Vipul Ltd vs Vipul Greens Residents Welfare ...

Vipul Ltd. ...Appellant

Vs.

M/s. Vipul Greens Residents Welfare Association ...Respondent

Present: For Appellant: - Mr. Sudhanshu Batra, Senior Advocate with Mr. Saroj Jha, Mr. Aditya Mishra, Mr. Tushav Kumar and Mr. Jaibir Singh Sethi, Advocates.

For Respondent: - Mr. Rajiv Virmani, Advocate.

O R D E R

08.01.2020─ The Appellant- 'Vipul Limited', an Infrastructure

Company, has challenged the order dated 15th November, 2019 passed

by the Adjudicating Authority (National Company Law Tribunal), New

Delhi Bench, whereby it has been asked to give certain details, as follows:

"The Corporate Debtor shall give details of the

maintenance amount outstanding in respect of

any of the 384 allottees who are members of the

RWA/ petitioner. They shall also give separate

details of this allottees who are not in default. The

outstanding liability should be as per actuals and

not with any interest or penalty. It is observed 2

that while the Corporate Debtor may or may not

be entitled to retain the one-time maintenance

taken by them, the liability towards electricity etc.

is an individual liability against the resident. The

liability of one resident cannot be off set against

the deposits of other residents. Therefore, the

corpus of the maintenance deposit of those

residents members of the RWA who are not in

default should be handed over to the RWA in

terms of the agreement. To come up on 25th

November, 2019. The Corporate Debtor shall also

indicate what are the common facilities which are

being provided to the residents from the one-time

maintenance deposit towards Common Area

Maintenance."

2. The Record shows that the application under Section 7 of the

Insolvency and Bankruptcy Code, 2016 has been filed by 'M/s. Vipul

Greens Residents Welfare Associates' alleging non transfer of 'Interest

Bearing Maintenance Security Deposit' (IBMS).

3. In the said application, before admitting, the Adjudicating

Authority directed to give details of the maintenance amount outstanding

in respect of 384 allottees (i) who are members of the RWA/Applicant; (ii)

Company Appeal (AT) (Insolvency) No. 21 of 2020 3

separate details of allottees who are not in default; (iii) outstanding

liability as per actuals and not with any interest or penalty.

4. Certain observation has been made with regard to the 'Corporate

Debtor' entitlement to retain the one-time maintenance and liability

towards electricity etc. and individual liability against the resident.

Observation has also been made that the liability of one resident cannot

be off set against the deposits of other residents.

5. An observation has been recorded that the corpus of the

maintenance deposit of those residents members of the RWA who are not

in default should be handed over to the RWA in terms of the Agreement

and ordered to list the case for orders on 25th November, 2019.

6. Mr. Rajiv Virmani, learned counsel appears on behalf of the

Respondent- 'M/s. Vipul Greens Residents Welfare Association'

(Applicant under Section 7) submits that it is a dilatory tactic of the

'Corporate Debtor' and contradictory Affidavits have been filed. In their

reply, the 'Corporate Debtor' has made a counter claim and escalated the

amount by giving further wrong Affidavit.

7. In "Innoventive Industries Ltd. v. ICICI Bank─ 2017 SCC

OnLine SC 1025", the Hon'ble Supreme Court has already held as to

how an application under Section 7 can be decided and the fact is to be

noticed. The Hon'ble Supreme Court also observed that what objection

can be raised by the 'Corporate Debtor'. Relevant of which reads as

follows:

Company Appeal (AT) (Insolvency) No. 21 of 2020 4

"27. The scheme of the Code is to ensure

that when a default takes place, in the

sense that a debt becomes due and is not

paid, the insolvency resolution process

begins. Default is defined in Section 3(12) in

very wide terms as meaning non-payment

of a debt once it becomes due and payable,

which includes non-payment of even part

thereof or an instalment amount. For the

meaning of "debt", we have to go to Section

3(11), which in turn tells us that a debt

means a liability of obligation in respect of

a "claim" and for the meaning of "claim", we

have to go back to Section 3(6) which

defines "claim" to mean a right to payment

even if it is disputed. The Code gets

triggered the moment default is of rupees

one lakh or more (Section 4). The corporate

insolvency resolution process may be

triggered by the corporate debtor itself or a

financial creditor or operational creditor. A

distinction is made by the Code between

debts owed to financial creditors and

operational creditors. A financial creditor

Company Appeal (AT) (Insolvency) No. 21 of 2020 5

has been defined under Section 5(7) as a

person to whom a financial debt is owed

and a financial debt is defined in Section

5(8) to mean a debt which is disbursed

against consideration for the time value of

money. As opposed to this, an operational

creditor means a person to whom an

operational debt is owed and an

operational debt under Section 5(21) means

a claim in respect of provision of goods or

services.

