Anand Sonbhadra Resolution ... vs Anuradha Sethi

(Arising out of the Order dated 23.07.2021 passed by the National Company Law Tribunal, New Delhi Bench (Court No. IV) in IA No. 525/2019 in CP (IB) No. 1059/ND/2018)

IN THE MATTER OF:

Anand Sonbhadra E-10A, Kailash Colony GK-1, New Delhi - 110048. ...Appellant

Versus Gulshan Sehti G-116, Preet Vihar, New Delhi. ...Respondents

Present

For Appellant: Mr. Abhishek Anand, Mr. Nipun Gautam, Ms. Kashish Rehan, Adv.

For Respondents: Mr. Nakul Mohta, Mr. Puneet Pathak, Adv.

With

Comp. App. (AT) (Ins) No. 768 of 2021

(Arising out of the Order dated 23.07.2021 passed by the National Company Law Tribunal, New Delhi Bench (Court No. IV) in IA No. 524/2019 in CP (IB) No. 1059/ND/2018)

IN THE MATTER OF:

Anand Sonbhadra E-10A, Kailash Colony GK-1, New Delhi - 110048. ...Appellant -2- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

Versus

Anuradha Sethi G-116, Preet Vihar, New Delhi. ...Respondents

Present

For Appellant: Mr. Abhishek Anand, Mr. Nipun Gautam & Ms. Kashish Rehan, Adv.

For Respondents: Mr. Nakul Mohta & Mr. Puneet Pathak, Adv.

JUDGEMENT

(08.05.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. Two Appeals have been filed by Anand Sonbhadra (in short Appellant)

who is the Resolution Professional of Shubhkamna Buildtech Pvt. Ltd. (in short

'Corporate Debtor') i.e., under Section 61 of the Insolvency & Bankruptcy

Code, 2016 (in short 'Code') in Company Appeal (AT) (Insolvency) No. 810 of

2021 and Company Appeal (AT) (Insolvency) No. 768 of 2021 against the

Impugned Order dated 23.07.2021 passed by the National Company Law

Tribunal, New Delhi Bench, Court No. IV (in short 'Adjudicating Authority').

2. It has been brought out that the Corporate Debtor went into Insolvency on

26.11.2018 as per the order of the Adjudicating Authority and the Appellant was

appointed as the Interim Resolution Professional (in short 'IRP')/ Resolution

Professional.

-3-

Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

3. The Appellant made the public announcement in 'Form A' on 29.11.2018

and 05.01.2019 and the last date of submission of the claims was 12.01.2019.

4. It has been stated that both the Respondents i.e., Gulshan Sethi in Company

Appeal (AT) (Ins.) No. 810 of 2022 made the claim of Rs. 17,72,75,157/- and

Anuradha Sethi in Company Appeal (AT) (Ins.) No. 728 of 2022 made the claim

of Rs. 3,93,74,137/-. We shall refer both the Respondents i.e, Gulshan Sethi and

Ms. Anuradha Sethi as the Respondents, herein after, as the causes of issue of

both the appeals are same.

5. The Resolution Professional did not accept the claim and thereafter the

Respondents- Gulshan Sethi and Anuradha Sethi filed their appeals before the

Adjudicating Authority and the Adjudicating Authority accepted the claims of the

Respondents in terms of clause 8.6(3) of the Resolution Plan.

6. It is the case of both the Respondents that they filed the claims well within

the statutory period described under Regulation 12 of CIRP Regulation, 2016 and

alleged that the Appellant did not act in accordance with Section 18(6), Section

25(2)(e) of the Code and also in terms of judgment of the Hon'ble Supreme Court

of India passed in Swiss Ribbons and Committee of Creditors of Essar Steel Vs.

Satish Kumar [(2020) 8 SCC 531].

7. The issue raised by the Appellant is whether the Respondents are 'Allottee'

within the meaning of Section 5(8)(f) of the Code or should be treated as

'Speculative Investor', in terms of judgment of the Hon'ble Supreme Court of -4- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

India in the matter of Pioneer Urban Land Infrastructure Limited & Ors. Vs.

