NCLAT - Creditors of a class for amended Section 7(1) threshold of 10% or 100 whichever is Lower must be from a particular project registered with RERA

Pankaj Mehta V/s M/s. Ansal Hi-tech Township Limited 

Company Appeal (AT) (INS) No. 248 of 2023 

(Arising out of the `Impugned Order’ dated 06.01.2023 in CP (IB) No. 596 (PB) / 2021)

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI  

Time line of the Matter :-

1. The ‘Appellant / Financial Creditor / Applicant’, along with106 other ‘Financial Creditors / Applicants’, had preferred petition ,under Section 7 of the I & B Code, 2016 before NCLT PB New Delhi.
2.  Wherein, M/s. Ansal Hi-Tech Township Limited, was described as the ‘Corporate Debtor’ and the Total Amount of Debt, was mentioned as Rs.41,81,90,116/- 
3. On Date 06/01/2023, NCLT,  dismissed the main Company Petition as `Not Maintainable’ terming that the `Allottees’, belong to different Sub Projects.

Fact of the Case:- 

1. A Project by the name of  'Sushant Megapolis near Dadri Town, adjoining Greater Noida, Uttar Pradesh.  by Corporate Debtor M/s Ansal comprises of Plots / Built-up Plots/ Row Houses/ Flats / Floors /  Villas / High-rise Apartments, under various allocated Sites.
2. License for developing the Township, was granted  in Year2006, by the UP Government with the instruction of Entire Construction be completed by year 2016.
3. By 2016 the Project was incomplete and M/s Ansal registered 25 separate projects having separate `RERA Registrations’ in this Township with RERA.
4.  Appellants are 107 different Allottee  who purchased different types of Units such as Plots / Flats/ Apartments /EWS unit , in the Project.
5. The Possession date of all the allottees  was from 36 months to 42 months, from the date of sanction of the `Layout Plan’ of the `Allotted Unit’. 

Submissions by Appellant

1.  All the Applicants had entered into respective BBAs, much before the RERA Act,2016 came into force.
2.  The said `Agreements’, specifically, defines that `Sushant Megapolis’, as one complete `Project’.
3. The `Single Layout Plan of this project reflects Group Housing/ Plots and EWS Units as part of `One Project’, comprising of 2504 Acres of Property.
4. A Single  Application for Environmental Clearance, was filed for the entire project. 
5.  The Project in question, is a `Single Real Estate Project’, for the purposes of Section 7 of the IB Code, 2016.
6. It therefore, falls under the requisite ambit of the provisos of the amended Section 7(1) of the IB Code 2016 pertaining to the minimum threshold requirement of 100 Allottees or 10% of the Total Allottees, whichever is less, belonging to the `same Real Estate project’. 
7. The NCLT, Passed the impugned Judgment without considering the decision of Hon’ble Supreme Court in Manish Kumar v. Union of India & Ors  (2021) 5 SCC OnLine SCC 1, wherein, it is observed that a Real estate project can be a composite one for Plots and Apartments or for Plots & Buildings.
8. Further, the definition of `Allottee’, is split into broadly three Categories Plot, Apartment and Building and the `Purchasers’ of all these are covered under the term `Allottee’ 
9.  The interpretation, laid down by the was incorrect  that 100 or 10% of the `Allottees’, must be from the `same Building’, and `not from the same `Real Estate Project’.

Submissions by Respondent

1. The Township, consists of Multiple Residential  and Commercial Real Estate Project, and all the sub-projects, are independent of each other and are being developed and sold as separate Projects.
2. Each and Every phase, is registered as a stand-alone Real Estate Project under RERA with separate `RERA Registration Numbers’
3. As per Hon’ble Supreme Court of India, that the task of ascertaining who will be Allottees and therefore, what would constitute 10% of total number of Allottees must depend upon the nature of the `Real Estate Project’.
4.  The Petitioners do not satisfy the required threshold limit of 10% or 100 persons’, whichever is lower, in none of the Project / Project categories, 
5. Approximately 50 Petitioners are either Co-Applicants or Third Applicants for a Single Unit just to fulfill the requisite number of 100 Allottees. whereas in the matter of Manish Kumar v. Union of India, wherein, it is held that `one unit equals to one Allottees’, even though, the said Unit is jointly held. 
6. The NCLT  made ‘inquiry’ and considered all the records pertaining to the Project.

