Wave Megacity Centre Private Limited vs. Rakesh Taneja & Ors
Company Appeal (AT) (Insolvency) No. 918 of 2022
Facts:
1.Lease Deed dated 02.09.2011 was signed between Noida Authority and Wave Megacity Ltd. in respect of Plot No.CC001, admeasuring 618,952.75 sq. mtrs. situated at Sector 25A and Sector 32, NOIDA for a period of 90 years. Wave Megacity paid payment of 10% of the total consideration, i.e., Rs.662.29 Crores. Wave Megacity could not complete the construction of the Project and failed to repay the remaining 90% of the premium amount.
2.After the allotment, the Appellant launched multiple Residential and commercial Projects on the Project land in 2011-12 in the parent name “Wave Mega City Centre the possession of which was promised to be handed over to the Homebuyers by 2016, for which Appellant had taken 90% consideration from majority of Homebuyers before 2016 itself. The Appellant did not complete the construction nor handed over the possession. From 2017 onwards, the Appellant stopped constructing the Project altogether.
3.State Government of Uttar Pradesh announced the Project Settlement Policy (“PSP”) in the year 2016 vide Government Order dated 15.12.2016 allowing developers/ builders to return Project land if it was unable to construct upon and Under the said Project Settlement Policy, Wave Megacity surrendered the area of 454,131.62 sq. mtrs. The remaining area of 164,821.13 sq. mtrs was allotted to Wave Megacity under certain terms and conditions. On 26.02.2020, Noida Authority called upon the Wave Megacity to make payment of Rs.2717,53,65,192/-, which included balance premium, ground rent etc. The Noida Authority on 17.07.2020 requested Wave Megacity to pay different sums, which included demand of Rs.32,47,09,936/- towards ground rent for 56,000 sq. mtrs of land.
4.Wave challenged the notices before Principal Secretary, Infrastructure and Industrial Development, Government of Uttar Pradesh vide Appeal, dated 31.07.2020. The State Government issued an order dated 17.11.2020 directing the Noida Authority to take a decision regarding its dues. Pursuant to the letter dated 17.11.2020, fresh demand notice dated 24.12.2020 was issued, demanding an amount of Rs.2519,33,47,546/-. The demand made by Noida Authority was also challenged by means of writ petition before Allahabad High Court by Wave Megacity Centre Homebuyers Association, which petition is claimed to be still pending.
5.Application under Section 10 of the Code was filed, several intervention application was filed in the main by the Homebuyers and the Noida Authority, raising objection to the main Company Petition. An IA No.2026 of 2021 was filed by Rakesh Taneja & 32 Ors. Applicants under Section 65 of the Code praying to reject the Application filed under Section 10 of the Code. All application was heard and AA rejected the section 10 application. Appellant is challenging the order
Issue: Whether AA erred in rejecting the application?
Arguments:
Appellant:
1.Counsel for the Appellant challenging the impugned order submits that Adjudicating Authority committed error in rejecting Section 10 Application filed by the Corporate Debtor, which was filed on the ground of default of the Corporate Debtor in paying the dues of Noida Authority and the pre-conditions as mentioned in Section 10 of the Code, having been fulfilled, Section 10 Application ought to have been admitted.
2.It was submitted that debts of the Noida Authority have been reflected in the Books of account of the Appellant and is also proved by the demand notices dated 26.02.2022 and notices issued thereafter. The Adjudicating Authority has nowhere examined the very existence of debt and default in the impugned order. Pendency of litigations against the Corporate Debtor in different Forums do not have any adverse effect on maintainability of Section 10 Application.
3.Counsel submitted that Even if, any dispute is pending with regard to quantum of debt, the same is not bar for filing Section 10 Application. Under Section 10, the Adjudicating Authority is only required to examine the existence of subsisting debt and default and Application being complete, it was required to be admitted. It was further submitted that resignation of Directors of the Corporate Debtor is of no consequence to commencement of the CIRP under Section 10 of the Code. The directions issued under Section 210(2) of the Companies Act for investigation is without following due process. The Application was not barred by Section 10A of the Code, since demand notices were issued prior to 25.03.2020.
Respondents:
1.Counsel appearing for the Noida Authority refuting the submissions of the Counsel for the Appellant submits that the Application under Section 10 filed by the Appellant was barred by Section 10A of the Code. It is submitted that after order passed by the State Government under Section 41 of the Uttar Pradesh Urban Planning and Development Act, 1973 vide order dated 17.11.2020, the Noida Authority revised the payment and final demand notice was issued on 24.12.2020. The final demand notice being dated 24.12.2020, which is during the prohibited period as per Section 10A, no Application under Section 10 could have been filed by the Appellant. The proceedings under Section 10 being proceeding in rem, both Financial Creditor and Operational Creditor can object to the very admission of the Application.
2.Counsel for Homebuyers Association submit that Appellant, who had launched multiple residential/ commercial project in the year 2012 for which possession were to be handed over by 2016, failed to handover the possession. The Appellant siphoned off huge amount from the Homebuyers and utilized the monies received from the Homebuyers for other purposes. The wrongful malpractices were adopted by the Appellant. Several Projects launched by the Appellant are incomplete. The Application under Section 10 was filed with fraudulent intent and the purpose for filing the Application was to save the Appellant from liabilities and prosecution.
3.It is submitted that Application under Section 10 is barred by Section 10A. It is further submitted that malicious intent of the Appellant is evident from the fact that the Directors of the Appellant Manpreet Singh Chadha and Charanjeet Singh, who were continuing from the very inception of the Corporate Debtor, have suddenly resigned before filing Section 10 Application
Decision: AA does not erred in passing the order.
Rationale:
1.NCLAT noted that The resignation of Directors few months before filing of Section 10 Application especially Manpreet Singh Chaddha, who was Director from day 1 and claiming dues as Financial Creditor in Section 10. Application fully proves the malicious intention of the Corporate Debtor. There is no doubt that 90% amount from the Homebuyers were received, which is claimed to be Rs.1400 crores and the Appellant has left most of the Project unfinished, depriving possession thereof to Homebuyers speaks for itself.
2.It held that facts brought on record and sequence of events indicate that dominant purpose and object of filing Section 10 Application was to save the Corporate Debtor from liabilities, responsibilities and prosecution. As per the pleadings, the possession of the units to the Homebuyers were to be handed over by 2016 and 90% of the amount from all the Homebuyers were realised before 2016. Filing of the Application under Section 10 took place in March 2021, which indicate that Application was filed with malicious purpose other than resolution of the Corporate Debtor.
3.In event CIRP is initiated by a corporate applicant fraudulently with malicious intent for any purpose other than the resolution of insolvency, holding it that it is obligatory for the Adjudicating Authority to admit Section 10 Application, will be contrary to the statutory scheme under Section 65. In event conditions under Section 65 are fulfilled, Section 10 Application can be rejected, even if debt and default is proved. Thus, Section 65 has to be read as enabling provision to reject an application even on proving of debt and default Section 10 Application is not to be obligatorily admitted.
Order:
