NCLAT (09.11.2020) in Shri Amit Katyal Vs. Mrs Meera Ahuja [Company Appeal (AT)(Insolvency) No. 1380 of 2019] held that;
When the Corporate Debtor failed to complete the Construction and could not deliver the possession, the default was committed. The petition is filed within three years from the date, when possession was scheduled to be delivered. Thus, it is clear that the objection of the Appellant regarding limitation is not sustainable.
Based on the above, it is clear that the Corporate Debtor had committed default in not completing the construction work of the flat in time and failed to deliver the possession on the stipulated date as per
Therefore in terms of Clauses 2.17 & 2.18 of the Agreement, it cannot be said that the Allottee/Financial Creditor has committed default in paying the instalments when due. It is undisputed that flat was to be delivered latest by 2nd week of February 2016, but construction work was still going on in the year 2018.
Coming to the facts of this case, we find that the Appellant /Real Estate Developer has failed to prove that Allottee is a speculative Investor and is not genuinely interested in purchasing the flat/Apartment and has initiated proceeding under the Code to pressurise the Corporate Debtor. Thus we do not find any justification to invoke Section 65 of the I&B Code against the Allottee.
Excerpts of the order;
This Appeal emanates from the Order dated 28th November 2019 passed by the Adjudicating Authority/National Company Law Tribunal, Delhi Bench, Delhi in Company Petition (I.B.) No. 1722/ND/2018, whereby the Adjudicating Authority has admitted the Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'I&B Code'). The Parties are represented by their original status in the Company Petition for the sake of convenience.
# 2. The brief facts of the case are as follows:
The Corporate Debtor is a builder of High-end Project in the name of "Krish Provence" in Gurgaon wherein booking of Flat No. C-1101, Tower-C, Floor-11 admeasuring 5800 sq. ft. for a total sale consideration of Rs.3,80,10,000/-.Booking of the flat was made under a Construction linked plan. The respondents are the Second Purchasers of the above stated flat booked vide Apartment Buyer Agreement (in short 'ABA') dated 07th August 2011, which was executed on 07th August 2012. As per Agreement, the completion period was 36 months plus six months as a grace period, i.e. February 2015.
# 12. Based on the pleadings of the parties, following issues arise for consideration:
i) Whether the Corporate Debtor has committed default in not completing the Construction of the flat in time and handing over possession of the same in terms of Agreement?
ii) Whether Financial Creditor/Home Buyer committed default in making payment of the instalments as per 'ABA' under construction link Plan?
iii) Whether the Application U/S 7 of the Code is filed fraudulently with malicious intent for the purposes other than for the Resolution of Insolvency or liquidation, as defined under Section 65 of the I&B Code, 2016?
iv) Whether the Application is barred by limitation?
# 13. We have heard the arguments of the Learned Counsel for the parties and perused the records. For the sake of convenience Issue, No 4 is firstly.
Issue No 4;
# 14. The Appellant contends that the default occurred on the date when Respondents stopped paying the instalments of the due Amount, as per construction Link Plan. It is further claimed that the present case is not a case of the continuous cause of action, as the Allotment was terminated by the Appellant vide letter dated 26th June 2015, on the default of the Respondent, i.e. much before the enforcement of I&B Code, 2016.
# 15. The above contention of the Appellant cannot be accepted because the date of default for financial creditor cannot be a date when the Respondent No.1 & 2 stopped paying the instalments. Admittedly, in this case, possession was to be handed over latest by 07th February 2016. There is nothing on record to show that the Corporate Debtor has ever offered possession of the flat and that the occupation certificate was applied for within the stipulated time of handing over possession. When the Corporate Debtor failed to complete the Construction and could not deliver the possession, the default was committed. The petition is filed within three years from the date, when possession was scheduled to be delivered. Thus, it is clear that the objection of the Appellant regarding limitation is not sustainable.
Issue No 1 & 2;
# 16. The Allottee/Financial Creditor contends that the Corporate Debtor has committed default in not completing the Construction of the flat in time and handing over possession of that in terms f Agreement. Per contra, the corporate debtor pleaded that Financial Creditor/Home Buyer committed default in making payment of the instalments, as per Agreement under construction link Plan. Thus, the Financial Creditor/Allottee itself committed default by not paying the instalments.
# 18. Based on the law laid down by Hon'ble Supreme Court in the above case, it is clear that once the prima-facie case is made out by the home buyer, the burden shifts on the Promoters/Real Estate Developer to point out in the reply that the Allottee is itself a defaulter.
# 43. Based on the above, it is clear that the Corporate Debtor had committed default in not completing the construction work of the flat in time and failed to deliver the possession on the stipulated date as per The Corporate Debtor himself has admitted in its reply to notice dated 15th November 2018, that unlike most builders who have abandoned the Project and stopped the work, it is completing the Project which is at the final stage where flooring and finishing work is underway. It is also evident that flat was to be delivered by 2nd week of February 2016, but the Corporate Debtor failed to honour its promise and could not deliver the flat in time. The Appellant admits the overall situation prevailing everywhere; therefore, in such a situation, there would have been reasonable apprehension in the mind of Allottee that building may not be completed. Therefore, the possibility cannot be ruled out that in the circumstances stated above the Allottee might have stopped further payment after 2013. It is also on record that in 20th December 2016 the Corporate Debtor raised a demand of VAT charges of Rs.3,00,615/, which was paid by the Allottee.
# 44. …….. Based on the above terms of the Agreement, under Construction Linked Payment Plan, it is clear that at the commencement of internal finishing and flooring work 7.5% of BSP + PLC was due against Allottee. It also appears that before the start of finishing and flooring work about 75% payment in instalments were to be made. Undisputedly, the Allottee had paid Rs.2,75,55,186/- out of the total sale consideration of Rs 3,80,10,000, which comes to about 72.49% of the total sale consideration. As per reply to the Notice, dated 05th November 2018, up to that time, internal finishing and flooring work was going on. The Corporate Debtor had not placed any record to show as to when the internal finishing and flooring work started. Mandatory condition of issuing Notice through speed post or courier to the Allottee, at every stage of Construction as per Agreement has not been followed. Therefore in terms of Clauses 2.17 & 2.18 of the Agreement, it cannot be said that the Allottee/Financial Creditor has committed default in paying the instalments when due. It is undisputed that flat was to be delivered latest by 2nd week of February 2016, but construction work was still going on in the year 2018.
Justification for Invoking Sec 65 of the Code
# 45. The Learned Counsel for the Corporate Debtor emphasised for the action against the Allottee under Section 65 of the Code. It is contended that Hon’ble Supreme Court in Pioneer’s Urban Land Infrastructure case has specified that Section 65 shifts the responsibility on the Corporate Debtor to furnish details of default. ……..
# 49. Coming to the facts of this case, we find that the Appellant /Real Estate Developer has failed to prove that Allottee is a speculative Investor and is not genuinely interested in purchasing the flat/Apartment and has initiated proceeding under the Code to pressurise the Corporate Debtor. Thus we do not find any justification to invoke Section 65 of the I&B Code against the Allottee.
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