Naresh Kumar Agarwal vs M/s SNG Realestate Private Limited

Per: Shri Deep Chandra Joshi, Judicial Member

The present application has been filed by Mr. Naresh Kumar Agarwal, through his Power of Attorney Holder Mr. Dinesh Kumar Agarwal ('Applicant/ 'Financial Creditor') against the Corporate Debtor namely M/s SNG Realestate Private Limited ('Respondent'/ 'Corporate Debtor') under Section 7 of Insolvency and Bankruptcy Code, 2016 (the 'IBC'/ 'Code') read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 seeking initiation of the Corporate Insolvency Resolution Process ('CIRP'), pursuant to default in repayment of loan amount by the Corporate Debtor to the Applicant.

The Corporate Debtor is a Private Limited Company, incorporated under the Companies Act, 1956 on 17.11.2008 and duly registered with the Registrar of Companies, Jaipur, having CIN: U45201RJ2008PTC027756. The registered office of the company is situated at 707, Paris Point, Bani Park, Jaipur. The authorized share capital of the company is Rs.10,00,00,000/- (Rupees Ten Crores Only) and paid-up share capital of the Company is Rs. 4,99,00,000/- (Rupees Four Crores Ninety-Nine Lacs Only). The details have been verified from the online database maintained by the Ministry of Corporate Affairs.

The details of the transactions leading to the filing of this application averred by the Applicant are as follows:

The Corporate Debtor acquired development rights of the Land situated at Plot No. O-13, Ashok Marg, C- Scheme, Jaipur vide Registered Development Agreement on which a residential group housing project was developed in the name and style of 'SUNRISERS'. The Applicant agreed to invest in the said project subject to assurances by Corporate Debtor of Minimum Guaranteed Returns and entered into three different Memorandum of Undertakings ('MoU') dated 04.11.2016 with the Corporate Debtor with regard to three different flats in that project.

The mechanism of all the MoU's entered into by Financial Creditor for the investment in the flats through which Corporate Debtor offered the minimum investment return are tabulated as under:

The Corporate Debtor failed to pay the assured returns, thus entered into settlement agreement with the Applicant. The Corporate Debtor vide Settlement Agreement agreed to sell Flat No. 304 to the Applicant, whereby the assured return of all the three MoU's were adjusted into the total cost of Flat No. 304 and further the MoU for Flat Nos. 302 & 303 were extended for the period of 12.93 months.

The Corporate Debtor again defaulted in payment of assured returns after renewal of MoU and also failed to transfer the possession of flat No. 304.

After repeated reminders and request to the Corporate Debtor for payment of due amount, the Applicant was left with no other alternative but to deposit the cheque given by the Corporate Debtor in lieu of return of investment clause as mentioned in the MoUs for the amount equivalent to bank loan and token money paid by the Applicant for the investment in all flats. The details of the cheques as under got dishonoured with the remark that 'payment stopped by drawer' are as below:

As per the penalty clause of MoU of the Corporate Debtor was to bear the penalty of 24% pa of the total invested amount, if in any case cheque gets dishonoured within 7 days of occurrence of default, but till date no such amount has been paid by the Corporate Debtor. Even after repeated requests and reminders, the Corporate has failed to make the payments due towards the MoU.

As a consequence of the aforementioned default, this Application has been filed seeking initiation of CIRP against the Corporate Debtor under Section 7 of the Code. The aforementioned details as reflected in Part IV of the Application is reiterated as below:

The Corporate Debtor filed reply vide Diary No. 1999/2023 dated 16.08.2023 wherein the following has been contended:

It has been mentioned that the Applicant through his POA Holder Mr. Dinesh Kumar Agarwal (brother of the Applicant) entered into several Agreement to Sale wherein he agreed to purchase several flats/units in the project SUNRISERS being undertaken by the Corporate Debtor on 30.09.2016 and paid an amount of Rs. 1,00,000/- against each flat. After entering into the Agreement to sale, the Applicant entered into three Tripartite Agreements with State Bank of India on 03.11.2016 and SBI disbursed the substantial amount against the aforesaid flats, subsequent to which MOUs dated 04.11.2016 were executed , the details of the same are tabulated below:

