K. Chellam & Ors. vs Green Peace Constructions Limited

Per: R.SUCHARITHA, MEMBER (JUDICIAL)

IBA/977/2019 is an Application that has been filed by flat Buyers viz. 1. Mrs. K. Chellam & Mr.S. Krishnakumar 2. Mr.RaghavanSriraman 3. Mr. Varun Raju & 4. Mr. L. Sriraman (hereinafter referred to as 'Financial Creditors') under Section 7 of the Insolvency & Bankruptcy Code 2016 (in short, 'IBC, 2016') r/w Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against M/s. Green Peace Constructions Private Limited (hereinafter referred to as 'Corporate Debtor'). The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor.

IA/316(CHE)/2021 is an Application filed by the Corporate Debtor under Section 65(1) of IBC, 2016 seeking thereof to reject the Petition filed by the Financial Creditors and to punish them for fraudulent and malicious prosecution for filing an Application under Section 7 of IBC, 2016.

The Applicants have filed the present Application before this Tribunal on 12.07.2019. The Financial Creditors have made the following claim in Part – IV of the Application, which is detailed as follows;

It is seen from the averments made in the Application that each of the Financial Creditors No. 1 to 3 have independently entered into a Registered Builders Agreement with the Corporate Debtor and had been allotted a Flat on payment of the advance amount. Thereafter, it is seen that a Sale Deed was executed independently in respect of the Financial Creditor Nos. 1 to 3 for the sale of Undivided Share (UDS) and the same is also registered on the file of the Sub – Registrar Office, Ashok Nagar.

The Learned Counsel for the Financial Creditors submitted that as per the Builders Agreement, the Corporate Debtor undertook to hand over possession within 12 months from signing of the agreement, i.e. by 15.03.2017. However, the Corporate Debtor failed to handover possession of the flat as agreed. Hence, it was submitted that due to the failure of the Corporate Debtor in handing over the possession of the flat to the Financial Creditor Nos. 1 to 3, the parties entered into Supplementary Agreement dated 21.08.2017, wherein the Corporate Debtor undertook to hand over the possession within 10 months, therefrom i.e. 20.06.2018, however it was submitted that the Corporate Debtor failed to hand over the possession of the flat. Thereafter, it is seen that the Financial Creditor Nos. 1 to 3 have issued a termination notice, whereby the Builders agreement dated 16.03.2016 and the Supplementary Agreement dated 21.08.2017 were terminated for the following reasons:

In relation to Financial Creditor No. 4, it is seen that a Joint Development Agreement dated 15.11.2012 was entered in to between Financial Creditor No.4 and the Corporate Debtor. The Financial Creditor No.4 and three other people were original owners of the land and building and as part of the said Joint Development Agreement, the Financial Creditor No.4 along with other owners agreed to sell 50% of the Undivided portion of land owned by them to the potential flat purchasers and requested the Corporate Debtor to build a building comprised of residential flats for the owners and potential flat buyers. It was submitted that The Financial Creditor No.4 along with other owners also agreed to execute a Power of Attorney (POA) in favour of the Corporate Debtor for obtaining approvals and also to sell 50% of the UDS of land to potential flat buyers. The Financial Creditor No.4 was only provided with a copy of the executed POA.

It was submitted that the Corporate Debtor failed to complete the building construction within 18 months from 01.10.2013 being the date on which possession was taken over. The 18 months' time period expired on 31.03.2015. The Financial Creditor No.4 had provided the certified copy of the Sale Deed dated 03.08.1981 bearing document Number 4278/1981, but the same has not been refunded by the Corporate Debtor. It was submitted that as per the Joint Development Agreement, the Corporate Debtor had agreed to pay Rs.9,00,000/- to Financial Creditor No.4 as Non-refundable money. The Corporate Debtor has paid only a sum of Rs.4,00,000/- via Cheque. The balance amount of Cheque of Rs.5,00,000/- plus interest and other amounts as agreed in the said agreement totals to Rs.58,78,463 as the total outstanding as on 15.06.2019.

