Real Estate Regulatory Authority Vs D.B. Corp Limited (NCLAT Delhi)
NCLAT Delhi held that RERA (Real Estate Regulatory Authority) being an aggrieved person under section 61 of I&B Code 2016 has a locus to file an Appeal against order initiating Corporate Insolvency Resolution Process (CIRP).
Facts- Vide the present appeals, the appellant challenges order by which the Adjudicating Authority (National Company Law Tribunal), Indore Bench, Court No.1 admitted Section 9 application filed by M/s D. B. Corp. Ltd., the Operational Creditor. Notably, appellant is Regulatory Authority constituted u/s. 20 of the Real Estate (Regulation and Development) Act, 2016.
M/s AG8 Ventures Ltd. is a registered company developing various real estate projects in the State of Madhya Pradesh. M/s AG8 Ventures Ltd. (Corporate Debtor) had obtained registration of 11 real estate projects from the Real Estate Regulation Authority, Madhya Pradesh (RERA). The Corporate Debtor under different real estate projects allotted various residential/commercial units to several allottees from the year 2010 onwards.
The RERA received various complaints from allottees of the Corporate Debtor, which complaints were entertained and various orders related to different projects were passed in the year 2020-21 directing the Corporate Debtor to refund the amount along with compensation to various complainants. RERA also passed an order on 18.08.2021 u/s. 35 of the RERA Act, 2016 to investigate about the diversion of funds from the designated account. Notice was also issued to the Promoter as to why the registration of the real estate project may not be cancelled. An order dated 08.01.2022 was passed by the RERA observing that the Corporate Debtor has diverted funds from the project and failed to maintain the same in a designated separate account. The registration of the real estate project ‘Aakriti Aquacity’ was also revoked.
Order passed by the RERA was challenged by the Corporate Debtor before the RERA Appellate Authority, which directed the Corporate Debtor to make deposit, which order was unsuccessfully challenged before the Madhya Pradesh High Court. Other Show Cause Notices were also issued to the Corporate Debtor. Orders were also passed on 23.03.2022 by RERA revoking the registration of the real estate project ‘Aakriti Business Arcade’ and directing for appointment of an agency for the completion of the said project u/s. 8 of the RERA Act, 2016.
Demand Notice u/s. 8 was issued by D.B. Corp. Ltd. to the Corporate Debtor claiming payment of Operational Debtor in Form 3 dated 13.01.2022 claiming an operational debt of Rs.10,77,17,000/- with interest relying on various Barter Agreements entered between the Operational Creditor and the Corporate Debtor.
Conclusion- Held that Appeal filed by the RERA cannot be thrown out on the ground of locus. The RERA held to be aggrieved person within the meaning of Section 61 of the Code.
Appellant being association of the home-buyers of Real Estate Project who has already initiated proceedings for direction of the interest of the home-buyers is aggrieved person within the meaning of Section 61 of the Code and the Appeal filed by the Appellant cannot be dismissed on the ground of locus. Thus, Aquacity Consumer and Social Welfare Society has a locus to file an Appeal under Section 61 of the Code against the Order dated 05th August, 2022.
