Moratorium U/S 14 Of IBC Doesn't Exempt Promoter From Complying With Mandatory Pre-Deposit Required U/S 43(5) Of RERA: Delhi High Court

Background Facts

Umang Realtech Pvt. Ltd. (the Appellant) filed the appeal under Section 58 of the RERA, challenging the Order dated 04.03.2024 passed by the Real Estate Appellate Tribunal, dismissing the application filed by the appellant by which the appellant had offered the attachment of a flat in lieu of the requisite pre-deposit as mandated under Section 43(5) of the RERA.

Submissions

Counsel for the appellant submitted that in terms of the Order dated 20.08.2019 passed by the National Company Law Tribunal, New Delhi in Rachna Singh & Anr. vs. Umang Realtech Pvt. Ltd., while admitting the application filed under Section 7 of the IBC, a moratorium had been granted for any claim against the appellant company. Therefore, insisting on a pre-deposit under Section 43(5) of the RERA would be contrary to the spirit of the order passed by the NCLT.

Further, the appeal, having been filed by the Interim Resolution Professional (IRP), cannot be considered as an appeal filed by a 'Promoter' and, therefore, the rigours of Section 43(5) of the RERA would not be applicable.

It was also submitted that the spirit of Section 43(5) of the RERA is fulfilled by the appellant offering a security against the pre-deposit requirement.

Counsel for the respondents submitted that the order dated 20.08.2019 had been explained by the National Company Law Appellate Tribunal by way of its Order dated 04.02.2020 in Flat Buyers Association Winter Hills – 77, Gurgaon vs. Umang Realtech Pvt. Ltd. through IRP & Ors. The NCLAT clarified that the insolvency proceedings against the appellant were confined to the particular development project at Gurugram and it shall have no effect on the other projects being carried out by the appellant. Therefore, the appellant cannot seek exemption from complying with section 43(5) of the RERA in view of the Judgment of the Supreme Court in New Tech Promoters and Developers Pvt. Ltd. vs. State of Uttar Pradesh & Ors.

Observations

The court noted Section 43(5) of RERA, which reads as under:

“Any person aggrieved by any direction or decision or order made by the Authority or by an adjudicating officer under this Act may prefer an appeal before the Appellate Tribunal having jurisdiction over the matter: Provided that where a promoter files an appeal with the Appellate Tribunal, it shall not be entertained, without the promoter first having deposited with the Appellate Tribunal at least thirty per cent. of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard.”

The court referred to New Tech Promoters and Developers Pvt. Ltd., where the provision was upheld and it was observed that the legislature in its wisdom has intended to ensure that the money which has been computed by the Authority at least must be safeguarded if the promoter intends to prefer an appeal before the Tribunal.

The Court noted that the NCLAT has clarified the scope of the moratorium in the following terms:

“Corporate Insolvency Resolution Process against a real estate company (Corporate Debtor) is limited to a project as per approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans approved.”

The court held that the appellant, therefore, cannot seek any benefit of the moratorium that has been issued by the NCLT for seeking an exemption from making the pre-deposit in terms of Section 43(5) of the RERA.

Further, the court observed that the IRP is representing the company itself, that is, the 'Promoter' and therefore, is to be considered as a 'Promoter' for the purposes of the appeal and the application of provisions of Section 43(5) of the RERA.

The court went on to hold that section 43(5) does not leave any scope for granting an exemption from making the pre-deposit and instead accepting a security.

The court dismissed the appeal. It granted liberty to the appellant to seek relief before the Real Estate Appellate Tribunal.

Case Title: Umang Realtech Pvt. Ltd. vs. Mrs Daphne Reita Rajan Sharma & Anr.

Case Number: RERA APPEAL 7/2024

Date of Judgment: 05.12.2024