J.M. Financial Asset Reconstruction ... vs Anil Kumar Tandon & Ors

IN THE MATTER OF: J.M. Financial Asset Reconstruction Company Ltd. Having its registered office at 7, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025 ...Appellant Versus 1. Dr. Anil Kumar Tandon, Having his address at House No. 34, Nishant Colony 74, Bunglows, T.T. Nagar, Bhopal, Madhya Pradesh - 462003. ...Respondent No. 1 2. Dr. Ankit Tandon, Having his address at House No. 34, Nishant Colony 74, Bunglows, T.T. Nagar, Bhopal, Madhya Pradesh - 462003. ...Respondent No. 2 3. Smt. Sumati Tandon, Having his address at House No. 34, Nishant Colony 74, Bunglows, T.T. Nagar, Bhopal, Madhya Pradesh - 462003. ...Respondent No. 3 4. Devendra P. Jain, Resolution Professional/ Liquidator of Sandhya Prakash Limited, Having his address at A-43, Prime Plaza, Opp. DLA School, Bodakdev, Ahmedabad-380054 Also at: Sandhya Prakash Limited, Shop No.-6, 2nd Floor, Aura Mall, E-8, Arera Colony, Gulmohar, Bhopal - 406039. Email: Sandhya.irp@gmail.com ...Respondent No. 4 5. Suspended Management of the Company: 5.1. Mr. Bharat Patel 5.2. Smt. Smita B. Patel 5.3. Smt. Bharti S. Patel 2

Malviya Nagar, Bhopal - 262003, Madhya Pradesh. ...Respondent No. 5

For Appellant: Shri Ramji Srinivasan, Sr. Advocate with Ms. Anushree Kapadia, Ms. Poonam Mathur, Shri Shivkrit Rai and Ms. Rajshree Chaudhary, Advocates

For Respondents: Shri Krishnendu Datta, Sr. Advocate with Shri Abhishek Anand, Shri Kunal Godhwani, Advocates (R-4)

Shri Pranay Nath Jha, Shri Shubham Gupta, Shri Aditya Parolia, Ms. Aditi Sinha and Shri Akshay Srivastava, Advocates (R-1, 2 & 3)

With Company Appeal (AT) (Ins) No.1327 of 2019

IN THE MATTER OF: 1. Dr. Anil Kumar Tandon, Having his address at House No. 34, Nishant Colony 74, Bunglows, T.T. Nagar, Bhopal, Madhya Pradesh - 462003. ...Appellant No. 1 2. Dr. Ankit Tandon, Having his address at House No. 34, Nishant Colony 74, Bunglows, T.T. Nagar, Bhopal, Madhya Pradesh - 462003. ...Appellant No. 2 3. Smt. Sumati Tandon, Having his address at House No. 34, Nishant Colony 74, Bunglows, T.T. Nagar, Bhopal, Madhya Pradesh - 462003. ...Appellant No. 3 Versus 1. Sandhya Prakash Ltd. Through the Liquidator/Erstwhile Resolution Professional Having Address At: Sandhya Prakash Bhawan Malviya Nagar, Bhopal 462003 ...Respondent No. 1

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 3

2. Mr. Devendra Padamchand Jain Liquidator/Erstwhile Resolution Professional of Corporate Debtor Top Floor, C/O Swati Jewellers, Spring Field, Judges Bunglow Road, Vastrapur, Ahemdabad - 380054 ...Respondent No. 2

3. Committee of Creditors Sandhya Prakash Limited Sandhya Prakash Bhawan Malviya Nagar, Bhopal - 462003 ...Respondent No. 3

For Appellants: Shri Pranay Nath Jha, Shri Shubham Gupta, Shri Aditya Parolia and Shri Akshay Srivastava, Advocates

For Respondents: Shri Krishnendu Datta, Sr. Advocate with Shri Abhishek Anand, Shri Kunal Godhwani, Advocates (R-1 and 2)

Shri Ramji Srinivasan, Sr. Advocate with Ms. Anushree Kapadia, Ms. Poonam Mathur, Shri Shivkrit Rai, Shri Kshitiz Dev and Ms. Rajshree Chaudhary, Advocates

(B). Company Appeal (AT) (Ins) No.1203 of 2019

IN THE MATTER OF: 1. Sachin Meena Resident of: 215 Bhauri Gram, Tehsil Huzur, District Bhopal - 462030 Madhya Pradesh Appellant No. 1 2. Monica Sehgal Resident of: 54-A, Shamla Road, Near Bharat Bhawan, Bhopal - 462002 Madhya Pradesh Appellant No. 2

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 4

3. Laxmi Narayan Resident of: Bhauri Gram, Tehsil Huzur, District Bhopal - 462030 Madhya Pradesh Appellant No. 3

Versus 1. Sandhya Prakash Ltd. Through the Liquidator/Erstwhile Resolution Professional Having Address At: Sandhya Prakash Bhawan Malviya Nagar, Bhopal 462003 ...Respondent No. 1 2. Mr. Devendra Padamchand Jain Liquidator/Erstwhile Resolution Professional of Corporate Debtor Top Floor, C/O Swati Jewellers, Spring Field, Judges Bunglow Road, Vastrapur, Ahemdabad - 380054 ...Respondent No. 2

3. Committee of Creditors Sandhya Prakash Limited Sandhya Prakash Bhawan Malviya Nagar, Bhopal - 462003 ...Respondent No. 3

For Appellant: Ms. Simran Soni and Shri Mahesh Kumar, Advocates

For Respondents: Shri Krishnendu Datta, Sr. Advocate with Shri Abhishek Anand, Shri Kunal Godhwani, Shri Viren Sharma and Shri Rahul Gupta, Advocates (R-1 and 2)