Union of India (UOI) & Ors. [AIR 2019 SC 4055].

8. The Appellant submitted that the claims made by the Respondents on the

basis of alleged settlement agreement dated 14.11.2017 was indeed entered by the

Respondents with the disqualified Directors of the Corporate Debtor on the

relevant date, hence is not valid.

9. We are informed by the Respondents that the Respondents i.e., Gulshan

Sethi in Company Appeal (AT) (Ins.) No. 810 of 2022, booked 15 flats in the

projects of the Corporate Debtor in the year 2013-14 for which consideration was

paid by cheques and cash and similarly Respondents - Anuradha Sethi in

Company Appeal (AT) (Ins.) No. 768 of 2022 also booked 6 flats in 2013-14 and

made the payment in cheques and cash to the Corporate Debtor.

10. It is the case of both the Respondents that their payments were reflected in

the books of the Corporate Debtor and alleged that the Corporate Debtor

committed fraud on them and resold the said flats to third parties and therefore,

both the Respondents filed an FIR which led to arrest of Directors of the

Corporate Debtor.

11. The Respondents also brought out that the Trial Court released the said

directors of the Corporate Debtor on bail on 14.11.2017 which was based on the

settlement with the Respondents and hence as per the Respondents, the settlement

agreement and the new agreement to sale are legal and binding of Respondents -5- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

and the Corporate Debtor. It is the case of the Respondents that the Corporate

Debtor passed the Resolution authorising Mr. Piyush Tiwari Director of the

Corporate Debtor to arrive the settlement with the Respondents.

12. At this stage, we will also take into account Clause 8.6 (3) of the Resolution

Plan which reads as under :-

"Clause 8.6 Sub Clause 3: Claims, if any, of unit buyers/allottees, who have not yet submitted their claims with RP, shall be entertained for a period of 60 days from the Effective Date. Any claim by the unit holders/allottees beyond this period of 60 days shall stand irrevocably and unconditionally abated and extinguished in perpetuity on and with effect from the end of 60 days from the Effective Date and the Unit shall stand cancelled and vest with the corporate debtor/resolution applicant except for the claims lodged with the aforesaid period of 60 days. The corporate debtor/resolution applicant shall make all the possible efforts to accommodate the claims against cancelled units in case there is no inventory available. However even if after all reasonable efforts such claims could not be adjusted, all such claims shall be treated as Unsecured Financial Creditors and shall be paid accordingly."

(Emphasis Supplied)

13. It is the case of the Respondents that the Directors of the Corporate Debtor

signed new agreement in 2018 to sale new units in the project of the Corporate

Debtor against the initial sale amount paid to the Corporate Debtor in 2013 for -6- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

the units purchased from the same Corporate Debtor, which the Corporate Debtor

did not hand over.

14. The Appellant pleaded that the Hon'ble Supreme Court of India in Pioneer

Urban Land (Supra) mentioned that the speculative investors cannot be treated

as Homebuyers and therefore cannot be treated as Financial Creditors in terms of

Section 5(8)(f) of the Code.

It is the case of the Appellant that at the best, they could have been treated

as other creditors.

15. On the other hand, the Respondents refuted the allegations of the Appellant

and pointed out that in the same judgement of Pioneer Urban Land (Supra), the

Hon'ble Supreme Court of India, held that all allottees who have given advance

to Real Estate Developers are Financial Creditors.

16. The Respondents tried to develop the case that the issue regarding genuine

Homebuyers vs. speculative investors is relevant only at the stage of admission

of Section 7 of the Code to determine the date of default and threshold and is not

relevant at the stage of verification of the claims by the Resolution Professional.

17. The Appellant pointed out that the claims of the Respondents were

incomplete and the receipts placed on record by the Respondents are dated

12.01.2018, whereas the alleged settlement agreement is dated 14.11.2017, which

could not have been executed as the Directors of the Corporate Debtor were

disqualified by the ROC.