Observations made by the Hon’ble Court.

1. The Corporate Debtor, had executed, at least Three different kinds of Agreements, namely  (a) `Plot Allottee Agreement’ (b) `Built-up Unit Allottee Agreement’ and (c) `Apartment Allottee Agreement as the projects were of `different character’ with `different type of developments with independent, RERA Registrations. ’
2. In none of the Projects / Project Categories, the Applicants  fulfil the requirement of Threshold Limit’ of 10% or 100 persons, whichever is less. 
3. the Appellant are from different numerous projects, and they have not established their case, as `Creditors of a class’, concerning any `particular project’, registered with RERA, with a view to fulfil the requirement of  Section 7 (1) of the IBC in regards to 10% or 100 Allottees’
4. In the present case on hand, the foremost aspect to be taken into account is the RERA Registration of the Projects, of the Corporate Debtor, for ensuring the Initial limit for pressing into service of the ingredients of Section 7 of the Code. 
5. The `Impugned Order’ and the views expressed in dismissing the CP (IB) No. 596 (PB) / 2021, is free from any `legal flaws’. 

Court’s Order

Accordingly the instant `Appeal’ sans merits is `Dismissed’ with no costs.

BOMBAY HIGH COURT - The liability of refund falls upon all the listed promoters even if they may not have received the amount in consideration.

BOMBAY HIGH COURT - The liability of refund falls upon all the listed promoters even if they may not have received the amount in consideration.

Wadhwa Group Housing Private Ltd vs Vijay Choksi & SSS Escatics Pvt. Ltd

SECOND APPEAL (Stamp) NO. 21842 OF 2023

Decided on 26 February 2024

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

Time line of the Matter :-

1. Allottee approached MahaRERA U/s 12 and 18 of the RERA act and sought refund of amount of Rs.2,62,35,056/- along with interest as well as compensation and costs.
2. On 24/09/2021 MahaRERA passed the Order holding that Allottee could not claim any equity under the provisions of act and his prayer for refund was rejected, and directed parties to execute registered agreement for sale within 30 day failing which the entire amount was directed to be refunded to the Allottee within six months.
3. Allottee filed Appeal U/s 43 of the RERA Act before the Appellate Tribunal.
4. On 18/10/2022 Appellate Tribunal partly allowed the appeal and set aside the Order directing both the Builders to Jointly refund the amount paid by the Allottee with interest.
5. Aggrieved by the Appellate Tribunal’s Order to put the liability to refund the amount received by SSS Escatics Pvt. Ltd the other Builder Wadhwa Group Housing Private Ltd chose to file this appeal.

Question of Law Framed in Second Appeal

"Whether a promoter who has not received any consideration from an allottee can be made liable for giving refund with interest under Section 18 of the Real Estate (Regulation and Development) Act, 2016?"

Fact of the Case:-

1. Builder SSS Escatics Pvt. Ltd, launched a project called “The Nest” as a Slum Rehabilitation Scheme.
2. On 05/09/2012 A JDA (Joint Development Agreement) came to be executed between both the Builders SSS Escatics Pvt. Ltd and Wadhwa Group Housing Private Ltd.
3. Under the said JDA Wadhwa and SSS segregated the constructed area amongst themselves for being sold to customers.
4. On 19/07/2013, Allottee booked a 3BHK Flat bearing B-502 admeasuring 2385 sq.ft in the said project for agreed consideration of Rs.2,65,35,000/-
5. Allottee paid an amount of Rs.1,20,00,000/- towards part consideration.
6.  On 24/07/2013 SSS issued allotment letter to Allottee.
7. The project remained incomplete on the date of coming into force of RERA Act, 2016.
8. The project was accordingly registered as ongoing project under Section 3 of the RERA by SSS in which the Wadhwa was declared as a Promoter (Investor).

