Harpal Singh Chawla Vs Vivek Khanna & Ors. (NCLAT Delhi)
No claim under IBC will survive when Unit Holders handed over possession and conveyance deed had been executed
Conclusion: When a unit holder was handed over possession and a Conveyance Deed had also been executed, no claim survives of such unit holders. Whether a claim filed by a Financial Creditor in a class, deserved admission, was a question, which need to be first looked into by the RP as per the statutory regulations governing the collation and verification of the claim.
Held: Harpal Singh Chawla, the suspended director of Spaze Towers Pvt. Ltd., the corporate debtor, filed an appeal contesting the NCLT’s ruling which admitted the Respondents’ Section 7 application (Respondent Nos. 1 to 26: Financial Creditor as a class). In a Section 7 application, the Respondents—Financial Creditors in a class that was allotted to a project called “Spaze Arrow” in Sector 78, Gurugram—claimed a default on the Corporate Debtor (“CD”) and sought to start the Corporate Insolvency Resolution Process (“CIRP”) against the CD. After hearing the parties, the adjudicating authority accepted the Section 7 application. Appellant filed Civil Appeal No.12189 of 2024—Harpal Singh Chawla vs. Vivek Khanna & Ors.—after being dissatisfied with the Tribunal’s ruling dated 28.102.024. The Hon’ble Supreme Court resolved the civil appeal on 08.11.2024. Adhering to the Supreme Court’s ruling, which the appellant filed on November 8, 2024. According to the appellant, Respondent Nos. 1 through 26 were creditors in the class of the Project Spaze Arrow, and in order to start a CIRP against the CD, they filed an application under Section 7 that only pertained to the Project Spaze Arrow. As a result, the CIRP was limited to just one project, Spaze Arrow. Additionally, it was asserted that the initiation of CIRP with respect to 12 completed projects would be detrimental to the interests of the allottees and put the already-finished projects in peril. According to the respondent’s own argument, the Appellant/Applicant argued that the CD abandoned the Project Spaze Arrow because the landowners’ disagreement and the interim orders against the CD prevented the project from being finished. Furthermore, it was stated that restricting CIRP to the Spaze Arrow Project would amount to denying rights to Financial Creditors who have already filed their claims and had those claims accepted by the IRP, since the CoC had already been established and consists of 228 allottees across all Projects. The landowner’s attorney argued that CD had no authority to build anything on the Project land, which was undeniably Ishan Singh’s. It was held by Tribunal that, in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution for Corporate Persons) Regulations, 2016, all financial creditors had the right to submit a claim at the time the CIRP was initiated against the CD. It was true that when a unit holder was handed over possession and a Conveyance Deed had also been executed, no claim survives of such unit holders. Whether a claim filed by a Financial Creditor in a class, deserved admission, was a question, which need to be first looked into by the RP as per the statutory regulations governing the collation and verification of the claim. At this stage, whether the claim filed by a particular Financial Creditor in a class before the RP was admissible or not was a question, which need to be looked into by the IRP and thereafter by the Adjudicating Authority and any aggrieved person had ample remedy by filing application under Section 60 sub-section (5), if any claim had wrongly been admitted, which ought not to have been admitted by the RP. When the Claimants had filed claims for the Project Corporate Park and the Project was not complete despite Occupancy Certificate and Completion Certificate, by confining the CIRP to only one Project – Spaze Arrow, should tantamount to excluding the claims filed before the RP from different Project. No order was to be passed confining the CIRP to only one Project, i.e. Spaze Arrow, as prayed in the Application filed by the Appellant/ Applicant.
