An allottee who has lost trust in Management is entitled to seek resolution through CIRP : NCLAT [Read Order]
The Tribunal concluded that the Agnihotri and Jain groups, who were involved in the management that caused the protracted delay, had totally lost the trust of the homebuyers
NCLAT – CIRP – IBC 2016 – taxscan
NCLAT – CIRP – IBC 2016 – taxscan
The National Company Law Appellate Tribunal (NCLAT) have upheld the admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Pushp Ratna Realty Pvt. Ltd and held that an allottee who has lost trust in the management is entitled to seek resolution through the Corporate Insolvency Resolution Process (CIRP).
M/s Jayshree Agnihotri and Ashok Kumar Jain challenged the Adjudicating Authority's ruling dated 16.10.2024 in appeals filed under Section 61 of the Insolvency and Bankruptcy Code, 2016. By the contested order dated 16.10.2024, NCLT started a CIRP against Pushp Ratna Realty Pvt. Ltd. and accepted a Section 7 application submitted by homebuyers.
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The dispute arose from a Memorandum of Understanding (MoU) dated 14.09.2009 between Rajeev Agnihotri and Jayshree Agnihotri (the Agnihotri group), Ashok Jain (the Jain group), and Pushp Ratna Realty Pvt. Ltd. The Agnihotri group owned land in Khajrana, Indore, and planned to develop a township with assistance from the Jain group, who agreed to arrange funds and oversee construction. Both groups were to appoint two directors each, and shareholding in the company was to be divided equally.
Following the debut of the "Lush by Pushp Ratna" project, 77 of 140 apartments were sold to customers. An assignment letter was given to each buyer, stating that the apartments had to be built and delivered within 30 months. Conflicts between the two groups then developed. The Agnihotri group refuted the Jain group's claim that the Memorandum of Understanding was canceled on September 26, 2011. The Additional District Judge granted the Agnihotri group's request for interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, after they had started arbitration procedures. The cancellation agreement was deemed a sham by the Madhya Pradesh High Court.
Homebuyers, meanwhile, submitted a Section 7 application to the NCLT. The application was withdrawn due to limitations. They submitted a new application under Section 7. After determining that the Corporate Debtor had defaulted by not turning over possession within the prearranged time frame, the NCLT accepted this application on October 16, 2024. Jayshree Agnihotri offered to settle the obligations in full when she filed an I.A. The NCLT determined that the application was within the allotted time and rejected the offer.
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The appellant's attorney argued that the homebuyers' initial Section 7 petition was precluded by limitation. To get around the limitation bar, the Jain group sent fake allottees backdated acknowledgment letters, which were used in the ensuing petition. Since the allotment letters from 28.03.2014 to 15.11.2016 were past due, the appellant contended that this was an attempt to get around the three-year statute of limitations.
The respondent's attorney argued that the argument based on limitation was without merit. To demonstrate that they were legitimate allottees and that their Section 7 application was submitted within the allotted time, the homebuyers submitted audited balance sheets and balance confirmation letters. The default, they contended, happened 30 months following the date of each allotment letter.
The New Dehi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) examined the Corporate Debtor's audited balance sheet dated 31.03.2020. It found that balance sheet mentioned “Advances from customers against flat booking”. This proved that the allottees had paid advances, which the Corporate Debtor recorded as 'other current liability'.
The Tribunal discovered that the Corporate Debtor acknowledged the debt in a balance confirmation letter sent to the Respondent-Homebuyers on November 9, 2021. It concluded that the obligation indicated in the 2020 audited balance sheet was legitimately acknowledged in this letter. As a result, the Section 7 application submitted on May 22, 2024, fell inside the three-year statute of limitations. The Tribunal determined that the second petition was not barred by the earlier petition's withdrawal on April 25, 2024.
The Tribunal noted that on November 19, 2024, the appellant, Jayshree Agnihotri, had made a settlement proposal in which she offered to either finish the project within 18 months or pay the full amount of the homebuyers' acknowledged claims without a haircut.
The Tribunal concluded that the Agnihotri and Jain groups, who were involved in the management that caused the protracted delay, had totally lost the trust of the homebuyers. It concluded that a case of debt and default was evident and supported. For more than ten years, the corporate debtor was unable to provide the apartments. Thus, the Tribunal maintained the Adjudicating Authority's decision to accept the Section 7 application.
To Read the full text of the Order CLICK HERE
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