NCLAT New Delhi: RERA Has Locus To Appeal Against CIRP Initiation Order And Is An “Aggrieved Person” U/S 61 Of IBC
The National Company Law Appellate Tribunal ('NCLAT'), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has held that the Real Estate Regulatory Authority ('RERA') has locus to challenge Corporate Insolvency Resolution Process ('CIRP') initiation Order in Real Estate Insolvency in appeal under Section 61 of Insolvency and Bankruptcy...
The National Company Law Appellate Tribunal ('NCLAT'), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has held that the Real Estate Regulatory Authority ('RERA') has locus to challenge Corporate Insolvency Resolution Process ('CIRP') initiation Order in Real Estate Insolvency in appeal under Section 61 of Insolvency and Bankruptcy Code, 2016 ('IBC') before NCLAT.
Background Facts
AG8 Ventures Ltd. ('Corporate Debtor') had obtained registration of 11 real estate projects from the RERA, Madhya Pradesh. To carry out extensive advertising and marketing campaigns for its projects, the Corporate Debtor had engaged with D.B. Corp Ltd. ('Operational Creditor'). Barter Agreements i.e. cash component and Barter component for consideration were entered upon between the Corporate Debtor and Operational Debtor with the Barter Component including allotment of units to be transferred in favor of the Operational Creditor.
Numerous complaints were received by RERA from the Corporate Debtor's allottees leading to various orders for refund of allotee amounts. Further, an order on 08.01.2022 found the Corporate Debtor guilty of fund diversion and failure to maintain the designated account, leading to the revocation of the 'Aakriti Aquacity' project registration. Further, orders were also passed revoking the registration of 'Aakriti Business Arcade' and instructing the appointment of an agency for project completion under Section 8 of the RERA Act, 2016.
On 05.08.2022, NCLT Indore admitted the CIRP application filed by the Operational Creditor under Section 9 of IBC claiming a default of Rs.10.77 crores with interest as per the Barter Agreements.
RERA, Interim Resolution Professional and Aquacity Consumer and Societies Welfare Society an association of 74 homebuyers have challenged the NCLT Indore's CIRP admission order.
Contentions of the Parties:
RERA contended that the CIRP was collusively filed with the Corporate Debtor to evade obligations set by RERA's orders.
The Operational Creditor argued that RERA has no locus to file the Appeal as RERA is a regulatory authority that could have no grievance against the NCLT Indore's order initiating CIRP against the Corporate Debtor.
NCLAT Verdict:
The NCLAT New Delhi allowed the appeal and held that RERA is a statutory authority under the Section 20 sub-section and as a body corporate is entitled to sue or to be sued in its name. The question of locus to file an Appeal under Section 61 of IBC as an aggrieved person and the question as to whether the appeal filed by the aggrieved person is to succeed, are two different questions and the question of locus is not dependent on the success of the grounds in the Appeal.
The Appellate Tribunal also highlighted the provision Section 61 of the IBC which 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”.
Further, it observed that presently, RERA has taken various actions against the Corporate Debtor by passing various orders and the same were to be complied with by the Corporate Debtor and it was only due to the continuation of CIRP against the Corporate Debtor that RERA could not have proceeded further to initiate compliance of its order.
It highlighted that the NCLAT's judgment of IBBI v. GTL Infrastructure & Ors., is distinguishable as it held that IBBI has nothing to do with the litigation between two parties i.e. Financial Creditor and Corporate Debtor whereas presently, 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.
It also pointed out that Aquacity Consumer and Social Welfare Society is an association of the home-buyers of Real Estate Projects and is an 'aggrieved person' under Section 61 of IBC with the locus to file an Appeal.
The NCLAT concluded that RERA had issued the orders before the issuance of the Demand Notice and thus, RERA has the locus to be an aggrieved person within the meaning of Section 61 of the Code and file an appeal.
Case Title: Real Estate Regulatory Authority vs. D.B. Corp Ltd. & Anr.
Case No.: Company Appeal (AT) (Insolvency) No.1172-1173 of 2022
Counsel for the Appellant: Mr. Abhijeet Sinha, Mr. Aditya Shukla, Ms. Heena Kochar, Mr. Anuj Tiwari, Mr. Swankit Nanda, Mr. Prakhar Shukla, Advocates.
Counsel for the Respondent: Mr. Krishnendu Datta, Sr. Advocate, Mr. Ashish Verma, Mr. Rahul Gupta, Ms. Salonee Keshwani, Advocates for R-1. Mr. Aditya Gauri, Mr. Amar Vivek, Advocates for RP. Mr. Keshav Sharma, Mr. Gulshan Vardhan, Mr. Mohit Singh, Mr. Praveen Agnihotri, Advocates for Intervenor. Mr. Abhishek Anand, Ms. Kashish Rehan, Advocates for Intervenor. Mr. Neeraj Malhotra, Sr. Advocate for Promoters.