Homebuyer Who Subrogated All Rights In Favour Of Bank Cannot Be Treated As Financial Creditor Under IBC, Says NCLT Allahabad [Read Order]

The Allahabad bench of National Company Law Tribunal has held that a homebuyer who subrogated all his rights in favour of the bank at the time of taking loan cannot be treated as a financial creditor under the Insolvency and Bankruptcy Code, 2016.

 A bench of Saroj Rajware and V P Singh said the petition filed by the homebuyer for initiating Corporate Insolvency Resolution Process is not maintainable as the agreement showed commutation of rights in favour of the bank.

 The Tribunal referred to Tripartite agreement which said that in the event of occurrence of default under the Loan Agreement which would result in the cancellation of the Allotment as a consequence thereof and/or for any reason whatsoever if the allotment is cancelled , any amount is payble to the Borrower in the event of cancellation in favour of the bank (HDFC, in the instant case).

 The agreement further showed that it was agreed between the parties that payment made by the Builder to the bank under this clause shall amount to a valid discharge of the Builder of its obligation to pay the Borrower the cancellation amount.

 "…a perusal of various clauses of the Tripartite Agreement …demonstrates that the applicant/ allottee assigned/ subrogated all its rights alleged to have been created in its favour by the Supplementary Agreement in favour of the HDFC Bank. There is no liability for the Corporate Debtor to pay the cancellation amount to the applicant. In the circumstances the applicant cannot be treated as financial Creditor, thus petition U/S 9 of IBC is not maintainable," said the Tribunal.

"As the applicant subrogated all its rights in favour of the HDFC Bank, therefore he cannot be treated as a financial creditor," it said while rejecting the petition.

 In the instant case, Ajay Walia, a resident of Gurgaon had moved NCLT praying for initiation of Corporate Insolvency Resolution Process against Sunworld Residency Private Limited, the corporate debtor.

Walia had booked an apartment in Sunworld Residency's project named 'Sunworld Arista' located in Noida, Uttar Pradesh for approximately Rs 1.36 crore in November 2014.

 The very day, he also agreed to invest in the Apartment under the housing loan scheme with an option to cancel the purchase in 24 months from the date of disbursement of the bank loan amount to Corporate Debtor.

 As per the terms and conditions, the financial creditor was not supposed to pay pre-EMI interest on loan and the same was to be taken care of by the builder.

 A tripartite agreement was executed between Walia, Sunworld and HDFC Bank Limited, which was represented before the Tribunal by advocate Pranjal Mehrotra.

 The Tribunal was informed that the supplementary agreement provided that in case Petitioner elects to cancel his booking after the Lock-in Period, he must send a written notice to corporate debtor who had promised to refund the entire booking amount of Rs. 11,51,15, which is 10% of the basic sale price, with an additional assured return of Rs. 7,76,999 totaling to Rs. 19,28,157 to within a period of 30 days after completion of the Lock-in Period.

 On October 25, 2016, Walia sent a notice to Sunworld to cancel his booking while also asking that he be paid his dues and that the entire outstanding loan amount payable to HDFC be settled.

 The Tribunal was informed further that pursuant to the legal notice, Sunworld paid eight EMIs until August, 2017 after which it did not pay any EMI and the bank is still withdrawing EMIs through ECS from his (financial creditor) bank account.

 "Corporate Debtor has defaulted on the last Four EMIs which were paid to HDFC by applicant. More than 12 months have lapsed, but Corporate Debtor has neither paid to Applicant his lawful dues under the supplementary agreement as raised in the duly and timely issued Cancellation Notice dated October 25, 2016, nor has corporate debtor fully and finally settled all outstanding amounts payable to HDFC, till date," submitted Walia.

In response, Sunworld objected to filing of the petition saying Walia was not a Financial Creditor as per IBC, 20216 and that the Tribunal had no jurisdiction to entertain the present Petition since petitioner should have first exhausted the remedy of mutual discussions and Arbitration as per term and conditions of the Agreement.

The Tribunal noted that a Financial creditor as defined in Section 5(7) of the IBC means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to.

 The Tribunal then referred to the tripartite agreement between the parties in the instant case to note that the applicant/ allottee had assigned/subrogated all its rights alleged to have been created in its favour by the Supplementary Agreement in favour of the HDFC Bank.

 The Tribunal, however, granted liberty to the petitioner to file claim for the refund of due amount on exercise of the option of cancellation as per the supplementary agreement before appropriate forum.

Read the Order Here