Homebuyer Moves NCLT Seeking Insolvency Process Against Builder, Notice Issued

Homebuyer Moves NCLT Seeking Insolvency Process Against Builder, Notice Issued

In probably the first petition to be filed after an ordinance brought homebuyers on par with financial creditors, an investor has moved the National Company Law Tribunal, Delhi, seeking to initiate corporate insolvency resolution process in respect of a builder who not only failed to handover possession of residential unit  despite missing the deadline five years ago but also did not refund the money paid by the petitioner (financial creditor)

 Surjendu Sekhar Kuila and Pooja Bhatnagar, residents of South Delhi, have moved NCLT through PSP Legal praying that an order be passed for initiating corporate insolvency resolution process in respect of M/s Granite Gate Properties Private Limited (a fellow company of 3C developers) which is developing a residential group housing project “Lotus Panache” at Gautam Budh Nagar, Noida in Uttar Pradesh.

 The NCLT bench comprising Deepti Mukesh and S K Mohapatra on Friday issued notice to the builder for August 28.

 The counsel for financial creditors, advocate Aditya Parolia, Partner PSP Legal and Vaibhav Tyagi, Senior Associate at PSP Legal told the Tribunal that they had made a booking in the project in July 2010 and paid Rs 4.90 lakh at the time of booking after taking a loan for the same.

 They were allotted a flat admeasuring 1592 Sq ft in September 2010.

“…in the year 2013, they made an aggregate payment of Rs.51,16,191 itself but did not get the possession within the stipulated period of time i.e. 39 months from the date of allotment of the apartment, therefore, clearly substantiating that the amount raised through the Financial Creditor(s) has been used as commercial borrowings,” said their counsel.

 In April 2014, the builder committed to deliver the flat by July 2015 to which the financial creditors demanded delay charges for the wilful delay in construction caused by the Corporate Debtor.

With the continuing delay caused by the builder in the completion of the project, the Financial Creditor(s) terminated the Agreement vide e-mail dated June 29, 2018 and demanded refund of entire amount paid by them.

 The counsel says in terms of 5.5 of the Agreement, the Corporate Debtor was liable to pay compensation to the Financial Creditor(s) upon delay in completion of construction.

 “despite the notice of termination issued by the Financial Creditor(s) and the demand for refund of entire amount paid to the Corporate Debtor, the Corporate Debtor has failed to return the amount to the Financial Creditor(s).

“…upon promulgation of the Insolvency & Bankruptcy Ordinance, 2018, explanation to Section 5(8)(f) has been added to the Insolvency & Bankruptcy Code, 2016 so as to include any amount raised from an allottee under a real estate project within the purview of financial debt. The said explanation to Section 5(8)(f) clearly states that amounts raised in real estate projects from allottees shall be deemed to be an amount having the commercial effect of a borrowing,” said Mr Parolia.

 “…the Financial Creditor(s) herein falls within the definition of the Financial Creditor under Section 5(7) of the Code in terms of the Insolvency & Bankruptcy Ordinance, 2018, the instant the debt of the Financial Creditor(s) falls squarely under Section 5(8) of the Code and the fact that such financial debt has incurred on account of the non-payment of the Corporate Debtor stands substantiated from the Bank Statements,” he added.

 Mr Parolia says the builder will now have to show why process of insolvency be not initiated against it.