MR. RAVI LUTHRA v. VATIKA LIMITED

a Shop unit in the above-mentioned project. Similarly, as per the Allotment Letters (attached as annexure A6 of Dairy No. 00332/2 dated 15.09.2023), the Applicants were allotted a commercial space unit in the above-mentioned project against full and final payment. In terms of the clauses of the Allotment letter, the petitioners were entitled to payment of "Committed Monthly Return" from the Corporate Debtor. As per the Allotment Letters, after receipt of the Occupation Certificate/Completion of the Project, the Corporate Debtor had to put the shop on lease to suitable tenants with minimum assured lease rent.

4. The Corporate Debtor post-execution of the Allotment Letters continued to pay the commitment charges till October 2018 but thereafter, the Corporate Debtor stopped paying the commitment charges to the Financial Creditors. The Corporate Debtor further failed to complete the construction of the project. Thereafter, the Corporate Debtor cancelled the Builder Buyer Agreement stating an excuse of impossibility in performing the duties under the Allotment Letter/ Builder Buyer Agreement by issuing the cancellation of Builder Buyer Agreement cum Refund Letter dated 12.08.2019. The reply was sent by the Financial Creditors for the Letter.

5. Aggrieved by the same, complaint was filed by the financial creditors before the National Consumer Dispute Redressal Commission, New Delhi bearing Complaint Case No. 360 of 2020 on 18.03.2020 claiming regular payments of assured returns. The complaint is still pending. Moreover, a writ petition was filed by the corporate debtor before the Hon'ble High Court of Punjab and Haryana bearing CWP No. 26740 OF 2022 tilted "Vatika Limited v. Union of India & Ors

wherein vide order dated 22.11.2022, court took cognizance in respect of Banning of Unregulated Depoists Schemes ACT, 2019 and restrained the Union of India and State of Haryana from taking coercive steps in criminal cases registered against the company for non-payment of assured returns to its allottees, till next date of hearing.

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The State of Haryana also notified the appointment of the competent authority under the BUDS Act who will decide the question of law whether such deposits are covered under the BUDS Act or not. The writ petition is still pending before the Hon'ble High Court. Aggrieved by the order dated 22.11.2022 of the Hon'ble Punjab and Haryana High Court, the financial creditor filed an LPA No. 264 of 2023 (O&M), the said LPA was disposed of being not maintainable vide order dated 14.03.2023 with the suggestion to approach before the single judge bench. The Financial Creditors have prayed for payment of the commitment charges/assured return along with delayed interest at the rate of 18% and not seeking refund of the whole consideration amount.

6. As stated in Part-IV of the amended Form No.1 filed vide Dairy No. 332/2 dated 15.19.2023, the total amount claimed to be in default is Rs. 8,54,76,383.18/- (Rupees Eight Crores Fifty-Four Lakhs Seventy-Six Thousand Three Hundred and Eighty-Three Paisa Eighteen) only including interest starting from 01.11.2018 till the date of the application i.e. 09.12.2019, refiled on 16.12.2019. The date of default indicated is 01.11.2018 i.e., as the last payment was received in October 2018. Copy of Form 26AS of applicant for amount of TDS deposited by the corporate debtor on payment of committed returns to the applicant (Annexure-A4), the amount of Financial Creditors as mentioned in respective statement of accounts (Annexure- A5), allotment letter of financial creditors as issued by the corporate debtor (Annexure-A6), Letter of corporate debtor (Annexure-A8), reply of financial creditor (Annexure-A9) are attached with the main petition.

