Gokul Kripa Colonizers And Developers ... vs Radiant Hotels Private Limited

[Arising out of Order dated 21.04.2022 passed by the Adjudicating Authority (National Company Law Tribunal, Court No. 5, Mumbai Bench) in CP(IB)-849/MB/2019]

IN THE MATTER OF:

Gokul Kripa Colonizers and Developers Private Limited, Having its registered office at: 702-703, Okay Plus Square, Sector-7, Madhyam Marg, Mansarovar, Jaipur - 302020, Rajasthan ...Appellant/FC

Versus

Radiant Hotels Private Limited, Having its registered office at: ...Respondent/CD 3rd Floor, Taj Building, 210 DN Road, Mumbai - 400001, Maharashtra

For Appellant: Mr. Krishnendu Dutta, Sr. Advocate, Ms. Pooja M. Sehgal, Ms. Riya Thomas, Mr. Apoorv Agarwal, Mr. Nikhil Sabri, Mr. Nipun Gupta, Advocates. For Respondents: Mr. Dhruv Dewan, Ms. Lara Jesani and Ms. Prerna Singh, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

1. This Appeal has been filed against the Order dated 21st April, 2022

passed by National Company Law Tribunal, Court No. 5, Mumbai Bench

by which order Section 7 Application filed by the Appellant has been

rejected holding that in the transaction between the parties, there is no

financial debt.

Cont'd.../ -2-

2. Aggrieved by the Impugned Order, Appellant has come up in this

Appeal.

3. Brief facts of the case necessary to be noticed for deciding this

Appeal are:-

 The Respondent Company owned land in Village Sanganer and

Khokhawas, Tehsil Sanganer, situated in Sanganer District, Jaipur

which as per Jaipur Development Authority is a land earmarked for

group housing project. Total land owned by the Respondent

Company was 73585 sq.m. part of which was sold to one Vedanta

Properties and another part of housing scheme which is underway

and further 36,402 sq.m. was available which was owned by the

Respondent.

 A Memorandum of Understanding between Respondent as First

Party and the Appellant as Second Party was entered on

28.02.2019 under which First Party agreed to sell area 36,402

sq.m. The Second Party was interesting in buying the same.

Consideration stated was Rs. 21,000 per sq. m. Total amount was

Rs. 91,42,95,850/- out of which Rs. 7,51,00,000/- was received as

advance. The parties agreed that First Party will get sub-division

done in the manner and approved by the Jaipur Development

Authority and Second Party shall pay 25% of the total amount of

consideration within 7 days of the approval of the map and balance

75% will be paid within period of 6 months from the date of map

approval.

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 The Agreement further contemplates that Second Party of the

Agreement shall have the right of booking of the plots to prospective

buyer on any price on the approved map of plotting project. 12.5%

of the 25% paid in advance will be treated as advance deposit and

will be adjusted in the last 12.5% plots of project. Agreement

further contemplates that if Second Party makes excess payment to

the First Party which is received through booking of plots which is

excess to the agreed amount between the parties for execution of

agreement then in that situation the excess amount will be treated

as commission of the Second Party and First Party shall transfer

the excess amount to Second Party.

 Subsequent to the MoU, Lay Out Plan was approved by the Jaipur

Development Authority and Agreement to Sale dated 14.10.2019

was again entered between Respondent M/s. Radiant Hotels Pvt.

Ltd. and the Appellant Mr. Gokul Kripa Colonizers and Developers

Pvt. Ltd. The Agreement to Sale was with regard to 36,399.38 sq.

m. The Agreement to Sale also contemplates that loan amount of

Rs. 18.87 Crores outstanding to State Bank of India shall be

cleared by the land owner First Party. The Agreement to Sale

contains following agreement between the parties:

"1. That First Party-Land owner agrees to sell out the Residential Scheme "The Royal Avenue" situated in village Sanganer and Village Khokhawas, Tehsil Sanganer, District Jaipur consisting of 155 residential plots of land which is having total area of

Company Appeal (AT) (Insolvency) No. 837 of 2022 -4-

19,397.53 sq. mtrs. And total 16 retail commercial shops which is having total area of 148.80 sq. mtrs in favour of the Second Party in lieu of total sale consideration of Rs. 92,91,99,184/- (Rupees ninety two crores ninety one lakhs ninety nine thousand one hundred and eighty four only)."

