Avaani Oxford Owners Association vs Oxford Facilities Management - Payments made by flat owners towards maintenance fund is financial debt.

NCLT Kolkata (13.03.2020) in Avaani Oxford Owners Association vs Oxford Facilities Management  [CP (IB) No. 2084/KB/2019, IA (IB) No.297/KB/2020 ] held that;. Payments made by flat owners towards maintenance fund is financial debt.

Excerpts of the order;

# 1. This application under Section 7 of IBC, 2016 has been filed by the financial creditor namely Avaani Oxford Owners Association to initiate corporate insolvency resolution process  "CIRP” against corporate debtor namely Oxford Facilities Management as the corporate debtor has committed default in payment of outstanding debt. The amount claimed to be in default is Rs.5,64,72,615.80. 

# 2. The facts, in brief, are that as a consequence of possession of Flats and formation of Residence Welfare Association, the funds given by the flats buyers to the builder in sinking fund and maintenance fund were to be transferred to the association by the entity assigned by the builder to utilize the same till such association was formed. However, such funds had not been returned. 

# 3. The Ld. Senior Counsel appeared on behalf of the financial creditor and drew our attention to clause 5 (8) (f) and explanation thereto to show that the amounts so due were financial  debt and non-payment thereof resulted into default. Thus, this application was maintainable under section 7 of IBC, 2016. Our attention was also drawn to the relevant clauses of the flat buyers agreement showing as to how such contributions were made. Our attention was also drawn to the fact that even the corporate debtor had accepted the fact of liability to pay the same to the financial creditor. Such claim in respect of sinking fund had been accepted in its entirety and maintenance fund refund was to be ascertained considering the amount received and the amount already spent. 

# 4. The Ld. Counsel for the corporate debtor appeared and mainly emphasized on the fact that for the same claim the financial creditor had lodged its claim during CIRP proceedings of the builder and drew our attention to the relevant pages of the paper book to substantiate its such claim. Accordingly, it was prayed that this application was not maintainable as the amount of claim of Rs. 5.64 Crores made herein had already been included in the total claim of approx. Rs. 30 Lacs made therein. 

# 5. In the rejoinder, the Ld. Counsel for the financial creditor submitted that financial creditor was withdrawing its claim from those proceedings to the extent of amount of debt involved in this application and in that view of the matter, the application could be admitted as there was an admitted debt which was more than Rupees One Lac. 

# 6. We have considered the submissions made by both sides and material on record. Admittedly, there is a debt which is due and default has occurred in payment thereof. The amount of undisputed debt is more than Rupees One Lac after considering the claim made by the financial creditor to exclude the amount of impugned debt from the claimed amount made against M/s. Avani Projects and Infrastructure Limited in separate CIRP proceedings. The debt also falls in the category of financial debt, hence, no dispute remains as regards the nature thereof. 

# 7. We further find that the name of IRP has been proposed, hence, we approve the same. The application is otherwise complete and defect-free. We admit the same and order as under: 

ORDER 

• (i) The application filed by the financial creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016 for initiating corporate insolvency resolution process against the corporate debtor, Oxford Facilities Management, is hereby admitted. 

• (ii) We declare a moratorium and cause public announcement in accordance with Sections 13 and 15 of the IBC, 2016. 

• (iii) Moratorium is declared for the purposes referred to in Section 14 of the Insolvency & Bankruptcy Code, 2016. The IRP shall cause a public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of Insolvency & Bankruptcy Code, 2016 shall be made immediately. 

• (iv) Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following: 

-  a) 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; 

-  b) Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; 

- c) 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 (54 of 2002); 

- d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. 

• (v) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated, suspended, or interrupted during moratorium period. 

• (vi) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. 

• (vii) The order of moratorium shall have effect from the date of admission till the completion of the corporate insolvency resolution process. 

• (viii) Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. 

• (ix) Necessary public announcement as per Section 15 of the IBC, 2016 may be made. 

• (x) Mr. Sneh Maheswari, Interim Resolution Professional, having Registration No. IBBI/IPA-001/IP-P01751/2019-2020/12691, working for gain at 9N, Block A, New Alipore, Kolkata - 700 053 is appointed as interim resolution professional for ascertaining the particulars of creditors and convening a Committee of Creditors for evolving a resolution plan. 

• (xi) The Financial Creditor to pay a sum of Rs.50,000/- (Rupees Fifty Thousand only) to IRP as advance fees as per Regulation 33(3) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 which shall be adjusted from final bill. 

• (xii) The Resolution Professional shall conduct CIRP in time bound manner as per Regulation 40A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016. 

• (xiii) List the matter on 21st April, 2020 for the filing of the progress report. 

• (xiv) IA (IB) No.297/KB/2020 is regarding maintainability of this petition on the ground of claim of the same relief is being made in two independent proceedings. In view of the concession given by the financial creditor, there remains no dispute as regards the admissibility of the application filed under Section 7 of IBC, 2016. Accordingly, this IA (IB) No.297/KB/2020 stands dismissed and disposed of. 

• (xv) Registry is hereby directed under section 7(7) of the I & B Code, 2016 to communicate the order to the Financial Creditors, the Corporate Debtor and to the IRP by Speed Post as well as through e-mail. 

• (xvi) Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities. 

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