7. Upon the issuance of notice, the Respondent filed its reply vide Diary No. 00332/3 dated 04.12.2023, wherein it is stated that as per the agreement, the respondent company had to remit the assured monthly return of Rs. 163.33 per sq. ft. till completion of the building. The petitioners were fully satisfied with the quantum

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of their returns along with the safety of their returns. The petitioners booked their units with the company with an objective of receiving agreed returns and profits on their investments in the project. It was an investment venture with attached risks and rewards which was communicated to the allottees. Allottees were receiving handsome assured returns till October 2018. Thereafter, the stoppage of assured returns was due to the introduction of the Banning of Unregulated Deposit Schemes Act 2019 w.e.f. 21.02.2019 and certain amendments made to the SEBI Act vide which Assured returns scheme was banned for projects not registered with SEBI.

7.1 The respondent company is not registered with SEBI. There is concealment of facts as the emails dated 09.11.2018 and 01.12.2018 are not disclosed by the petitioners, wherein all the petitioners were intimated regarding the legal and regulatory changes and stoppage of assured rental schemes. Further, it also intimated about the statutory reasons for not paying the assured returns and their decision of not selling any units further in the project. The option was given to the petitioners for a refund of their money or switching to another project. The present petition is not maintainable.

7.2 Due to the above-mentioned fact the respondent was constrained to cancel the Builder Buyer Agreement by refunding the entire amount invested by petitioners' subject to the return of original documents (Cancellation of Builder Buyer Agreement cum Refund Letter dated 12.08.2019 attached as Annexure A-8 of the amended Form 1 of petition). Therefore, the Financial creditors are not even allottees of the Respondent, therefore, they have no locus standi. The petitioners neither returned the original documents nor accepted the proposal to get the refund. Further, the respondent company offered to refund back the money and crossed the Builder Buyer Agreement (blank), which is attached as annexure R10 of the reply.

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7.3 The financial creditors have picked and chose the clauses of the agreement as they have only referred to clause 4 of the agreement and ignored clause 2 of the agreement. As per clause 2 of the agreement, it is mentioned that,

"the said allotment is provisional and subject to remittance of payments in terms of the payment plan/ schedule of payment, as agreed / opted by the Allottee. In the event the applicant does not pay the balance amount or defaults in execution of Builder Buyer Agreement within stipulated time, the present allotment letter shall stand withdrawn and 30% of the total sales consideration, as earnest money, along with other non-refundable amounts shall stand forfeited and the remaining amount, if any, shall be refunded to the Allottee."

7.4 No property has been sold to the financial creditors. The financial creditors do not qualify to be the allottees even either under the RERA Act or under IBC,2016. Further, till the filling of the present application, the cancellation of Builder Buyer Agreement was not challenged by the financial creditors before any court of law. Subsequently, a complaint was filed by the financial creditors before the NCDRC, New Delhi bearing Complaint Case No. 360 of 2020 on 18.03.2020 claiming regular payments of assured returns which is still pending and this fact has not been disclosed before this Adjudicating Authority.

7.5 It is further submitted that Force Majeure is a valid clause in every agreement/contract and this clause is required to be enforced on events beyond the control of parties which can affect the performance of either party without their fault and the same was included in Clause 7 and 11 of the Builder Buyer Agreement. Therefore, there is no debt and default on the part of the corporate debtor.

8. The petitioners-financial creditors filed the rejoinder vide Dairy No. 00332/4 dated 01.01.2024, wherein it is stated that the outstanding dues were not paid as the Corporate Debtor refrained from making payments based on the introduction of

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the 'Banning of Unregulated Deposit Schemes (BUDS) Act 2019'. Further, another reason for the non-release of payment was that certain amendments were made to the SEBI Act vide which the Assured Returns Scheme was banned for projects not registered with SEBI. However, till the date of filing of the present petition, no such reasons were ever pleaded by the Corporate Debtor nor intimated the same properly to the financial creditors/petitioners.