Shri Ramji Srinivasan, Sr. Advocate with Ms. Anushree Kapadia, Ms. Poonam Mathur, Shri Kshitiz Dev, Shri Shivkrit Rai and Ms. Rajshree Chaudhary, Advocates (R-3)

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 5

(C). Company Appeal (AT) (Ins) No.1176 of 2019

IN THE MATTER OF: Abba Consultants Pvt. Ltd. Having its registered office at: 6, Sirifort, 3rd Floor, New Delhi ...Appellant Versus 1. Sandhya Prakash Ltd. Through the Liquidator/Erstwhile Resolution Professional Having Address At: Sandhya Prakash Bhawan Malviya Nagar, Bhopal 462003 ...Respondent No. 1 2. Mr. Devendra Padamchand Jain Liquidator/Erstwhile Resolution Professional of Corporate Debtor Top Floor, C/O Swati Jewellers, Spring Field, Judges Bunglow Road, Vastrapur, Ahemdabad - 380054 ...Respondent No. 2

3. Committee of Creditors Sandhya Prakash Limited Sandhya Prakash Bhawan Malviya Nagar, Bhopal - 462003 ...Respondent No. 3

For Appellant: Ms. Simran Soni and Shri Mahesh Kumar, Advocates

For Respondents: Shri Krishnendu Datta, Sr. Advocate with Shri Abhishek Anand, Shri Kunal Godhwani, Shri Viren Sharma and Shri Rahul Gupta, Advocates (R-1 and 2)

Shri Ramji Srinivasan, Sr. Advocate with

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 6

Ms. Anushree Kapadia, Ms. Poonam Mathur, Shri Kshitiz Dev, Shri Shivkrit Rai and Ms. Rajshree Chaudhary, Advocates (R-3)

(23rd July, 2021)

A.I.S. Cheema, J.:

1. These Appeals arise out of Corporate Insolvency Resolution Process

(CIRP in short) which was initiated against "Sandhya Prakash Ltd."- the

Corporate Debtor of which Mr. Devendra Padamchand Jain was Resolution

Professional. The Corporate Debtor is now in Liquidation and Mr. Devendra

Padamchand Jain is now the Liquidator of the Corporate Debtor. J.M.

Financial Asset Reconstruction Company Ltd. has been asserting rights on

the basis of being part of Committee of Creditors (CoC in short) and Financial

Creditor of the Corporate Debtor.

2. These Appeals have been heard together. We will take up (A) Company

Appeal (AT) (Ins.) No. 1219 of 2019 with Company Appeal (AT) (Ins.) No. 1327

of 2019 together for discussion and then we will deal with Company Appeal

(AT) (Ins.) No. 1203 of 2019 and then Company Appeal (AT) (Ins.) No. 1176 of

2019.

In brief -Facts common for all these Appeals

3. J.M. Financial Asset Reconstruction Company Ltd. (Hereinafter referred

as J.M. Financial) filed Application under Section 7 of Insolvency and

Bankruptcy Code, 2016 (IBC in short) having CP (IB) No.

113/7/NCLT/AHM/2017 against the Corporate Debtor. The Application was

admitted by Adjudicating Authority (National Company Law Tribunal,

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 7

Ahmedabad Bench, Ahmedabad) vide Order dated 14.09.2017 and Mr.

Devendra Padamchand Jain was initially appointed as Interim Resolution

Professional. He later become Resolution Professional when CoC was

constituted on 16.10.2017. CIRP proceeded. Later in 4th CoC Meeting held on

22.02.2018, CoC resolved for Liquidation and Application under Section 33(1)

of IBC was filed by the Resolution Professional having I.A. No. 82 of 2018 for

Liquidation. Vide Order dated 17th April, 2018, Adjudicating Authority

directed if the parties concerned were interested they could come up with

concrete proposal. CoC in 5th CoC Meeting decided to request for extension of

CIRP Period for further 90 days beyond 180 days.

4. Considering above the I.A. 82 of 2018 by the Adjudicating Authority, the

same was dismissed as infructuous and period of CIRP was extended. In 9th

CoC Meeting dated 10.09.2018, as plans received were not viable CoC again

decided to file for Liquidation and I.A. No. 376 of 2018 was filed by Resolution

Professional on 25th September, 2018. I.A. No. 376 of 2018 filed by the

Resolution Professional was accepted by the Adjudicating Authority on 20th

September, 2019 and Order of Liquidation was passed.

Company Appeal (AT) (Ins.) No. 1219 of 2019 read with Company Appeal (AT) (Ins.) No. 1327 of 2019.

5. J.M. Financial-the Financial Creditor who was part of CoC has filed the

Company Appeal (AT) (Ins.) No. 1219 of 2019 against the Respondent Nos. 1

to 3 - Dr. Anil Kumar Tandon, Dr. Ankit Tandon and Smt. Sumati Tandon

(collectively we will refer to them as Dr. Tandon and others). Dr. Tandon and

others who are Appellants in Company Appeal (AT) (Ins.) No. 1327 of 2019

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 8

filed I.A. No. 327 of 2018 claiming to have entered into Agreement to Sell (ATS)

of the real estate who were allotted Unit No. S-01 Unit on the 2nd Floor of

AURA Mall, Bhopal being constructed by the Corporate Debtor and that they

have paid consideration of Rs. 2,17,00,000/- in March, 2012 and they were

Financial Creditors. They sought to be included in CoC as Financial Creditors

and sought execution of Sale deed of the Unit concerned. J.M. Financial claims

that CoC opposed the I.A. No. 327 of 2018 claiming that there was no

registered Sale deed or valid allotment of the Unit in AURA Mall. The land and

the Mall was under mortgage by Corporate Debtor in favour of HUDCO and

Dena Bank as per Agreement dated 04.04.2008 where the ex-management

had agreed that they will not sell, transfer, mortgage, charge, pledge etc. any

of the properties as long as they are indebted to HUDCO. Thus it was claimed

that the Agreement as claimed could not have been executed. J.M Financial

claims that on 18.09.2019, Adjudicating Authority passed Impugned Order in

I.A. 327 of 2018 in C.P. (IB) No. 113/NCLT/AHM/2017 holding that Dr.

