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Insolvency proceedings against real estate firm Emaar MGF Land

The National Company Law Tribunal (NCLT) has asked to initiate insolvency proceedings against real estate firm Emaar MGF Land after a home buyer filed petition against the company for a huge delay in delivery of their housing units. 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.

The case relates to a home buyer (Mr. Neeraj Gupta- Financial Creditor ) 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. 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 court however rejected Emaar's plea saying that the amount raised from the buyer comes within the scope of 'financial debt' and hence he can invoke insolvency resolution process.

While giving the order, 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 court also further stated 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.

 

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Divya Patwal

VOICE