Held that there was no operational debt due on the corporate debtor on which operational creditor can claim payment of money from the corporate debtor to enable it to issue a demand notice under Section 8 or to file Section 9 Application before the Adjudicating Authority. We thus are satisfied that entire initiation of proceedings under Section 9 by the Operational Creditor is contrary to the scheme of IBC and no payment of money was due on the corporate debtor on basis of which unpaid dues any proceedings under Section 9 can be initiated.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
These two appeals challenges same order dated 05.08.2022 by which order the Adjudicating Authority (National Company Law Tribunal), Indore Bench, Court No.1 admitted Section 9 application filed by M/s D. B. Corp. Ltd., the Operational Creditor. Appellant in Company Appeal (AT) (Ins) No. 1172-1173 of 2022 is Regulatory Authority constituted under Section 20 of the Real Estate (Regulation and Development) Act, 2016. In Company Appeal (AT) (Ins) No. 1172-1173 of 2022 order dated 11.08.2022 appointment of Mr. Anil Goel, Interim Resolution Professional has also been challenged. Company Appeal (AT) (Ins) No. 1321 of 2022 has been filed by ‘Aquacity Consumer and Societies Welfare Society’ which claim to be association of 74 homebuyers who are aggrieved by the admission order dated 05.08.2022. Brief facts of the case giving rise to these appeals need to be first noted:
(i) M/s AG8 Ventures Ltd. is a registered company developing various real estate projects in the State of Madhya Pradesh. M/s AG8 Ventures Ltd. (hereinafter referred to as ‘Corporate Debtor’) had obtained registration of 11 real estate projects from Real Estate Regulation Authority, Madhya Pradesh (hereinafter referred to as ‘RERA’). The Corporate Debtor under different real estate projects allotted various residential/commercial units to several allottees from the year 2010 onwards. The Corporate Debtor during the period 2010 to 13.08.20 19 entered into various agreements titled as Barter Agreements with M/s D. B. Corp Ltd. (hereinafter referred to as ‘Operational Creditor’). The Operational Creditor is engaged in business of publishing of various newspapers, periodicals and other literary and publications in print and non-print media. The Corporate Debtor entered into Barter Agreement with the Operational Creditor for extensive advertising campaign of its projects. Under the Agreement, the Operational Creditor was to advertise in media for the projects of Corporate Debtor as per terms and conditions mentioned in the Agreement. Pursuant to the Agreement, the Operational Creditor was to publish Advertisement for consideration which included cash component and Barter Component. The Cash Component against the advertising was to the paid and the Barter Component was to be utilized in form of allotment of units which were required to be transferred in favour of the Operational Creditor.
(ii) The RERA received various complaints from allottees of the Corporate Debtor, which complaints were entertained and various orders related to different projects were passed in the year 2020-21 directing the Corporate Debtor to refund the amount along with compensation to various complainants. RERA also passed an order on 18.08.202 1 under Section 35 of the RERA Act, 2016 to investigate about the diversion of funds from the designated account. Notice was also issued to the Promoter as to why the registration of the real estate project may not be cancelled. An order dated 08.0 1.2022 was passed by the RERA observing that the Corporate Debtor has diverted funds from the project and failed to maintain the same in designated separate account. Vide order dated 08.01.2022, the registration of the real estate project ‘Aakriti Aquacity’ was also revoked.
(iii) The order passed by the RERA was challenged by the Corporate Debtor before RERA Appellate Authority, which directed the Corporate Debtor to make deposit, which order was unsuccessfully challenged before the Madhya Pradesh High Court.
(iv) Other Show Cause Notices were also issued to the Corporate Debtor. Orders were also passed on 23.03.2022 by RERA revoking the registration of real estate project ‘Aakriti Business Arcade’ and directing for appointment of an agency for completion of the said project under Section 8 of the RERA Act, 2016.
(v) Demand Notice under Section 8 dated 13.0 1.2022 was issued by D.B. Corp. Ltd. to the Corporate Debtor claiming payment of Operational Debtor in Form 3 dated 13.0 1.2022 claiming an operational debt of Rs. 10,77,17,000/- with interest relying on various Barter Agreements entered between the Operational Creditor and the Corporate Debtor.
(vi) An application under Section 9 was filed by the Operational Creditor before the Adjudicating Authority on 02.02.2022 claiming default of operational debt of Rs. 10,77,17,000/- with interest consequent to the Barter Agreement entered between the Operational Creditor and the Corporate Debtor. The debt was claimed to be fell due from 13.02.2020. Some additional facts contained in Company Appeal (AT) (Ins.) No. 1321 of 2022 also need to be noted.
(vii) The Appellant – Aquacity Consumer and Societies Welfare Society claiming to be a society of homebuyers claimed to have filed two consumer complaints under Section 12(1)(b) of the Consumer Protection Act, 1986 for its members/homebuyers. Case of the Appellant was that his members have booked their respective units in the year 20 14-17. It was submitted that the Corporate Debtor has siphoned of the money collected from the buyers of the project. The NCDRC allowed both the Consumer Complaints and directed the Corporate Debtor to refund the amount collected from the homebuyers along with interest of 9% pa from the date of possession.
(viii) Civil Appeals bearing no. CA 7872/2021 and CA 402/2022 were filed before the Hon’ble Supreme Court by the Appellant Association for modification of the order of NCDRC to the extent that the interest should be from the date of payment and not from the date of possession. In the Appeals notices were issued. In the Civil Appeal before the Hon’ble Supreme Court adjournment was sought by the Corporate Debtor on 11.04.2022 to place the payment plan along with counter affidavit.
