M/S Sterling Paraphernalia Pvt. Ltd vs Debashis Nanda

The present appeal is filed by the Appellant M/s. Sterling

Paraphernelia Pvt. Ltd., who is aggrieved by the order dated

8.6.2022 passed by the Adjudicating Authority (National Company

Law Tribunal, New Delhi) in IA No. 6052 of 2021 in CP (IB) Company Appeal (AT) (Ins.) No. 888 of 2022

Page 1 of 12 1744/ND/2019 (hereinafter called 'Impugned Order') under Section

61 of the Insolvency and Bankruptcy Code (hereinafter called 'IBC').

2. The Appellant's case is that he had given a loan of Rs. 2 Crores

to the Corporate Debtor M/s Bulland Buildtech Pvt. Ltd., which was

disbursed through four demand drafts of Rs. 50 lakhs each at 2.40%

rate of interest. He has further stated that when the Corporate

Debtor could not pay back the amount when it became due, the

Appellant and the Corporate Debtor entered into an MOU dated

14.9.2015, whereby four flats being built by the Corporate Debtor

in a project called 'Bulland Elevates' were given in security towards

repayment. When the Corporate Debtor committed default, the

Appellant filed a Section 7 application bearing CP(IB)73(ND)/2019

against the Corporate Debtor which was withdrawn after the

Appellant and the Corporate Debtor entered into a settlement and

as a result another MOU dated 23.11.2019 was entered into by

them, whereby seven flats/apartment units were allotted by the

Corporate Debtor in the name of M/s. Sterling Paraphernalia Pvt.

Ltd. in the residential project 'Bulland Elevates' located at plot no.

GH-3A, Sector 16 C, Greater Noida (UP). The Appellant has stated

that with the signing of the second MOU dated 23.11.2019 all the

earlier documents, receipts, and Builder Buyer Agreement were

returned by the Appellant to the Corporate Debtor. Company Appeal (AT) (Ins.) No. 888 of 2022

Page 2 of 12

3. Subsequently, on a petition under Section 7 of the IBC,

Corporate Insolvency Resolution Process (CIRP) was initiated

against the Corporate Debtor and the Appellant filed its claim in

Form-CA, claiming to be allottee of seven flats in the Corporate

Debtor's project, which was not accepted by Resolution Professional

(in short 'RP) and the Appellant was advised to file his claim for the

seven flats in Form C, as the Appellant did not stand on the same

footing as home buyers.

4. The Appellant has stated that aggrieved by the email dated

6.12.2021 from the RP in respect of his claim about the seven flats,

he filed application IA No. 6052 of 2021 before the Adjudicating

Authority, which was disposed of by the order dated 8.6.2022, and

whereby the Appellant's application for considering it as homebuyer

was not accepted.

5. We heard the arguments of the Learned Counsels of both the

parties and perused the record.

6. The Learned Counsel for Appellant has submitted that the

Corporate Debtor entered into an MoU dated 14.9.2015 whereby the

Corporate Debtor pledged security for the loan granted by the Company Appeal (AT) (Ins.) No. 888 of 2022

Page 3 of 12 Appellant in the form of four flats. He has submitted that the

Appellant filed section 7 application as financial creditor against the

Corporate Debtor after the matter between them was settled vide

settlement dated 23.11.2019, which is the second MoU by which the

effect of first MoU was fully novated.

7. The Learned Counsel of Appellant has further submitted that

this second MoU established the Appellant as an allottee of 7 flats

and as per clauses 9, 10 and 11 of the second MoU dated

23.11.2019, the rights and liabilities of both the parties prior to the

MoU stood null and void and this new MoU substituted the earlier

MoU dated 14.9.2015.

8. The Learned Counsel of the Appellant has further submitted

that on a section 7 application filed by the erstwhile Syndicate Bank

(now called Canara Bank) in the matter of CP (IB) 1744/ND/2019,

CIRP was initiated against the Corporate Debtor, and the IRP called

for submission of claim after public announcement. The Learned

Counsel for Appellant has further stated that the Appellant filed his

claim in Form-CA as financial creditor in class, and after the new

Resolution Professional took over, he again submitted his claim in

Form-CA, which was not accepted by the RP and the Appellant was

advised vide e-mail dated 6.12.2021 that he does not stand on the Company Appeal (AT) (Ins.) No. 888 of 2022

Page 4 of 12 same footing as homebuyers and therefore, he should file in Form-

C instead of Form-CA.

