Green Peace Construction Pvt Ltd vs Ajantha Flat Owners Association & Anr

P.R. Earnarst, Director of M/s. Green Peace Construction Pvt. Ltd. ...Appellant

Vs.

M/s. Ajantha Flat Owners Association & Anr. ...Respondents

Present: For Appellants: - Mr. P.V. Yogeswaran, Mr. Babul Kumar, Mr. A.K. Udhayay and Mr. Y. Lokesh, Advocates.

For Respondents:- Mr. Swaroop George, Advocate.

O R D E R

07.05.2019─ This appeal has been preferred by the Appellant- 'P.R.

Earnarst, Director of 'M/s. Green Peace Construction Pvt. Ltd.'-

('Corporate Debtor') against the order dated 27th August, 2018 passed by

the Adjudicating Authority (National Company Law Tribunal), Single

Bench, Chennai, admitting the application under Section 9 of the

Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short) filed by the

Respondent- 'M/s. Ajanta Flat Owners' Association'.

2. The application under Section 9 was filed by 'M/s. Ajanta Flat

Owners' Association' on the ground that certain correctional measures

which were to be taken by the Builder, namely-- 'M/s. Green Peace

Contd/-...............

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Construction Pvt. Ltd.'- ('Corporate Debtor') were not taken by the

'Corporate Debtor'.

3. Later on, 'M/s. Green Peace Construction Pvt. Ltd.'- ('Corporate

Debtor') asked 'M/s. Ajanta Flat Owners' Association' to take correctional

measures from their side and whatever the cost incurred will be paid to

them. In this way, 'M/s. Ajanta Flat Owners' Association' incurred a cost

of Rs. 40 Lakhs and other amount for purchase of two generators.

4. Initially, plea was taken by the Appellant that for the action as

alleged, 'M/s. Ajanta Flat Owners' Association' cannot claim to be

'Operational Creditors' having not supplied any goods nor given any

services. In fact, the services were to be given by the 'Corporate Debtor'

and, therefore, Section 9 application was not maintainable.

5. However, it was submitted that the Appellant intends to settle the

matter with 'M/s. Ajanta Flat Owners' Association'. In view of such

submissions, on 26th September, 2018, when the notice was issued, this

Appellate Tribunal framed question as to whether 'Association of Flat

Owners' can claim to be 'Operational Creditor' within the meaning of

Section 5(20) read with Section 5(21) of the 'I&B Code' for filing an

application under Section 9 of the 'I&B Code'. The Adjudicating Authority

and the 'Interim Resolution Professional' were directed not to publish any

Company Appeal (AT) (Insolvency) No. 572 of 2018 -3-

notice in the newspapers and 'Interim Resolution Professional' was

allowed to ensure that the company remains a going concern.

6. Today, a 'Terms of Settlement' dated 25th February, 2019 has been

filed by the parties and it is stated that the expenditure incurred by the

Respondent- 'M/s. Ajanta Flat Owners' Association' for correctional

measures and installation of generator has already been paid. It is also

accepted by Mr. Swaroop George, learned counsel appearing on behalf of

'M/s. Ajanta Flat Owners' Association'.

7. Having heard learned counsel for the parties, we are of the view

that the claim made by 'M/s. Ajanta Flat Owners' Association' having not

supplied any goods nor given any services, cannot claim to be

'Operational Creditor' and thereby, the application under Section 9 was

not maintainable.

8. Further, the Adjudicating Authority and the 'Interim Resolution

Professional' having been asked not to publish any notice in the

newspaper normally the 'Committee of Creditors' should not have been

constituted by the 'Resolution Professional' though it was informed it has

been constituted.

9. However, as we have held that the application under Section 9 was

not maintainable and the parties have settled the matter, we set aside the

Company Appeal (AT) (Insolvency) No. 572 of 2018 -4-

impugned order dated 27th August, 2018 and dismiss the application

under Section 9 filed by the Respondent- 'M/s. Ajanta Flat Owners'

Association'.

10. In effect, order (s), passed by the Adjudicating Authority appointing

any 'Interim Resolution Professional', declaring moratorium, freezing of

account, and all other order (s) passed by the Adjudicating Authority

pursuant to impugned order and action, if any, taken by the 'Interim

Resolution Professional', including the advertisement, if any, published

in the newspaper calling for applications all such orders and actions are

declared illegal and are set aside. The application preferred by

Respondent under Section 9 of the 'I&B Code' is dismissed. Learned

Adjudicating Authority will now close the proceeding. The appellant

'Corporate Debtor' (company) is released from all the rigour of law and is

allowed to function independently through its Board of Directors from

immediate effect.

11. The Adjudicating Authority will fix the fee of 'Interim Resolution

Professional' and the 'Corporate Debtor' will pay the fees of the 'Interim

Resolution Professional', for the period he has functioned. The appeal is

allowed with aforesaid observation. However, in the facts and

circumstances of the case, there shall be no order as to cost.

Company Appeal (AT) (Insolvency) No. 572 of 2018 -5-

12. Let photocopy of the 'Terms of Settlement' be kept on record.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice A.I.S. Cheema) Member(Judicial)

Ar/g

Company Appeal (AT) (Insolvency) No. 572 of 2018