(ix) The Company Petition which was filed by the Operational Creditor came for hearing before the Adjudicating Authority on 05.05.2022, on which date the Adjudicating Authority directed the matter to be listed for final arguments on 07.07.2022. The Operational Creditor filed an early hearing application in the Company Petition, on which application the matter was posted for 17.06.2022, which was again adjourned to 07.07.2022. On 07.07.2022, the matter was heard by the Adjudicating Authority and order was reserved.
(x) In the Company Petition, the Corporate Debtor filed an affidavit in reply where it expressed its inability to make the payment of the Operational Creditor. The Corporate Debtor also expressed its willingness to pay admitted Principal Amount of Rs.5,25,89,000/-. The Adjudicating Authority noticing that the Demand Notice was sent which was not replied by the Corporate Debtor and the Corporate Debtor having admitted the debt to the extent of Rs.5,25,89,000/- admitted Section9 application and imposed moratorium under Section 14(1) of the I&B Code. Aggrieved by the order dated 05.08.2022, these two Appeal have been filed.
2. We have heard Shri Abhijeet Sinha, learned counsel for the Appellant appearing in Company Appeal (AT) (Ins) No. 1172-1173 of 2022 filed by RERA and we have heard Shri Piyush Singh, learned counsel appearing for the Appellant in Company Appeal (AT) (Ins) No. 1321 of 2022. Shri Krishnendu Datta, learned senior counsel has appeared for the Operational Creditor – D. B. Corp. Ltd. Shri Aditya Gauri and Shri Amar Vivek, leanred counsel have appeared for the Resolution Professional. We have also heard Shri Neeraj Malhotra, learned senior counsel and other learned counsels who had filed different IAs in these Appeals.
3. Company Appeal (AT) (Ins) No. 1172-1173 of 2022 came for consideration before this Tribunal on 30.09.2022, on which date notices were issued in the Appeal and impugned order dated 05.08.2022 was stayed. Following order was passed on 30.09.2022:
“O R D E R
30.09.2022: Learned counsel for the Appellant submits that by the impugned order dated 05.08.2022 the Adjudicating Authority has admitted section 9 application filed by Respondent No.1 – ‘M/s D.B. Corp. Ltd.’ (Operational Creditor). It is submitted that the Section 9 proceedings were collusively initiated and because of the fact the Appellant, the Regulatory Authority, has passed orders against the real estate company – the Corporate Debtor, to avoid the consequences of said orders application under Section 9 has been filed. It is further submitted that invoices which has been filed by the Operational Creditor in support of his claim are forged invoices. Learned counsel for the Appellant submits that the Operational Creditor claims in Section 9 application that Corporate Debtor under the agreement under barter system to allocate certain flats/units to the Operational Creditor. He submits that the Regulatory Authority itself has disapproved such procedure and its process. Learned counsel for the Respondent submits that the Appellant (Regulatory Authority) has itself in certain other matters has recognized barter system.
Be that as it may, on the grounds which has been pleaded in the Appeal, we permit leave to the Appellant to file this Appeal.
Issue notice. Learned counsel for Respondent No.1 accepts notice. He prays for and is allowed three weeks’ time to file Reply.
Issue notice on Respondent No.2, who may also file reply within three weeks.
List this Appeal on 15.11.2022 along with company appeal filed with Dairy No. 39947 of 2022.
In the meantime, the order dated 05.08.2022 shall remain stayed.”
4. In Company Appeal (AT) (Ins) No. 1172-1173 of 2022 reply has been filed both by the Operational Creditor and the Corporate Debtor. In Company Appeal (AT) (Ins) No. 1321 of 2022 reply has been filed by the IRP to which rejoinder has also been filed.
