National Company Law Appellate Tribunal | While dealing with an appeal challenging the impugned order passed by NCLT, Ashok Bhushan*, J., Dr. Alok Srivastava (Technical Member) and Barun Mitra (Technical Member), held that the date of default and acknowledgement are two different events and date of default is not dependent on acknowledgement of debt. The Tribunal imposed a penalty of Rs. 25 Lakh as filing of application under S. 9 IBC was an attempt to stop the implementation of a RERA order.
Factual Matrix
M/s PSA IMPEX (P) Ltd., a corporate debtor (CD) launched a real estate project in the year 2012 to be completed within 36 months. Due to the delay in completion of project, home buyers approached RERA with complaints under Real Estate (Regulation and Development) Act, 2016. RERA conducted an inspection and it was found that only 10% of the work has been started and the rest was abandoned. RERA cancelled the registration of the project and in response to public notice issued by RERA for completion of remaining project work, SLB Welfare Association (Appellant) submitted a proposal to complete Project.
An application under S. 9 of the Insolvency and Bankruptcy Code, 2016 was filed by M/s. Rudra Buildwell Constructions (P) Ltd. claiming to be an Operational Creditor (OC) which was later withdrawn by OC as case is hit by S. 10A of the Code. The Adjudicating Authority (NCLT) vide order dated 29-11-2021 dismissed the application as withdrawn.
The OC again issued notice dated 06-12-2021 under S. 8 IBC to the CD demanding payment of an unpaid operational debt of Rs.5,39,60,674/- including interest, the date of default being 31-03-2020.
The OC filed an application under S. 9 IBC on 24-12-2021 against CD. After seeking clarification on the issue of S. 10-A IBC from OC, the Adjudicating Authority allowed the application on 18-04-2022 ex-parte, as CD did not appear.
This appeal was filed by the appellant challenging the order dated 18-04-2022 and 25-07-2022 vide which appellant was ordered to handover peaceful possession and custody of the project to Interim Resolution Professional (IRP).
Tribunal’s Observation
While examining the facts in the appeal, the Tribunal observed that appeals against orders of RERA were filed by the CD through its authorised signatory Mr. Raj Kumar, OC who had filed an application under S. 9 IBC. After dismissal of the RERA appeal, a second appeal was filed in the High Court by CD through Mr. Raj Kumar, wherein it was submitted that 99.75% of shares in CD have been transferred to OC.
The Tribunal observed that the object of filing of application under S. 9 IBC by the OC, was not for resolution of insolvency of CD, but was an attempt to stop the implementation of RERA order and to take back the Project from the Appellant.
The Tribunal stated that the object for enactment of the IBC is re-ogranisation and insolvency resolution of the CD.
The Tribunal further observed that proforma invoices prepared bears the date of 31-03-2020 and contains the particulars of various materials supplied from 25-08-2019 to 19-01-2020 which do not contain GST details as required under the law and entries made in the books of accounts were not in normal course of business. This is evidenced from the fact that no work was undertaken at the project site during the relevant period.
The Tribunal stated that the issue of date of default mentioned as 31-03-2020, the affidavit submitted by OC before Adjudicating Authority, stated that CD vide letter dated 03-06-2021 acknowledged the inability to repay and had acknowledged the debt; and therefore, the date of default occurred on 03-06-2021.
The Tribunal observed that mere acknowledgement given by CD on 03-06-2021 accepting the debt, shall not change the date of default. The date of default and acknowledgement are two different events and date of default is not dependent on acknowledgement of debt. Hence, the application filed under S. 9 IBC was also liable to be rejected being hit by S. 10A.
Tribunal’s Decision
While allowing the appeals, the Tribunal held that initiation of CIRP by the OC was done fraudulently with a purpose other than insolvency resolution as such admission order vitiated in law and imposed a penalty of Rs. 25,00,000/- on OC.
[SLB Welfare Assn. v. PSA IMPEX (P) Ltd., Company Appeal (AT) (Insolvency) Nos. 905 and 642 of 2022, decided on 04-11-2022]
Advocates who appeared in this case :
Mr. Abhijeet Sinha, Mr. Shantanu Singh, Mr. Ravi Sehgal, Mr. Aditya Shukla and Ms. Divya Narayanan, Counsel for the the Appellant;
Mr. Saurabh Jain, Counsel for Impleader (SLAB Home Buyer’s Welfare Association);
Mr. Abhishek Anand, Mr. Nipun Gautam and Mr. Pathik Chaudhury, Counsel for the Respondent No. 1;
Mr. Gaurav Mitra, CS Gaurav Joshi and Mr. Atul Bhatia, Counsel for the Respondent No. 4
Mr. Prabhjot Ranjan Singh, for RP.
*Ritu Singh, Editorial Assistant has put this report together.