Tandon and others were not Financial Creditors; that their claim was barred

by Limitation and that litigation was pending before Competent Court and that

their claim was pre-mature. However, the Impugned Order directed Resolution

Professional/now Liquidator to refund the amount purported to be given as

advance by Dr. Tandon and others to the extent of Rs. 2.17 Crores as it did

not form part of the Assets of the Corporate Debtor and that it was improper

receipt of money under a disputed Agreement of Sale. The Resolution

Professional/Liquidator was directed to refund the money to Dr. Tandon and

others, as per Order/direction as may be issued by Competent Court in

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 9

pending litigation filed by the Dr. Tandon and others against the suspended

management.

6. This order is challenged by J.M. Financial in Company Appeal (AT) (Ins.)

No. 1219 of 2019 claiming that when the Adjudicating Authority accepted that

Dr. Tandon and others were not financial Creditors and that their claim was

time-barred, the Adjudicating Authority could not have directed the

Resolution Professional to return the money as has been directed.

7. The Appellants in Company Appeal (AT) (Ins.) No. 1327 of 2019 are Dr

Anil Kumar Tandon, Dr. Ankit Tandon and Smt. Sumati Tandon (Dr. Tandon

& others). These Appellants claim that the Corporate Debtor had executed

Agreement to sell dated 31.03.2012 (Annexure A-3 in their Appeal). They paid

entire sale consideration of Rs. 2.17 Crores to the Corporate Debtor and also

paid Rs. 15,00,000/- out of which Rs. 5 Lakhs was adjusted against assured

lease rental for internal financing. Their Appeal gives details of the payments

made through RTGS to the Corporate Debtor between the dates of 12th March,

2012 till 31st July, 2012. Copy of Statement from State Bank of India depicting

the payments, has been filed at Annexure A-4 of the Appeal. These Appellants

point out that the copy of the Ledger Account of Corporate Debtor at Annexure

A-5 (Colly) which includes audited Financial Statements of the Corporate

Debtor as on 31st March, 2013 (Page 130 of the Appeal). The Appeal claims

and it is argued for Dr. Tandon and others that the audited accounts of the

Corporate Debtor themselves show (Page 159 of the Appeal) entry to the effect

"Application money for space booking in AURA by Ankit Tandon", the amount

of Rs. 2.17 Crores as claimed by these Appellants reflects in such audited

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 10

statement. These Appellants have further claimed that the Corporate Debtor

assigned the space for the Unit for which Agreement was entered into with

these Appellants for Game Zone and there was a Letter of Intent (In short LoI)

executed with one M/s. H.M. Leisure for a period of 9 years for running Game

Zone and M/s. H. M. Leisure assured the Appellants payment of Rs. 50 per.

Sq. ft. per month as minimum monthly guaranteed return as per Annexure A-

6 (Page 202). These Appellants claim that the Agreement to sell (In short ATS)

was signed under Committed Return Plan and in view of the same the

Corporate Debtor was to pay a total of Rs. 87,17,810/- to these Appellants as

guaranteed monthly return from 01.01.2013 to 13.11.2016. However, the

Corporate Debtor paid assured returns only till February, 2015 to an extent

of Rs. 17,50,000/- of which particulars are given in the Appeal Para 7(ix).

These Appellants have further claimed in their Appeal that in spite of Notice

when the Corporate Debtor did not respond they initiated proceedings (as per

Annexure A-10) in RERA (Real Estate Regulatory Authority, Bhopal) on 17th

May, 2017 and sought execution of Sale-deed. The Corporate Debtor in RERA

contrary to the Audited Balance-sheet of 2012-13 took a stand that the money

was allegedly a deposit and investment and that the signatory of ATS was not

authorized. However, Mr. Amresh Pandya who had signed the Agreement to

sell (ATS) for the Corporate Debtor addressed letter to RERA on 21st July, 2017

making it clear that he left the Corporate Debtor only on 26th February, 2016.

These Appellants rely on Annexure A-12 (colly) Page 268 to show that when

ATS was executed on 31st March, 2012, Mr. Amresh Pandya was very much

part of the Corporate Debtor and was authorized signatory.

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 11

8. The Appeal of Dr. Tandon and others further states that when

Application under Section 7 of IBC was admitted on 14.09.2017 thereafter the

Corporate Debtor through promoter/director still claimed on 21.09.2017

before RERA that the Sale-deed was forged and that Mr. Amresh Pandya has

no authority. The document is pointed out in the Appeal as Annexure A-14.

9. Dr. Tandon and others claimed that on 26.09.2017 they filed claims

with the Resolution Professional in Form C claiming to be Real Estate Allottees

for Rs. 5.53 Crores (Annexure A-15 of the Appeal) but the Resolution

Professional did not communicate with them. Dr. Tandon and others claimed

that Corporate Debtor and CoC moved before RERA seeking closure of

proceedings due to moratorium and when RERA asked the Corporate Debtor

to state on affidavit under which head money was collected the Corporate

Debtor claimed thereafter that it was "advance of Rs. 2.17 crores 'against

booking' in Mall" from the applicants but added that the amount was received

against lease of the area. Copy of the Affidavit has been filed by Dr. Tandon

and others at Annexure A-16, Page 295. The Appeal of Dr. Tandon and others

claims that the Adjudicating Authority had on 28th November, 2018 in I.A. No.