 Agreement to Sale further contemplates that out of entire amount

of sale consideration, 25% amount has been received by the land

owner from the Second Party and the entire remaining amount of

the consideration will be paid to the First Party land owned by the

Second Party buyer or the persons nominated by the Second Party.

After the Agreement to Sale another supplementary agreement was

executed on 10th July, 2020 as per the aforesaid agreement, land

was allotted to nominees of Appellant by the Respondent and

amounts were received.

 Appellant filed Section 7 Application CP(IB) 849/MB/2019 claiming

a Financial Debt of Rs. 13,48,07,556/- against the Respondent

which according to Part-IV of Section 7 Application was balance

amount which was required to be paid by the Respondent. In the

said application, Reply was filed by the Respondent refuting the

claim. It was pleaded by the Respondent that there is no financial

debt owed by the Respondent, money was transferred to the

Respondent as sale consideration for 17,314.85 sq.m. in the project

in favour of the persons nominated by the Appellant and not as a

commercial borrowing or a debt which needed to be repaid by the

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Respondent in any given amount of time. Agreement between the

parties contains a payment schedule, to be paid by the Appellant to

the Respondent and not vice versa. Appellant is neither Financial

Creditor nor an allottee under Section 5(8) of the Code. It was

pleaded that Respondent does not owe any amount. The

Adjudicating Authority heard both the parties and by the Impugned

Order has dismissed Section 7 Application holding that the

Appellant cannot be treated to be allottee under Section 5(8) of the

Code and MoU/Agreement to Sale/Addendum is essentially an

arrangement of certain marketing, promoting and bringing

prospective allottee to the Corporate Debtor for developing the

project through its sister company Gokul Kripa Pvt. Buildtech.

 The Adjudicating Authority rejected the Application holding that

obligation of payment of money under the agreement to sale by no

stretch of imagination can be considered as a financial debt.

4. We have heard Mr. Krishnendu Dutta, Learned Sr. Counsel for the

Appellant and Mr. Dhruv Dewan, Learned Counsel appearing for the

Respondent.

5. Learned Sr. Counsel for the Appellant in support of his

submissions submits that Appellant is an allottee in terms of Section 2(d)

and 2(zn) of the RERA Act. The RERA Authority has also by its order

dated 18th July, 2022 held the Appellant as an allottee. It is recorded in

the Agreement to Sale dated 14.10.2019 that Appellant has made

payment of Rs. 23,22,99,796/-. Learned Sr. Counsel for the Appellant

has referred to clause 3,5 and 11 of the MoU dated 28.02.2019. Learned

Company Appeal (AT) (Insolvency) No. 837 of 2022 -6-

Sr. Counsel for the Appellant has also referred to Agreement to Sale, its

various clauses, which agreement superseded all previous agreement. It

is submitted that transaction entered between the parties contains a

Financial Debt. The amount paid by the Appellant was disbursal against

time value for money as per agreement and as addendum, Respondent is

required to refund the amount of Rs. 13,48,07,556/- since the

Respondent has received an amount of Rs. 33,96,45,071/- and

Respondent has repaid only an amount of Rs. 20,38,37,5015-. It is

submitted that the certificate of registration issued by RERA is in the

name of Respondent who is promoter. Appellant is not basing its entire

case on the Order dated 18th July, 2022 of the RERA. The impugned

order is liable to be set aside on the ground that Appellant is an allottee

in terms of Section 2(d) and Section 2(zn) of the RERA Act and Section 7

of IBC read with Section 5(8) of the Code.