5. Shri Abhijeet Sinha, learned counsel appearing for the RERA, Appellant in Company Appeal (AT) (Ins) No. 1172-1173 of 2022 submits that application filed under Section 9 by the Operational Creditor was an application filed in collusion with the Corporate Debtor so that Corporate Debtor may wriggle out from its obligation as imposed by various orders passed by RERA under 2016 Act. It is submitted that the Appellant is a Statutory Authority constituted under 2016 Act which is bound to protect and preserve rights of allottees. It is submitted that very basis of Section 9 application i.e. Barter Agreement has already been declared as unfair practices by RERA by its order dated 12.05.2022. It is submitted that there was no operational debt due against the Corporate Debtor on basis of which application under Section 9 could have been maintained by the Operational Creditor. It is submitted that under the Barter Agreements which are basis for initiation of Section 9 proceeding, the cash component has already been paid to the Operational Creditor and against the Barter Component, the Operational Creditor had claimed allotment of units. Allotment of units under Barter Agreements cannot be operational debt to enable the Operational Creditor to initiate Section 9 proceeding against the Corporate Debtor. The invoices which were filed along with the Section 9 application were all forged and fabricated invoices prepared for the purposes of the case. It is submitted that invoices are claimed to be for year 2010 to 2017, however, the invoices which are filed along with Section 9 application even of the year 2010 contains column for CGST and IGST while the Goods and Services Tax came into force only on 01.07.2017. A bare look on the invoices reveal that the invoices have been prepared after 01.07.2017 for the purposes of the case. The Operational Creditor has fabricated the invoices with the sole purpose of initiating corporate insolvency resolution process against the Corporate Debtor. It is submitted that the invoices were never relied upon while issuing Demand Notice under Section 8. The Corporate Debtor and the Operational Creditor have entered into unfair trade practice and relied on illegal agreement to initiate CIRP against the Corporate Debtor. The Operational Creditor has also ascertained its right as allottee before RERA, hence, it is not open for them to initiate CIRP claiming to be Operational Creditor against the Corporate Debtor. The proceeding under Section 9 initiated by the Operational Creditor is clear abuse of process of law. Application on the strength of Barter Agreement, as filed by the Operation Creditor, if permitted, the same will defeat the object and purpose of the I&B Code. The Adjudicating Authority failed to notice that the Operational Creditor cannot fall within the definition of Operational Creditor under Section 5 (20) of the I&B Code. It is submitted that out of list of 210 invoices filed along with the Section 9 application only one invoice dated 29.08.2019 was within three years from filing of Section 9 application, whereas all other invoices were beyond three years and were barred by time.
6. Learned counsel for the Appellant in support of Company Appeal (AT) (Ins) No. 1321 of 2022 has adopted the submission advanced by Shri Abhijeet Sinha, learned counsel appearing for RERA. It is further submitted the Appellant who are homebuyers of the real estate project plotted by Corporate Debtor have paid the amount to the Corporate Debtor between years 2010-2014 which amounts were siphoned off by the Corporate Debtor and possession of respective units was never given to the homebuyers. On the complaints filed before the NCDRC, orders were passed for refund of amount along with 9% interest. Aggrieved by part of the order by which interest was directed from the date of possession, Appeals were filed being Civil Appeals No. CA 7872/2021 and CA 402/2022, in which appeals the Hon’ble Supreme Court has issued notices. In the Civil Appeals, the Corporate Debtor appeared before the Hon’ble Supreme Court and sought adjournment to place the repayment plan, however, during the said period the Company Petition was got collusively filed by the Corporate Debtor through Operational Creditor, which was admitted on 05.08.2022. It is submitted that the Appellant is aggrieved by the order since by initiation of the CIRP, Appellant homebuyers shall neither get their amount back nor shall be able to receive possession of the allotted units. It is submitted that timing of filing of Section 9 application itself indicate that it has collusively done to benefit the Corporate Debtor and save him from discharging his statutory obligation.
7. Shri Krishnendu Datta, learned senior counsel appearing for the Operational Creditor refuting the submission of learned counsel for the Appellant submits that RERA has no locus to file the Appeal as RERA is a regulatory authority which could have no grievance against initiation of CIRP against the Corporate Debtor by the impugned order dated 05.08.2022. It is submitted that mention of CGST and IGST in the invoices prior to 01.07.2017 were due to reason that invoices were printed from a new software which contains CGST and ITST number. It is, however, submitted that with regard to invoices prior to 01.07.2017 column of CGST and IGST are nil. The Operational Creditor is a responsible newspaper and Barter Agreement is common media practice. The RERA has itself declared the Operational Creditor as allottee on the basis of Barter Agreement. It is submitted that invoices were issued in pursuance of Barter Agreement which was agreement for services rendered by the Operational Creditor and is covered within the definition of operational debt as per Section 5(20) and 5(21) of the I&B Code, the Operational Debt having arisen out of the services provided to the Corporate Debtor.