-7-

Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

18. On the other hand, the Respondents stated that the Appellant failed to do

his duties w.r.t. collation of the claims. In this connection, the Respondents

pointed out that the Corporate Debtor was admitted into the CIRP on 26.11.2018

whereas the public announcement for calling of claims was done on 05.01.2019

and the Respondents filed their claims on 26.02.2019 which was forwarded by

the Respondents through e-mail on 14.06.2019 and the Appellant acknowledged

the same vide e-mail dated 30.08.2019.

19. The Respondents submitted that on failure of the Appellant to collate their

claims, the Respondents filed their petitions before the Adjudicating Authority

and after examining of the relevant facts, the Impugned Order was correctly

passed by the Adjudicating Authority.

20. Based on the above issues raised by both the Respondents, we would like

to examine the issues raised by both the Appellant and the Respondents.

21. At this stage, we would like to go into the definition of Financial Debt as

referred in Section 5(8)(f) of the Code, which reads as under :-

"5. Definitions. -

(8) "financial debt" means a debt alongwith interest, if any,

which is disbursed against the consideration for the time value of money and includes-

(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the -8- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

commercial effect of a borrowing; 1 [Explanation. -For the purposes of this sub-clause, -

(i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and

(ii) the expressions, "allottee" and "real estate project"

shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);]"

(Emphasis Supplied)

22. From above, it is clear that the Homebuyers are treated as Financial

Creditors in relation to Real Estate Project and the amount paid by them has to be

considered as having commercial effect of the borrowing.

23. We would also like to take into account the definition of "Allottee" and the

"Real Estate Project" which as per Section 5(8)(f) of the Code has been assigned

the same meaning as contained in Real Estate (Regulation and Development) Act,

2016 (in short RERA Act, 2016) and relevant clause on the RERA Act, 2016

reads as under:-

"2. Definitions.-In this Act, unless the context otherwise requires,--

(d) "allottee" in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter, and -9- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent;

(zn) "real estate project" means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto;"

(Emphasis Supplied)

24. The issue raised by the Appellant is regarding speculative investors in

terms of judgment of Pioneer Urban Land (Supra) the relevant portion of the

judgment as quoted by the Appellant in his submission, reads as under :-

" ..the real estate developer can also point out that the insolvency resolution process under the Code has been invoked fraudulently, with malicious intent, or for any purpose other than the resolution of insolvency. This the real estate developer may do by pointing out, for example, that the allottee who has knocked at the doors of the NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment. They can also -10- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

point out that in a real estate market which is falling, the allottee does not, in fact, want to go ahead with its obligation to take possession of the flat/apartment under RERA, but wants to jump ship and really get back, by way of this coercive measure, monies already paid by it. Given the above, it is clear that it is very difficult to accede to the Petitioners' contention that a wholly one-sided and futile hearing will take place before the NCLT by trigger-happy allottees who would be able to ignite the process of removal of the management of the real estate project and/or lead the corporate debtor to its death..."

(Emphasis Supplied)

25. It is therefore, the case of the Appellant that the speculative Homebuyer or

unit allottees are not entitled to come as Financial Creditors under the categorical

as defined under Section 5(8)(f) of the Code. The Appellant stated that since, the

Respondents are purely speculative investors and therefore are not genuine unit

purchasers.

26. On the other hand, it is the case of the Respondents that Code and the

judgments do not differentiate between the Homebuyers and the speculative

investors as long as they are allottees in the Real Estate Project.

27. In this connection, the Respondents also cited the case of Pioneer Urban

Land (Supra) and relied on Para 47 of the said judgment where the Hon'ble -11- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

Supreme Court of India held that all 'Allottee' who have given advance to Real

Estate Developers are Financial Creditors.

28. We will reproduce Para 47 of Pioneer Urban Land (Supra) which reads as

under :-

"47. We have already held that given the fact that homebuyers/allottees give advances to the real estate developer and thereby finance the real estate project at hand, are really financial creditors. Given this finding, this plea of the petitioners must also be rejected. This challenge must also, therefore, fail."

