Mr. Rajendra K. Bhuta vs Maharashtra Housing & Area Development ...

(Arising out of Order dated 2nd April, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, Mumbai)

IN THE MATTER OF:

Mr. Rajendra K. Bhuta Resolution Professional (For Guruashish Construction Private Limited) ...Appellant

Vs

Maharashtra Housing and Area Development Authority (MHADA) ....Respondent

Present:

For Appellant: Mr. S.N. Jha and Mr. A.K. Sinha, Senior Advocates with Mr. Ashish Verma and Ms. Avika Madhura, Advocates.

For Respondent: Mr. Tushar Mehta, Solicitor General and Mr. Arun Kathpalia, Senior Advocate with Ms. Bani Brar, Mr. Siddharth Nath, Mr. Chirag Shroff, Ms. Joyshree Barman, Mr. Shardul Singh, Ms. Neha Sangwan and Ms. Sanjana Nangia, Advocates.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by Mr. Rajendra K. Bhuta, 'Resolution

Professional' against order dated 2nd April, 2018 passed by the Adjudicating

Authority (National Company Law Tribunal), Mumbai Bench, whereby and

whereunder the application preferred by the Appellant for applying

Company Appeal (AT) (Insolvency) No. 119 of 2018 2

'Moratorium' in terms of Section 14(1)(d) of the Insolvency and Bankruptcy

Code, 2016 ('I&B Code' for short) on the land of 'Maharashtra Housing and

Area Development Authority' has been rejected.

2. The land in question originally belonged to 'Bombay Housing & Area

Development Board', which was vested in the 'Maharashtra Housing and

Area Development Authority' in the year 1966 pursuant to 'Maharashtra

Housing and Area Development Authority Act, 1966' with all rights,

liabilities and obligations.

3. The land admeasuring 40 acres was allotted in favour of a society on

8th February, 1988. The society in its Annual General Meeting decided to

enter into an agreement with 'Guru Ashish Construction Private Limited'-

('Corporate Debtor') and a 'Joint Development Agreement' was executed

between the Society, 'Corporate Debtor' and 'Maharashtra Housing and

Area Development Authority' on 10th April, 2008 for construction of

building by the 'Corporate Debtor' and thereafter, to hand over to the

Society for rehousing of 672 tenants and the area earmarked for the

'Maharashtra Housing and Area Development Authority'.

4. The 'Corporate Debtor' had taken Rs. 200 Crores Term Loan Facility

from the 'Union Bank of India' on 25th March, 2011. Subsequently, the

permission was granted by the 'Maharashtra Housing and Area

Development Authority' to sell the 'free sale component' without the

Company Appeal (AT) (Insolvency) No. 119 of 2018 3

signature of the officers of 'Maharashtra Housing and Area Development

Authority'. However, NOC for the occupation certificate 'for free sale

component' could not have been issued by the 'Maharashtra Housing and

Area Development Authority' unless and until proportionate share of built

up area is handed over to the 'Maharashtra Housing and Area Development

Authority'.

5. On 20th March, 2017, a suit was filed before the Hon'ble High Court

of Bombay being Suit No. 40 of 2017 by flat purchasers, for revised timeline

for construction of 'Rehab Component', 'Maharashtra Housing and Area

Development Authority Component' and 'Free Sale Component'. On 24th

April, 2017, the 'Maharashtra Housing and Area Development Authority'

issued a letter informing the 'Corporate Debtor' that they are revoking the

agreement followed by 'Stop Work notice' issued in the year 2015.

6. On 30th April, 2017, the 'Corporate Debtor' defaulted to pay

Rs. 254,53,85,278/- towards the loan facility provided by the 'Union Bank

of India'. In this background, the application under Section 7 of the 'I&B

Code' was filed by the 'Union Bank of India' against the 'Corporate Debtor'

on 15th May, 2017 which was admitted on 24th July, 2017.

7. Pursuant to the order of termination letter, in terms of clause 6.1 of

'Joint Development Agreement', on 12th January, 2018, the 'Maharashtra

Housing and Area Development Authority' asked to handover the land. The

Company Appeal (AT) (Insolvency) No. 119 of 2018 4

'Resolution Professional' who had taken over the management of the

'Corporate Debtor' by his letter dated 15th January, 2018 intimated the

'Maharashtra Housing and Area Development Authority' that the 'Corporate

Debtor' is under 'Moratorium' and thereby requested not to proceed in

terms of notice of termination, and not to terminate the 'Joint Development

Agreement'.

8. Having received no reply, on 22nd February, 2018, the 'Resolution

Professional' filed Miscellaneous Application being MA 137 of 2018 for

carrying out amendment in MA 96 of 2018 to which reply was filed by the

'Maharashtra Housing and Area Development Authority'.

9. The Adjudicating Authority by impugned order dated 2nd April, 2018,

rejected the application filed by the 'Resolution Professional' for amendment

and thereby refused to apply provision of Section 14(1) (d) of the 'I&B Code'

in respect to the property in question which belongs to the 'Maharashtra

Housing and Area Development Authority'.

10. During the course of hearing, it is informed that 270 days' period of

'Corporate Insolvency Resolution Process' has been completed on 19th April,

2018, and 'Resolution Plan' submitted.

11. Learned Senior Counsel appearing on behalf of the 'Resolution

Professional' placed reliance on 'Agreement' dated 9th November, 2011 and

the 'Joint Development Agreement' dated 10th April, 2008 to suggest that

Company Appeal (AT) (Insolvency) No. 119 of 2018 5

the 'Corporate Debtor' has right over the land in question. Reliance has

also been placed on letter of termination issued by the 'Maharashtra

Housing and Area Development Authority'.

12. Learned Senior Counsel for the 'Resolution Professional' referring to

Section 14(1)(d) of the 'I&B Code' and submitted that the 'Moratorium' is

applicable to the land in question.

13. On the other hand, according to the learned Senior Counsel for the

Respondent- ('Maharashtra Housing and Area Development Authority'), no

right was created in favour of the 'Corporate Debtor', who is merely a

developer of the land, the 'Corporate Debtor' sold its right to the third party.

14. On perusal of record, we find that pursuant to the 'Joint

Development Agreement' the land of the 'Maharashtra Housing and Area

Development Authority' was handed over to the 'Corporate Debtor' and

'except for development work' the 'Corporate Debtor' has not accrued any

right over the land in question. The land belongs to the 'Maharashtra

Housing and Area Development Authority' which has not formally

transferred it in favour of the 'Corporate Debtor'. Hence, it cannot be

treated to be the asset of the 'Corporate Debtor' for application of provisions

of Section 14(1) (d) of the 'I&B Code'.

15. This apart, as we find that 270 days' period has already lapsed on

19th April, 2018 and the period of 'Moratorium' in any case come to an end,

Company Appeal (AT) (Insolvency) No. 119 of 2018 6

the question raised has become academic. We find no merit in this appeal.

It is accordingly dismissed. No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI

14th December, 2018

AR

Company Appeal (AT) (Insolvency) No. 119 of 2018