Submissions by Appellant

1. Wadhwa cannot be held responsible for refund of any amount to the Allottee as he has not paid any amount to the Wadhwa and that therefore there is no question of refunding any amount to him.
2. As per the JDA both builders identified their respective entitlements in constructed portion of the building and the flat in question falls in the share of SSS, and it  alone received the entire consideration from the Allottee thereby no question of Wadhwa refunding the amount which it did not receive.
3. Mere a change in law requiring reflection of name of wadhwa as Promoter does not create its liability, which did not exist prior to introduction of RERA.  

Submissions by Respondent

1. Wadhwa is undoubtedly covered by definition of the term ‘Promoter’ per se Section 2(zk) of RERA.
2. Definition U/s 2(zk) makes it clear that all promoters are jointly liable under the Act.
3. That a promoter cannot be permitted to defeat the rights of the flat purchasers by making internal arrangements with investors, land owners, etc 

observations made by the Hon’ble Court

1. There appears to be no dispute that the payments were made by the Allottee to the SSS.
2. it is necessary to determine whether Wadhwa falls in the definition of the term ‘promoter’.
3. While registering the project as ongoing project under Section 3 of the RERA, Wadhwa’s name has been included in the list of Promoters. Therefore, Wadhwa cannot run away from the fact that it is the promoter in respect of the project ‘The Nest’
4. Mere falling of flat in the share of the SSS under the JDA would not excuse the Wadhwa from the responsibilities and liabilities under the RERA, Rules and Regulations made thereunder qua that flat. 
5. RERA does not demarcate or restrict liabilities of different promoters in different areas and the liability is joint for all purposes under the Act, Rules and Regulations
6.  Since the Wadhwa is covered by definition of the term ‘Promoter’, it is also jointly liable to refund the amount along with the SSS.
7. Distinction between projects launched before and after coming into force of RERA cannot be a ruse to escape the liabilities as promoter under RERA.
8. The Wadhwa’s contention about absence of privity of contract between it and the Complainant is totally misplaced as it is a matter of indoor management between the Promoters and the flat purchaser who is not supposed to know the intricacies of the arrangements made between several promoters amongst themselves.

Court’s Order

Accordingly the Second Appeal is accordingly dismissed with costs.

In the Second Appeal , BOMBAY HIGH COURT upheld the Condonation of Delay granted by the MAHAREAT Stating that It is not unnatural for a flat purchaser, who had book the flat in 2011 and was yet to receive possession in 2018, to feel anxious especially when he was not permitted to inspect the flat.

In the Second Appeal , BOMBAY HIGH COURT  upheld the Condonation of Delay granted by the MAHAREAT Stating that It is not unnatural for a flat purchaser, who had book the flat in 2011 and was yet to receive possession in 2018, to feel anxious especially when he was not permitted to inspect the flat.

Lucina Land Developers Limited V/s Navin Kumar

SECOND APPEAL NO.585 OF 2020

Decided on 27 MARCH 2024

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

Question of Law framed in 2nd Appeal :-

“Whether the Appellate Tribunal was justified in condoning the delay of 395 days in filing the appeal by the original complainant (Respondent herein)?

Time line of the Matter :-

1. Respondent (Allottee) filed Complaint before the Maharashtra Real Estate Regulatory Authority, (Maharera) complaining non-delivery of possession within the agreed period and claimed interest under provisions of section 18 of the Maharashtra Real Estate (Regulation and Development) Act, 2016 (RERA).
2. On 13/12/2017 Maharera disposed of the complaint holding that the Allottee failed to establish that the Appellant did not complete the project or was unable to deliver possession of the Apartment in accordance with the Agreement and directed the Appellant to handover possession of the Apartment with occupancy certificate to Allottee before 31 December 2018, failing which the Appellant was directed to pay interest as per Rule 18 with effect from 1 January 2019 till the actual date of possession on the entire amount paid by the Allottee. 
3. On 11/01/2019 Allottee filed Appeal before the Maharashtra Real Estate Appellate Tribunal (Appellate Tribunal)  challenging the order along with an application seeking condonation delay in filing the appeal. 
4. On 19/08/2019 the Appellate Tribunal  allowed the application for condonation of delay.
5. The Appellant has filed this Second Appeal challenging the judgment and order dated 19th August 2019 passed by the Appellate Tribunal.

