Sree Sankeshwara Foundation & ... vs Dugar Housing Ltd

M/s. Sree Sankeshwara Foundation and ....Appellant Investments

Vs.

M/s. Dugar Housing Limited ....Respondent

Present:

For Appellant: Mr. Krishnendu Dutta, Mr. Siddhant Buxy and Mr. Shivankar Sharma, Advocates.

For Respondent: None.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant- 'M/s. Sree Sankeshwara Foundation and

Investments'- ('Operational Creditor') filed an application under Section

9 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short)

for initiation of the 'Corporate Insolvency Resolution Process' against

'M/s. Dugar Housing Limited'- ('Corporate Debtor'). The Adjudicating

Authority (National Company Law Tribunal), Division Bench, Chennai,

by impugned order dated 10th April, 2019 rejected the application on 2

the ground that the Appellant does not come within the meaning of

'Operational Creditor' and, therefore, cannot be treated as Creditor.

2. The Adjudicating Authority further noticed that the Appellant is

one of the party to the Joint Development Agreement executed in the

year 2012 and, therefore, cannot be held to be 'Operational Creditor'.

Further held that the application is also barred by limitation.

3. Learned counsel for the Appellant submitted that the

arrangement between the Appellant and the Respondent as per the

Joint Development Agreement and various other agreements is:

a) The Appellant would grant development rights in respect of

the land and the Respondent would develop it. The

Respondent would allot 42.5% of the developed portion to

the Appellant, who would in return transfer 57.5% of the

interest in the land to the developer.

b) Later, instead of allocation of built up space, the Appellant

exercised its option to take a share in the revenue/ sale

proceeds of the apartments.

4. It was submitted that the aforesaid agreement was never given

effect to and the Respondent admitted that a sum of Rs.2,64,19,557/-

was due.

Company Appeal (AT) (Insolvency) No. 515 of 2019 3

5. Reliance was also placed on Notification No.4/2018- Central Tax

(Rate) dated 25th January, 2018 published by the Ministry of Finance

(Department of Revenue), Government of India to suggest that "supply

of development rights to a developer, builder, construction company or

any other registered person against consideration, wholly or partly, in the

form of construction service of complex, building or civil structure",

constitute service.

6. Having gone through the records and stand taken by the

Appellant, we hold that the Appellant along with Respondent ('Corporate

Debtor') had executed Joint Development Agreement in the year 2012

for construction of structure and allotment to allottees. Both of them

being parties to a joint venture project, we hold that the Appellant

cannot claim to be 'Operational Creditor' as it does not relate to supply

of goods nor service rendered by the Appellant. If joint venture under

any service to the allottees and for that to pay service tax it does not

mean that the parties of the joint venture will render service to each

other.

7. Therefore, we hold that the Appellant is not an 'Operational

Creditor'. The application under Section 9 at the instance of the

Appellant was not maintainable and the same has been rightly rejected

by the Adjudicating Authority.

Company Appeal (AT) (Insolvency) No. 515 of 2019 4

The appeal is dismissed with aforesaid observations. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

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

[Kanthi Narahari] Member (Technical)

NEW DELHI 25th November, 2019

AR

Company Appeal (AT) (Insolvency) No. 515 of 2019