National Company Law Tribunal, Delhi has initiated a Corporate Insolvency Resolution Process against Emaar MGF Land. The Court has appointed Manoj Kumar Anand as the Insolvency Resolution Professional for the case and had directed him to make the announcement public within three days of the order.
In the instant case one Mr. Neeraj Gupta- Financial Creditor has filed application under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with rule 4 of the Insolvency and Bankruptcy Rules, 2016 for initiation of Corporate Insolvency Resolution Process against the Emaar MGF Land Limited-Corporate Debtor.
The case relates to a home buyer who had purchased an apartment in Palm Greens, KherkiDaula, Gurgaon for total sale consideration of Rs 91,97,879/-. He pleaded that even though he paid Rs. 88,49,036/- of the total consideration, the flat was not delivered to him in proposed time i.e. by July 2014 as per the builder-buyer agreement. The builder did not pay the compensation even when there was inordinate delay in delivering the possession of the said flat.
However, Advocates representing Emaar MGF said that the buyer has failed to pay the amount timely and thus, Insolvency process cannot be initiated as there is no debt due and payable. The amount has already been invested in the project and unit is virtually complete and OC can be issued anytime now.
It was asserted by Emaar MGF that numerous stakeholders are involved in the matter including a huge number of homebuyers, other creditors, vendors etc. who would be put to great inconvenience and duress if the Corporate Insolvency Resolution Process is initiated. On January 4, Emaar MGF also showed the intent to settle the matter amicably which came to court for hearing on 17th January, 2019 which was ultimately rejected by the Court.
M.M. Kumar, Chief Justice (retired) while passing the order stated that the period of thirty six months plus three months of grace period came to end in July, 2014 and possession of the unit was required to be delivered. A reasonable period of delay of six months to one year is acceptable however, the facts in the present case shows that the project was not completed and the occupation certificate has not been obtained till date. There is extraordinary delay of about five years in delivering the possession and the Financial Creditor-homebuyer cannot be put to ransom by strict construction that the contract is not determined. Stating these, the court said that by no terms or clauses of the flat buyers’ agreement the obligation to deliver possession of the flat within the reasonable period could be excluded and the argument advanced on behalf of the Corporate Debtor was rejected. The Court said that that the possession should have been offered by July, 2015 and therefore, the principal amount along with compensation and interest becomes payable.
Emaar MGF also asserted that the said application of the homebuyer was not maintainable. To this the court explained that in view of the revised definition, any amount raised from an allottee/homebuyer under a real estate project is deemed to be an amount having the commercial effect of a borrowing and this is covered by the definition of financial debt which is specifically amended to include dues of homebuyers as Financial Creditors. Accordingly, the home buyers can initiate Corporate Insolvency Resolution Process against defaulting builder or developer or Financial Creditor.
The court also cited the case of Rajendra Kumar Saxena vs. Earth Gracia Buildon Private Limited, wherein it was held that any amount raised from an allottee/homebuyer under a real estate project shall be deemed to be an amount having the commercial effect of borrowing. Thereby, after amendment of the Act, the allottees/homebuyers of real estate project have been treated as Financial Creditors. The amount has been raised from the allottee/homebuyer under a real estate project. In such a situation, not only the debt has a commercial effect of borrowings and come within the scope of financial debt but also the homebuyer in the present case is covered by the definition of financial creditor. And thus, the homebuyer being the financial creditor can invoke Corporate Insolvency Resolution Process under Section 7 of the Code.
The Court said it is confirmed that the Applicant/homebuyer had disbursed the money to the Emaar MGF as consideration for purchase of a residential flat. A considerable long period has elapsed and even the principal amount disbursed has not been repaid by Emaar MGF. It was accordingly held that Emaar MGF has committed default in repayment of the outstanding financial debt. Accordingly, the court admitted the application under Section 7(5)(a) of the Code, with direction to the Interim Insolvency Resolution Professional to make public announcement.
The court has further said that Emaar MGF Land cannot transfer, encumber, alienate or dispose of any of its assets. It cannot foreclose, recover or enforce any security interest created by them. Emaar MGF also cannot recover any property by an owner or lessor where such property is occupied by or in the possession of the company.
HEAD- LEGAL VOICE