8.1 The Corporate Debtor on its own has self-proclaimed and declared commitment charges/ assured returns as illegal after the enactment of the BUDS Act, 2019. The Corporate Debtor has mentioned about email communications dated 09.11.2018 and 01.12.2018 but in fact it has never communicated in the mail any such bogus issues related to the enactment of the Banning of Unregulated Deposit Schemes Act, 2019. The Corporate Debtor nowhere mentioned stopping the project or stopping the payments of assured returns to the Financial Creditors. In the letter dated 12.08.2019 it was stated by the Corporate Debtor that due to the unwillingness of the Lead Financial Creditor, they are cancelling the captioned booking. However, the Corporate Debtor duped the Financial Creditors on false assurances. The Financial Creditors have not been paid their respective dues / financial debt which were promised by the Corporate Debtor and indeed admitted, in terms of the Allotment Letters/ Builder Buyer Agreements.

8.2 Further, various Courts including RERA Benches have made it clear that Assured Returns do not come under the definition of Deposits under Section 2(4)

(g) of the BUDS Act 2019. The order of Hon'ble Punjab & Haryana High Court is not applicable to the present case as it is not a Criminal complaint matter. The corporate debtor never made the Builder Buyer Agreement even after taking payment for registration of the Builder Buyer Agreement of Rs. 23,600/- from the financial creditors and returned one crossed agreement and later on informed that the Builder

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Buyer Agreement is lost. The project is only 15-20% complete and no further construction is taking place.

8.3 Further, the case before NCDRC was with respect to the arbitrary cancellation made by the corporate debtor of the lead financial creditors. The corporate debtor on one hand seeks no default and on the other hand seeks invocation of the 'Force Majeure' clause.

9. The Short Written Submissions were filed by the petitioner vide Diary No. 00332/5 dated 17.01.2024 and by the Respondent vide Diary No.00332/10 dated 18.03.2024 reiterating the above-mentioned facts.

10. We have heard the submissions of both the parties carefully and perused the documents placed on record by both the parties, including their Written Submissions. The Respondent has objected towards the admission of the Application, inter alia, on the grounds that the Petition is not maintainable as the Allotments of the Applicants were cancelled and there was no builder-buyer agreement executed between the parties, therefore they cannot be considered as an "allottee" under Section 5(8)(f)(ii) of IBC, 2016. It is further contended by the Respondent that it had stopped the payment of Assured Return due to the introduction of the BUDS Act (Banning of Unregulated Deposit Schemes Act, 2019), which was introduced in the Parliament on 18.07.2018, and was referred to the Standing Committee on Finance (SCF). The report of SCF was submitted to the parliament on 03.01.2019 after which it was passed by the Lok Sabha on 13.02.2019 but could not be passed by the Rajya Sabha. Since, the Parliament was not in session, an Ordinance was issued by the President of India vide notification dated 21.02.2019. Subsequently, The Banning of Unregulated Deposits Bill, 2019 was passed by the Parliament. The Banning of Unregulated Deposits Act, 2019 was enacted on 31.07.2019 but was deemed to have come into force from 21.02.2019

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as per Section 1(3) of the Act. The BUDS Act defines the term "Unregulated Deposit Scheme" in Section 2(17), which highlights that if there is a scheme/arrangement, under which deposits are accepted/solicited by any deposit taker by way of business and which is not a Regulated Deposit Scheme, as specified under Column (3) of the First schedule, is specifically banned by the Section 3 of the Act, which made the Scheme inoperable as it was not registered with any authority as perused in Column (3) of the First Schedule.

11. Per contra, the Applicants have contended that the explanations and reasons as per the Corporate Debtor only came into existence after service of the Demand Notice. It is pertinent to note that prior to that there was no communication regarding any of the reasons mentioned by the Corporate Debtor in their reply. There was no communication between the Respondent and Financial Creditors. It is pertinent to note that the Respondent at the start gave two Builder Buyer Agreements to the Financial Creditors stating that he will register the one which would be accepted by RERA and return the other one to the Financial Creditors. It is further pertinent to note that the Respondent never made the Builder Buyer Agreement even after taking payment for registration of the Builder Buyer Agreement of Rs. 23,600/- from the Financial Creditors and returned one crossed agreement and informed the Financial Creditors that the Builder Buyer Agreement was lost. Other Builder Buyer Agreement was also supposed to be destroyed as it was not according to RERA format.

