No Claim Survives When Unit Holder Is Handed Over Possession And Conveyance Deed Has Been Executed: NCLAT

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that when a unit holder is handed over possession and a Conveyance Deed has also been executed, no claim survives of such unit holders. Whether a claim filed by a Financial Creditor in a class, deserves admission, is a question, which need to be first looked into by the RP as per the statutory regulations governing the collation and verification of the claim. Brief Facts This appeal has been filed by the Suspended Director of the Corporate Debtor - Spaze Towers Pvt. Ltd. challenging order dated 21.10.2024 passed by the NCLT admitting Section 7 Application filed by Respondents (Respondent Nos.1 to 26 – Financial Creditor in a class). The Respondents – Financial Creditors in a class being allottee of a Project namely 'Spaze Arrow' located at Sector 78, Gurugram filed Section 7 Application claiming a default on the Corporate Debtor (“CD”) seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the CD. The Adjudicating Authority after hearing the parties by order dated 21.10.2024 admitted Section 7 Application. The Appellant aggrieved by the order dated 28.102.024 passed by this Tribunal in the present Appeal filed Civil Appeal No.12189 of 2024 – Harpal Singh Chawla vs. Vivek Khanna & Ors., which Civil Appeal has been disposed of by order of the Hon'ble Supreme Court dated 08.11.2024. After judgment of the Supreme Court, present IA No.7853 of 2024 has been filed by the Appellant on 08.11.2024 itself. Contentions: The appellant submitted that Respondent Nos.1 to 26, creditors in class are of the Project Spaze Arrow and to initiate CIRP against the CD, filed Application under Section 7, which relate to only one Project namely – Spaze Arrow. Hence, the CIRP, be confined to only one Project, i.e. Spaze Arrow. It was also argued that Initiation of CIRP with regard to 12 completed Projects, shall be prejudicial to the interest of the allottees and put the Projects in jeopardy, which have already been completed. Per contra, the respondent submitted that the CD abandoned the Project Spaze Arrow and according to own case of the Appellant/ Applicant, due to dispute raised by the land owners and due to interim orders passed against the CD, the Project could not be completed. It was further argued that the CoC having already been constituted, comprising of 228 allottees across all Projects, confining CIRP to only Spaze Arrow Project would amount to denial of rights to Financial Creditors, who have already filed their claims, which have been admitted by the IRP. Counsel for land owner submitted that CD has no right to carry out any construction on the Project land, which is undisputedly owned by Ishan Singh. Observations: The tribunal after going through the facts of the case observed that when CIRP was commenced against the CD, all Financial Creditors are entitled to file claim as per the Insolvency and Bankruptcy Board of India (Insolvency Resolution for Corporate Persons) Regulations, 2016. It further added that the real-estate allottees are Financial Creditors as per provisions of the IBC and in event any real-estate allottee has a claim against the CD, he is fully entitled to file a claim on commencement of the CIRP against the CD. 19. It is true that when a unit holder is handed over possession and a Conveyance Deed has also been executed, no claim survives of such unit holders. The tribunal said that whether a claim filed by a Financial Creditor in a class, deserves admission, is a question, which need to be first looked into by the RP as per the statutory regulations governing the collation and verification of the claim. “At this stage, whether the claim filed by a particular Financial Creditor in a class before the RP is admissible or not is a question, which need to be looked into by the IRP and thereafter by the Adjudicating Authority and any aggrieved person has ample remedy by filing application under Section 60 sub-section (5), if any claim has wrongly been admitted, which ought not to have been admitted by the RP.” the tribunal observed The tribunal concluded that “when the Claimants have filed claims for the Project Corporate Park, which we have noted above and who have pleaded that the Project is not complete despite Occupancy Certificate and Completion Certificate, by confining the CIRP to only one Project – Spaze Arrow, shall tantamount to excluding the claims filed before the RP from different Project.” Case Title: Harpal Singh Chawla (Suspended Director of Spaze Towers Pvt. Ltd.) Versus Vivek Khanna & Ors. Case Number: Interlocutory Application No.7853 of 2024 in Company Appeal (AT) (Insolvency) No. 2002 of 2024 Judgment Date: 17/12/2024 Click Here To Read/Download The Order

No Claim Survives When Unit Holder Is Handed Over Possession And Conveyance Deed Has Been Executed: NCLAT

Mohd Malik Chauhan

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