National Company Law Appellate Tribunal rules in housing society maintenance row
The Appellant Tribunal said the amount raised from allottees under real estate project should be deemed to be an amount
National Company Law Appellate Tribunal rules in housing society maintenance row The Appellant Tribunal said the amount raised from allottees under real estate project should be deemed to be an amount having the commercial effect of a borrowing The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed against the order passed by the National Company Law Tribunal...
National Company Law Appellate Tribunal rules in housing society maintenance row
The Appellant Tribunal said the amount raised from allottees under real estate project should be deemed to be an amount having the commercial effect of a borrowing
The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed against the order passed by the National Company Law Tribunal (NCLT) at Kolkata Bench, which admitted an application u/S 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the Corporate Debtor.
The Principal Bench of the National Company Law Appellate Tribunal at New Delhi, comprising of Justice A.I.S. Cheema and Mr V. P. Singh heard the matter titled Bhaskar Biswas v Avaani Oxford Owners' Association And Ors.
The facts of the case are that a sale agreement was executed between the Developer – 'M/s Avaani Projects and Infrastructure Ltd' and the main landowner 'M/s Electrical Manufacturing Company Ltd' and the Corporate Debtor as Maintenance Company were to render common service and upkeep till the association/society of the flat owners was formed. The Appellant is the Suspended Director of the Corporate Debtor – Oxford Facilities Management, which worked as the Maintenance Company and is the Subsidiary Company of the Developer Company. The amount claimed to be in default were deposits made by flat owners with the Developer Company, when the flat owners executed the agreements. The amounts were deposited by the flat owners towards maintenance and sinking fund with the Developer and subsequently transferred to the present Corporate Debtor
The Appellant claimed that a separate Corporate Insolvency Resolution Process (CIRP) u/S 7 of IBC against the Developer Company is pending and the claims against the Corporate Debtor were raised therein which led to the filing of application u/S 7 of IBC against the Corporate Debtor as well. The Appellant submitted that the Developer - 'M/s Avaani Projects and Infrastructure Ltd' proposed to construct 'Avani Oxford' a residential complex at Kolkata and thus, the sinking and maintenance fund were created. It was contended by the Appellant that the amount was in the nature of a deposit for being used for maintenance and thus, it was not a 'Financial Debt' and this said claim in the CIRP should have been pursued against the Developer, which makes this application not maintainable.
The Respondent – Financial Creditor submitted that the dispute regarding the 'Financial Debt' was not raised by the Corporate Debtor before the National Company Law Tribunal. The Respondent clarified that it was not a case that the same amount was being claimed in two proceedings and that the Respondent had informed the Tribunal that they would be withdrawing the deposit claim filed in the CIRP against the Developer. The Respondent further relied on the Balance Sheets of the Corporate Debtor to submit that the debt of the Financial Creditor was admitted in the Balance Sheets for the years from 2016 to 2018.
The bench after going through the submissions observed that the Corporate Debtor was to look after the maintenance till three years of the Deed of Conveyance by the respective purchasers with the Developer and Maintenance Company or so soon after completion of construction of Phase II of Avani Oxford whichever was later. It further observed that it had been admitted that the amounts were collected by the Developer and kept with its subsidiary, the Corporate Debtor, for the purpose of maintenance till the association/society or holding organization gets established to hand over the amounts to the body of the flat owners.
The bench while considering whether the amount was 'Financial Debt' or not, referred to Section 5(8)(f) Explanation of the IBC, which made it clear that any amount raised from an allottee under a real estate project should be deemed to be an amount having the commercial effect of a borrowing. Therefore, the bench concluded there was 'Financial Debt' due and in default of amount more than threshold stated in Section 4 of the IBC and thus, dismissed this appeal.