12. Now, we would like to examine the contentions raised by both the parties. The First issue which emerges for determination is whether the Applicants are "allotees"

in terms of Section 5(8)(f)(ii) of IBC, 2016 as on the date of filing of the Petition. In this context, we refer to one of the Allotment letters annexed with the Application by the Applicants, the contents of which reads thus:

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From a plain reading of aforesaid Allotment letter, it is observed that the Allotment was provisional in nature and the execution of the Builder Buyer agreement was a condition precedent to make the Allotment conclusive, which is not the case herein. Though the Registration charges were paid by the Applicant and a draft cancelled Buyer Agreement was sent to the Applicant, however, the same was cancelled by

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the Respondent vide its cancellation letter dated 17.06.2019. Admittedly, aggrieved by the same, the Applicants had filed a complaint before the National Consumer Dispute Redressal Commission, New Delhi bearing Complaint Case No. 360 of 2020 on 18.03.2020, challenging cancellation of allotment letters and claiming regular payments of assured returns. The Respondent has contended that the said complaint was filed during the pendency of the present petition.

14. From the record, it is seen that the Applicant No.1 had sent a "Demand notice"

to the Respondent on 17.06.2019. We would like to examine whether it was issued in the capacity of an "allottee". Accordingly, we refer to the demand notice 17.06.2019 sent on behalf of Mr. Ravi Luthra (Applicant No. 1), the contents of which reads thus:

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15. From a perusal of the abovesaid Demand Notice, specifically para 7, it is observed that the demand was raised by the Applicant No. 1 towards the default pertaining to the "payment of assured returns of Rs. 14,37,304/- along with interest @ 18%", and not for the failure of delivery of handing over possession of unit.

16. In view of the fact that no builder buyer agreement(s) could be executed between the parties and the allotment(s) was cancelled; and the fact that the amounts claimed by the Applicants has been arising out of default pertaining to the "assured returns", we are of the view that the Applicants cannot be considered as "allottees".

However, we would still like to examine whether the Applicants still maintain the petition as Financial Creditors claiming default towards assured returns.

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17. In its submissions, the Respondent has stated that it had informed the Applicants well in advance that it cannot provide any further assured returns in view of the introduction of BUDS Act. However, the Applicants had denied any such intimation. In this context, the Respondent has relied upon the email dated 12.01.2018, the contents of which reads thus:

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18. From perusal of the aforesaid email, it is observed that the Respondent has used the words viz., "…a Proposed Bill # 85 (subsequent to receiving the Cabinet Approval) tabled in the Lok Sabha in July 2018"…, which indicates that the Respondent had intimated the applicant(s) about Banning of Unregulated Deposit Schemes. Whether the Banning of Unregulated Deposit Schemes Act, 2019, is applicable on the transaction is a question, can only be decided by the Court of appropriate jurisdiction, and which is not this Adjudicating Authority. However, whether a CIRP can be initiated by an Applicant claiming payment of the Assured Returns has already been decided by the Hon'ble Supreme Court in the

Pioneer Urban Land and Infrastructure Ltd. and Anr. Vs Union of India and Ors., (2019) 8 Supreme Court Cases 416. Similarly, the Hon'ble NCLAT in its judgment dated 31.01.2022 in Company Appeal (AT) (Ins) no. 1035 of 2020 in Mrs. Nidhi Rekhan Vs M/s. Samyak Projects Private Limited, held that a Speculative Investor is not a Financial Creditor. The relevant para of the judgement reads thus:

"12. We, therefore, now examine the various clauses of the Agreement entered between the Corporate Debtor Samyak Projects Private Limited and Mrs. Nidhi Rekhan who purports to be an allottee. The above-mentioned clauses 3, 4, 5 and 6 of the Agreement are primarily concerned with the "Down Payment" and

an assured rate of return of 24% p.a. and the right of the First Party/Mrs. Nidhi Rekhan, to assign the flat to any of her nominees. Clause 7 is about the right of the allottee to cancel the booking after the specified period of one year. There is no clause in the agreement which relates to the construction/completion of the flats, the time stipulated for completion of construction, any penalty to be imposed on the developer/builder for delaying Case Citation: (2022) ibclaw.in

109 NCLAT construction and other such provisions that are pertinent and

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germane to a housing development project and which are necessary for protecting the interest of the allottee. All such provisions are usual and necessary elements of a Builder-Buyer Agreement. We find from the said agreement that there is a "Down Payment" of Rs. 1 Crore with remaining balance of Rs. 11,90,000/- (Rupees Eleven Lakhs Ninety Thousand only) and an assured rate of return @ 24% per annum. In addition, the allottee is given the right, in its absolute discretion, to cancel or rescind the allotment of the flats/units booked through the agreement. The assured rate of return of 24% per annum is a very high rate of interest that a builder would not offer to an allottee even when she is making down payment. The Agreement in this case does not, therefore, have the necessary elements of a Builder-Buyer agreement. On the contrary, it is an agreement which is more in the nature of detailing and protecting an investment made by Mrs. Nidhi Rekhan, who is coming in the garb of an allottee. As has been held by this tribunal in the matter of Sudha Sharma versus Mansi Brar & Anr. [Company Appeal (AT) (INS) No. 83 of 2020] and the subsequent order of Hon"ble Supreme Court in Mansi Brar Fernandes versus Sudha Sharma and Anr. [Civil Appeal No. 3826/2020] which affirms the order of this Tribunal in Company Appeal (AT) (INS) No. 83 of 2020, we find that the purported allottee Mrs. Nidhi Rekhan, is actually a speculative investor earning a high rate of interest on her investment and is by no means interested in the construction, completion and possession of the said flats no. A-1201 and E-1301. Therefore, we have no hesitation in holding that Mrs. Nidhi Rekhan/Appellant cannot claim to be a "financial creditor" as defined under explanation (i) of section 5(8)(f) of the IBC. The facts in the matter of Pioneer Urban Land and Infrastructure (supra) support the facts of this case as in this case the Appellant is not a genuine allottee but an investor

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who has come as allottee with no intention of possessing the flats. The Ld. Counsel for Appellant has also referred to Pioneer Urban Land and Infrastructure (supra), particularly paragraph 67 wherein it is held that "…The expression "borrow" is wide enough to include an advance given by the home buyers to a real estate developer for "temporary use" i.e. for use in construction project so long as it is intended by the agreement to give "something equivalent" to money back to the home buyers." It is noted by us that the Appellant in the instant case is not a genuine home buyer but someone who has invested a certain amount but is coming before us as a home buyer. We distinguish the above observation made in the Pioneer Urban Land and Infrastructure (supra) judgment as the Appellant is not a genuine home buyer and hence he cannot claim benefit as an "allottee" in a real estate project and hence will not be considered a financial creditor by taking recourse to Explanation (i) of section 5(8)(f) of the IBC."

XXXX

XXXX

"17. Thus, in our clear opinion, the Appellant, who is a speculative investor, cannot claim status and benefits as financial creditor under Explanation (i) of Section 5(8)(f) of the IBC, and is not interested in the financial well-being, growth and vitality of the Corporate Debtor, but is just interested in her investment and has come in the garb of an allottee. In such a situation, the Appellant is certainly not a financial creditor holding financial debt, which is in default of payment by the Corporate Debtor, and consequently we conclude that the Impugned Order does not require any interference. The appeal is, therefore, dismissed. There is no order as to costs."