It is also seen that as per the Supplementary Agreement entered with the Financial Creditors Nos.1, 2 & 3, and as per the signed minutes dated 23.01.2018 of the meeting held on 22.01.2018, the Corporate Debtor agreed to bring payments of one Mr. G. Kumar (Flat 2D of the Wingate Project) and Mr. K. N. Kasi (Flat 4D of the Wingate Project) aggregating to Rs.99.5 lakhs in to the Special account but the same has not been done by the Corporate Debtor. Further, the Corporate Debtor without authorisation and fraudulently withdrew Rs.28,06,582/- from the Special Account bearing account Number 161613500000560 with Karur Vysya Bank, K.K.Nagar Chennai – 600078. The total amount that should be brought in to the Special account amounts to Rs.1,27,56,582/- as the same has caused a huge deficit in meeting the total cost of project completion that will now have to be borne by the homeowners.

It is seen from the record of proceedings that when the matter was posted for hearing before this Bench on 26.12.2019, the Respondent was granted five days’ time as last chance to file its counter and the matter stood posted to 08.01.2020. In the interregnum, the IBC (Amendment) Act, 2019 was passed imposing a condition that for allottees to qualify as Financial Creditors under IBC, they had to be at least 100 in number or 1/10th of the total number of allottees. In lieu of the same, all applications filed by allottees were put on hold till a memo as to whether the allottees satisfied the criteria Imposed by the Amendment Act. The Application was therefore, not listed on 08.01.2020.

Thereafter, it is seen that on 12.03.2020, the Learned Counsel for the Financial Creditors filed a memo by stating that the Petitioners herein are allottees under the Real Estate Regulatory Authority Act, 2016 and have preferred a Joint application under section 7 of the IBC, 2016 against the Corporate Debtor which is the Builder Company. It was submitted that the total number of flats to be constructed in Project 'Wingate' was 16 and there was a total of 13 Allottees. The Financial Creditors herein being 4 in number constitute more than 1/10th of the total number of allottees. It was therefore submitted that the Financial Creditors herein satisfy the criteria sought to be imposed under the IBC (Amendment) Act, 2019 and that the Application is in any case maintainable.

It is also relevant to point out here that this Adjudicating Authority initiated the Corporate Insolvency Resolution Process against the Corporate Debtor in CP/344/IB/2018 vide its order dated 27.08.2018. Subsequently, the Corporate Debtor filed an Appeal against the said order and the Hon'ble NCLAT vide Order dated 07.05.2019 in Company Appeal (AT) (Insolvency) No. 572 of 2018 has set-aside the order passed by this Adjudicating Authority and held as follows;

Hence it was submitted that the Present petition was filed on 12.07.2019 that is after the aforesaid NCLAT Order and it is maintainable.

The Corporate Debtor has filed Counter and it was submitted by the Learned Counsel for the Corporate Debtor that the Application filed by the Financial Creditors under Section 7 of IBC 2016, is not maintainable both in facts and law.

The Learned Counsel for the Corporate Debtor submitted that the transaction mentioned in the petition in respect of the Financial Creditor No. 4 has arisen out of and based on the Joint Development Agreement (JDA) entered on 15.11.2012 between Four Land Owners and the Financial Creditor No.4 herein as the builder for development of the land and construction of flats thereon. The landowners are the owners of 3 grounds and 290 sqft (7290 sqft) of land. The terms of the JDA reveal that the land owners had decided to sell 50% of undivided share of land to the prospective Flat Purchasers being the nominees of the Developer, the Respondent herein and to build flat for them. It was further agreed that the building to be constructed would be stilt plus four floors and total number of 16 flats would be constructed. The total built of area would be 17600sq.ft.

