Chandy John Samuel & Ors. vs Asten Realtors Private Limited

The applicants have filed this application under Section 7 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as “IB Code”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as “Adjudicating Authority Rules, 2016”) for initiation of Corporate Insolvency Process against the Corporate Debtor, ASTEN REALTORS Private Limited. The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (IRP).

Applicant Nos. 1 and 2 stated that after listening to one proposed project of the respondent company which was slated to commence soon, they decided to invest into the project and a Booking Form dated October 18, 2014 was issued to the Applicant. Later, they have entered into a Memorandum of Agreement (hereinafter the “MOA”) with the Managing Director of the respondent company on October 25, 2014. On the same day, a cheque was drawn on the Federal Bank account of the Applicant and on October 29, 2014, an amount of Rs 50,00,000/- (Rupees Fifty Lakh only) was transferred from the same bank account of the Applicant to the Corporate Debtor (hereinafter the “CD”).

It is further stated that the scheduled property in the MOA was having an extent of 9.471 Acres (23.402 cents) in Sy No 996/3 (Part) of Ernakulum Village. In the MOA, the CD was represented as the developer/builder and the ownership of the subject property was with one Padmakumari Vijayan Pillai as per Document No 1201/2009 of Ernakulam SRO. It was stated that the said Padmakumari and the CD entered into Agreement of Sale and Development of the Scheduled property on September 19, 2014.

The learned counsel for the applicants submitted that in the MOA it was promised to the 1^st and 2^nd Applicants that they would be allotted Flat No 10 with 3500 Sq. Ft build up area, with undivided interest and rights in common areas and facilities of the scheduled property and no matter any plan changes in future, the 1^st and 2^nd Applicants would be allotted an apartment unit just below the Top floor for the agreed square feet price which was Rs 8,500 per Sq Ft, a pre-launch offer.

It was further promised to the Applicant vide the MoU with them that the Builder or the CD would complete the construction of the building and make the same ready for possession within 24 months from the date of obtaining building permit for the construction of apartment with the government authorities concerned. It was additionally agreed upon that, if the building permit is not obtained from the appropriate government within 120 days of signing the agreement, the CD would refund the advance money with 12 percent interest.

It is stated that in the year 2015, the 1^st and 2^nd Applicants were informed that the CD secured a Building Permit and Approved Plan sanctioned from Cochin Corporation vide Permit No KRP --97/ 15/COC/KRP/0081 15 dated 07.03.2015. Thus, with renewed enthusiasm and hope, trusting the CD; 1^st Applicant on behalf of himself and for the 2^nd Applicant issued another cheque with the Federal Bank account of the Applicant and on 24.04.2015, an additional amount of Rs 50,00,000/— (Rupees Fifty Lakh only) was transferred from the same bank account of the Applicant to the CD. The Federal Bank account statement of the 181 Applicants for the period 01.10.2014 to 30.04.2015 have been produced with this application.

There were various email communications back and forth with the builder/CD. Whenever the status of the construction was asked, the CD used to send a copy of the building permit. The Building Permit which was approved by the appropriate government within the time period was renewed number of times as understood by the 1^st and 2^nd Applicants on enquiry.

The applicants stated that on May 23, 2017, the Applicant received another mail assuring the commencement of the work soon. Even the mails received in 2018, would show that no substantial works were done as assured. On 22 Feb, 2018, another communication to the Applicant was about the status of the work. No significant progress from last year was noticed by the Applicant. Therefore, on March 2018, the Applicant met with the Managing Director who assured him about the construction. On March 27, 2018 the Applicant received a letter with request for further investment. Meanwhile, the Applicant was informed that there was transfer of property between the Owner of the subject matter property and the builder. In fact; the CD instead of investing the ‘money collected from the 1^st and 2^nd Applicant for constructing the apartments as agreed; invested the same in purchasing the Property into its own name. This is a clear violation of the assurance regarding the mode of development which is supposed to be joint venture.

Applicants further stated that during June 2020, the 1^st Applicant himself has visited the project site and it was found that the project was completely stopped and there was no further progress in the work. Then the 1^st and 2^nd applicants contacted the Managing Director of the CD and entered into an Extension Agreement dated December 4, 2020 with the CD by which the CD agreed to complete the project on or before 8/ 12/2021 or to pay back the entire amount with 15% interest from the date of payment along with the liquidated damages of Rupees 25 Lakh. However, no further work has been done and no progress has been reported thereafter. The total amount in default and its computation with days of default of Applicant 1 and Applicant 2 as on 21.10.2022 is Rs. 2,33,75,000/-.