9. The Learned Counsel for Appellant has submitted that the RP

also communicated that the said seven flats are mortgaged to

Canara Bank and therefore, the Appellant cannot claim as

homebuyers and filed claim in Form-CA. The Learned Counsel for

Appellant has further submitted that the Canara Bank (erstwhile

Syndicate Bank) has exclusive charge on all immovable assets

including structures built thereon together with entire current and

future receivables and the current assets from the project, but,

since no flats have been constructed till date, therefore, there is

question of any flat being mortgage to Canara Bank and moreover,

no physical demarcation of the flats has been done till now.

Therefore, future receivables of the flats cannot be equated with

future assets of the Corporate Debtor. On this ground, the

Appellant has claimed that the seven flats, which were allotted to

him vide MoU dated 23.11.2019 by the Corporate Debtor, were free

of all charge and therefore, the Appellant was clearly in the category

of homebuyers and his claim Form-CA should be accepted.

10. The Learned Counsel for Respondent/Resolution Professional Company Appeal (AT) (Ins.) No. 888 of 2022

Page 5 of 12 has argued that Canara Bank, which is a financial creditor in the

CIRP of the Corporate Debtor Bulland Buildtech had advanced a

loan to the Corporate Debtor vide sanction letter dated 1.7.2016

whereby an amount of Rs.37.80 crores was given as loan to

Corporate Debtor alongwith security, which included exclusive

charge on all movable and immovable assets, including structures

built thereon together with current, future receivables and current

assets from the project were mortgaged to the bank. Thus, Canara

Bank has security over the entire project called 'Bulland Elevates'.

He has further stated that the sanction letter records that for each

flat/group of flats to be allotted by the Corporate Debtor NOC will

be given by Canara Bank, which was not done in the present case

and therefore the allotment of seven flats done vide MOU dated

23.11.2019 is null and void. He has also submitted that the loan

sanction letter of Canara Bank also stipulates that the Corporate

Debtor will not sell or dispose of or create security or encumbrances

on the assets charge to the bank in favor of any other bank

/financial institution /company /firm /individual, or any other

concern, and thus, in the absence of any NOC from Canara Bank,

which was mandatorily required no right accrued to the Appellant

by virtue of the second MOU dated 23.11.2019.

11. Learned Counsel for Respondent/RP has also argued that a Company Appeal (AT) (Ins.) No. 888 of 2022

Page 6 of 12 perusal of the letter of Appellant and the Corporate Debtor also

proves that the original nature of debt provided to the Corporate

Debtor by the Appellant was a financial debt, even though the

Appellant later decided to enter into an MOU dated 23.11.2019,

which was unregistered, to change the nature of its debt. He has

also stated that in the case of an allottee of a project the ledger

entries are usually unidirectional i.e. monies flowing from allottee to

the developer, whereas in the present case, the ledger entries are

two directional which clearly suggests that the Appellant is financial

creditor and not a financial creditor in class i.e. homebuyer. He

has also submitted that a perusal of the ledger account maintained

by the Corporate Debtor suggests that Corporate Debtor paid a large

amount of money in interest to the Appellant on the original loan

and thus, the debt of the Appellant satisfies the requisites of being

a financial debt.

12. The Learned Counsel for Respondent/RP has also stated that

the initial unsecured loan of Rs. 2.00 crores given by Appellant to

the Corporate Debtor was the basis of the Appellant's Section 7

application jointly filed along with two other financial creditors

bearing CP No. (IB)-73/ND/2019, which was disposed of on

5.12.2019, as another petition filed by Ultimate Infracity Private

Limited was admitted on 29.11.2019. He has submitted that once Company Appeal (AT) (Ins.) No. 888 of 2022

Page 7 of 12 the Corporate Debtor's account was declared as NPA on 29.6.2018,

the Appellant decided to change the original nature of its debt and

wrongfully attempted to secure its interest by creating interest over

the alleged seven flats/apartment units of the Corporate Debtor. He

has further stated that the Appellant does not come within the

definition of 'allottee' as per section 2(z) of Real Estate (Development

and Regulation) Act, 2016 and therefore, the Appellant cannot claim

the status of an allottee/homebuyer. Moreover, the Appellant is not

a genuine allottee as has been enunciated in the judgment of

Hon'ble Supreme Court in the case of Pioneer Urban Land and

Infrastructure Limited versus Union of India & Ors. (WP Civil

No. 43/2019), wherein a clear distinction between a genuine

allottee and a speculative investor has been made and the judgment

goes on to say that a speculative investor cannot claim the same

status and rights as homebuyers/allottees.

