Moratorium excludes government-notified transactions of essential goods/services & surety in a contract of guarantee

Manish Aneja & Ors. Vs Revital Reality Private Limited (NCLT Delhi)

Manish Aneja and other financial creditors (collectively referred to as the “Financial Creditors”) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate the Corporate Insolvency Resolution Process (CIRP) against Revital Reality Private Limited (“Corporate Debtor”). The petition was filed on the grounds of a default amounting to INR 31,22,62,345, which the Corporate Debtor failed to pay for residential units booked by the Financial Creditors in a real estate project named “Basera.”

Key Facts:

1. Corporate Debtor Information: Incorporated on 06.04.2011, Revital Reality Pvt. Ltd. engaged in real estate activities, including developing, buying, selling, and managing properties.
2. Project and Financial Creditor Claims: Financial Creditors booked residential units in the “Basera” project during 2014-2017 under the “Affordable Group Housing Policy 2013.” The Corporate Debtor issued allotment letters and entered into Flat Buyer’s Agreements (FBAs) with the Financial Creditors, agreeing to complete the project within four years from the later of building plan approval or environmental clearance.
3. Default and Filing: Building plans were approved on 19.12.2014, and environmental clearance was granted on 22.01.2016, setting a possession deadline of 22.01.2020. The Financial Creditors claimed that despite paying the sale consideration of INR 31,22,62,345, the Corporate Debtor failed to deliver possession by the stipulated date.

Corporate Debtor’s Defense:

1. Co-Allottees Issue: The Corporate Debtor argued that the petition misrepresented the number of individual allottees by counting co-allottees as separate allottees.
2. Default Timing: They claimed the default date of 22.01.2020 was within the 6-month grace period provided in the agreements, extending the deadline to 22.07.2020, and within the period excluded under Section 10A IBC (25.03.2020 to 24.03.2021).
3. Occupancy Certificate: They argued that the possession was contingent upon receiving the Occupancy Certificate, which was not yet obtained due to delays caused by force majeure events, including a Supreme Court stay on construction and the COVID-19 pandemic.
4. Project Progress: The Corporate Debtor contended that alternative units were offered, the project was nearing completion, and several units were already handed over.

Tribunal Analysis and Findings:

1. Jurisdiction and Threshold: The Tribunal confirmed its jurisdiction and verified that the petition met the threshold requirements of being filed by at least 100 allottees as stipulated under Section 7 of the IBC.
2. Debt and Default: It affirmed the existence of a financial debt and default, substantiated by the payment receipts and the Corporate Debtor’s failure to hand over possession as per the agreements. The Corporate Debtor’s argument that possession was contingent on the Occupancy Certificate was dismissed, stating that the certificate should be timely obtained and not used to delay possession indefinitely.
3. Exclusion Period: The Tribunal ruled that the default was of a continuing nature and occurred before and after the period excluded under Section 10A IBC, thus not protected by the exclusion.

Conclusion: The Tribunal admitted the petition, initiating CIRP against Revital Reality Pvt. Ltd. and appointed Mr. Gaurav Katiyar as the Interim Resolution Professional (IRP). A moratorium under Section 14 of the IBC was declared, prohibiting:

• Institution or continuation of suits or proceedings against the Corporate Debtor.
• Transfer, encumbrance, or disposal of any of the Corporate Debtor’s assets.
• Actions to foreclose, recover, or enforce any security interest.
• Recovery of property in possession of the Corporate Debtor.

The moratorium excludes government-notified transactions involving essential goods/services and the surety in a contract of guarantee. Public announcement of the CIRP initiation was directed, and the Financial Creditors were instructed to deposit INR 2 lakhs with the IRP for initial expenses, subject to adjustment towards resolution process costs. The IRP was mandated to perform duties per the IBC, ensuring cooperation from all personnel associated with the Corporate Debtor.