The 3^rd Applicant is a Private Limited Company incorporated under the Companies Act 1956. On December 2014, the 3^rd Applicant has passed a resolution to purchase an apartment at the CD project site and authorized its Managing Director to represent the applicant in a its transactions with the CD. The Managing Director, inter alia has passed a power of attorney in favour of the signatory herein to proceed with the case on behalf of the 3^rd Respondent Company. Pursuant to the representation and assurances of CD, the 3^rd Applicant decided to invest in the housing project of the CD, booked a unit of the apartment in their project named “AURUM WOODS” with unit No: 6A, in the 61h Floor of the building, with a plinth area of 3550 square Feet, @ Rs. 8750 per square foot. The total agreed consideration was Rs. 3,69,45,261/- (Rupees Three Crores Sixty-Nine lakhs forty five thousand two hundred and sixty one only).

3^rd Applicant Vide its cheque dated 12.01.2015 paid Rs 5,00,000 (Five Lakh only) and the CD has issued receipt dated 17.01.2015 acknowledging the receipt of the part Sale consideration. The 3^rd Applicant made a further investment of Rs. 52,30,553/— (Rupees Fifty-Two lakh Thirty Thousand Five hundred and fifty-three only) vide RTGS transaction dated 26.06.2015.

Though, the CD gave many deadlines for commencement and completion of the construction activities, all assurances ended up in defaults and thereafter, the CD issued an extension Agreement with the 3^rd Applicant assuring a final date for completion of the construction or the interest and damages in case of non-performance. The Extension Agreement dated 10.12.2020 signed between the CD and the 3^rd Applicant assuring a final date for completion of the construction or the interest and damages in case of non-performance.

Now it has been realized by the Applicants that the CD is not in a position either to proceed with the construction activities or to pay back the invested amounts along with interest and damages as undertaken by it and therefore filed this application to initiate Corporate Insolvency resolution Process against the Corporate Debtor, i.e., Asten Realtors Private Limited.

The Respondents admitted every fact and pleaded that only on account of the COVID pandemic situations and the prior financial difficulties suffered by the Company, this respondent could not keep up the promise given to the allottees. The applicants are well aware of these financial crises and that it was not at all on account of any wilful default or lapses on the part of the respondent.

It is further stated that the construction project had to be stopped because of the unexpected financial crisis met by the respondent. It is only in good gesture and bonafide that the applicants and the respondent entered into an agreement dated 4.12.2020 to extend the period of completion of the work and handing over of the apartment with a default clause to pay back the entire amount along with liquidated damages of Rs.25,00,000/— to the applicants in the event of default in completion of the project.

Heard the Counsel for the Financial Creditor and perused the averments made in the application. The main determination is to be made is whether the present applicants being home buyers constitute 10% of the total allottees and are entitled to file the present application against the Corporate Debtor.

Undisputedly, the applicant stated that the project comprised of developing a multi-storeyed residential building comprising of Nine premium apartments in the most sought-after destination of Cochin, Panampilly Nagar. It was not objected by the Corporate Debtor. The present application is filed by 3 applicants, who were allotted 2 apartments.

In this context it is relevant to reproduce Section 7 of the IBC, 2016, which states as under:

From the bare perusal of the above provisions of Section 7(1) of IBC, 2016, it is clear that if 10% of the total allottees in the real estate project filed the petition, then the eligibility criteria for filing the same shall be met out. Accordingly, the present application on behalf of the applicants is maintainable.

Now, it has to be seen whether on the basis of all these allegations by the allottees, the Corporate Debtor can be put to insolvency.

Admittedly, in the present case, the respondent has committed an act of default as understood in the provisions of Section 3(12) of the IBC. This is evident from the fact that THE RESPONDENT/ Corporate Debtor could not overcome its financial difficulties to settle the debt owed to the applicants, was also noted by this Adjudicating Authority.

Thus, it is evident that there exists a ‘Debt’ between the parties and the said debt qualifies to be a ‘Financial Debt’ as defined under Sec. 5(8)(c) of IBC, 2016 and also the Corporate Debtor has defaulted in repayment of the said ‘Financial Debt’ which is due and payable to the Financial Creditor. Under the aforementioned conditions, this Tribunal has no choice but to move forward with the current case and start the Corporate Insolvency Resolution Process with regards to the Corporate Debtor in light of any objections raised by the Corporate Debtor.

So, in light of the case's facts, circumstances, and legal situation, we believe that this application, as submitted by the Applicant—Financial Creditor, must be admitted under Section 7(5) of the IBC, 2016.

In view of the aforesaid observations, we hereby admit the petition and pass the following Orders:

CP (IBC) No.54/ KOB /2022 to come up on 01.03.2023 for progress report.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

Certified Copy of this order may be issued, if applied for, upon compliance of all requisite formalities.