corporate Debtor has failed to deliver the possession of the Units within the stipulated period of time, clearly substantiating that the amounts raised through the Financial Creditors have been used as commercial borrowings. viii.) As per Part-IV of Form-1, the amount claimed to be in default is Rs.13,05,25,856 (Rupees Thirteen Crore Five Lakh Twenty-Five Thousand Eight Hundred and Fifty-Six only) and the date of default is in December, 2019. ix.) In support of its submissions, the Petitioners have also relied upon the following judgments:

Innoventive Industries Limited v. ICICI Bank and Another (2018) 1 SCC 407;

Pioneer Urban Land and Infrastructure Limited & Ors. v. Union of India (Writ Petition (Civil) 43 of 2019);

Flat Buyers Association Winter Hills - 77, Gurgaon v. Umang Realtech Private Limited through IRP & Ors. [Company Appeal (AT) (Insolvency) No.96 of 2019];

Manish Kumar v. Union of India & Anr. (2021 SCC Online SC 30);

x.) It is stated that the present application is maintainable as it is in alignment with the provisions of the I&B Code (Amendment) Act, 2020.

xi.) Further, in terms of the 2018 amendment to the Code, any amount raised from an allottee under a real estate project shall be deemed to be an amount having the effect of a commercial borrowing and therefore, the instant amount payable by the Corporate Debtor falls under the definition of a financial debt in terms of Section 5(8) of the Code. In view of the above facts, the Financial Creditors herein falls within the definition of the Financial Creditor u/s 5(7) of the Code. The instant debt of the Financial Creditors falls squarely u/s 5(8) of the Code and the fact that such financial debt has incurred on account of the non-payment of the Corporate Debtor stands substantiated from the Bank Statements. Hence, the application.

i.) Copy of Construction Agreements ii.) Copy of Payment Receipts along with the Loan Disbursement Schedule iii.) Copy of Loan Sanction Letter iv.) Copy of the notice along with the Postal Receipt and Email Service v.) Copy of Bank Statement of the Financial Creditors vi.) Copy of reply to the notice sent by the Corporate Debtor vii.) Copy of computation chart calculating the total amount due viii.) Copy of the list of Financial Creditors and their respective Unit holdings ix.) Copy of the Layout Plan for Phase-II of the Project including the total number of Units. x.) Copy of the PAN Card of the Financial Creditors.

i.) The instant Petition is hit by law of res judicata as the Petitioner had filed a Petition earlier in CP (IB) No.75/BB/2020 on the same cause of action by the (1^{\text{st}}) 1 to 6 Applicant/Financial Creditors against the Respondent, and the same was dismissed with the observation that there should be 25 flats to file a Petition and no liberty was obtained to file a Petition on the same ground. ii.) The Respondent submits that the sale and construction agreement was of year 06.06.2013 it has to be completed by 30.06.2014 and extended for a period of three months, the Petitioner ought to have filed the complaint within three years of 2014 for not completing the flats in time, thus the same is not maintainable and is barred by limitation since by the time in 2019 all the Applicants' flats was ready. Out of 140 flats more than 120 flats are registered and they are residing in the flats. iii.) The Respondent / Corporate Debtor are not going to dispute or comment on the documents enclosed with the Petition. The claim of the Applicant was cancellation of flats / are barred by law of limitation they ought to have filed / given notice within three years from 2014.

iv.) It is contended that, Petitioner made an Agreement with landlords for purchase of the site along with Respondent, and landlords are not made parties to the Application and thus needs to be dismissed. v.) The Agreement was entered with the Respondent only during the year 2013, whereas the Real Estate (Regulation and Development) Act came into effect from 2016 and the IBC came into effect much later than 2013 and thus the above Acts are not applicable to the Respondent. vi.) There is a clause in Agreement to Sell for appointment of Arbitrator in case any dispute with the Respondent and Applicant could have referred it to the Arbitrator. vii.) The Respondent as a Developer constructed nearly 180 flats in the name of 'Prakruthi Solitaire', out of that, 50 flats go to the share of the landlord. More than (80%) of flats are registered in the name of the Buyers. It is further stated that more than 10 of the Applicants have got the Flats registered in their name and residing in the Flats.