(Emphasis placed)

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19. As we have already noted from the pleadings, the Applicants in the present case are claiming assured returns @ Rs. 163.33 per sq. feet, and over and above, they have claimed 18% interest on their claims. The clause 4 of the allotment letter, though cancelled as on date, regarding assured return @ Rs. 163.33 per sq. feet along with delivery of unit and the claims of the Applicants towards the assured returns along with exorbitant interest, reflects that the Applicants are the Speculative Investors, who have invested their money to get return on monthly basis. As we have found in the previous paragraph, the Hon'ble NCLAT in Mrs. Nidhi Rekhan (Supra), while relying on the Judgement of the Hon'ble Supreme Court in Pioneer Urban Land and Infrastructure Ltd. and Anr.v Union of India and Ors. has clearly held that a Speculative Investor is not a Financial Creditor.

20. In view of the above, we conclude that Applicants herein claiming assured returns are not "allottees" and rather "Speculative investors" and therefore, not

"Financial Creditors". Hence, we have no other option but to dismiss the Application.

21. Accordingly, the present CP(IB) No. 663/Chd/Hry/2019 is dismissed.

Sd/- Sd/- (L.N. Gupta) (Harnam Singh Thakur) Member (Technical) Member (Judicial) June 07, 2024

TB

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ANNEXURE-1

LIST OF FINANCIAL CREDITORS

1. Mr. Ravi Luthra C-47, Inderpuri New Delhi-110012 landmarkravi@gmail.com

2. Mr. Anil Aggarwal & Mr. Arun Aggarwal House No. - 394, First floor, Gurgaon Sector- 45

Haryana- 122003

akbadm70550@gmail.com

3. Mrs. Anita Gahlaut R/o J- 603 Sispal Vihar, A W H O Sector- 49, South City II, Gurgaon,

Haryana- 122018

anitakkn@gmail.com

4. Mr. Sanjeev Khattar & Mrs. Vandana Khattar & Sanjeev Khattar (HUF) R/o -37, Second Floor, LajpatNagar-3,

New Delhi 110024 drsanjeevkhattar@gmail.com

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5. Dr. Ashwini Kumar Setya & Mrs. Chitra Setya R/o C-6, Sector 20,

Naida U.P. - 201301

ashwini.setya@gmail.com

6. Mrs. Apeksha Sachdeva & Mr. Rohit Sachdeva & Mr. Anil Sachdeva R/o 7 /257, Sunder Vihar, Paschim Vihar, New Delhi - 110087 anilsachdeva2020@gmail.com

7. Mr. Rajesh Khanna R/o D-173, Block- D, 1st Floor, Vivek Vihar, New Delhi- 110095 aarkay.2904@gmail.com

8. Mr. Lalit Kumar Vashisht & Mrs. Anita Vashisht (053) 307, Espace Nirvana Country,

Gurgaon, Haryana- 122018

lkvashisht@yahoo.com

9. Mr. Lalit Kumar Vashisht & Mrs. Anita Vashisht (055) 307, Espace Nirvana Country,

Gurgaon, Haryana- 122018

lkvashisht@yahoo.com

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10. Mr. Lalit Kumar Vashisht & Mrs. Anita Vashisht (145) 307, Espace Nirvana Country,

Gurgaon, Haryana- 122018

lkvashisht@yahoo.com

11. Mr. Dhruv Kohli & Mr. Samarth Kohli & Mr. Kanav Kohli

R/o 17 /51 A, Tilak Nagar

New Delhi- 110018

anilsachdeva2020@gmail.com

12. Mrs. Arti Bhardwaj (047) R/o Flat no. 172, Pocket-4, Sector 12, Dwarka, NSIT Dwarka, South West Delhi, Delhi 110078 bhardwaj.mb@gmail.com

13. Mrs. Arti Bhardwaj (120) Flat no. 172, Pocket-4, Sector 12, Dwarka, NSIT Dwarka, South West Delhi, Delhi 110078 bhardwaj.mb@gmail.com

(APPLICANTS REPRESENTED THROUGH RAVI LUTHRA)

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