6. Learned Counsel for the Respondent refuting the submissions of

Learned Counsel for the Appellant submits that the Appellant is taking a

new case in this Appeal that Appellant is an allottee whereas no such

case was taken by the Appellant in Section 7 Application, and case in

Section 7 Application was that amount of Rs. 13,48,07,556/- which was

received by the Respondent as an excess amount of sale value has not

been refunded which is financial debt owed by the Respondent to the

Appellant. It was pleaded by the Respondent in his Reply that Appellant

is not Real Estate Allottee nor he can be considered as a Financial

Creditor under Section 5(8)(f) of the Code. It is submitted that nature of

transaction between the parties was transaction of sale of plot of land to

Company Appeal (AT) (Insolvency) No. 837 of 2022 -7-

the final allottee as nominated by the Appellant. The Order of RERA dated

18th July, 2022 where Appellant has been held to be allottee has been

stayed by the Real Estate Appellate Tribunal by order dated 02.09.2022

which stay is still effective hence reliance on the order dated 18th July,

2022 by the Appellant is erroneous. It is submitted that Appellant cannot

be said to be allottee of the land, the responsibility of promoting,

marketing the project and bringing the final allottee for sale of plots was

of the Appellant and any excess amount paid above the rate agreed

between the Appellant and Respondent by the allottee for the plot, was

required to be transferred to the Appellant as its commission and for any

deficit amount paid by the allottees to Respondent, Appellant was

required to issue debit note asking the Respondent to deduct the amount

from security lying with the Respondent, no plot was allotted or

transferred to the Appellant. The Respondent owes no sum to the

Appellant. It is further submitted that under the Agreement to Sale, there

was arbitration clause and it was open for the Appellant to take recourse

of the arbitration clause.

7. We have considered the submissions of the Learned Counsel for the

parties and have perused the record.

8. Before we enter into rival submissions of the parties, it is relevant

to notice certain clauses of agreement to sale dated 28.02.2019 entered

between the Respondent as Seller First Party and Appellant as Purchaser

Second Party. From the very description of parties in the Agreement that

is "seller first party and purchaser second party" indicates that agreement

Company Appeal (AT) (Insolvency) No. 837 of 2022 -8-

was nothing but sale and purchase agreement. The agreement contained

following statement:

"That the first party because of requirement of money has agreed to sale his part of land that is apx.43537.85 sq.yd.(apx.36402 sq.m.) to second party who is interested in buying the same on which this agreemtn both the parties have agreed in writing that they will complay following terms and conditions ...."

9. The agreement further noted the consideration and total

consideration of the land and advance payment of Rs. 7,51,00,000/- in

following words:

"That, the first party of this agreemtn has agreed with second party to sale of the west part of land measuring areas apx.43537.85sq.yd. which is shown in yellow color in the map of the land for this part attached herewith this agreemtn with full realization and transfer of the property rights outside, indside, uperwards, underwards etc. at the price of 21,000/- per sq. yd. which is cost to total consideration of the land subjected to be sold to second part is apx.91,42,94,850/- ruppes (In words ninty one crores fourty two lacks, ninty four thousand, eight hundred and fifty only), and a part of in total consideration of rupees 7,51,00,000/- (in words sevel crores, fifty one lacs only) paid in advance by second party as follows:-

Amount Chq./DD/RTGS No. Date Bank & Branch BKIDH19042295948 11/02/2019 Bank of India, 51,00,000/- Mansarovar,

Company Appeal (AT) (Insolvency) No. 837 of 2022 -9-

Jaipur 026925 26/02/2019 HDFC Bank, 1,50,00,000/- Vaishali Nagar, Jaipur 065570 27/02/2019 Bank of India, 1,50,00,000/- Mansarovar, Jaipur 065573 27/02/2019 Bank of India, 1,50,00,000/- Mansarovar, Jaipur 065571 04/03/2019 Bank of India, 2,50,00,000/- Mansarovar, Jaipur

It is determined in this agreement by both the parties that any economic transaction on account of execution of this agreement will be subject to deduction of the TDS for that the second party of the agreement will transferred the funds to first party after deduction of the TDS."

10. The agreement contemplated that after approval from the Jaipur

Development Authority of plotting project, Second Party of the Agreement

(Appellant herein) shall have the right of booking of the plots to

prospective buyer on any price on the approved map. The agreement

further contemplated in clauses 17 to the following effect:

"That, if in case the second party will make accesse payment to the first party which is received through booking of plots which is access to the agreed amount between both the party for execution of the agreement then in that situation the access amount will be treated as commission of the second party. The first party will transferred the accesse amount to second party or representative of the second party and the applicable taxes will bear by the second party at sole."

Company Appeal (AT) (Insolvency) No. 837 of 2022 -10-

11. Subsequent to above agreement dated 28.02.2019, an agreement to

sale was entered between the parties on 14.10.2019 after approval by the

Jaipur Development Authority of the lay out plan and the project. After

certain preliminary statement, the agreement contains the relevant

clauses in clause 1 to 4 to the following effect:

"1. That First Party-Land owner agrees to sell out the Residential Scheme "The Royal Avenue"

situated in village Sanganer and Village Khokhawas, Tehsil Sanganer, District Jaipur consisting of 155 residential plots of land which is having total area of 19,397.53 sq. mtrs. And total 16 retail commercial shops which is having total area of 148.80 sq. mtrs in favour of the Second Party in lieu of total sale consideration of Rs. 92,91,99,184/- (Rupees ninety two crores ninety one lakhs ninety nine thousand one hundred and eighty four only)."

