Nature Of Decree Depends On The Nature Of Transaction From Which The Decretal Debt Has Arisen: NCLT Mumbai Reiterates

The National Company Law Tribunal, Mumbai Bench, comprising of Shri Kishore Vemulapalli (Judicial member) and Shri Prabhat Kumar (Technical Member), while adjudicating an application filed under section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Mr. J.K Shah and Anr vs Tridhaatu Builders LLP has reiterated that nature of decree depends on the nature of transaction from which the decretal debt has arisen. The Tribunal refused to categorize the failure to return an amount advanced in lieu of a residential flat as “Operational Debt”.

Background facts

Mr. J.K. Shah (“Operational Creditor”) purchased a residential flat in the building called “Tridhaatu Arista” located in Matunga, Mumbai. Tridhaatu Builders LLP (“Corporate Debtor”) and the Operational Creditor entered into an agreement to sell dated 31.03.2019 and executed a Registered Deed of Rectification dated 25.04.2019 for 2 reserved car parking. The total consideration paid by the Operational Creditors amounted to Rs. 3,05,00,000/-. When the project was not completed by the Corporate Debtor as per the aforesaid agreements, the Operational Creditor filed a complaint before the RERA Maharashtra for refund of the paid amount along with the accrued interest.

However, the parties amicably settled the dispute by entering into Consent Terms dated 06.08.2021. These Consent Terms were placed before RERA Maharashtra and on the basis of this, RERA Maharashtra disposed of the complaint as settled between the parties vide an order dated 26.08.2021.

In pursuance of the Consent Terms, the Corporate Debtor issued a cheque amounting to Rs 2,16,06,320/- in discharge of the debt for payment of Decretal amount. However, the cheque was not honoured upon presentation and was returned by the banker of the Operational Creditor with the remark “Funds Insufficient” on 13.01.2022.

It was alleged by the Operational Creditor that even after repeated reminders, the Corporate Debtor failed to return the outstanding amount which constrained the Operational Creditor to issue a Demand Notice dated 15.01.2022.

On the Contrary, it was submitted by the Corporate Debtor that the debt advanced by the Operational Creditor does not fall within the ambit of Operational Debt and that the Operational Creditor needs to approach RERA Maharashtra in the event of a default of any of the Consent Terms.

Findings of the Tribunal

The Tribunal observed that the Consent Terms do not give rise to any “Operational Debt” as the debt arose due to the failure of the Corporate Debtor to deliver a flat to the Operational Creditor. The Corporate Debtor was required to repay the amount paid by the Operational Creditor in terms of the consent terms filed before RERA Maharashtra. The Tribunal observed that such debt “does not arise from the provision of goods or services or employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority.”

The Tribunal held that the nature of decree depends on the nature of transaction from which the decretal debt has arisen. Reliance was placed on the decision of the Madras High Court in Cholamandalam Investment and Finance Company Ltd. V. Navrang Roadlines Private Limited (O.S.A (CAD) no. 115 of 2022 wherein it was held that the nature of the underlying claim of the creditor, would determine the categorization of the amount payable under the final decree passed adjudication of the same claim. The Tribunal observed that since the claimed amount is not in the nature of operational debt, the amount claimed in default in the petition cannot be held as “Operational Debt”

With the aforesaid observations, the Tribunal dismissed the petition.

Case:

Mr. J.K Shah and Anr vs Tridhaatu Builders LLP

Case No.

CP (IB) No.388/MB-IV/2022

Appearance for the Applicant

Adv. Prashant Chande

Counsel for the Respondent

Adv. Ruchi Magoo a/w Adv. Anshuman Jagtap and Adv. Dhiren Durante i/b Lexicon Law Partners

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