(Emphasis Supplied)

29. From the definition of the Code of Homebuyers as Financial Creditors as

contained in Section 5(8)(f) along with two explanation along with definition of

'Allottees' and 'Real Estate Projects' as contained in Section 2(d) and 2 (zn) of

the RERA Act, 2016, it is clear that any allotee who has paid the amount in the

Real Estate Project shall be deemed to be Financial Creditor and the said amount

paid to Real Estate Developers will be treated having commercial effect of the

borrowing.

30. The definition of the allottee as contained in Section 2(d) of RERA Act,

2016 defines as the person to whom plot, apartment, or the building as the case

may be has been allotted or sold, whether free hold or lease hold or otherwise -12- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

transferred by the Promoters including person who acquired the said allotment

through sale, transfer or otherwise but does not include a person to whom some

plot or apartment or building as the case may be is given on rent.

31. Since, 2(d) also mentioned about apartment which is defined in Section

2(e) of the RERA Act, 2016, we will take into consideration the definition of

'Apartment' which reads as under :-

"2(e) "apartment" whether called block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, tenement, unit or by any other name, means a separate and self-contained part of any immovable property, including one or more rooms or enclosed spaces, located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for any residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified;"

(Emphasis Supplied)

32. The definition of the 'Apartment' amplifies the scope of the word 'allottee'

which may includes block, chamber, dwelling unit, flat, office, showroom, shop,

godown, premises, suit, tenement, unit of by any other name which is a separate

self contained part of any immovable property, including one or more rooms or

enclosed spaces, located on one or more floors or any thereof. In a building or on -13- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

a plot of land, used or intended to be used for any residential or commercial use

such as residence, office, shop showroom or godown or for carrying on any

business, occupation, profession or trade, or for any other type of use ancillary to

the purpose specified.

33. The word 'allottee' as contained in explanation 1 of Section 5(8)(f) of the

Code is by nature is quite exhaustive and illustrative and may include Homebuyer

or unit owner or any commercial property owner.

34. The Code or the RERA Act, 2016 do not differentiate anywhere between

the Homebuyers who purchase units for his own consumption or the Homebuyers

or unit purchaser who purchase the multiple units for commercial purposes.

35. Similarly, the Hon'ble Supreme Court of India in Pioneer Urban Land

(Supra) held that the allottee, who has given advance or paid money to the Real

Estate Developers is a Financial Creditor.

36. We find the merit in the logic of the Respondents who pleaded that the

issue regarding the genuine Homebuyers v/s Speculative Homebuyers is relevant

only at the stage for the admission of CIRP under Section 7 of the Code and in

this connection we will reiterate that the Hon'ble Supreme Court of India

narrating as under :-

"...the real estate developer can also point out that the insolvency resolution process under the Code has been invoked fraudulently, with malicious intent, or for any -14- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

purpose other than the resolution of insolvency. This the real estate developer may do by pointing out, for example that the allottee who has knocked at the doors of the NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment.

(Emphasis Supplied)

37. Thus, it becomes clear that the Hon'ble Supreme Court of India held the

position of speculative investors only for seeking unnecessary insolvency of the

Corporate Debtor and nowhere even discuss about collation of the claims of the

Homebuyers or unit purchasers. In fact, the Hon'ble Supreme Court of India held

that any allottee who paid for purchasing units will be treated as having effect of

commercial borrowing and consequently such unit purchaser will be treated as

Financial Creditors.

38. In view of above discussions, we do not find the merit in the argument of

the Appellant regarding the status of the Respondents, whether genuine units

buyers or speculative unit buyers, has any adverse impact the Respondents'

claims as Financial Creditors of the Corporate Debtor.

39. Another point raised by the Appellant is that the Respondents is not the

Financial Creditor in true sense, within the definition of 5(8)(f) of the Code and

during the pleadings, the Appellant brought out the facts before this Appellate

Tribunal that the Respondents has been working as commission agents on behalf -15- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

of the Corporate Debtor for marketing of the properties and has been getting

money much prior to alleged settlement agreement dated 14.11.2017 or alleged

allotment of units of the Corporate Debtor in the year 2018.