8. Learned counsel for the Resolution Professional submits that in furtherance of initiation of CIRP a public announcement was made on 12.08.2022 and homebuyers/allottees of the Corporate Debtor have filed their claims. The Interim Resolution Professional has received 1761 claims from the creditors in class i.e. allottees/ homebuyers. The IRP has also constituted the Committee of Creditors and first meeting of the Committee of Creditors has already been held on 09.09.2022.
9. Shri Neeraj Malhotra, learned senor counsel advanced submissions in I.A. No. 4406 of 2023 and I.A. No. 284-285 of 2023. In I.A. No. 284-285 of 2023, the applicant has sought impleadment and clarification of order dated 30.09.2022. In I.A. No. 4406 of 2023 applicant Hemant Kumar Soni has sought stay of imposition of penalty by RERA during pendency of Company Appeal (AT) (Ins.) No. 1172-1173 of 2022.
10. I.A. No. 4156 of 2022 has been filed by the IRP for clarification of order dated 30.09.2022 passed in Company Appeal (AT) (Ins.) No. 1172-1173 of 2022. I.A. No. 760 of 2023 has also been filed by the IRP. I.A. No. 83-84 of 2023 has been filed by one Vishwa Bandhu Sharma seeking impleadment in Company Appeal (AT) (Ins.) No. 1172-1173 of 2022. Applicant Vishwa Bandhu Sharma claims to be allottee/homebuyer in project Aakriti Aqua City.
11. We have considered the submissions of learned counsel for the parties as well as learned counsel appearing in different I.As, as noted above and perused the record. From the submissions of learned counsel for the parties following questions arise for consideration in these appeals:
1. Whether Real Estate Regulatory Authority has locus to file Company Appeal (AT) (Ins.) No. 1172-1173 of 2022 challenging the order dated 05.08.2022 under Section 61 of the I&B Code?
2. Whether Aquacity Consumer and Societies Welfare Society, Appellant in Company Appeal (AT) (Ins.) No. 1321 of 2022 has locus to file Appeal within the meaning of Section 61 of the I&B Code?
3. Whether the Corporate Debtor owed operational debt to the Operational Creditor on the basis of Barter Agreements and consequent invoices to enable the Operational Creditor to initiate proceedings under Section 9 of the I& B Code?
4. Whether the application under Section 9 filed by the Operational Creditor was filed in collusion with the Corporate Debtor to save the Corporate Debtor from carrying out its statutory obligations?
5. Whether invoices which were filed along with the Section 9 application by the Operational Creditor were manufactured and forged invoices prepared for the purposes of the case, which were not genuine invoices?
Question No. I
12. Section 61 of the I&B Code, 2016 provides for an Appeal by “any person aggrieved by the Order of the Adjudicating Authority”. Section 61, sub-Section (1) uses the expression “any person aggrieved”. Learned Counsel for the Operational Creditor has questioned the locus of the Real Estate Regulatory Authority to file an Appeal under Section 61 of the Code challenging the Impugned Order dated 05th August, 2022. The submission is that the Appellant is a Real Estate Regulatory Authority under the Real Estate Regulation and Development Act, 2016 and has only regulatory role as contained in the enactment. By Order of the Adjudicating Authority initiating ‘Corporate Insolvency Resolution Process’ against the Corporate Debtor and imposing the moratorium, Regulatory Authority cannot be held to be aggrieved since the moratorium comes into play by statutory provisions of the Code and has applicability on all proceedings covered by Section 14 of the Code.
13. Mr. Krishnendu Datta, Sr. Advocate has also in support of his submission placed reliance on various Judgments of this Tribunal and Hon’ble Supreme Court which we shall refer hereinafter.
14. There can be no dispute that moratorium as declared under Section 14 of the Code has effect on institution of suits and continuation of pending suits or proceedings against the Corporate Debtor including the execution of Judgment, Decree or Order. The consequence of moratorium is that Orders passed by RERA cannot be executed against the Corporate Debtor but only on said consequences it cannot be said that RERA can be said to be aggrieved by the declaration of moratorium. Moratorium is consequential to the initiation of proceedings under Section 9 or under Section 7 of the Code.