28. When it comes to a financial creditor

triggering the process, Section 7 becomes

relevant. Under the explanation to Section

7(1), a default is in respect of a financial debt

owed to any financial creditor of the corporate

debtor- it need not be a debt owed to the

applicant financial creditor. Under Section

7(2), an application is to be made under sub-

section (1) in such form and manner as is

prescribed, which takes us to the Insolvency

and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016. Under Rule 4, the

application is made by a financial creditor in

Company Appeal (AT) (Insolvency) No. 21 of 2020 6

Form 1 accompanied by documents and

records required therein. Form 1 is a detailed

form in 5 parts, which requires particulars of

the applicant in Part I, particulars of the

corporate debtor in Part II, particulars of the

proposed interim resolution professional in

part III, particulars of the financial debt in part

IV and documents, records and evidence of

default in part V. Under Rule 4(3), the

applicant is to dispatch a copy of the

application filed with the adjudicating

authority by registered post or speed post to

the registered office of the corporate debtor.

The speed, within which the adjudicating

authority is to ascertain the existence of a

default from the records of the information

utility or on the basis of evidence furnished by

the financial creditor, is important. This it

must do within 14 days of the receipt of the

application. It is at the stage of Section 7(5),

where the adjudicating authority is to be

satisfied that a default has occurred, that the

corporate debtor is entitled to point out that a

default has not occurred in the sense that the

Company Appeal (AT) (Insolvency) No. 21 of 2020 7

"debt", which may also include a disputed

claim, is not due. A debt may not be due if it

is not payable in law or in fact. The moment

the adjudicating authority is satisfied that a

default has occurred, the application must be

admitted unless it is incomplete, in which case

it may give notice to the applicant to rectify the

defect within 7 days of receipt of a notice from

the adjudicating authority. Under sub-section

(7), the adjudicating authority shall then

communicate the order passed to the financial

creditor and corporate debtor within 7 days of

admission or rejection of such application, as

the case may be."

8. The Hon'ble President of India has recently promulgated an

Ordinance furthering amendment in the 'Insolvency and Bankruptcy

Code, 2016' published in the Gazette of India extraordinary Part II-

Section 1 dated 28th December, 2019 wherein in Section 7 of the principal

Act, in sub-section (1), before the Explanation, the following provisos have

been inserted:─

"Provided that for the financial creditors, referred

to in clauses (a) and (b) of sub-section (6A) of

section 21, an application for initiating corporate

Company Appeal (AT) (Insolvency) No. 21 of 2020 8

insolvency resolution process against the corporate

debtor shall be filed jointly by not less than one

hundred of such creditors in the same class or not

less than ten per cent. of the total number of such

creditors in the same class, whichever is less:

Provided further that for financial creditors

who are allottees under a real estate project, an

application for initiating corporate insolvency

resolution process against the corporate debtor

shall be filed jointly by not less than one hundred

of such allottees under the same real estate project

or not less than ten per cent. of the total number of

such allottees under the same real estate project,

whichever is less:

Provided also that where an application for

initiating the corporate insolvency resolution

process against a corporate debtor has been filed

by a financial creditor referred to in the first or

second provisos and has not been admitted by the

Adjudicating Authority before the commencement

of the Insolvency and Bankruptcy Code

(Amendment) Ordinance, 2019, such application

shall be modified to comply with the requirements

of the first or second provisos as the case may be

Company Appeal (AT) (Insolvency) No. 21 of 2020 9

within thirty days of the commencement of the said

Ordinance, failing which the application shall be

deemed to be withdrawn before its admission."

9. In view of the aforesaid insertion of provisions under explanation

below Section 7, the Adjudicating Authority is only required to see

whether the application under Section 7 has been filed by 100 allottees,

who are members of RWA or a 10% of the allottees who are members of

the allottees to maintain it. The Adjudicating Authority is required to take

into consideration only the Form-1 and the enclosure therein but find out

the default, if any and to proceed in accordance with law. Before the

admission of the application under Section 7, the Adjudicating Authority

has no jurisdiction to direct the 'Corporate Debtor' to deposit any amount

to certain corpus or with regard to maintenance which may not be a

subject matter of application under Section 7.

10. For the said reason, we set aside the impugned order dated 15th

November, 2019 and remit the case to the Adjudicating Authority to

decide the matter in accordance with law taking into consideration the

fact whether the claim, as made, comes within the meaning of 'financial

debt' as defined under Section 5(8) and on the basis of Form-1 as filed by

the Applicant and not on the basis of any pleading by one or other parties.

The Adjudicating Authority is also required to notice the maintainability

on the basis of insertion as made by Ordinance dated 28th December,

Company Appeal (AT) (Insolvency) No. 21 of 2020 10

2019 as noticed above and then to find out whether any debt is payable

in the eye of law or in fact and there is a default.

11. Except the aforesaid facts and the observations as given by the

Hon'ble Supreme Court in "Innoventive Industries Ltd. v. ICICI Bank─

2017 SCC OnLine SC 1025" as quoted above, the Adjudicating

Authority will not go into the other facts which are required to be

determined by Court of Competent Jurisdiction.

The appeal is allowed with aforesaid observations and direction. No

costs.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member(Judicial)

Ar/g

Company Appeal (AT) (Insolvency) No. 21 of 2020