M/s. Sterling Paraphernelia Pvt. Ltd. vs Debashis Nanda

[Per.: Dr. Alok Srivastava, Member (Technical)]

The present appeal is filed by the Appellant M/s. Sterling Paraphernelia Pvt. Ltd., who is aggrieved by the order dated 8.6.2022 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi) in IA No. 6052 of 2021 in CP (IB) 1744/ND/2019 (hereinafter called ‘Impugned Order’) under Section 61 of the Insolvency and Bankruptcy Code (hereinafter called ‘IBC’).

The Appellant’s case is that he had given a loan of Rs. 2 Crores to the Corporate Debtor M/s Bulland Buildtech Pvt. Ltd., which was disbursed through four demand drafts of Rs. 50 lakhs each at 2.40% rate of interest. He has further stated that when the Corporate Debtor could not pay back the amount when it became due, the Appellant and the Corporate Debtor entered into an MOU dated 14.9.2015, whereby four flats being built by the Corporate Debtor in a project called ‘Bulland Elevates’ were given in security towards repayment. When the Corporate Debtor committed default, the Appellant filed a Section 7 application bearing CP(IB)73(ND)/2019 against the Corporate Debtor which was withdrawn after the Appellant and the Corporate Debtor entered into a settlement and as a result another MOU dated 23.11.2019 was entered into by them, whereby seven flats/apartment units were allotted by the Corporate Debtor in the name of M/s. Sterling Paraphernalia Pvt. Ltd. in the residential project ‘Bulland Elevates’ located at plot no. GH–3A, Sector 16 C, Greater Noida (UP). The Appellant has stated that with the signing of the second MOU dated 23.11.2019 all the earlier documents, receipts, and Builder Buyer Agreement were returned by the Appellant to the Corporate Debtor.

Subsequently, on a petition under Section 7 of the IBC, Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor and the Appellant filed its claim in Form-CA, claiming to be allottee of seven flats in the Corporate Debtor’s project, which was not accepted by Resolution Professional (in short ‘RP) and the Appellant was advised to file his claim for the seven flats in Form C, as the Appellant did not stand on the same footing as home buyers.

The Appellant has stated that aggrieved by the email dated 6.12.2021 from the RP in respect of his claim about the seven flats, he filed application IA No. 6052 of 2021 before the Adjudicating Authority, which was disposed of by the order dated 8.6.2022, and whereby the Appellant’s application for considering it as homebuyer was not accepted.

We heard the arguments of the Learned Counsels of both the parties and perused the record.

The Learned Counsel for Appellant has submitted that the Corporate Debtor entered into an MoU dated 14.9.2015 whereby the Corporate Debtor pledged security for the loan granted by the Appellant in the form of four flats. He has submitted that the Appellant filed section 7 application as financial creditor against the Corporate Debtor after the matter between them was settled vide settlement dated 23.11.2019, which is the second MoU by which the effect of first MoU was fully novated.

The Learned Counsel of Appellant has further submitted that this second MoU established the Appellant as an allottee of 7 flats and as per clauses 9, 10 and 11 of the second MoU dated 23.11.2019, the rights and liabilities of both the parties prior to the MoU stood null and void and this new MoU substituted the earlier MoU dated 14.9.2015.

The Learned Counsel of the Appellant has further submitted that on a section 7 application filed by the erstwhile Syndicate Bank (now called Canara Bank) in the matter of CP (IB) 1744/ND/2019, CIRP was initiated against the Corporate Debtor, and the IRP called for submission of claim after public announcement. The Learned Counsel for Appellant has further stated that the Appellant filed his claim in Form-CA as financial creditor in class, and after the new Resolution Professional took over, he again submitted his claim in Form-CA, which was not accepted by the RP and the Appellant was advised vide e-mail dated 6.12.2021 that he does not stand on the same footing as homebuyers and therefore, he should file in Form-C instead of Form-CA.

The Learned Counsel for Appellant has submitted that the RP also communicated that the said seven flats are mortgaged to Canara Bank and therefore, the Appellant cannot claim as homebuyers and filed claim in Form-CA. The Learned Counsel for Appellant has further submitted that the Canara Bank (erstwhile Syndicate Bank) has exclusive charge on all immovable assets including structures built thereon together with entire current and future receivables and the current assets from the project, but, since no flats have been constructed till date, therefore, there is question of any flat being mortgage to Canara Bank and moreover, no physical demarcation of the flats has been done till now. Therefore, future receivables of the flats cannot be equated with future assets of the Corporate Debtor. On this ground, the Appellant has claimed that the seven flats, which were allotted to him vide MoU dated 23.11.2019 by the Corporate Debtor, were free of all charge and therefore, the Appellant was clearly in the category of homebuyers and his claim Form-CA should be accepted.

The Learned Counsel for Respondent/Resolution Professional has argued that Canara Bank, which is a financial creditor in the CIRP of the Corporate Debtor Bulland Buildtech had advanced a loan to the Corporate Debtor vide sanction letter dated 1.7.2016 whereby an amount of Rs.37.80 crores was given as loan to Corporate Debtor alongwith security, which included exclusive charge on all movable and immovable assets, including structures built thereon together with current, future receivables and current assets from the project were mortgaged to the bank. Thus, Canara Bank has security over the entire project called ‘Bulland Elevates’. He has further stated that the sanction letter records that for each flat/group of flats to be allotted by the Corporate Debtor NOC will be given by Canara Bank, which was not done in the present case and therefore the allotment of seven flats done vide MOU dated 23.11.2019 is null and void. He has also submitted that the loan sanction letter of Canara Bank also stipulates that the Corporate Debtor will not sell or dispose of or create security or encumbrances on the assets charge to the bank in favor of any other bank /financial institution /company /firm /individual, or any other concern, and thus, in the absence of any NOC from Canara Bank, which was mandatorily required no right accrued to the Appellant by virtue of the second MOU dated 23.11.2019.