183 of 2018 observed against the erstwhile management of the Corporate

Debtor that they were not providing relevant documents to the Resolution

Professional and CoC. These Appellants claim that in spite of objections by

these Appellants RERA dismissed their complaint vide Order dated 03rd April,

2018 in view of the moratorium. Copy of the Order is at Annexure R-7 in

Appeal No. 1327 of 2019 filed by Respondents 1 and 2. The Order does show

that in view of the Section 14 of IBC, the proceeding was closed.

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 12

Dr. Tandon and others claim that they have filed appeal against the said

dismissal of their complaints. Dr. Tandon and others claim that they have filed

I.A. 187 of 2018 before Adjudicating Authority to get their name included as

Financial Creditors and in spite of the directions of the Adjudicating Authority

dated 05th June, 2018 the Resolution Professional asked Appellants to show

no objection of HUDCO and Dena Bank and copy of the registered Agreement

to sell. The Appellants claim that they qualified as allottees under Section 5

(8) but the Resolution Professional sent e-mail Annexure A-23 that considering

the recent amendment with regard to the definition of financial creditor the

Resolution Professional will give final conclusion by 2nd August, 2018. On 3rd

August, 2018 however Resolution Professional claimed that as the matter was

already under litigation on the basis of simple Agreement to sell, Dr. Tandon

and others could not establish to be allottees and sought registered Agreement

to sell supported by document showing person who signed the agreement for

Corporate Debtor was authorized. He also sought No Objection Certificate

from the lenders as the property was already mortgaged. He also sought from

Appellants allotment letter from the Corporate Debtor. Resolution Professional

also claimed that the matter was under litigation before RERA. Dr. Tandon

and others have further claimed that after correspondence the Resolution

Professional said that he would not be able to adjudicate their claim. The

Appellant filed I.A. No. 327 of 2018. The Resolution Professional filed I.A. 376

of 2018 seeking Liquidation. Dr. Tandon and others have referred to the

Impugned Order to claim that the Adjudicating Authority wrongly held them

as not Real Estate Allottees and directed return of their money. Appellants

thus claim they were not clear regarding the status of their claims filed.

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 13

10. We have heard Learned Counsel for the parties. Parties in both the

Appeals i.e. Company Appeal (AT) (Ins.) No. 1219 of 2019 and Company Appeal

(AT) (Ins.) No. 1327 of 2019. Learned Counsel for J.M Financial claimed and

argued that the Agreement of Sale dated 31st March, 2012 could not have been

executed by the Corporate Debtor as there was already mortgage in favour of

HUDCO and Dena Bank. The Agreement was neither sufficiently stamped nor

registered document. J.M. Financial is relying on the stand taken by the

Corporate Debtor before RERA that the Agreement was not signed by

Authorized Representative and that the same was forged. The land was of

AURA Mall mortgaged to the Financial Institution and was given to the

Corporate Debtor on 30 years lease and the sale deed could not be executed;

that there was only an Agreement of Sale and not a sale deed. It is claimed in

state of Madhya Pradesh in view of Section 17(1) clause 'f' added Registration

Act, 1908 document which purports or operates to effect any contract for sale

of any immovable property is required to be compulsorily registered. Under

Section 49 such document cannot be received as evidence of any transaction

affecting the property. Dr. Tandon and others did not show copy of registered

sale-deed to show that it was executed by authorized representative and thus

they were not allottees of Real Estate Project. It is argued that Dr. Tandon and

others could not be treated as Financial Creditors.

11. J.M. Financial in its Company Appeal (AT) (Ins.) No. 1219 of 2019 has

claimed that the Adjudicating Authority erred in directing Rs. 2.17 Crores to

be treated as advance and that it was not improper receipt under a disputed

agreement and so should be refunded by Resolution Professional/Liquidator

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 14

as per Orders/Directions to be issued by Competent Civil Court. Such

Directions would bypass Section 53 of the IBC and could not have been given.

12. The Corporate Debtor through Liquidator has submitted that Mr.

Amresh Pandya who signed the Agreement to sell had no power or Board

Resolution that authorized him. It is stated that Dr. Tandon and others could

not submit copy of registered agreement of sale and No Objection Certificate

from HUDCO and Dena Bank or allotment letter issued by Corporate Debtor.

Thus it is claimed that Dr. Tandon and others could not show that they were

real estate allottees. It is also claimed that the alleged agreement of sale is

dated 31st March, 2012 and thus the claim was time-barred.

13. Having heard parties in these two Appeals and having gone through the

records, we now refer to the Impugned Order dated 18th September, 2019

passed by the Adjudicating Authority. The Impugned Order shows that the

Adjudicating Authority referred to the prayers made by Dr. Tandon and others

to treat them as Financial Creditors and to make them part of CoC and direct

execution of sale-deed in their favour. The Adjudicating Authority considered

the prayer of Resolution Professional whether Dr. Tandon and others could be

treated as Financial Creditors in view of the amendment which had then been

brought about under Section 5(8)(f) of IBC. Adjudicating Authority discussed

the case which was put by Dr. Tandon and others and the long Judgment has

reproduced averments made in I.A. No. 327 of 2018 which was filed by Dr.

Tandon and others. Then reference was made in Paragraph 6, to the

submissions made by the Resolution Professional. The Resolution Professional

informed the Adjudicating Authority (See para 9 of Impugned Order) that J.M.

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 15

Financial had communicated to the Resolution Professional that Dr. Tandon

and others would not fall in the definition of Financial Creditors. Resolution

Professional had placed on record extract of opinion which was given by J.M.