2. That out of the entire amount of the sale consideration, 25 percent amount i.e. Rs.

23,22,99,796/- (Rupees Twenty Three Crores Twenty Two Lakhs Ninety Nine Thousand Seven Hundred Ninety Six Only) has been received by the First Party Landowner from the second party buyer as a security in the following manner:-

............

Thus, First Party-Landowner has received the total amount of Rs. 23,22,99,796/- (Rupees twenty three crores twenty two lakhs ninety nine thousand seven hundred and ninety six only) as security, receiving of which is hereby acknowledged by the First Party Landowner.

Company Appeal (AT) (Insolvency) No. 837 of 2022 -11-

3. That the entire remaining amount of the consideration will be paid to the first party- landowner by the second party buyer or the persons nominated by the Second Party in the following manner:-

A. 25 percent amount of the entire amount of sale consideration of Rs. 92,91,,99,184 i.e. Rs. 23,22,99,786/- (Rupees twenty three crores twenty two lakhs ninety nine thousand seven hundred and eighty six only) will be paid by 01.03.2020.

B. 25 percent amount of the entire amount of sale consideration of Rs. 92,91,,99,184 i.e. Rs. 23,22,99,786/- (Rupees twenty three crores twenty two lakhs ninety nine thousand seven hundred and eighty six only) will be paid by 01.04.2020.

C. 25 percent amount of the entire amount of sale consideration of Rs. 92,91,,99,184 i.e. Rs. 23,22,99,786/- (Rupees twenty three crores twenty two lakhs ninety nine thousand seven hundred and eighty six only) will be paid by 01.05.2020.

4. That Second Party Buyers assures the First Party Landowner that it will pay the agreed amount of remaining sale consideration by the agreed time period otherwise will get it paid through the persons nominated by it. If amount of sale consideration to be paid to the First Party Landowner by the Second Party Buyer or the persons nominated by the Second Party Buyer before the agreed time period, then First Party shall pay the interest at the rate of 18 percent

Company Appeal (AT) (Insolvency) No. 837 of 2022 -12-

per annum on the received amount to the Second Party Buyer, otherwise amount of interest will be adjusted in the upcoming installment. If Second Party Buyer fails to pay the amount of installments within the agreed time period to the First Party Landowner or commits delay in paying it, then Second Party by adding the interest at the rate of 18 percent per annum in the principal amount of that installment for the delayed period, will pay it to the First Party- Landowner, and total period of delay in all the installments should not be more than 60 days and in case total delay period goes over 60 days and in case total delay period goes over 60 days, this agreement shall stand terminated, thereafter, First Party Landowner shall acquire the right to sell out etc. the above Estate to some other person etc."

12. The first issue which need to be considered in this Appeal is as to

what is the nature of transaction between the parties whether the

transaction can be held to be financial debt within the meaning of Section

5(8) of the Code.

13. The first limb of argument of the Appellant is that Appellant is an

allottee of the Real Estate Project which has also been accepted by RERA

in its order dated 18th July, 2022. Learned Counsel for the Appellant has

relied on provisions of Section 2(d) and 2(zn) of the RERA Act, 2016 which

are as follows:

"Section 2 "Definitions" - The Real Estate (Regulation and Development Act, 2016) ........

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(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 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 apartment, 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;"

14. The definition of an allottee under Section 2(d) is a wide definition.

15. Learned Counsel for the Respondent has pleaded that the Section 7

Application filed by the Appellant was not premised on, that the Appellant

is an allottee of Real Estate Project rather the claim of the amount of Rs.

13,40,07,556/- was based on MoU and Agreement to Sale as the amount

which according to the Appellant the Respondent was liable to refund as

the excess amount received. IBC also adopt the definition of allottee as

Company Appeal (AT) (Insolvency) No. 837 of 2022 -14-

occurring in RERA Act. Section 5(8) of IBC, Explanation II defines

allottees in following words:

"Section 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--

.......