Fact of the Case :-

1. Allottee  purchased an apartment bearing No.203 in the project India bulls Greens-II situated at Panvel and Entered into Flat Buyer's Agreement on 18/10/2011.
2. As per the Flat Buyer's Agreement, possession was to be handed over within 60 months with grace period of 9 months.

Contentions of Appellant :-

1.  The Appellate Tribunal has committed a manifest error in condoning inordinate delay of 395 days in filing the Appeal.
2. Allottee  was not prevented by any disability or cause from filing the Appeal within the period of limitation.
3. Allottee took a false plea of heart disease, which was relatable to the year 2016.

Contentions of Respondent :- 

1. No substantial question of law is involved in the present Appeal as the impugned order merely condones delay of 395 days in filing the Appeal.
2. That Condonation of delay is the discretionary power exercised by the Appellate Court in which this Court cannot interfere in exercise of jurisdiction under Section 100 of the Code of Civil Procedure (Code).
3.  Technicalities cannot be permitted to overtake the substantive rights sought to be agitated by a flat purchaser.
4. That Allottee suffers from serious cardiac ailments for prolonged time, which is evidenced in various certificates produced before the Appellate Tribunal. 
5. That Allottee also faced financial distress on account of health issues suffered by him
6. The Allottee has excellent case on merits, and the same cannot be thrown out on the ground of limitation without considering the merits involved in the Appeal.

Observations of the High Court:-

1. The short issue that requires consideration in the present Appeal is about correctness of the order passed by the Appellate Tribunal in condoning delay of 395 days in filing the Appeal.
2. Condonation of delay is a matter of discretion to be exercised by a Court. So long as exercise of discretion is sound, the Appellate Court shall not substitute its discretion with the discretion exercised by the Court condoning the delay 
3. it cannot be stated that there is complete absence of any cause in the application. Respondent, in his capacity as a flat purchaser first made an attempt to prosecute his complaint personally considering the ease of access provided to parties-in-person before Regulatory Authority.
4. There is sound exercise of discretion by the Appellate Tribunal in condoning the delay. So long as the exercise of discretion by the Appellate Tribunal is not arbitrary, interference by this Court in exercise of discretion is clearly unwarranted.
5.  the Respondent repeatedly pursued various issues with Appellant after passing of the order by the Regulatory Authority. The email correspondence started from 24 February 2018 and went on till 4 December 2018. Most of the emails were in respect of permission to visit the flat, since the Respondent believed that the same was not habitable
6. It is not unnatural for a flat purchaser, who had book the flat in 2011 and was yet to receive possession, to feel anxious especially when he was not permitted to inspect the flat.

Order of the High Court:-

1. the Appellate Tribunal was justified in condoning the delay in filing the Appeal by Respondent.
2. The Second Appeal is accordingly dismissed without any orders as to costs. 

FIR by Maharashtra RERA Against Builder after forensic audit for Non Compliance and Misappropriation U/s 4,406,409,420

FIR by Maharashtra RERA Against Builder after forensic audit for Non Compliance and Misappropriation.

On the Date 23/02/2024 , On the Directions of the Maharashtra RERA, the administrative officer Lodged the FIR u/s 34,406,409,420 against the

1. PARAMVIR DEVELOPERS LLP
2. KUMAR KANAYALAL MORDANI (Director) and
3. KANAYALAL MORDANI (Director)

Timeline of the Matter

1. On Date 11/01/2023 Maharashtra Real Estate Regulatory Authority (Maharera) sent a letter to PARAMVIR DEVELOPERS LLP dated regarding non compliance of its rules.
2. Again On Date 27/02/2023 another letter was sent to Builder dated regarding non compliance.
3. No reply received from the Builder.
4. Due to No Reply by the Builder,  On Date 14/03/2023 ,a company named Neelam Arch Consultant was appointed as an investigator for the Builder's Project High street (Maharera Registration No. 51800005582)
5. The investigator was not allowed access to the site by the Builder.
6.  On the Intervention of Maharera only the Investigator was given access to the said site
7. After studying the site the Investigator submitted a report to Maharera on 23/03/2023.
8. On Date 24/03/2023, Maharera sent a letter to Builder regarding non-filing of any return but again the builder did not respond.
9. On Date 02/05/23, Maharera decided to appoint M/s BDO India LLP to conduct a forensic audit of Builder's high street project .
10. The company B.D.O. India. LLP submitted the report in this regard to Maharera on 25/08/2023.