Financial and the same has been reproduced by the Adjudicating Authority in

Paragraph 9 of the Impugned Order of which Para 3.1 needs to be reproduced.

The same reads as under:

"3. Whether Tandons can be considered as 'financial creditor' under the Insolvency and Bankruptcy Code, 2016.

3.1 Since the Aura Mall building was commissioned some time during December 2014, the Real Estate Regulation and Development Act, 2016 ("RERA") would not be applicable in the present case. In view thereof, claim of Tandons to be treated as financial creditors on the basis of the explanation appended to Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016 ("IBC") would not be sustainable as it pre-supposes the applicability of RERA........."

(Emphasis Supplied)

14. After referring to such cases put before the Adjudicating Authority by

the parties Adjudicating Authority held in para 11 of the Impugned Order that

Dr. Tandon and others could not be treated as Financial Creditors because

their claim was mainly based on agreement of sale which was unregistered

and insufficiently stamped and that the execution was seriously disputed if

Mr. Amresh Pandya had the authority. Adjudicating Authority observed that

it could not act as a full-fledged Civil Court. Adjudicating Authority then

observed in Para 11 (ii) that money advanced was towards consideration of

Agreement to sell given by Dr. Tandon and others in a ready and built up

project and their claim cannot be treated as having commercial effect of

borrowing because the money advanced cannot be treated as financing to the

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 16

building project of AURA Mall. The Adjudicating Authority then reproduced

portions from Judgment in the matter of "Pioneer Urban Land and

Infrastructure Ltd. & Anr. Vs. Union of India & Ors. (Writ Petition (Civil) No.

43 of 2019). In para 11(iii) Adjudicating Authority observed that shop was

already built up and money paid as advance towards sale consideration could

not be termed as financing to builder/developer to complete projects and thus

it did not have the commercial effect of borrowing. The Impugned Order then

refers to excerpts form Law Committee Report and repeated that it was

disputed agreement of sale. Then observations were made with regard to the

matter pending before RERA and that some facts were disputed there.

Impugned Order further shows that the Adjudicating Authority treated the

claim as barred by Limitation as it relied on agreement of sale executed on

31st March, 2012 and that 3 years period was already over. Having said so,

the Adjudicating Authority observed that Dr. Tandon and others were not

financial creditors and there was no commercial effect of borrowing. Reference

was then made to Judgment in the matter of "Chitra Sharma Vs. Union of

India & Ors." and that Hon'ble Supreme Court of India had invoked

extraordinary powers under Article 142 of the Constitution of India in that

matter. Adjudicating Authority then took up on itself that it had to do complete

justice in the matter and expected to act in aid of the Hon'ble Supreme Court

of India and after reproducing portions form Judgment in the matter of "Chitra

Sharma Vs. Union of India & Ors". observed as under:

"11...(xii). Therefore, by following the above stated observation and in aid of it, we, being Adjudicating Authority, must observe in the present matter that the receipt of amount by the Corporate Debtor company as an advance from the applicants, which is

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 17

reflected in the balance sheet as advance to the extent of Rs. 2.17 crore does not form part of the assets of the Corporate Debtor company, because it is improper receipt of payment in the corporate Debtor company's account under a disputed Agreement to sell or without executing proper sale deed. Hence, such improper receipt of money amount to unjust enrichment or may tantamount also to crime proceed, if criminal complaints are lodged or criminal proceedings are pending against the Corporate Debtor company. Hence, the RP/Liquidator is not expected to appropriate such money to some other heads and in some other account. Hence, we are of the considered view that such amount needs to be refunded at the earliest to the proper person concerned/eligible claimant, through proper channel and it needs to be returned through the same channel and source it was received.

(xiii). As there is some pending litigation between the applicant and the suspended management of the Corporate Debtor company, the RP or Liquidator to act as per the order/direction that may be issued by a competent civil court or law forum in this respect."

15. After such findings, Adjudicating Authority disposed of I.A. 327 of 2018

filed by Dr. Tandon and others and I.A. 375 of 2018 filed by Resolution

Professional was allowed in the light of such observations/directions.

16. Having heard Learned Counsel for both-sides and keeping in view

Judgment of the Adjudicating Authority summarised as above, it appears to

us that the Adjudicating Authority has missed material facts which were

relevant. The Impugned Order itself while referring to the extract of opinion of

J.M. Financial Paragraph 3.1 which we have reproduced above had recorded

that AURA Mall building was commissioned some time during December,

2014. In the face of such stand of the main contesting Financial Creditor

against Dr. Tandon and others without recording as to on what basis the

Adjudicating Authority was holding that the shop was already built up

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 18

Adjudicating Authority concluded that money paid could not be said to be

towards financing to Builder/Developer to complete the project. In Company

Appeal (AT) (Ins.) No. 1327 of 2019, Dr. Tandon and others have pointed out

as to how the Adjudicating Authority itself was earlier required to pass orders

against the erstwhile management for not providing record to the Resolution

Professional/CoC. The Appeal Paragraph 7 (xxxi) may be reproduced:

"7.(xxxi) In fact, the Adjudicating Authority itself took note of the conduct of the promoters (directors) in interim order dated November 28, 2018 in IA 183 of 2018, by stating that - "Notwithstanding, the above we are constrained to observe that despite the moratorium period is already over and liquidation of the Corporate Debtor (RP) is going on but, erstwhile management did not provide relevant record to the RP and CoC which prima facie attracts the penal provision amounting to the breach of the Insolvency and Bankruptcy Code, therefore, before this court to take serious view the Respondents are legally expected to ensure for providing of all material record of the company to the RP and CoC."