15. The Appellant’s case in the Appeal is that initiation of proceedings under Section 9 by the Operational Creditor is a collusive proceeding which is apparent from the fact that the Corporate Debtor admitted its debt in its affidavit of Reply and did not contest the proceedings. Several Orders were passed by RERA against the Corporate Debtor including the investigation under Section 35 of the RERA Act, 2016 and direction to deposit amount of Rs. 81 Crores in the designated account, the corporate debtor to save itself from various proceedings sought protection under the moratorium. The further case of the Appellant is that there is no operational debt on basis of which Section 9 Proceeding can be initiated. The RERA is thus aggrieved not by consequence of the moratorium but is questioning the very initiation of Section 9 proceeding which according to the Appellant is not in accord with the provisions of the Code. The Ground is that there being no operational debt and D.B. Corporation Limited being not operational creditor within meaning of IBC, the Adjudicating Authority committed jurisdictional error in admitting Section 9 Application.
16. The RERA has been constituted under Section 20 of the Real Estate Regulation and Development Act, 2016 to exercise the powers conferred on it or assigned to it under the Act. Section 32 of the Act elaborates the functions of authority for promotion of Real Estate Sector. One of the functions entrusted to the Authority is protection of interest of the allottees, promoters and real estate agents. Section 34 of the Act provides that function of the authority shall include, to register and regulate Real Estate Project and Real Estate Agent registered under the Act. Real Estate Regulatory Authority thus is statutorily entrusted to promote the real estate sector and to protect the interest of the allottees.
17. In the facts of the present case where Regulatory Authority has come up in the Appeal questioning the very maintainability of Section 9 Application and further alleging that Section 9 Proceedings are collusive proceedings between Corporate Debtor and Operational Creditor, can it be said that it has no locus to file an Appeal?
18. The obvious consequences of admission of Section 9 Application and declaration of moratorium is that all proceedings before RERA against the Corporate Debtor has to come to a grinding halt. RERA is a statutory authority under Section 20 sub-section (2). RERA is a body corporate and is entitled to sue or to be sued in its name. RERA is thus fully competent to sue in its name and it has questioned the order on grounds as enumerated in paragraph 9 of the Appeal. We make it clear that question of locus to file an Appeal as an aggrieved person and the question as to whether appeal filed by the aggrieved person is to succeed, are two different questions and the question of locus is not dependent on success of the grounds in the Appeal.
19. We may now revert to the cases which have been relied on by Learned Counsel for the Operational Creditor in support of his submission that Appellant is not aggrieved person.
20. Learned Sr. Counsel Mr. Krishnendu Datta has relied on Judgment of this Tribunal in Company Appeal (AT) Ins. No. 1194 of 2022, Securities & Exchange Board of India Vs. Rajesh Sureshchandra Sheth & Ors. which was an Appeal filed by SEBI challenging an order of admission under Section 7 of the Code filed by Operational Creditors. SEBI was opposing initiation on the ground that it has already initiated proceedings under the Corporate Debtor by order dated 29.02.2016 and has issued recovery certificate. This Tribunal held that the grounds raised by SEBI to oppose the initiation cannot be held to be sufficient grounds. In paragraph 15 of the Judgment, following has been observed:
“15. This Tribunal thus has clearly held that initiation of proceeding under IBC cannot be nullified by any order passed by SEBI. Thus, the proceedings initiated by SEBI by order dated 29.02.2016 and the Recovery Certificate issued thereunder and steps taken by the SEBI cannot be a ground to oppose the initiation of proceedings under Section 7 of IBC”
21. It is relevant to notice the observations in paragraph 15 as quoted above were observations of the Court on merits of the Appeal. In the above judgment, this Tribunal has not laid down that SEBI has no locus to file the Appeal in fact it was not even contended before the Tribunal that SEBI is not aggrieved person against the Order of initiation of CIRP Process. The above judgment thus does not help the Appellant in support of submission that RERA has no locus to file the Appeal.
