Under Section 7 of the Insolvency and Bankruptcy Code, 2016, homebuyers Shilpa Jain and Akash Jain (collectively, "Respondents") submitted an application to start a corporate insolvency resolution process (CIRP) against Raheja Developers (the "Corporate Debtor"). By judgement dated August 20, 2020 (the "Impugned Order"), the National Company Law Tribunal, Special Bench at New Delhi ("NCLT") began CIRP against the Corporate Debtor. Navin Raheja, the promoter and shareholder, then filed an appeal before the National Company Law Appellate Tribunal ("NCLAT") to contest the impugned order on two main grounds: I that the CIRP was started fraudulently and maliciously; and (ii) that the application made by the Respondents was time-barred and unmaintainable for a number of other reasons. By its decision dated January 22, 2020, the NCLAT concluded that it was inadmissible to claim that a corporate debtor had defaulted if the delay was not their fault.
In the instant case titled Navin raheja vs Shilpa Jain and Ors., the issue raised for clarification before the NCLAT was:
Whether the offer of possession was put off owing to circumstances beyond the Corporate Debtor's control, whether a default had been made?
With regard to this issue, the construction was subject to force majeure conditions as stated in Clause 4.4 of the Buyer's Agreement, which included, among other things, the requirement for a delay in the issuance of a completion/occupation certificate by the Government and/or any other authority or if non-delivery of possession is beyond the control of the company. Depending on the conditions at the time, the Corporate Debtor was entitled to a reasonable extension of time for transfer of the possession in this situation.
Additionally, the Corporate Debtor had the right to modify the terms and conditions of allocation or even suspend the plan if the situation called for it. According to Clause 5.1 of the Buyer's Agreement, the Appellant had the right to revoke the allocation and get a return of the cash plus interest at a rate of 5% annually. In essence, it was impossible to say that the Respondents needed fewer remedies. The Real Estate (Regulation and Development) Act of 2016 ("RERA") was held by the SC to be in addition to and not in derogation of the provisions of any other law now in effect in the matter of Pioneer, the NCLAT said.
The NCLAT noted that a significant portion of the allottees were speculative investors. They merely desired to relinquish ownership and claim funds that had already been paid. The NCLAT noted that the NCLT had rejected the notice of possession, which requested a further four months for giving up possession and a further three months for registering the property, respectively.
The NCLAT further took note of the appellant's position before the NCLT on the government's lack of availability of basic infrastructure facilities for carrying out developmental initiatives. The NCLAT determined that the Respondents had filed the Section 7 of the IBC application dishonestly and with malicious intent, and that their only goal was to abandon ship and recover the money paid by using coercive means. The applicable competent authority's delay in granting approval could not be taken into account in determining whether the corporate debtor had delayed in delivering possession. The SC's ruling, which was binding on all courts despite being issued before the application was admitted, was also disregarded by the NCLT.
The NCLAT determined that the case was covered under Section 65 of the IBC. In addition to reversing the contested order and rejecting the application made in accordance with Section 7 of the IBC, it also assessed penalties against the respondents. The NCLAT further stated that it would be advisable for the NCLT to determine whether the allottees' aim was to seek a refund rather than possession of the flat before admitting any matter.
Furthermore, it could not be claimed that the corporate debtor had failed to deliver the possession if the delay was due to force majeure and not its own fault.
The NCLAT categorically stated that,
"The Appellant has also given the details of amount sanctioned by one or other 'Financial Creditors' and time frame to pay the amount within prescribed time. We expect that the 'Corporate Debtor' will stick to the time frame given before this Appellate Tribunal. Company Appeal (AT) (Insolvency) No. 864 of 2019."