Thus the erstwhile management did not provide records even to RP/CoC

and all these persons get together to tell the Adjudicating Authority that the

words of such management before RERA that Mr. Amresh Pandya who signed

the agreement of sale did not have authority and so the agreement of sale

should be treated as forged. If the management can resist the RP and CoC and

suppress documents and Corporate Debtor lands in stage of Liquidation and

such order as above was required to be passed, we would not believe such

erstwhile management and will not ignore documents being put up by Dr.

Tandon and others.

17. If AURA Mall got commissioned in 2014, the agreement dated 31st

March, 2012 could not be said to have been for agreement to purchase in a

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 19

completed project. The contents of the Agreement to sell if perused clearly

show that it related to Mall which was under consideration. The said

document cannot be said to be back-dated as there are Bank Entries showing

payments to the Corporate Debtor in 2012. It is surprising that before the

Adjudicating Authority contents in the Financial Statements submitted by

Chartered Accountant in audit of the Corporate Debtor have been ignored

which clearly stated that it was "application money for space booking in Aura

Mall by Dr. Ankit Tandon". It is argued that under Section 17 of State of

Madhya Pradesh added clause 'f' to Sub-Section 1 require that any document

which purports or operates having "effect in contract for sale of any immovable

property" the same would require compulsorily registration. J.M.Financial and

the Resolution Professional are relying on this Section and Section 49 of the

Registration Act to say that the document cannot be looked into as it cannot

be received as evidence of transaction affecting the property. Proviso under

Section 49 of the Registration Act, 1908 reads as under:

"49. Effect of non-registration of documents required to be registered.--

No document required by section 17 [or by any provision of the Transfer of Property Act, 1882,] to be registered shall--

(a) affect any immovable property comprised therein, or

(b) confer any power to adopt, or

(c) be received as evidence of any transaction affecting such property or conferring such power,

unless it has been registered:

[Provided that an unregistered document affecting immovable property and required by this Act, or the Transfer of Property Act, 1882, to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 20

of the Specific Relief Act, 1877 or as evidence of any collateral transaction not required to be effected by registered instrument]."

If the above proviso is seen and the amendment in IBC- Section 5(8) is

seen, amounts raised from allottees under a Real Estate Project is deemed to

have commercial effect of borrowing. Explanation below Section 5(8)(f) links

us to definition of "allottee" under Real Estate (Regulation and Development)

Act, 2016, which reads as under:

(d) "allottee" in relation to a real estate project, means the person to whom a plot, apartment or buildings, 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;"

"Allotment" could be by various modes, including an "otherwise"

document like "Agreement to Sell" which may be eclipsed under Registration

Act for not being registered. Under the Real Estate Projects Corporate Debtors

raise amounts by different modes issuing allotment letters and documents by

different names which have now received protection in view of explanation

which was added under Section 5(8) by IBC (2nd Amendment Act, 2018) with

effect from 06th June, 2018. Dr. Tandon and others are banking on such

Agreement supported by Bank entries and entries in the audited financial

statements of the Corporate Debtor. We would rely on the Application of such

applicants like Dr. Tandon and others and treat Agreement to Sell as evidence

lending weight to their claim made that they are allottees. While referring to

the case of Dr. Tandon and others we have purposely referred in some details

the averments made in the Appeal and the documents and to call back

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 21

Annexure A-12 where Mr. Amresh Pandya who signed the agreement of sale

sent letter to the secretary of RERA that he resigned from the services of the

Corporate Debtor with effect from 26th February, 2016. The present Agreement

being of 31ST March, 2012, we would discard the stand taken by the J.M.

Financial and the Resolution Professional which is based on what the directors

stated before RERA that Mr. Amresh Pandya was not an authorized signatory.

Even Annexure A-16 shows the Company Secretary of Corporate Debtor filing

affidavit before RERA that there was an advance of Rs. 2.17 Crores already

appearing "as advance received against booking of Mall" from Dr. Ankit

Tandon in the Balance-Sheets. Of course, there is sentence added that it was

received against lease of the area on 2nd Floor Unit No. S-01. It is difficult to

swallow that Rs. 2.17 Crores was received for lease of the Unit stated. Such

statement in the affidavit has to be read with clause 6 of the Agreement to sell

(Annexure A-3) where there was an arrangement for assured returns to run

the Game Zone through M/s. H.M. Leisure which rents would be transferred

by the vendors to the Vendee on signing of tripartite agreement.

18. It appears to us that the Adjudicating Authority erred in not considering

such documents and it came to the wrong conclusion that Dr. Tandon and

others could not be treated as Financial Creditors. As per the amended

definition of Section 5(8) which added the Explanation, Dr. Tandon and others

were required to be treated as allottees to Real Estate Project and to have been

treated accordingly.

19. It was also error on the part of the Adjudicating Authority to state that

agreement of sale was dated 31st March, 2012 and thus the claim was time-

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 22

barred. The contents of the Agreement to sell have terms like handing over the

possession to vendee and signing of tripartite agreement between vendor,

vendee and M/s. H.M. Leisure for a term of 9 years against what Dr. Tandon

and others was towards assured returns. In the facts of the matter, when it is

not shown that the Real Estate Developer has handed over the possession and

brought into force or complied with other parts of the agreement, it cannot be

said that the claims being made by the Dr. Tandon and others were time-

barred.

20. Coming back to the Impugned Order we do find that the Adjudicating

Authority could not have given directions as seen in Para 7 (xii) reproduced

above to refund the amounts to Dr. Tandon and others. That would be against

the provisions of IBC either in stage of the CIRP or at the stage of Liquidation.