The Forensic Audit Report revealed the Followings:-

• The Builder collected a total of Rs.19.82 crores from the customers and deposited the entire amount in the current account of his firm and not in the Separate RERA bank as mandated U/s section 4(2)(l)(d).
• Out of Total Rs.19.82 crores received by the developer from the customers, an amount of Rs.11.61 crores is given as Interest free loan and advance to other Sister companies/firms without any agreement and document.
• The Builder raised a loan of Rs. 202.33 crores  from Banks and Financial Institutions for the said project.

• Out of the total loan amount raised, Rs. 66.43 crores is given as Interest free loan and advance to other Sister companies/firms without any agreement and document.

•  A total of Rs 109.13 crore was repaid to the financial institutions even before completing the project.

• There by The Builder misappropriated a total amount of Rs 78.04 crore.
• Only an amount of Rs. 6.40 crores was used under the project expenses in the ledger books.

• The developer had taken bookings for the project from 34 customers. On verification of the customer ledger and sales ledger from the developer, it was seen that the booking amount of five customers was 220 crores, but due to cancellation of their bookings, the amount refunded to them was only Rs. 2.83 crores. This raised doubts about the refund amount.

• Since 2017 the developer did not submitted  any quarterly report.

• The developer constructed a thirteen storied RCC against a permission of a six storied building. 

• The developer only completed 30 % of the project by December 2022.

Thus Resulting in the FIR against the Builders and its Directors.

TSRERA :- The Allottee has an obligation to adhere to the payment schedule as agreed in its Agreement of Sale as per Section 19(6) and non procurement of the Home loan amount cannot put the Builder under financial distress.

The Allottee has an obligation to adhere to the payment schedule as agreed in its Agreement of Sale as per Section 19(6) and non procurement of the  Home loan amount cannot put the  Builder under financial distress. 

Sri Umesh Choudhary Vs/ M/s Alpine Infratech 

COMPLAINT NO.519 OF 2023 decided on 12th Day of March, 2024 

BEFORE TELANGANA STATE REAL ESTATE REGULATORY AUTHORITY

Facts :-

1. The Complainant booked a flat in August 2021 in the project of the Respondent Builder.
2. Application Form/Terms and Conditions of Allotment was signed by him.
3. The Agreement of Sale was executed in the month of January 2022.
4. Complainant paid 20% of the cost and the balance 80% amount was to be arranged in form of Home loan.
5. The Project was approved from many nationalized bank but as the Complainant was a Central Government employee so he wanted the Home Loan in the form of House Building Allowance (HBA) from his concerned department. 
6. That vide e-mail dated 15.04.2022, the Complainant sought for several documents ( a list of 19 documents) from the Respondent Builder to avail HBA loan.
7. The complete documents were finally given by the builder on 20.02.2023.
8.  The Builder directed the Complainant to pay the Final due amount by 28.03.2023 else base price will be increased by Rs.200 per sft.
9. The Complainant offered an interim payment of Rs.5,00,000/-  by first week of May 2023 and the full payment by July 2023.
10. In May 2023, the Complainant requested the builder to accept the due amount of Rs.25,00,000/-
11. The Builder refused to accept the amount and stated that they will only accept if the Complainant agreed to make the payment with the revised base rate by Rs. 1000 per sft an increase of  Rs.11,20,000 in total price. 

Complainants Contentions :-

1. The delay in making payment occurred due to non-handing over of documents in time. hence, management is responsible for such delays.
2.  The revised increased rate is not acceptable as the delay in making payment did not occur on default of the Complainant. 
3. Prayed to take needful action against the Respondent Builder as per the applicable rules and regulations and to get the flat at the original agreed rate.

