NCLT New Delhi Initiates Insolvency Proceedings Against Revital Reality Private Limited For Financial Debt And Default

The bench noted:

“…it is clear that the applicants are Financial Creditors and the debt owed to them by the Corporate Debtor is a Financial Debt, and there has been a default, as stipulated in Sections 3(12), 5(7) and Section 5(8) of the IBC”

Brief Facts:

Mr Manish Aneja, a Financial Creditors, approached the National Company Law Tribunal Court (NCLT) under Section 7 of the Insolvency and Bankruptcy Code, 2016 and sought to initiate a Corporate Insolvency Resolution Process (CIRP) against M/s Revital Reality Private Limited, (“Corporate Debtor”). The petition was filed on the grounds of defaulting on a payment of Rs. 31,22,62,345/-. The Financial Creditors, initially 147 unit-holders of a real estate project named 'Basera,' booked residential units under the Affordable Group Housing Policy 2013. The Corporate Debtor failed to deliver possession of the units within the stipulated time frame. The Financial Creditors proposed Gaurav Katiyar as the Interim Resolution Professional.

The Financial Creditors contended that they fulfilled their obligations by making payments according to the agreement but the Corporate Debtor failed to deliver possession as per the agreed terms. They argued that the default fell within the purview of Section 7 of the IBC and that the delay cannot be excused by force majeure events. The Financial Creditors argued that the Corporate Debtor failed to provide relevant documentation to support their claims and that the delay in offering possession was not solely due to force majeure events but also due to mismanagement.

On the other hand, the Corporate Debtor argued that the petition inaccurately represented the number of allottees involved and misinterpreted the terms of the agreement regarding the default period. It contended that the delay in possession was due to force majeure events beyond its control, such as a blanket stay on construction activities in the NCR region and the COVID-19 pandemic. The Corporate Debtor maintained that it offered alternative units to buyers, and the project was near completion. It also argued that the possession was subject to the receipt of an Occupancy Certificate (OC), which it did not receive, hence no default occurred.

Observations by the NCLT:

To determine whether the petition aligns with the provisions of Section 7 of the IBC, the NCLT examined whether there existed a debt owed to the Financial Creditor and if there was a default concerning such debt.

The proviso to Section 7 outlines the minimum threshold limit for Financial Creditors who are allottees under a real estate project. It states that such an application must be filed jointly by not less than one hundred of such allottees or not less than ten per cent of the total number of allottees, whichever is less.

The NCLT noted that the petition was initially filed by 172 allottees holding 147 units. However, certain allottees later withdrew their names due to settlements with the Corporate Debtor. Despite contentions from the Corporate Debtor regarding the portrayal of co-allottees, the NCLT observed that the total number of allottees, even considering the unit-holders, exceeded the minimum threshold of 100 allottees as required by Section 7 of the IBC.

Furthermore, the NCLT examined the contractual agreements between the Financial Creditors and the Corporate Debtor. It found that the Financial Creditors made payments to the Corporate Debtor as per the agreements which substantiated the existence of a debt.

Regarding the default, the Corporate Debtor argued that the possession was not yet become due as it was contingent upon receiving the Occupancy Certificate. However, the NCLT found this argument untenable and held that such a clause cannot be used to indefinitely delay possession. It held that the Corporate Debtor's failure to obtain the Occupancy Certificate within the stipulated time indicated a deficiency in services and confirmed the default.

The Corporate Debtor also claimed that the default occurred during the excluded period under Section 10A of the IBC. However, the NCLT found that even considering any grace period mentioned in the agreement, the default occurred before the excluded period and did not solely fall within it.

Therefore, the NCLT admitted the petition filed by the Financial Creditors and initiated CIRP against the Corporate Debtor. Additionally, Gaurav Katiyar was appointed as the Interim Resolution Professional, and a moratorium was declared in accordance with Section 14 of the IBC.

Case Title:Manish Aneja & Ors. Vs M/S Revital Reality Private Limited

Case Number: COMPANY PETITION IB (IBC) NO. 657/ND/2021

Advocate for the Applicant: Mr Piyush Singh, Mr Akshay Srivastava, Mr Vivek Kumar, Mr Jayant Upadhyay, Advs.

Advocate for the Respondent: Mr Ishan Dewan, Mr V. Siddharth, Ms Gunjan Arora, Mr Amritesh Krishna, Ms Ayushi Mishra, Advs.

Date of Judgment: 04.06.2024

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