(NCLAT judgement dated 13-07-2021 in Company Appeal (AT) (Insolvency) No. 864 of 2020)
Status as on- 28/07/2021
Brief Facts of the case
The Appellant filed an appeal against impugned order by the National Company Law Tribunal Kolkata Bench. The bench admitted the application under Section 7 of Insolvency and Bankruptcy Code, 2016 filed by Respondent No. 1 and Corporate Insolvency Resolution Process (CIRP) was initiated. It was stated that the application filed under Section 7 claimed that there was a debt. The amount claimed to be in default were deposits made by flat owners with the Developer, when the flat owners executed respective agreements. It is claimed that the amounts were not paid to the present Corporate Debtor but were deposited by the flat owners towards maintenance fund and sinking fund with the Developer and which were held by the Developer and subsequently transferred to the present Corporate Debtor, which is a Non-Profit Company
Held
The Hon’ble NCLAT held as follows:
- The appeal was dismissed and the NCLAT did not find any error in the impugned order vide which the CIRP was initiated.
- That any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing. Thus, the NCLAT accepted the claim made by Respondent No. 1 that it is a ‘Financial Debt’.
- The Respondent No. 1 Company of Flat Purchasers has been trying to get back the money deposited by Flat Buyers themselves. This is not a case where the Financial creditors were sleeping over their rights, they have been pursuing with the Developer and the Corporate Debtor. They have also pursued rights in Consumer Forum. The NCLAT did not find that there is any substance in the claim made by the Appellant that the debt is time barred.
- The amounts were collected by the Developer and kept with its subsidiary, the Corporate Debtor, for the purpose of maintenance till the Association/ Society or Holding Organization (i.e. Respondent No. 1) gets established to hand over the amounts to the body of the flat owners. Section 5(8)(f) Explanation makes it clear that any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing.
Conclusion
The NCLAT referred to the Hon’ble Supreme Court’s judgement in the case of “Sesh Nath Singh & Anr. vs. Bidyabati Sheoraphuli Co-operative Bank Ltd. & Anr “it can be said that this is not a case where the Financial creditors were sleeping over their rights. They have been pursuing with the Developer and the Corporate Debtor. The Respondent No. 1 Company of Flat Purchasers has been trying to get back the money deposited by Flat Buyers themselves. They have also pursued rights in Consumer Forum. We do not find that there is any substance in the claim made by the Appellant that the debt is time barred.”
The NCLAT again clarified that any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing.
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