40. In this direction, the Appellant drew our attention to the ledger account of

the Respondents maintained by the Corporate Debtor, which reads as under :- -16-

Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

41. The Appellant stated that the said ledger account is from the period

01.04.2013 to 15.09.2019 which reflects several credit entries and several debit

entries, which according to the Appellant, indicate that the Respondents used to

indulge in the marketing and selling of property on behalf of the Corporate Debtor

and thus used to get commission. The Appellant stated that the Corporate Debtor

used to settle the account with the accordingly.

It is the case of the Appellant that this ledger account clearly demonstrate

that these were not transactions between the unit holders and the Corporate Debtor

and therefore, the Respondents cannot be treated as Financial Creditor.

42. This Appellate Tribunal raised an query to the Appellant regarding specific

description in the ledger accounts which indicate that the alleged amount received

by the Respondents was on account of the commission from the Corporate

Debtor. No such clear explanation was made available except stating that these

transactions pertain to period prior to the alleged settlement of 2017 and alleged

allotment of properties in 2018.

43. Thus, we cannot accept the contentions of the Appellant as absolute truth

that these ledger account reflect the commission received by the Respondents.

44. On the other hand Respondents pointed out that they, in fact, purchased the

properties from the Corporate Debtor way back in 2013-2014.

The Respondents Gulshan Sethi pointed out that he purchased 15 flats in

Tec Homes Projects and Shubhkamana City Project of the Corporate Debtor in -17- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

the year 2013-2014 and the receipts were issued by the Corporate Debtor as well

as books of the Corporate Debtor clearly reflect him as allottee of the Corporate

Debtor. Similarly, the Respondent- Anuradha Sethi also said to have purchased

6 flats in the year 2013-14.

45. In this connection, we note that the Respondents have attached several said

allotment letters, the 'Agreement to Sale' and the receipts of the money against

such units which pertains to 2013-2014.

46. We will like to take into account and reproduced one of such allotment

letters, "Agreement to Sale" and receipt enclosed with allotment letter No. C-3/F-

10 and D-1/F-12 of the Corporate Debtor in 2013-14, only with purpose to

understand the correctness of submission of the Respondent in this regard. These

read as under :-

-18-

Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -19- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -20- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -21- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -22- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -23- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -24- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -25- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

47. This Appellate Tribunal mentioned to the Respondents that normally the

allotment letters are issued unit wise and are generally in format as allotment -26- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

letter. The Respondents submitted that in case of bulk purchase, sometime the

developers, like the Corporate Debtor in the present case, issue such allotment

letters and which is a legal. The Respondents further submitted that there is no

specific format for the allotment letter anywhere contained in the RERA Act,

2016 or any other law.

48. The Respondents emphasised that they have linked all the documents

indicating that they were genuine unit purchasers of the Corporate Debtor way

back in 2013-14.

49. The Respondents also denied the allegations of the Appellant regarding the

relationship between the Corporate Debtor as the commission agents or marketing

agent on behalf of the Corporate Debtor.

50. The Respondents submitted that the Corporate Debtor passed a proper

resolution authorising the Directors of the Corporate Debtor to settle the matter

with the Respondents and the minutes were recorded on 06.11.2017 reflecting this

position.

51. Hence, we will reproduce the said extract of the minutes of the Board of

Director of the Corporate Debtor dated 06.11.2017, which reads as under :-

-27- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -28- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

52. The settlement agreement dated 14.11.2017 between the Respondents and

the Corporate Debtor read as under :-

-29- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -30- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -31- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -32- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -33- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -34- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021 -35- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

53. It is the case of the Appellant that the settlement agreement dated

14.11.2017 is illegal as in the year 2017 the Director Mr. Piyush Tiwari and Mr.

Deep Tiwari were declared unqualified as per the information uploaded by the

ROC on the website of MCA and drew our attention to such document as filed by

the ROC during the pleadings of the case.