The Corporate Debtor has contended that the Applicant does not meet the minimum threshold criteria under Section 7 of the Code, being the allottee as per the provisions of the RERA Act. It has been brought on record that as per the available information on web portal of RERA, the said project has 38 flats, 2 stilt floors, 1 club house and 2 commercial units, therefore the said petition deserves to be dismissed in light of 1st and 3rd proviso of Section 7(1) of IBC, 2016. Also, as per the Tripartite Agreement, the Applicant has already subrogated his all right in favour of SBI. According to clause 2, 4, 13 & 18 of the agreement, in the event of default by the Applicant, SBI may at its discretion enforce the security, in furtherance of which the SBI has already on 19.10.2019, in the capacity of creditor, had already proceeded against the Corporate Debtor by filing an Original Application No. 1356/2019 (recovery suit) and claiming the security interest over the flats of the Applicant. Therefore, SBI is in the shoe of creditor standing against the Corporate Debtor for same set of debt before the DRT against which the Applicant is also claiming amount due under Section 7 of this Application.

It is submitted that no cause of action survives in favour of the Applicant and the Corporate Debtor is entitled to recover the amount of Rs. 1,30,15,711/- (Rupees One Crore Thirty Lakhs Fifteen Thousand Seven Hundred and Eleven Only) towards the Flat Nos. 302 & 303 for the balance sale consideration.

The Applicant also preferred Written Submissions vide Diary No. 2885/2023 dated 05.12.2023 wherein it has been contended that the Financial Creditor entered into three MOUs with the Corporate Debtor dated 04.11.2016 for Flat No. 302, 303 and 304 in the project named SUNRISERS for aggregate sale amount of Rs. 1,85,33,317/- (One Crore Eighty-Five Lakhs Thirty-Three Thousand Three Hundred and Seventeen Only), Rs. 1,83,42,394/- (Rupees One Crore Eighty-Three Lakhs Forty-Two Thousand Three Hundred and Ninety-Four Only) and Rs. 1,87,54,895/- (Rupees One Crore Eighty-Seven Lakhs Fifty-Four Thousand Eight Hundred and Ninety-Five Only). As per the MOUs an advance of Rs. 1,00,000/- (Rupees One Lakh) for each flat was paid by the Financial Creditor and respective Loan amount against the three flats i.e. Flat No. 302, 303 and 304 was paid by availing loan facility from SBI. In consonance with the RoI clause in the MOU, it has been submitted that the Applicant is an investor in the present set of circumstances.

We have heard the Ld. Counsels for the parties and perused the averments made in the Petition, Reply, Written Submissions and Applications along with the documents enclosed therein.

This Adjudicating Authority having perused all the relevant papers and found them in order is passing this order as below. The Registered Office of the Respondent is situated in Jaipur; therefore, this Adjudicating Authority has jurisdiction to entertain and try this Application. Further, this matter is within the purview of Laws of Limitation, as the debt fell due in 2017, and the Application was filed before this Adjudicating Authority in 2018. Hence, the period of three years after the default occurred had not exhausted at the time of filing this Application. Therefore, the present Application has been filed within the prescribed period of limitation.

The first thing which has to be determined is the nature of the transactions which undertook between the Corporate Debtor and the Applicant. It is an admitted fact the as per chronology, first, the Tripartite Agreements dated 03.11.2016 were executed between the Applicant, the Corporate Debtor and SBI. After the execution of the Tripartite Agreements, the Applicant entered into MOUs dated 04.11.2016 with the Corporate Debtor, the details of which are tabulated as below:

The Applicant has submitted that he is not a homebuyer and to substantiate the same, reliance has been placed upon the RoI Clause of the MOU. For reference, the RoI clause as mentioned in the MOUs is reiterated as below:

Relevant Portion of the RoI clause with respect to the Flat No. 302 as mentioned in MOU dated 04.11.2016:

Relevant Portion of the RoI clause with respect to the Flat No. 303 as mentioned in MOU dated 04.11.2016:

Relevant Portion of the RoI clause with respect to the Flat No. 304 as mentioned in MOU dated 04.11.2016:

To determine the nature of the transaction executed between the parties, it is relevant to refer to the terms of the MOUs entered between the parties on 04.11.2016. The MOUs state that the Sale Agreement has been executed in favour of the Applicant for the purchase of the respective Flats in the project of the Corporate Debtor SUNRISERS for which advance payment has been made through Home Loan availed from the State Bank of India via the Tripartite Agreements. Besides the MOUs, it is an undisputed fact that the Applicant has confirmed that he had purchased three flats in the project of the Corporate Debtor. It is important to refer to Section 2(d) of The Real Estate (Regulation And Development) Act, 2016 (‘RERA 2016’), which reads as under:

Bare perusal of the provision and the matter at hand, shows that the Applicant falls within the definition of allottee as mentioned under the provisions of the RERA Act, 2016. The three MOUs executed on 04.11.2016 between the Applicant and the Corporate Debtor for the sale of the flats in the project of the Corporate Debtor SUNRISERS have referred to the Applicant as allottees.

