NCLAT Upholds Admission Of CIRP Against Pushp Ratna Realty

The National Company Law Appellate Tribunal (NCLAT), New Dehi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) have upheld the admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Pushp Ratna Realty Pvt. Ltd. The Tribunal also upheld the rejection of a settlement proposal made by the Appellant-Jayshree Agnihotri, noting that the Committee of Creditors (CoC), composed of homebuyers, had reasonably and unanimously opposed it. The home-buyers had been awaiting delivery of their constructed units for over a decade. The Tribunal held that an allottee who has lost trust in the management is entitled to seek resolution through the Corporate Insolvency Resolution Process (CIRP). Brief Facts M/s Jayshree Agnihotri and Ashok Kumar Jain filed the appeals under Section 61 of the Insolvency and Bankruptcy Code, 2016 challenging the order dated 16.10.2024 passed by the Adjudicating Authority. By the impugned order dated 16.10.2024, NCLT admitted a Section 7 application filed by homebuyers and initiated CIRP against Pushp Ratna Realty Pvt. Ltd. The dispute arose from a Memorandum of Understanding (MoU) dated 14.09.2009 between Rajeev Agnihotri and Jayshree Agnihotri (the Agnihotri group), Ashok Jain (the Jain group), and Pushp Ratna Realty Pvt. Ltd. The Agnihotri group owned land in Khajrana, Indore, and planned to develop a township with assistance from the Jain group, who agreed to arrange funds and oversee construction. Both groups were to appoint two directors each, and shareholding in the company was to be divided equally. The project “Lush by Pushp Ratna” was launched, and 77 out of 140 units were sold to homebuyers. Each homebuyer was issued an allotment letter as per which the units were to be constructed and handed over within 30 months. Thereafter, disputes arose between the two groups. The Jain group claimed that the MoU was cancelled on 26.09.2011, while the Agnihotri group denied this. The Agnihotri group initiated arbitration proceedings and filed for interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, which was granted by the Additional District Judge. The Madhya Pradesh High Court called the cancellation agreement a sham. Meanwhile, homebuyers filed a Section 7 application before the NCLT. They withdrew the application on grounds of limitation. They filed a fresh Section 7 application. On 16.10.2024, the NCLT admitted this application after finding that the Corporate Debtor had defaulted by failing to hand over possession within the agreed period. Jayshree Agnihotri filed an I.A., offering to pay off the debts in full. The NCLT rejected the offer and held that the application was within limitation. Submissions Counsel for the Appellant submitted that the original Section 7 petition filed by the home-buyers was barred by limitation. The subsequent petition was filed with backdated acknowledgment letters issued by the Jain group to dummy allottees to overcome the limitation bar. The Appellant argued that this was an attempt to circumvent the three-year limitation period, as the allotment letters dated between 28.03.2014 and 15.11.2016 had become time-barred. Counsel for the Respondent submitted that the objection on the ground of limitation lacked merit. The home-buyers filed audited balance sheets and balance confirmation letters to prove that they were genuine allottees and their Section 7 application was within limitation period. They argued that the default occurred 30 months after the date of each allotment letter. Observations The NCLAT examined the Corporate Debtor's audited balance sheet dated 31.03.2020. It found that balance sheet mentioned “Advances from customers against flat booking”. This proved that the allottees had paid advances, which the Corporate Debtor recorded as 'other current liability'. The Tribunal noted that the Appellant and Agnihotri group themselves relied on the same balance sheet to claim 50% shareholding in the Corporate Debtor. Therefore, the Appellant cannot question the same balance sheet when home-buyers rely on it to prove their debt. The Tribunal found that on 09.11.2021, the Corporate Debtor issued a balance confirmation letter to the Respondent-Homebuyers, acknowledging the debt. It held that this letter was a valid acknowledgment of the liability shown in the 2020 audited balance sheet. Therefore, the Section 7 application filed on 22.05.2024 was within the three-year limitation period. The Tribunal held that the withdrawal of the earlier petition on 25.04.2024 did not bar the second petition. The Tribunal further observed that the Appellant-Jayshree Agnihotri had submitted a settlement proposal on 19.11.2024, offering to pay the entire admitted claims of the home-buyers without any haircut, or alternatively, to complete...

NCLAT Upholds Admission Of CIRP Against Pushp Ratna Realty

Tazeen Ahmed

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