21. Whether or not Corporate Debtor could have ultimately executed Sale

Deed is not relevant in the facts of case read with provisions of IBC. Resolution

Professional/Liquidator could not have asked Dr. Tandon & Ors. to first show

No Objection of HUDCO or show document to prove that Mr. Amresh Pandya

had authority without which the Resolution Professional outright refused to

look into the document of Agreement to Sell which was coupled with huge

amounts admittedly received in accounts of Corporate Debtor and reflected in

Audited Returns. We hold that the Appellants in Company Appeal (AT) (Ins.)

No. 1327 of 2019 should have been treated as Financial Creditors and their

claim should have been admitted by Resolution Professional who is now

Liquidator. We are not reversing any of the stages of the CIRP or Liquidation.

The Liquidator (then Resolution Professional) will treat the Appellants of

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 23

Company Appeal (AT) (Ins.) No. 1327 of 2019 as Financial Creditors in view of

the definition under Section 5(8) Explanation of IBC. The Appellants in

Company Appeal (AT) (Ins.) No. 1327 of 2019 are at liberty to request the

Liquidator to act on the claim as they had filed during the period of CIRP or

they may submit their fresh updated claim with the Liquidator under

Regulation 18 of Insolvency and Bankruptcy Board of India (Liquidation

Process) Regulations, 2016. The Liquidator is directed to receive the same and

act according to law.

22. For the above reasons, the Impugned Order dated 18.09.2019 in

Company Appeal (AT) (Ins.) No. 1219 of 2019 and 1327 of 2019 is quashed

and set aside. Company Appeal (AT) (Ins.) No. 1219 of 2019 and Company

Appeal (AT) (Ins.) No. 1327 of 2019 are disposed as per directions mentioned

above.

Company Appeal (AT) (Ins.) No. 1203 of 2019

23. This Appeal is by three applicants against Impugned Order passed by

Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench)

in I.A. 376 of 2018 in CP (IB) 113/7/NCLT/AHM/2017 dated 20th September,

2019 directing liquidation. Appellant No. 1-Sachin Meena claims to have

entered into registered lease deed dated 21st February, 2011 with the

Corporate Debtor for commercial space bearing No. S-16, 2nd Floor in AURA

Mall and that he had paid premium of Rs. 21 Lakhs. It is claimed that the

Corporate Debtor required the Appellant to lease back the shop to the

Corporate Debtor and leave and licence agreement dated 2nd September, 2013

for a period of 18 years in the nature of monthly assured returns was executed.

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 24

The Corporate Debtor paid monthly rent/licence fees/assured return to

Appellant No. 1 till 27.06.2016 and then stopped paying the same. Appellant

No. 1 claimed that he filed claim on 25.09.2017 as Operational Creditor on

advice of Respondent No. 2 although the Appellant No. 1 was a Financial

Creditor as Corporate Debtor was aware that not being Financial Institution

it could not accept deposit from public and concept of leasing the space upon

payment and then taking the same space back on lease for assured monthly

return was a means of raising finance. Thus Appellant No. 1 claimed that

Appellant No. 1 was Financial Creditor. The Appellant claims that Appellant

filed I.A. 481 of 2019 (copy of the same is at Annexure A-4) before Adjudicating

Authority to be considered as Financial Creditor. However, without deciding

the I.A 479 of 2019 Adjudicating Authority passed orders of Liquidation.

24. In the common Appeal, Appellant No. 2 Monika Sehgal claims that the

Corporate Debtor signed Letter of Intent with Appellant No. 2 with regard to

commercial space No. S-10 in Food Court. The document of "LoI" is pointed at

Annexure A-5. Appellant No. 2 claims that advance of Rs. 2,28,150/- was paid

as security deposit. It is stated that no lease deed was signed between the

Corporate Debtor and the Appellant No. 2 even after the expiry of the period

and the Corporate Debtor failed to hand over the shop to the Appellant No. 2

and Appellant No. 2 had sought refund of the advance given as security

deposit. Appellant No. 2 filed dispute in District Consumer Redressal Forum

and the Forum directed refund of the advance made with costs of the

complaint. Appellant No. 2 also claims that on initiation of CIRP on suggestion

of Respondent No. 2 RP/now Liquidator asked her to file claim as Operational

Creditor. Thereafter Appellant No. 2 claims to have filed I.A. 483 of 2019 before

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 25

the Adjudicating Authority to treat her as Financial Creditor under Section

5(8)(f) of the IBC which was I.A. 483 of 2019 copy of which is filed at Annexure

A-6. Appellant No. 2 also claims that without deciding the I.A. 479 of 2019,

the Impugned Order of Liquidation was passed.

25. Appellant No. 3- Mr. Laxman Narayan claims that Corporate Debtor

entered into a registered lease deed dated 21st February, 2011 with the

Appellant No. 3 and the lease-deed was for 30 years. Appellant No. 3 paid

premium of Rs. 21 Lakhs for the shop and the document of lease deed is at

Annexure A-7. Even this Appellant states that the Corporate Debtor then

required the Appellant No. 3 to lease back the shop to Corporate Debtor and

to enter into leave and licence agreement dated 2nd September, 2013 with

Appellant No. 3 for a period of 18 years. The monthly rent /licence fee was

fixed at Rs. 18,000/- with escalation of 15 percent at the end of every three

years. This Appellant also claims that the aforesaid monthly rent/licence fees

was in the nature of monthly assured return to be paid by the Corporate

Debtor. The Agreement is pointed out at Annexure A-8. This Appellant also

claims that the monthly rent/licence fee/assured return was paid till

27.06.2016 and then the same was stopped without any reason. This

Appellant also claims that in spite of demands payments were not received

and when CIRP was initiated the Resolution Professional (now liquidator)

advised the Appellant No. 3 to file claim as Operational Creditor and the same

was filed on 25.09.2017. This Appellant also claims that the real status of the

Respondent No. 3 was that of a Financial Creditor and I.A. 479 of 2019 was

filed to consider the Appellant No. 3 also as Financial Creditor. This Appellant

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 26

also claims that without deciding the I.A. 479 of 2019 (Annexure A-9) filed by

this Appellant, the Liquidation Order was passed.