i.) Pursuant to amendment made to Section 7(1) of the Code and since the CP (IB) No.75/BB/2020 which was filed by 5 allottees, who are Financial Creditors herein, did not meet the requisite threshold, the said application was disposed of by order dated 27.01.2021 with liberty to file fresh CP in accordance with law. Therefore, it is denied that the present application is hit by the law of res judicata because there was no final adjudication on the merits of the case. Moreover, the Respondents have made a totally incorrect claim that in the order dated 27.01.2021, this Tribunal has mentioned that there should be 25 Flats to file a Petition; and that the Tribunal had granted no liberty to file a fresh Petition.

ii.) The Financial Creditors have correctly made the Corporate Debtor a party as it was the Corporate Debtor that was responsible for the construction of the Project. The Agreements which were executed between the Corporate Debtor and the Financial Creditor also bear the stamp of the Corporate Debtor. The Corporate Debtor itself issued the payment receipts against the money paid by the Financial Creditors and thus the Corporate Debtor is the correct party.

iii.) The construction of the Project was to be completed by the Corporate Debtor latest by September 2014 with a grace period of 3 months (and for Financial Creditor Nos.24 and 25 by 30.09.2016), however, the Project has not been completed till date, the Corporate Debtor has failed to obtain the Occupation Certificate and has failed to offer legal possession of the Units to the Financial Creditors. Being aggrieved by the empty promises of the Corporate Debtor, in October 2019 the Financial Creditors terminated the said Agreement and sought refund of money along with interest. However, the Corporate Debtor failed to do so and thereby committed a default under the Code. The Project remains incomplete even as on date as there is no Occupation/Completion Certificate issued by concerned authorities. Although the Project was to be completed by September 2014, by Minutes of Meeting dt.03.09.2016 (copy filed), the Corporate Debtor promised to deliver it by March 2017. However, the same was not delivered even by March 2017 and by October 2019 (i.e., within 3 years from the extended due date of possession expiring in March 2020), the Financial Creditors terminated the Agreements. It is further contested that the Project was completed in 2019; since the Corporate Debtor itself gave an undertaking dated 09.11.2019 (copy annexed) promising to complete the Project by 21.01.2020. Further, no Completion / Occupancy Certificate has been issued to the Corporate Debtor even as on date. Thus, by applying the provisions of Section 18 of Limitation Act, 1963, the present application is well within limitation and is maintainable.

iv.) The Petitioners further relied on the decision rendered by the Hon’ble Supreme Court in Meerut Development Authority v. Mukesh Kumar Gupta (SLP (C) No.8481 of 2012; decided on 09.05.2012) and the decision of Hon’ble Principal Bench, NCLT in Satyajeet Panda & Anr. V. M/s. ANS Apartments Pvt. Ltd. in CP (IB) No.1481 (PB) of 2019; decided on 06.12.2019.

v.) It is further submitted that the landowners had entered into a Joint Development Agreement dt.12.08.2011 with the Corporate Debtor for development of the Project and has also executed a General Power of Attorney dt.29.08.2011 in favour of the Corporate Debtor for development of the Project. The Agreement for Sale that was signed with the landowners was limited to purchase of the proportionate undivided share in the Project and by the Financial Creditors and the contractual obligation to construct the Project was solely of the Respondent.

vi.) Provisions of the Code are applicable to the Corporate Debtor and there is no provision under law which exclude the applicability of the Code to the Corporate Debtor merely because the agreements in question were executed in 2013, prior to its enactment. Therefore, the argument regarding the date of execution of agreements being in 2013, which are prior to enactment of the Code or RERA Act, 2016, is devoid of merit and liable to be rejected. Further, it is stated that the existing of an arbitration clause cannot take away the right of the Financial Creditors to trigger the Code.