13. The basic issue in this appeal relates to whether the claim

filed by the Appellant in Form-CA should be accepted in the CIRP of

the Corporate Debtor.

14. We note, as admitted by the Appellant that he advanced a loan

of Rs. two crores to the Corporate Debtor, which was disbursed

through four demand drafts of Rs. 50 lakhs each between 6.11.2018 Company Appeal (AT) (Ins.) No. 888 of 2022

Page 8 of 12 and 24.10.2019. When this unsecured loan was defaulted in

repayment by the Corporate Debtor, the Appellant filed a section 7

application CP (IB) No. 73/ND/2019, which was disposed of as

another section 7 application was admitted on 29.11.2019 against

the Corporate Debtor. We also note that the second MoU, which is

claimed to have been executed between the Appellant and the

Corporate Debtor on 23.11.2019 is an unregistered document by

which the Appellant was ostensibly allotted seven flats bearing nos.

703 (1370 sq. foot super built up area), 1002 (1445 sq. foot super

built up area), 1503 (1370 sq. foot super built up area), 1606 (1370

sq. foot super built up area), 1702 (1445 sq. foot super built up

area), 1802 (1445 sq. foot super built up area) and 1802 (1445 sq.

foot super built up area), all located in Block 'D' with allotment

letters dated 23.11.2019 in all the cases in lieu of the amount

pending for repayment by him.

15. We also note that the sanction letter of Canara Bank dated

1.7.2016 whereby a loan of Rs. 37.80 crores was extended to the

Corporate Debtor, very clearly records the following security created

in favour of the bank:-

"Exclusive charge on all movable and immovable assets, including structures built thereon together with entire current, and future receivables and current assets from the project."

Company Appeal (AT) (Ins.) No. 888 of 2022

Page 9 of 12 This charge dated 18.8.2016 is annexed at pp. 240-241 of the appeal

paperbook in the claim submitted in Form-C by the Canara Bank to

the IRP. Further, the loan sanction letter of the bank also records

that NOC will be required for each flat/group of flats subject to

confirmation from the Company that full amount is received and the

account is stranded on that date and that all the sale proceeds and

other transactions shall be through the escrow account to be opened

by the Corporate Debtor. We note that there was no deposit of any

money in the said account with regard to the seven flats. We also

note that definition of an 'allottee' as per section 2(d) of the Real

Estate (Development and Regulation) Act, 2016 is as follows:

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

xx xx xx xx

(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;"

16. Thus, two points are very clear viz. that the entire project with

immovable and movable assets, including structures built thereon

Company Appeal (AT) (Ins.) No. 888 of 2022

Page 10 of 12 with entire current, future receivables and current assets from the

project were all mortgaged to Canara Bank and such flats would not

have been allotted to any person without an NOC from Canara Bank.

Also, the Appellant, who claims to be an allottee and desires the

benefit of filing his claim as homebuyer in Form-CA, is not an

original allottee, but has received the seven flats as in lieu of its due

amount of Rs. 3.03 crores from the Corporate Debtor vide a

settlement MoU dated 23.11.2019.

17. It is also not clear as to how an original mortgage of four flats

in same project against a loan of Rs. 2 crores, gets converted into an

allotment of seven flats in the same project 'Bulland Elevates', when

the Corporate Debtor had evidently paid huge amount as interest to

the Appellant. Moreover, this purported transaction between the

Appellant and Corporate Debtor vide MoU dated 23.11.2019, also

infringes sections 43 and 66 of the IBC, a point that has been noted

in the Impugned Order.

18. In the light of very grave doubt that exists regarding the

allotment of seven flats to the Appellant, which in the absence of

any NOC from Canara Bank could not have been made, we do not

think that the RP committed any error in asking the Appellant to file

its claim in Form-C instead of Form-CA, as an unsecured creditor, Company Appeal (AT) (Ins.) No. 888 of 2022

Page 11 of 12 a decision which was affirmed by the Adjudicating Authority vide

the Impugned Order dated 8.6.2022. Thus, we find no error in the

Impugned Order and affirm the same. The appeal being devoid of

any merit fails. It is accordingly dismissed.

19. There is no order as to costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Barun Mitra] Member (Technical)

New Delhi 23rd November, 2022

/aks/

Company Appeal (AT) (Ins.) No. 888 of 2022

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