From the above-noted paras, it is determined that the Applicant is allottee in the Real Estate Project of the Corporate Debtor named SUNRISERS. As per the provisions of the IBC, 2016, an allottee is covered under the definition of a Financial Creditor under Section 5(8)(f) of the Code. Now that it is established that the Applicant is an allottees under the RERA Act, 2016, it is relevant to determine whether the transactions fall under the nature of a Financial Debt under the provisions of the Code. To conclude the same, it is pertinent to refer to the definition of 'Financial Creditor' and 'Financial Debt' as envisaged under Section 5(7) and Section 5(8) of the Code respectively, which are being reproduced as under:

Therefore, an allottee in a real estate project is a Financial Creditor. Hence, the nature of transaction falls within the scope of a financial debt as envisaged under the provisions of the Code. Now we come to Section 7 of the Code, under which for the purpose of initiation of the CIRP, a threshold limit is specified with respect to the number of allottees, who can jointly file a petition to initiate CIRP of the Corporate Debtor. The Insolvency and Bankruptcy (Amendment) Act, 2020 (‘Amendment’) added certain provisos to Section 7 of the Code; whereby special conditions were included for real estate allottees to qualify as Financial Creditors under the provisions of the Code. The amendment included is as under:

Accordingly, an Application filed under Section 7 of the Code shall be modified to comply with the requirements of the first or second proviso within 30 days of the commencement of the IBC Amendment Act, 2020 failing which the Applicant shall be deemed to be withdrawn before its admission. The present Application was filed on 27.05.2020 after the Insolvency and Bankruptcy Code (Amendment) Act, 2020. The said amendment came into force w.e.f. 28.12.2019. The Applicant ought to have modified the present Application in accordance with the amended provisions of the Section 7 of the Code.

In view of the foregoing, there is no iota of doubt that the Applicant in the case, who is an allottee, has applied for commencement of the CIRP against the Corporate Debtor, does not meet the benchmark mentioned under Section 7 of the Code. The Application does not meet the benchmark of either having jointly filing of the Application by 100 allottees or jointly filing by not less than 10% of the number of allottees, whichever is less. Therefore, this Petition filed by an applicant homebuyer, does not qualify the threshold in accordance with Section 7 of the Code, as amended from time to time, so as to make it fit to be considered for CIRP.

The Hon’ble Supreme Court in the matter of Manish Kumar vs. Union of India, Writ Petition(C) No.26 of 2020 has held the following:

Therefore, it is pertinent to state that Section 7(1) of the Code, 2016 mandates the Financial Creditors, who are allottees under a Real Estate Project, to file an Application for initiating CIRP against the Corporate Debtor jointly by not less than 100 of such allottees under the same Real Estate Project or not less than (10%) of the total number of such allottees under the same Real Estate Project, whichever is less.

Keeping in view the ratio of the aforementioned Judgment and having regard to the terms and conditions of the Memorandum of Understandings along with the Tripartite Agreement entered between the parties, this Adjudicating Authority is of the considered view that the present Petition filed by the Applicant cannot be admitted and therefore, is liable to be rejected.

The Order in the present matter is made in terms of Section 7 of IBC, 2016 based on the facts and pleadings submitted by the parties in the instant case and shall not prejudice any matter or proceedings between the parties, if any, before any other Court, Tribunal or any judicial or other authority. This order shall not act as a bar to the Applicant in pursuing any other remedies available to it, under the prescribed provisions of law.

Accordingly, in the circumstances, CP No. (IB) 93/7/JPR/2020 is dismissed as rejected. Any other Applications, if any, also stand disposed off in terms of the order in the main Application.

The registry is directed to provide a copy of this Order to the parties to the case.