Respondent Builder's Contentions :-

1. The Complainant in spite of availing discount did not pay the agreed amount on time.
2. The Complainant initially agreed orally to take loan from various nationalized banks but later in the month of July 2022, started requesting various documents from the Respondent Company
3. The Complainant made one or the other request for the documents and that too after a lapse of one year and also which were beyond the purview of the Respondent Company and evaded the payments due to the Respondent Company. 
4. The Respondent Company sent several mails requesting the Complainant to visit the office of the Respondent Company to sort the issue. 
5. The Complainant failed to perform his part of contractual obligation and did not make the payment as per schedule, that's why the Company is justified in cancelling the booking 

Observations of the Authority :-

1. In Clause 1.3 of the BBA, the Complainant agreed to make payment as per payment plan set out in Schedule C (Payment Plan).
2. As per the Payment Schedule annexed to the said Agreement of Sale, the Complainant categorically agreed to payment of the schedule therein. which is not disputed by either party 
3. in the annexure to the said Payment Schedule, Point No.4 stipulates that prices are subject to change without prior notice upon non confirmation of sale.  
4.  the Complainant is bound by the same and failure of the Complainant in complying with the payment schedule is derogation of his duty under Section 19(6) of the Act.
5. the delay in procuring the documents cannot be attributed to the Respondent Builder as the said documents may not readily available with him and he may not be in a position to produce documents such as 
1. government pleader's certificate, 
2. estimates, 
3. permission under Conduct Rules for purchase of site and for construction of the house,
4.  Notice under Section 26(1) of the Urban Land (Ceiling & Regulation) Act, 1976, etc
6. Clause 9.3 (ii) of the undated Agreement of Sale executed between the parties clearly stipulates In case of Default by Allottee under the condition listed above continues for a period beyond 2 (two) consecutive months after notice from the Promoter in this regard, the Promoter may cancel the allotment of the [Apartment/Plot] in favor of the Allottee and refund the money paid to him by the allottee by deducting the booking amount and the interest liabilities and this Agreement shall thereupon stand terminated

Order of Authority:-

1. The Complainant is directed to pay the remaining amounts which is pending as on date as per the payment schedule agreed upon by both the parties within 60 (sixty) days, along with interest of 10.65%.
2. In the event the Complainant fails to complete such payment, the Respondent is to initiate measures in accordance with the provisions of the Act and Rules thereunder.

Bombay High Court - Where Part Occupancy Certificate of a Project was granted under the rules of the Authority, a flat owner can not seek cancellation of it on the ground of violation , affecting the other owners , who may not be a party to the case.

before The Bombay High Court

Sanjay Phulwaria And Others

vs

Mumbai Metropolitan Region Development Authority And Others

Writ Petition Lodging No. 2639 Of 2018 With Notice Of Motion Lodging No. 542 Of 2018, Chamber Summons No. 238 Of 2018

decided on 16-10-2018

Where Part Occupancy Certificate of a Project was granted under the rules of the Authority, a flat owner can not seek cancellation of it on the ground of violation , affecting the other owners , who may not be a party to the case.

Chattisgarh RERA Notification on Joint Venture Agreement between Land Owners and Developers

 Joint Venture Agreement between Land Owners and Developers

 Chattisgarh Real Estate Regulatory Authority (RERA) vide circular No./94 /RERA/2023/1956 dated 01/12/2023 directs following clauses to be mandatorily added in the joint venture agreement between the land owners and builders:

1. The land owners and the builders shall be jointly & severally liable to fulfill all obligations under RERA;
2. The Agreement to Sale with the allottee should be signed by both.

NCLAT New Delhi- Association of the home-buyers of Real Estate Project is aggrieved person within the meaning of Section 61 of the Code.

 IN THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL

Principal Bench, New Delhi

Real Estate Regulatory Authority

v.

D.B. Corp Ltd. & Anr.

Company Appeal (AT) (Insolvency) No. 1172-1173 of 2022 with 1321 of 2022

Decided on 08-Dec-23

Brief about the decision:

Facts of the case

• Corporate Debtor entered into Barter Agreement with Operational Creditor for extensive advertising campaign of its projects. Pursuant to the Agreement, the Operational Creditor was to publish Advertisement for consideration which included cash component and Barter Component. The Cash Component against the advertising was to the paid and the Barter Component was to be utilized in form of allotment of units which were required to be transferred in favour of the Operational Creditor.
• The RERA received various complaints from allottees of the Corporate Debtor, which complaints were entertained and various orders related to different projects were passed in the year 2020-21 directing the Corporate Debtor to refund the amount along with compensation to various complainants. RERA also passed an order on 18.08.2021 under Section 35 of the RERA Act, 2016 to investigate about the diversion of funds from the designated account.
• Orders were also passed on 23.03.2022 by RERA revoking the registration of real estate project ‘Aakriti Business Arcade’ and directing for appointment of an agency for completion of the said project under Section 8 of the RERA Act, 2016.
• An application under Section 9 was filed by the Operational Creditor before the Adjudicating Authority on 02.02.2022 claiming default of operational debt of Rs.10,77,17,000/- with interest consequent to the Barter Agreement entered between the Operational Creditor and the Corporate Debtor and same has been admitted by Adjudicating Authority (NCLT), Indore Bench, Court No.1.
• Appellants herein Regulatory Authority(RERA) constituted under Section 20 of the RERA Act, 2016, Interim Resolution Professional and Aquacity Consumer and Societies Welfare Society’ which claim to be association of 74 homebuyers have challenged the CIRP admission order under Sec. 9 of IBC of NCLT.
• The Appellant, Aquacity Consumer and Societies Welfare Society claiming to be a society of homebuyers claimed to have filed two consumer complaints under Section 12(1)(b) of the Consumer Protection Act, 1986 for its members/homebuyers. The NCDRC allowed both the Consumer Complaints and directed the Corporate Debtor to refund the amount collected from the homebuyers along with interest of 9% pa from the date of possession. Civil Appeals were filed before the Hon’ble Supreme Court by the Appellant Association for modification of the order of NCDRC to the extent that the interest should be from the date of payment and not from the date of possession. In the Appeals notices were issued.

Decision of the Appellate Tribunal

A. Question No. I: Whether RERA has locus to challenge CIRP admission order before NCLAT?

• Section 61 of the Code, 2016 provides for an Appeal by “any person aggrieved by the Order of the Adjudicating Authority”. Section 61, sub- Section (1) uses the expression “any person aggrieved”.(p12)
• RERA is a statutory authority under Section 20 sub-section (2). RERA is a body corporate and is entitled to sue or to be sued in its name. RERA is thus fully competent to sue in its name. Question of locus to file an Appeal as an aggrieved person and the question as to whether appeal filed by the aggrieved person is to succeed, are two different questions and the question of locus is not dependent on success of the grounds in the Appeal.(p18)
• In the present case the RERA has taken various actions against the Corporate Debtor and various orders passed by RERA were to be complied by the Corporate Debtor and it was only due to continuation of CIRP against the Corporate Debtor that RERA could not have proceeded further to initiate compliance of its order.(p23)
• NCLAT in paragraph 6 of the judgment in IBBI v. GTL Infrastructure & Ors. (2023) ibclaw.in 110 NCLAT took the view that IBBI has nothing to do with the litigation between two parties i.e. Financial Creditor and Corporate Debtor whereas in the present case the RERA who had already issued various orders against the Corporate Debtor has to do with the corporate debtor and was directly involved with the enforcement of the RERA Act qua the Corporate Debtor hence the judgment in the case of IBBI (supra) is clearly distinguishable.(p23)
• In view of the sequence and events of the facts which took place and various proceedings drawn by RERA much prior to issuance of notice under Section 8 of the Code by the Operational Creditor, we are satisfied that Appeal filed by the RERA cannot be thrown out on the ground of locus. The RERA held to be aggrieved person within the meaning of Section 61 of the Code.(p25)
• Thus, the Question No. I has to be answered in affirmative holding that RERA has locus to file Company Appeal (AT) Ins. No. 1172-1173 of 2022.(p26)

B. Question No. II Whether Aquacity Consumer and Societies Welfare Society has locus to file Appeal within the meaning of Section 61 of the Code?