The Learned Counsel for the Corporate Debtor further submitted that the Financial Creditor No. 1 has suppressed the fact that the Corporate Debtor has completed the construction of stilt plus 4 floors of the building with completion of brick works and 50% of internal plastering. Further it was submitted that as per the terms and conditions of the Builders Agreement, at this stage of completed level of construction of the building, the Financial Creditor No. 1 ought to have paid (including brick work payment of Rs.3,50,000/-) a sum of Rs. 1,07,00,017/- (including brick work payment of Rs.3,50,000/- the internal plastering payment not included) but they had paid only a sum of Rs.90,50,017/-. As there no level for payment of brick work and internal plastering, even after deducting the brick work payment of Rs.3,50,000 and handing over amount of Rs.1,69,025 both put together Rs.5,19,025/-, the First Petitioner is yet to pay a sum of Rs.13,00,000 together with interest amount of Rs.8,66,754 totalling a sum of Rs.21,68,754 to the Builder the Respondent herein.

The Learned Counsel for the Corporate Debtor further submitted that the Financial Creditors along with some other Allottees have filed a complaint before the TNRERA and prayed for taking over the remaining construction of the Project. It was submitted that TNRERA after observing that more than 75% of the construction of the project over and completed, permitted the "Block Ninety Flat Owners Association" K.K. Nagar comprising of the Financial Creditors and some others being land owners and flat purchasers as its members to take over the project at its present stage and to do the remaining work, as the majority of the members sought for the same. It was submitted that there are six members who still want the Respondent to continue. Further, it was submitted that the Corporate Debtor herein in accordance with the order of TNRERA has handed over the possession of the constructed building and all the original documents to the Association comprising the Petitioner herein.

The Learned Counsel for the Corporate Debtor further submitted that each of the Financial Creditors have filed a working separately claiming interest for each stage of their payment from the said date, however it was submitted that the Financial Creditors have consciously ignored and suppressed the fact that the money paid by them has been utilised for purchase of Undivided share of land in their name and apart from the same, the money has been utilized for the construction of their flat and it is a known fact that without such utilization the building could not have been completed to the level of 80%. Thus it was submitted that the said working sheet for calculation of interest is not only erroneous but also unsustainable and hence it cannot be accepted but to be rejected.

The Learned counsel for the Corporate Debtor submitted that they had complied with the order of TNRERA by handing over the possession of the constructed flats and all the original documents to the Association comprising the Financial Creditors herein and hence it was submitted that the claim of the Financial Creditors that the money paid has not been returned and the flats have not handed over is not maintainable and is required to be rejected. Furthermore, it was submitted that the Corporate Debtor does not owe any money to the Financial Creditors and also made a counter claim against each of the Financial Creditor Nos. 1 to 3.

With respect to the Financial Creditor No.4, it was submitted by the Learned Counsel for the Corporate Debtor that on 15.11.2012 the Financial Creditor No.4 had signed a Joint Development Agreement with the Corporate Debtor herein for development of the land and construction of flats thereon. It was submitted that the developer had offered and agreed to construct flats to each Land owner and accordingly constructed two flats for the Financial Creditor No.4 herein. Moreover the Respondent has paid a sum of Rs.5,00,000/- but in the petition filed it is claimed as Rs.4,00,000. Further it was submitted that the fact remains that Corporate Debtor, in accordance with order of the TNRERA has handed over the possession of the constructed building and all the original documents to the Association comprising the petitioners herein. The petitioners including the Financial Creditor No.4, and others as on date are in possession of his two flats. The value for the constructed portion of one flat is Rs.47,91,782/- and for two flats is Rs. 95,83,564/-. It was submitted that the money already paid by the Corporate Debtor along with interest works out to be Rs.6,15,856/- with the money already paid the total comes to Rs.1,01,99,420/-. Thus, it was submitted that the Corporate Debtor had spent huge amount towards construction of the flat and the Financial Creditor No.4, without acknowledging and accepting the actual fact, has submitted a false claim in the present Application. Further, it was submitted that the Corporate Debtor does not owe any money as the Corporate Debtor had paid more than the claim amount. Hence, the common prayer of the petitioners that money paid not returned and flats are not handed over is not maintainable and sustainable and shall be dismissed. Hence the Corporate Debtor sought for the dismissal of the present petition.