26. Although these Appellants claim that I.As filed by them were not decided

and the Order of Liquidation came to be passed. The Respondents have

pointed out that all concerned I.As i.e. I.A. 481 of 2019, I.A. 483 of 2019 and

I.A. 471 of 2019 have already been disposed by the Adjudicating Authority

referring to the Order of Liquidation and directing the Applicants to file

Application before the Liquidator as per rules. We have gone through the

claims made by these Appellants. Appellant Nos. 1 and 3 claimed to have

registered lease deed in their favour executed in 2011 and both of them then

claimed that subsequently they executed lease deed in favour of the Corporate

Debtor for the same space for which they had entered into lease deed by other

documents of leave and licence executed in 2013. Appellant Nos. 1 and 3

claimed that the said documents of leave and licence were in the nature of

assured returns. Their claims appear to be in the nature of claiming rent.

These Appellants have tried to draw parity with the case of Dr. Tandon and

others where the document was of the Agreement to Sell. These Appellants

cannot seek to be treated similarly with Dr. Tandon and others. The definition

of Allottee under the RERA we have already reproduced above. Considering

the definition of allottee, we are unable to accept Appellant Nos. 1 and 3 as

Financial Creditors. As regards the Appellant No. 2, it is only a claim for return

of security deposit for which already litigation was raised before the District

Consumer Redressal Forum.

27. For such reasons, it appears to us that the Adjudicating Authority

rightly directed these Appellants to file their claims before the Liquidator.

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 27

28. Company Appeal (AT) (Ins.) No. 1203 of 2019 stands disposed with

direction to the Liquidator to receive the claims made by these Appellants (if

not already made) and treat the same appropriately under the provisions of

law.

Company Appeal (AT) (Ins.) No. 1176 of 2019

29. This Appeal has been filed by the Appellant claiming to be Operational

Creditor of the Corporate Debtor-Sandhya Prakash Ltd. The Appeal has been

filed against the Impugned Order dated 20.09.2019 passed in I.A. 376 of 2018

in CP (IB) 113/7/NCLT/AHM/2017 vide which Liquidation of the Corporate

Debtor was ordered by the Adjudicating Authority as mentioned above. The

whole Appeal has various particulars making out grievances against the

Resolution Professional (Now Liquidator)-Mr. Devendra Padamchand Jain.

Various grievances are being made like the Resolution Professional failed to

publish announcement in two widely circulated Newspapers: that it was not

within three days; that the Newspapers concerned were not widely circulated

Newspapers in the area of Bhopal; that wrong statement was made before

Adjudicating Authority with regard to date of publication; that information of

memorandum could not be shared or disclosed without taking undertaking of

confidentiality; that however the same was uploaded on the website of the

Corporate Debtor on 09th December, 2017; that list of creditors was not

uploaded and expression of interest was called without necessary information

being incorporated. The Appellant has made grievances as to how when claim

was filed by the Appellant it was not examined within seven days nor there

was any reply from the Resolution Professional and in spite of filing I.A. 186

of 2018 and Order dated 05th June, 2018 passed by Adjudicating Authority

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 28

the claim was not considered and e-mail was sent on 05th July, 2018 that the

claim will be considered as per provisions of IBC; that Appellant again filed

I.A. 486/2018 and then Resolution Professional sent e-mail dated 14th

January, 2019 Annexure A-8 informing that the claim of the Appellant was

admitted. Thus harassment is claimed.

30. With such and other averments against the Resolution Professional-

(now Liquidator), the Appeal claims that the CIRP was not properly conducted

and thus the Liquidation Order is required to be set aside. The Respondent-

Liquidator has argued and filed written-submissions Diary No. 24144

justifying actions taken by the Resolution Professional (now Liquidator) and

has mentioned that the Appellant made complaint on similar grounds with

the IBBI in which the Liquidator has filed Reply and the Appellant cannot

reagitate the said issue before this Appellate Tribunal. The Liquidator has

justified the actions taken and answered the averments made with regard to

not publishing expression of interest in Form-B referring to the amendments

and their timing in that regard to justify his step.

31. Impugned Order shows that Section 7 of IBC Application in the matter

was admitted on 14.09.2017. The Liquidation Order has been passed on 20th

September, 2019. Clearly much more period than what Section 12 of IBC

prescribes was consumed. The prayer of the Appellant to set aside the

Liquidation Order for reasons stated against the Resolution

Professional/Liquidator cannot be granted as in the set of facts Liquidation is

the necessary consequence if in the time prescribed under Section 12 of IBC

Resolution Plan has not become possible. As regards, averments made against

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019 29

the Resolution Professional/Liquidator, as IBBI which is the regulatory

authority for Resolution Professionals has already been ceased of the matter

we need not deliberate over those issues and leave them for IBBI. We thus find

no reason to allow the Company Appeal (AT) (Ins.) No. 1176 of 2019 as filed

by the Appellant-Abba Consultants Pvt. Ltd.

The Appeal is dismissed. No order as to costs.

[Justice A.I.S. Cheema] The Officiating Chairperson

[Dr. Alok Srivastava] Member (Technical)

New Delhi 23rd July, 2021 Basant

Company Appeal (AT) (Ins.) No. 1176, 1203, 1219 & 1327 of 2019