22. Another judgment relied on by Learned Counsel for the Operational Creditor is “Company Appeal (AT) Ins. No. 103 of 2023, Insolvency and Bankruptcy Board of India Vs. GTL Infrastructure & Ors.” where IBBI filed an appeal challenging the order of the Adjudicating Authority dismissing Section 7 Application which was filed by the Canara Bank. This Tribunal took the view that Canara Bank had already filed an Appeal challenging the Order of the Adjudicating Authority in which notices have been issued by this Tribunal. The Appeal filed by the IBBI was held not to be maintainable. In paragraph 5 and 6 of the Judgment, following has been observed by this Tribunal:
“5. At the outset, Counsel for the Appellant has been asked as to how the Appellant Board is an aggrieved person especially when the aggrieved person (Canara Bank) has already filed the appeals i.e. CA (AT) (Ins) No. 68 & 69 of 2023. In merely requested that the present appeal may be re-notified to be heard along with aforesaid two appeals on 17.03.2023. However, from the perusal of the memorandum of appeal, we could not find the cause of concern much less the grievance of the Appellant for preferring the present appeal especially when the appeals have already been filed by the aggrieved person. In this regard, we may also refer to an order passed by this Tribunal in the case of Insolvency and Bankruptcy Board of India Vs. Wig Associates Pvt. Ltd. & Ors., 2018 SCC Online NCLAT 386, in which the Tribunal has recorded its displeasure while noticing the fact that the appeal has been filed by the board as an aggrieved person which was held to be not maintainable.
6. In our considered opinion as well, the Appellant has nothing to do with the litigation between two parties i.e. ‘Financial Creditor’ and ‘Corporate Debtor’, in order to challenge the impugned order by which the petition filed by the Financial Creditor has been dismissed for whatever reasons.”
23. It is relevant to notice that in the present case the RERA has taken various actions against the Corporate Debtor and various orders passed by RERA were to be complied by the Corporate Debtor and it was only due to continuation of CIRP Process against the Corporate Debtor that RERA could not have proceeded further to initiate compliance of its order. This Tribunal in paragraph 6 of the above judgment took the view that IBBI has nothing to do with the litigation between two parties i.e. ‘Financial Creditor’ and ‘Corporate Debtor’ whereas in the present case the RERA who had already issued various orders against the Corporate Debtor has to do with the corporate debtor and was directly involved with the enforcement of the RERA Act qua the Corporate Debtor hence the Judgment of this Tribunal in the case of IBBI (supra) is clearly distinguishable.
24. We may also notice certain orders passed by RERA before initiation of Section 9 Proceedings by the Operational Creditor before the Adjudicating Authority. RERA on various complaints received from the allottees in the year 2021 has registered proceedings against the Corporate Debtor. A show cause notice dated 09.09.2021 was issued to the promoter of the project Aakriti Aquacity under Section 7 of the 2016 RERA Act as to why allottees should not be refunded deposit amount and compensation need to be paid and why action cannot be taken to revoke the registration of the project Aquacity for noncompliance of the Orders. Reply was submitted by the Corporate Debtor in October, 2021. Investigation Report from Financial Advisor was also obtained which report mentioned that the amount received by the promoter has not been deposited in the prescribed bank account and order dated 28th January, 2022 was passed by RERA against the Corporate Debtor and its Directors Mr. Raju Soni and Mr. Hemant Kumar Soni. Further, the Adjudicating Authority issued following directions in paragraph 42 to 49 of the Order:
“42. Keeping in view the facts available on record in the case and the information provided by the appellant to the Authority from time to time, on the basis of the above discussion, this Authority comes to the conclusion that:
i. 37 orders regarding refund of deposited amount and payment of compensation have not been complied with by the appellant and 13 orders have been complied with only partially. Thus, the appellant has violated rule 18.
ii. From the date of coming into force of section 4 of the Act, 01.05.2017 till date, 70 percent of the amount received from the allottees has been received by the appellant as per section 42) clause (1 VD) of the Act PROJECT LO REAL ESTATE has not been deposited in the special bank account created for the project as per clause (1) (D) of section 4 (2) read with rule 5. As on 30th September, 2021, ln the special bank account created for the project, the amount required by section 4 (2) clause (1) (D) read rule:5 is only zero as compared to the amount of Rs 7718 lakh. Thus, the appellant has continuously contravened the provisions of this section after the commencement of section 4 of the Act.
43. In the context of the above findings, in order to protect the interests of the allottees and for the purpose of getting the project completed as soon as possible, the appellant is directed to:
I. And according to the orders of the adjudicating officer, the payment of the amount should be made to the allottees by 31.03.2022.
II. As per the provisions of section 4 (2) of section (1) (D) read rule 26 of the Act, the amount deposited less in the special account of the project, Rs 81 crore should be definitely deposited in the project account by 31.03.2022.