Learned Counsel for Respondent/RP has also argued that a perusal of the letter of Appellant and the Corporate Debtor also proves that the original nature of debt provided to the Corporate Debtor by the Appellant was a financial debt, even though the Appellant later decided to enter into an MOU dated 23.11.2019, which was unregistered, to change the nature of its debt. He has also stated that in the case of an allottee of a project the ledger entries are usually unidirectional i.e. monies flowing from allottee to the developer, whereas in the present case, the ledger entries are two directional which clearly suggests that the Appellant is financial creditor and not a financial creditor in class i.e. homebuyer. He has also submitted that a perusal of the ledger account maintained by the Corporate Debtor suggests that Corporate Debtor paid a large amount of money in interest to the Appellant on the original loan and thus, the debt of the Appellant satisfies the requisites of being a financial debt.

The Learned Counsel for Respondent/RP has also stated that the initial unsecured loan of Rs. 2.00 crores given by Appellant to the Corporate Debtor was the basis of the Appellant’s Section 7 application jointly filed along with two other financial creditors bearing CP No. (IB)-73/ND/2019, which was disposed of on 5.12.2019, as another petition filed by Ultimate Infracity Private Limited was admitted on 29.11.2019. He has submitted that once the Corporate Debtor’s account was declared as NPA on 29.6.2018, the Appellant decided to change the original nature of its debt and wrongfully attempted to secure its interest by creating interest over the alleged seven flats/apartment units of the Corporate Debtor. He has further stated that the Appellant does not come within the definition of ‘allottee’ as per section 2(z) of Real Estate (Development and Regulation) Act, 2016 and therefore, the Appellant cannot claim the status of an allottee/homebuyer. Moreover, the Appellant is not a genuine allottee as has been enunciated in the judgment of Hon’ble Supreme Court in the case of Pioneer Urban Land and Infrastructure Limited versus Union of India & Ors. (WP Civil No. 43/2019), wherein a clear distinction between a genuine allottee and a speculative investor has been made and the judgment goes on to say that a speculative investor cannot claim the same status and rights as homebuyers/allottees.

The basic issue in this appeal relates to whether the claim filed by the Appellant in Form-CA should be accepted in the CIRP of the Corporate Debtor.

We note, as admitted by the Appellant that he advanced a loan of Rs. two crores to the Corporate Debtor, which was disbursed through four demand drafts of Rs. 50 lakhs each between 6.11.2018 and 24.10.2019. When this unsecured loan was defaulted in repayment by the Corporate Debtor, the Appellant filed a section 7 application CP (IB) No. 73/ND/2019, which was disposed of as another section 7 application was admitted on 29.11.2019 against the Corporate Debtor. We also note that the second MoU, which is claimed to have been executed between the Appellant and the Corporate Debtor on 23.11.2019 is an unregistered document by which the Appellant was ostensibly allotted seven flats bearing nos. 703 (1370 sq. foot super built up area), 1002 (1445 sq. foot super built up area), 1503 (1370 sq. foot super built up area), 1606 (1370 sq. foot super built up area), 1702 (1445 sq. foot super built up area), 1802 (1445 sq. foot super built up area) and 1802 (1445 sq. foot super built up area), all located in Block ‘D’ with allotment letters dated 23.11.2019 in all the cases in lieu of the amount pending for repayment by him.

We also note that the sanction letter of Canara Bank dated 1.7.2016 whereby a loan of Rs. 37.80 crores was extended to the Corporate Debtor, very clearly records the following security created in favour of the bank:-

Thus, two points are very clear viz. that the entire project with immovable and movable assets, including structures built thereon with entire current, future receivables and current assets from the project were all mortgaged to Canara Bank and such flats would not have been allotted to any person without an NOC from Canara Bank. Also, the Appellant, who claims to be an allottee and desires the benefit of filing his claim as homebuyer in Form-CA, is not an original allottee, but has received the seven flats as in lieu of its due amount of Rs. 3.03 crores from the Corporate Debtor vide a settlement MoU dated 23.11.2019.

It is also not clear as to how an original mortgage of four flats in same project against a loan of Rs. 2 crores, gets converted into an allotment of seven flats in the same project ‘Bulland Elevates’, when the Corporate Debtor had evidently paid huge amount as interest to the Appellant. Moreover, this purported transaction between the Appellant and Corporate Debtor vide MoU dated 23.11.2019, also infringes sections 43 and 66 of the IBC, a point that has been noted in the Impugned Order.

In the light of very grave doubt that exists regarding the allotment of seven flats to the Appellant, which in the absence of any NOC from Canara Bank could not have been made, we do not think that the RP committed any error in asking the Appellant to file its claim in Form-C instead of Form-CA, as an unsecured creditor, a decision which was affirmed by the Adjudicating Authority vide the Impugned Order dated 8.6.2022. Thus, we find no error in the Impugned Order and affirm the same. The appeal being devoid of any merit fails. It is accordingly dismissed.

There is no order as to costs.