The Financial Creditors have filed rejoinder and the Learned Counsel for the Financial Creditor submitted that there is sufficient proof of debt and non-payment of debt has been adduced along with the Joint Application filed by the Applicants and in this regard the Petitioner is relying on the entire contents and annexures of the application listed below:

The aforesaid documents prove that the Corporate Debtor had failed to complete construction and deliver possession of the flats as promised and in the alternative has failed to refund the money that has been paid towards the consideration for the flats. The learned counsel for the Petitioner submitted that he denied paras 19 and 20 of the Counter Affidavit by stating that the Respondent has constantly been breaching and violating its contractual obligations

The Learned Counsel for the Respondent filed the Written Submissions wherein they had submitted that the facts with documentary evidence submitted supra categorically confirms and proves that:

Furthermore the Respondent/Corporate Debtor placed heavy reliance in the matter of Pioneer Urban Land -Vs- Union of Infrastructure Limited India (2019) 8 SCC 416 wherein the Supreme court ruled that the Allottees themselves defaulters not be entitled for any relief including compensation and in the case of Navin Raheja -Vs- Shilpa Jain and others in Company Appeal (AT)(Insolvency) No.864 of 2019 vide order dated 22.01.2020

We have heard the submissions made by the Learned Counsel for both the parties and have gone through the documents filed along with the typed set. In the present case, it is imperative to set out the facts upright. The Builders' Agreement was entered into between the parties in the year 2016 and thereafter a Supplementary Agreement was entered into between the parties in the year 2017. Since the Corporate Debtor was unable to complete the project within the time limit stipulated under the Supplementary Agreement, the Financial Creditors have issued a Termination Notice to the Corporate Debtor. Thereafter, it is seen that the Financial Creditors herein have filed a Complaint before the Tamil Nadu Real Estate Regulatory Authority (TNRERA) vide C.Nos. 21,24 to 27 and 66/2018 and 342, 343, 351 & 360/2019 and it is seen that the TNRERA vide its order dated 17.10.2019 has passed an order. It is necessary to refer to the relevant portion of the said order;

Thus, a perusal of the order passed by the TNRERA would show that the Financial Creditors herein had already formed an Association by name 'Block Ninety Flat Owners Association KK Nagar' and have given their willingness and consent to commence construction with another builders to carry out the remaining construction in respect of the project 'Wintage'. This act of the Financial Creditors in adopting one stand before TNRERA and another stand before this Tribunal would amount to forum shopping. Further the Allottees, including the Financial Creditors herein have given their consent to commence construction with another builders to carry out the remaining construction in respect of the project 'Wintage' by forming an Association and at this point of time, if the Corporate Insolvency Resolution Process in respect of the Corporate Debtor is ordered, it would put the entire project at peril, since the 'Block Ninety Flat Owners Association KK Nagar' as per the order of TNRERA is required to complete the remaining work.

Further, it is also seen that the Financial Creditors have not paid the entire amount which is required to be paid to the Corporate Debtor and that they have paid the amount in schedules in proportionate to the work completed by the Corporate Debtor. It is also seen that the Financial Creditor No.1 is required to pay a sum of Rs.21,68,754/- and the Financial Creditor No.2 is required to pay a sum of Rs.19,52,773/- and the Financial Creditor No.3 is required to pay a sum of Rs.33,03,080/- to the Corporate Debtor. Thus, the question which arises before this Tribunal is whether these applicants have committed a 'default' is payment of the sum to the Corporate Debtor as per the schedule to the Agreements.

It is also required to be noted that the project 'Wintage' as per the orders passed by the TNRERA is now under the control of 'Block Ninety Flat Owners Association KK Nagar' in which the Financial Creditors herein are also a member and that the Financial Creditors on the one hand have given their consent before the RERA and on the other hand is acting in a way which is detrimental to the interest of the project. Thus, it seems that the Financial Creditors are 'speculative homebuyer' who are not interested in completion and handing over of the flat.

Hence for the reasons aforestated, we are of the view that the Applications filed by the Financial Creditors deserve to be dismissed and accordingly stands dismissed. Connected IA/316(CHE)/2021 also stands closed. No costs.