• Appellant being association of the home-buyers of Real Estate Project who has already initiated proceedings for direction of the interest of the home-buyers is aggrieved person within the meaning of Section 61 of the Code and the Appeal filed by the Appellant cannot be dismissed on the ground of locus.(p27)
• NCLAT answers Question No. II in affirmative holding that Aquacity Consumer and Social Welfare Society has a locus to file an Appeal under Section 61 of the Code against the Order dated 05th August, 2022.(p28)

C. Question No. III Whether Barter Transaction falls under definition of Operational Debt under IBC?

• There are nine Barter Agreements between the parties beginning from 29.09.2010 and last being 13.08.2019. Barter Agreement is entered between DB Corporation Ltd. and AG8 Ventures Ltd. which is executed on stamp duty of Rs. 1000.(p32)
• From the definition of claim under Section 3(6) of IBC it is clear that both sub-clause ‘(a)’ and ‘(b)’ refers to “a right to payment”. The claim must subsist for a debt being debt to become operational debt must relate to a right to payment unless operational creditor has a claim i.e. a right to payment against the corporate debtor, no operational debt can arise to enable Operational Creditor to initiate proceeding under Section 9 of the Code.(p41)
• The claim of Section 8 and Section 9 also indicates that proceedings under Section 9 by Operational Creditor can be initiated for payment of unpaid operational debt. Section 8(1) uses expression “demanding payment of the amount involved in the default” whereas Section 8(2)(b) uses the expression “the payment of unpaid operational debt” thus non-payment of operational debt is sine qua non for giving any demand notice under Section 8 of the Code leading to Section 9 also makes it clear that after the expiry of period of 10 days from the date of delivery of notice, sub-section 1 of Section 8 of the Code states if the Operational Creditor does not receive payment from the Corporate Debtor, operational Creditor may file an application for initiating a CIRP, thus not receiving the payment from the Corporate Debtor is a condition precedent for initiating Section 9 Application.(p41)
• Hon’ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association and Ors. NBCC (India) Ltd. & Ors. (2021) ibclaw.in 63 SC held that expression payment only refers to the payment of money and not anything of its equivalent in nature of Barter; when construing the same expression of payment in Section 30(2), the Hon’ble Supreme Court has held that payment refers only to payment of money and not anything of its equivalent in the nature of Barter, the same interpretation has to be put to Section 8 and 9 also of the Code.(p47)
• There was no operational debt due on the corporate debtor on which operational creditor can claim payment of money from the corporate debtor to enable it to issue a demand notice under Section 8 or to file Section 9 Application before the Adjudicating Authority. Entire initiation of proceedings under Section 9 by the Operational Creditor is contrary to the scheme of IBC and no payment of money was due on the corporate debtor on basis of which unpaid dues any proceedings under Section 9 can be initiated.(p49)
• On the basis of Barter Agreement and consequent invoices, non-discharge of Barter Component by the Corporate Debtor shall not lead to any operational debt on basis of which payment of money can be demanded by the Operational Creditor from the Corporate Debtor. No operational debt was owed to the Operational Creditor in the facts of the present case hence initiation of proceedings under Section 9 by the Operational Creditor was contrary to the provisions of the IBC.(p50)

D. Question No. IV & V

• While considering Question No III it has already been held that there was no Operational Debt due on the Corporate Debtor and the proceedings initiated by the Operational Creditor being wholly outside Section 8 and 9 of the Code, no necessity to enter into Question No. IV & V for the purpose of the present case.(p51)

E. Conclusion

NCLAT concludes that:

• Application filed under Section 9 by the Operational Creditor alleging Operational Debt was non-maintainable since there was no operational debt on basis of which payment of money could have been demanded by the Operational Creditor from the Corporate Debtor on account of non-discharge of Barter Component by the Corporate Debtor. At best, the Applicant was entitled for claiming allotment of units as per the Barter Agreement between the parties for which it was open for the Operational Creditor to take such remedy as permissible.(p52)
• However, Section 9 Application was clearly not maintainable, the Adjudicating Authority committed error in admitting Section 9 Application without adverting to the real nature of the transaction between the parties, which is the very basis of the Section 9 Application, the Order of the Adjudicating Authority just is unsustainable.(p52)
• In result, we allow both the appeals, set aside the Order dated 05th August, 2022 admitting Section 9 Application. Both the Appeals having been allowed, no orders are necessary in different IAs, as noted above. The IAs are disposed of. Parties shall bear their own costs.(p53)

Source :- https://ibclaw.in/real-estate-regulatory-authority-v-d-b-corp-ltd-anr-nclat-new-delhi/