54. On the other hand, the Respondents empathetically argued that they were

not aware whether Mr. Piyush Tiwar and Mr. Deep Tiwari were disqualified

directors of the Corporate Debtor as these Directors used to represent the

company from the beginning. It is further the case of the Respondents that when

they entered into the agreement for the said 15 units by Gulshan Sethi and 6 units

by Anuradha Sethi with the same, the same directors who entered into the

agreements with the Respondents and accordingly the money was paid to the

Corporate Debtor and allotment letters and agreements to sale were executed by

these same directors of the Corporate Debtor.

55. The Respondents submitted that as simple unit buyers, they do not know

the corporate niceties and in any case based on the "Doctrine of Indoor

Management", the Respondents cannot be put to any adverse situation.

56. The Respondents submitted that "Doctrine of Indoor Management" is very

well recognized in the law as can be seen from Section 176 of the Companies Act,

2013. In this connection, they cited several judgments Shiromani Sugar Mills

Limited vs. Debi Prasad [ILR (1951) 2 ALL 228 (ALL)], Official Liquidator, -36- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

Manasuba and Co. (Pvt. ) Ltd. Commission of Police [(1967) SCC Online Mad

240] and Ram Baran Singh Vs. Mufassil Bank Ltd. [(1924) SCC Online ALL

311].

57. Based on several documents made available in the Appeal and the

pleadings before us, we note that the Respondent Gulshan Sethi indeed purchased

the 15 units and the Respondent Anuradha Sethi indeed purchased 6 units in the

year 2013-14 as evident from the allotment letters, receipts, and agreement to sale

on the stamped papers.

58. We have also noted from the pleadings of the Respondents that the

Corporate Debtor allegedly tried to defraud the Respondents and sold the same

units to multiple people and as such FIR was filed by the Respondents on

14.11.2017 vide FIR No. 07/2017 which is placed at page 69 to 71 of the Appeal

Paper Book, subsequent to which according to the Respondents, the Directors of

the Corporate Debtor were arrested and the Directors of the Corporate Debtor

agreed to enter into the settlement agreement with the Respondents and thereafter

the new properties were allotted in favour of the Respondents in the year 2018.

We find from the flow of the chain of the documents and the events, as

logical and do not find any merit in the contention of the Appellant on this

account.

-37-

Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

59. Only contention of the Appellant is that Directors of the Corporate Debtor

who signed the alleged settlement agreement on 14.11.2017 was invalid as they

were disqualified directors on that date.

60. In this connection, we would like to refer to Section 176 of the Companies

Act, 2013 which reads as under :-

"176. Defects in appointment of directors not to invalidate actions taken No act done by a person as a director shall be deemed to be invalid, notwithstanding that it was subsequently noticed that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in this Act or in the articles of the company:

Provided that nothing in this section shall be deemed to give validity to any act done by the director after his appointment has been noticed by the company to be invalid or to have terminated.

(Emphasis Supplied)

61. Thus, we find that the Respondents are protected by the doctrine of indoor

management and Section 176 of the Companies Act, 2013 and cannot be put to

any disadvantage position on this account and the pleadings of the Appellant on

this issue is not sustainable.

62. Another point raised by the Appellant is regarding that the allotment letters

and the receipts place on record by the Respondents are dated 12.01.2018 whereas

the settlement agreement dated 14.11.2017 and as such the claim of the -38- Comp. App. (AT) (Ins.) No. 810 of 2021 & Comp. App. (AT) (Ins.) No. 768 of 2021

Respondents should not have been accepted as Financial Creditor. In this

connection, in the preceding detailed discussions we have already noted the

sequence which led to the settlement agreement dated 14.11.2017 and thus in a

way, the Respondents were the original allottee of the Corporate Debtor in

another units way back in 2013-14 and on failure the Corporate Debtor to hand

over the said units the settlement agreement dated 14.11.2017 was executed based

on which the new units were allotted to the Respondents in the year 2018.

Hence the contentions of the Appellant in this regard is also not sustainable.

63. Therefore, based on the above detailed analysis, we do not find any error

in the Impugned Order. The Appeals fail and stand dismissed. No Costs.

Interlocutory Application(s), if any, are Closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

Sim