vii.) It is further submitted that the Respondents have made a totally incorrect statement in Para 11 of the Reply that 10 Financial Creditors have registered the Units in their name and are residing in the Units, and that under the influence of the first six Financial Creditors, the other Financial Creditors have filed the instant Application for unlawful gain. The Respondent throughout the Reply, made vague statement, unsupported with evidence.

i.) The Authority Letters annexed at pages 81-100 to the Petition and authority emails at pages 17 to 29 of the Statement of Rejoinder are in the form of letter / email and therefore are not valid authority letters as required under Law. It is stated that Shri Anup Tripathi (Financial Creditor No.1) has signed on behalf of himself, Financial Creditor Nos. 2, 3, 20 and 21. However, no authority letter in Petition/Rejoinder issued by Financial Creditor Nos. 20 and 21, and thus Financial Creditor No.1 has no authority to sign on their behalf. It is stated that Financial Creditor No.20 has already executed Sale Deed dated 22.10.2020 and having executed the same, Financial Creditor Nos.20 and 21 could not have been made party to this Petition. Further, Shri Uttam Kumar Dubey (Financial Creditor No.34) has signed on behalf of himself, Financial Creditor Nos.35, 4, 5, 28 and 29. However, no authority letter was given to him by Financial Creditor Nos.28 and 29 and thus cannot be treated as Parties to this Petition. ii.) 'Prakruthi Solitaire' Project consists of totally 338 units. Therefore, the minimum number of Financial Creditors have to be at least 34 allottees. The Respondent have already handed over more than 290 Flats and thus the Petition is not maintainable. iii.) It is further stated that each Agreement, except for Financial Creditor No.3, has two joint purchasers and they cannot be treated as two separate Financial Creditors and therefore, the Petition filed by alleged 19 Financial Creditors does not meet the requirement of threshold. iv.) The said Project consists of two Phases. Phase I consists of 146 flats & Phase 2 consists of 192 flats and all the Petitioners belong to Phase 2 of the development which has 192 flats. Both the Phases are of the same Project and thus cannot be treated as a separate Project. Further, majority of the Petitioners have not paid the entire consideration and therefore cannot call upon the Respondent to refund as the promises are reciprocal in nature.

v.) It is stated that there is no letter of termination on record and the notice issued u/s 8 of the Code cannot be treated as termination notices. The Respondent vide reply to the above notice clearly stated that the Flats are ready and that only when the Petitioner pay the balance amount due can the Respondent hand over the possession and registration can be done. Further, the date of default is stated to be December 2019, which is a date taken without any basis and thus the Petition is barred by limitation.

vi.) The Respondent has relied upon the judgment of the Hon'ble NCLAT in the matter of Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd. through IRP & Ors. in Company Appeal (AT) (Insolvency) No.926 of 2019; Univalue Projects Pvt. Ltd. v. Union of India (2020) SCC OnLine Cal 1452.

i.) Theco India Pvt. Ltd. v. Dental Ceramists (India) Pvt. Ltd. (2020) SCC Online NCLT 1016; ii.) Usha Verma v. Swaayam Ksheer (2018) SCC Online NCLT 26211; iii.) Potluri Raja Mohan Rao v. Chalasani Rao (2019) SCC Online NCLT 18145; iv.) IDBI Capital Markets & Securities Ltd. v. JPF Petrochemicals Ltd. (2020) SCC Online NCLT 5510; v.) AKK Nambiar v. Union of India (1969) 3 SCC 864; vi.) M. Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd. (2020) 14 SCC 643;

vii.) BK Educational Services Pvt. Ltd. v. Parag Gupta & Associates (2019) 11 SCC 633; viii.) Santosh Kapoor v. Radha & Ors. (Civil Suit No.194/16).

The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Corporate Debtor;

It is further directed that the supply of essential goods or services to the Corporate Debtor as may be specified, shall not be terminated or suspended or interrupted during the moratorium period;

The provisions of sub-section (1) shall however, not apply to such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority, and to a surety in a contract of guarantee to a Corporate Debtor;

The order of moratorium shall have effect from the date of this order till completion of the Corporate Insolvency Resolution Process or until this Bench approves the Resolution Plan under sub-section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33 as the case may be.