Explanation. -For the purposes of this sub-clause,- ..........

(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);

........"

16. When we look into the MoU and Agreement to Sale, the parties

agreed that lease/allotment shall be issued in favour of nominees of the

Appellant thus actual allotment were issued by the Respondent in favour

of allottees. With regard to initiation of Corporate Insolvency Resolution

Process by Financial Creditor, Section 7 has been amended by Act

1/2020 by inserting proviso which is as follows:

"Section 7: Initiation of corporate insolvency resolution process by financial creditor. *7. (1) A financial creditor either by itself or jointly with 1[other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government] may file an application for initiating corporate insolvency

Company Appeal (AT) (Insolvency) No. 837 of 2022 -15-

resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.

[Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent. of the total number of such creditors in the same class, whichever is less:

Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less:

Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission."

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17. Thus, even for argument sake, we accept the submission of the

Appellant that appellant is an allottee, application under Section 7 was

required to be complied with the provisions of Section 7(1) as amended by

Act 1/2020, thus Application has to be filed by not less than 100 of such

creditors in a class or not less than 10% of total number of such

creditors. Appellant having not filed the application as allottee has not

even pleaded that the Application under Section 7 which was filed on 29th

July, 2021 fulfils the conditions as provided in section 7(1) thus even if

we accept that Appellant as an allottee within the meaning of Section 2(d)

of the RERA, there being no compliance of Section 7(1), the Application

under Section 7 cannot succeed on the ground that Appellant is an

allottee in the Real Estate Project. Thus the submission of the Appellant

that Appellant is an allottee does not render any benefit to the Appellant

and on the said submission the application filed as an allottee cannot be

admitted and was liable to be rejected due to non-compliance of Section

7(1) of the Code.

18. It is relevant to notice that said issues were not gone into before the

Adjudicating Authority nor raised by the Appellant hence the

Adjudicating Authority had no occasion to consider the claim of the

Appellant as an allottee in the Impugned Order. Bare perusal of the

Impugned Order indicates that the case was not pleaded by the Appellant

as Financial Creditor being an allottee of the Real Estate Project. The

submission of the Appellant that application was maintainable under

Section 7 as Appellant being Real Estate Allottee cannot be accepted and

deserves to be rejected.

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19. Now we come to the submission of the Appellant that transaction in

question falls within the definition of Section 5(8)(f) of the Code. All

transactions which are covered under Section 5(8) which has to be

treated as a financial debt, has to be necessarily disbursal against the

consideration for the time value of money. Agreement entered between the

parties was for sale and purchase of the land on consideration fixed in

the agreement i.e. 21,000 per sq. m. The Appellant who was to bring

allottees in whose favour the leases were to be executed by the

Respondent, it was open for the Appellant to sell the land at any price i.e.

even higher to the amount fixed between the parties and the excess

amount on which any lease is executed by the Respondent shall be

treated as commission of the Appellant. The Agreement further

contemplated that if the lease is executed at a price less than the agreed

price, the difference of the amount from the agreed price is to be deducted

from the Security which was deposited by the Appellant. The transaction

was thus clearly transaction for sale and purchase of the assets and it

cannot be said that disbursal was for time value of money. The

transaction between the parties does not fall under Section 5(8)(f) of the

Code. We having also held that application filed by the Appellant cannot

be sustained under Section 7 as an allottee of the real estate project as

the Appellant being allottee of Real Estate Project thus under Section

5(8)(f) claim of the Appellant as Real Estate Project allottee is

unsustainable for the reasons as indicated above.

20. The Adjudicating Authority in the Impugned Order has come to the

conclusion that transaction as described in MoU/Agreement to

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Sale/Addendum is essentially in the form of arrangement of selling,

marketing, promoting and bringing prospective allottees to the

Respondent Radiant Hotels Pvt. Ltd. The Adjudicating Authority has also

rightly come to the conclusion that obligation of payments of money

under the agreement of sale by no stretch of imagination can be

construed as a financial debt. We are in full agreement with the above

finding of the Adjudicating Authority while rejecting the application filed

under Section 7 of the Code.

21. In view of the above discussion and conclusion, we are of the view

that no error has been committed by the Adjudicating Authority in

rejecting the Section 7 Application filed by the Appellant. There is no

merit in the Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI 16th February, 2024

Basant

Company Appeal (AT) (Insolvency) No. 837 of 2022