RERA being an Aggrieved Person u/s 61 of IBC has Locus Appeal Against CIRP Initiation Order: NCLAT

The National Company Law Appellate Tribunal ('NCLAT'), New Delhi Bench has held that the Real Estate Regulatory Authority (RERA) being an aggrieved person under section 61 of IBC has locus appeal against the CIRP initiation order.

The appellant challenged the order by which the Adjudicating Authority (National Company Law Tribunal), admitted the Section 9 application filed by M/s D. B. Corp. Ltd., the Operational Creditor. The Appellant in Company Appeal (AT) is the Regulatory Authority constituted under Section 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, in 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 under Section 35 of the RERA Act, 2016 to investigate 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. The order passed by the RERA was challenged by the Corporate Debtor before the RERA Appellate Authority, which directed the Corporate Debtor to make a 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 under Section 8 of the RERA Act, 2016.

Demand Notice under Section 8 dated 13.01.2022 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.

The two-member bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member observed 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.

The Court held that the 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 based on which unpaid dues any proceedings under Section 9 can be initiated.

The Court allowed the appeal and set aside the Order admitting the Section 9 Application.

To Read the full text of the Order CLICK HERE

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