44. The amount deposited by the allottees and the interest and compensation payable thereon has not been paid within the time limit of 2 months after the order of the authority and the adjudicating officer. In exercise of powers under Section 38 of the Act, Shri Dhiman Narayan Shukla, (Retired District Judge) Enforcement Officer, RERA is authorized under Section 81 of the Act to determine the penal interest payable for the period of delay.
45. That the deposited amount of the allottes and the returning of interest on it and not complied the order passed in section 18, and by using the right of sub section 61 of section 38, Rs. 60 lakh on the appellant in exercise and Rs. 350 Lakhs A penalty of 350 lakhs is imposed.
46. Revocation of registration of the project in question due to non-compliance of rule 18 and noncompliance of rule 18 after the date of coming into force of rule 5 read ln section 4 (2) of section (1) (D) of the Act of registration) is also ordered to be done.
47. In the case under consideration on the point of diversion of funds received from the allottees. Since the serious doubts remain in the investigation so far, it is necessary that a thorough scrutiny of the financial records of the promoter be continued. This is also necessary because funds will be required to complete the remaining work of the project and this amount can be obtained from those sources in which the amount received from the allottees has been diverted promoter. Therefore, by Mr. the Milind Waikar, Financial Adviser, Authority will continue its investigation with regard to the financial accounts of the Promoter and the Promoter will continue to provide him with the records and information sought by him. Shri Milind Waikar, Financial Adviser will keep the Authority informed from time to time about the findings of its investigation, so that the Authority can take legal action accordingly.
48. Necessary action should be taken by the Secretary, Authority as per clause (a), (b) and (c) of section 7(4) of the Act.
49. In exercise of the power conferred by clause (d) of section 7(4) of the Act, the appellant is directed that the authority selected by the authority under section 8 for completion of the project the proper financial help will be provided.”
25. In view of the sequence and events of the facts which took place and various proceedings drawn by RERA much prior to issuance of notice under Section 8 of the Code by the Operational Creditor, we are satisfied that Appeal filed by the RERA cannot be thrown out on the ground of locus. The RERA held to be aggrieved person within the meaning of Section 61 of the Code.
26. Thus, the Question No. I has to be answered in affirmative holding that RERA has locus to file Company Appeal (AT) Ins. No. 1172-1173 of 2022.
Question No. II
27. The Appellant who has filed Company Appeal (AT) Ins. No. 1321 of 2022 is association of home buyers of a registered Real Estate Project developed by the Corporate Debtor. The Members of the Appellant were allotted units in the year 2010-14 and they were promised possession of their respective units in the year 20 14-17. Appellant association being aggrieved by the Corporate Debtor has filed the consumer complaints before the National Consumer Disputes Redressal Commission on which order was passed on 27.10.2021 directing the Corporate Debtor to refund with interest at the rate of 9% from the date of possession is handed over. The order dated 27.10.2021 was assailed by the Appellant Aqua City Consumer and Social Welfare Society by Civil Appeal No. 7872 of 2021 in so far as the direction was issued to make payment of interest from the date of possession. Learned Counsel for the Appellant has also handed over the copy of the Order of the Hon’ble Supreme Court dated 17.10.2022 passed by the Hon’ble Supreme Court in Civil Appeal No. 7872 of 2021 where the Appeals filed by the Appellant has been allowed and the direction was issued that compensation shall be payable to each of the homebuyers with 9% interest per annum from the date when deposit was made over to the Respondent. Appellant aggrieved by the Order dated 05th August, 2022 has filed the Appeal. It is not even contended by the Respondent that Appellant Aquacity Consumer and Social Welfare Society is not an aggrieved person. Appellant being association of the home-buyers of Real Estate Project who has already initiated proceedings for direction of the interest of the home-buyers is aggrieved person within the meaning of Section 61 of the Code and the Appeal filed by the Appellant cannot be dismissed on the ground of locus.
28. We thus answer Question No. II in affirmative holding that Aquacity Consumer and Social Welfare Society has a locus to file an Appeal under Section 61 of the Code against the Order dated 05th August, 2022.
Question No. III
29. Before we enter into the rival submissions of Learned Counsel for the parties, we may first notice the particulars of the operational debt as given in Part-IV of the Section 9 Application filed under Form-5. It is the case of the Operational Creditor that the Corporate Debtor entered into various Barter Agreements with the Operational Creditor which Barter Agreements were enclosed with the Section 9 Application. It is useful to extract Part-IV of the Application which is as follows:
