Atul Mittal vs Khushal Infratech Pvt. Ltd. & Anr
- CitationCOMPANY APPEAL(AT)(INS) NO. 8
Ratio decidendi
The rule this decision rests on
Where a flat buyer relies on Section 5(8) of the Insolvency and Bankruptcy Code, 2016 to claim status as a financial creditor, the burden lies on that buyer to establish that the transaction falls within the statutory definition. Where the buyer's agreement makes the assured-return option conditional on a prior written election within a stipulated time, and the buyer cannot show that such election was made, the buyer has not proved financial creditor status, and an admission of the insolvency application under Section 7 cannot stand. Where the financial creditor's dues have been paid in full before the appellate hearing, the Adjudicating Authority is directed to close the proceedings, and all orders consequent upon an admission that is set aside, including the appointment of an Interim Resolution Professional, the declaration of moratorium, and actions taken pursuant to them, fall with it.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Mr. Atul Mittal ...Appellant
Vs
Khushal Infratech Private Limited & Anr. ....Respondents
Present: For Appellant: Mr. Rajiv Shankar Dwivedi, Md. Ziauddin Ahmad and Ms. Aarti Dwivedi, Advocates
For Respondents: Mr. Ashok Jung, Advocate for Respondent No. 1 Mr. Devinder Arora, RP
ORDER
01.05.2018 This appeal has been preferred by Mr. Atul Mittal, Director of
APS Buildtech Pvt. Ltd. ('Corporate Debtor') against an order dated 09.02.2018
passed by the Adjudicating Authority (National Company Law Tribunal), New
Delhi in (IB) 19(ND) 2018 whereby and whereunder the application under
Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to
as "I&B Code") preferred by Respondent- Khushal Infratech Pvt. Ltd has been
admitted. Order of 'Moratorium' has been passed and 'Interim Resolution
Professional' has been appointed.
2. Learned Counsel appearing on behalf of the Appellant submits that the 1st
Respondent does not come within the meaning of 'Financial Creditor' in terms of
Section 5(7) and Section 5(8) of the I & B Code. He placed reliance on the part of
COMPANY APPEAL(AT)(INS) NO. 86 OF 2018 1 the agreement for sale of flat reached between 'Corporate Debtor' and the 1st
Respondent as noticed by the Adjudicating Authority and reads as follows:
..
"AND WHEREAS the Second Party is desirous of booking/holding 02 No. of flats in the said Project under flexi payment plan of the First Party for a lock in period of one year with an option to either to exit from the Project with assured return of 27% after the expiry of the lock in period from the date of execution of this MOU or to sell the said flats prior to expiry of the one year period (directly) in the market or to continue and retain the same till completion of the project after making the balance payment under the flexi plan.
AND WHEREAS the Parties agree that in the event the Second Party chooses the option of assured return, then in that even the second party has to inform one month in advance to the first party in writing of its decision to continue or not to continue with the booking/holding of the said flats and thereafter the first party would return the deposit within next one month along with an assured return amount calculated @ 2.25% monthly till the date of actual return."
..
3. It is submitted that in terms of the said agreement, the Second Party was
required to opt for 'assured return' and in that event Second Party (1st
Respondent herein) was required to inform within a month in advance in writing
to the 'Corporate Debtor' that he intended to continue booking/holding of the
said flat. It is submitted that no record was brought to the notice of the
Adjudicating Authority to show that the 1st Respondent opted for 'assured return'
within one month and thereby the agreement was not given effect in its letter
COMPANY APPEAL(AT)(INS) NO. 86 OF 2018 2 and spirit. Without discussing the aforesaid issue and on mere presumption the
1st Respondent has been treated as 'Financial Creditor'.
4. It is further submitted that the total amount as was due to the 1st
Respondent - flat buyer has already been paid back.
5. Learned Counsel appearing on behalf of the 1st Respondent- flat buyer
accepts that the total amount has been paid back by the Appellant. The terms
of settlement have been brought on record. Learned Counsel for the 1st
Respondent also failed to show that the 1st Respondent had informed one month
in advance from the date of the agreement, to the 'Corporate Debtor' that he
intended to continue with the booking/holding of the flat in question.
6. In view of the fact that the 1st Respondent has failed to prove that he comes
within the meaning of 'Financial Creditor' of the 'Corporate Debtor', the order
passed by the Adjudicating Authority cannot be upheld. For the reasons
aforesaid, we set aside the impugned order dated 09.02.2018 passed by the
Adjudicating Authority in (IB) 19(ND) 2018. The 1st Respondent having paid the
total dues, we direct the Adjudicating Authority to close the proceeding.
7. In effect, order(s) passed by the Adjudicating Authority appointing 'Interim
Resolution Professional', declaring moratorium, freezing of account and all other
order(s) passed by the Adjudicating Authority pursuant to impugned order and
action, taken by the 'Interim Resolution Professional, including the
advertisement, if any, published in the newspaper calling for applications and
all such orders and actions are declared illegal and are set aside. The 'Corporate
COMPANY APPEAL(AT)(INS) NO. 86 OF 2018 3 Debtor' Company is released from all the rigour of law and is allowed to function
independently through its Board of Directors from immediate effect., The appeal
is allowed. No cost.
[Justice S.J. Mukhopadhaya] Chairperson
[Justice Bansi Lal Bhat] Member (Judicial) Akc/unk
COMPANY APPEAL(AT)(INS) NO. 86 OF 2018 4
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