NCLAT: Allottee Cannot Be Considered Financial Creditor When Allotted Unit Is Cancelled At Their Request
Pranav B Prem
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) New Delhi bench, comprising Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member), has held that an allottee of a unit cannot be considered a financial creditor if the allotted unit was canceled at their request and the loan taken to purchase the flat was settled with the lending bank.
Case Background
The case involved an appeal by Gaurav Jindal (Appellant), who was initially allotted Flat No.C-103 upon payment of Rs. 29 lakhs on 04.06.2015. The entire amount was paid by UCO Bank to the corporate debtor through a loan taken by the Appellant. However, on 03.02.2018, the Appellant requested the corporate debtor to cancel the allotment and clear the bank loan amount. Consequently, the bank initiated proceedings against the Appellant before the Debt Recovery Tribunal (DRT). Subsequently, the Appellant also filed a complaint before the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) on 02.03.2019. On 05.08.2019, the UP RERA issued a decree against the corporate debtor for payment of outstanding amounts along with interest. Later, in 2020, the Appellant reached a settlement with the bank, clearing his dues by paying Rs. 17 lakhs as full and final settlement. Following this, the bank withdrew OA No. 617 of 2018, which had been filed against the Appellant. Meanwhile, by an order dated 22.03.2021, the Corporate Insolvency Resolution Process (CIRP) commenced against the Corporate Debtor.
The Appellant subsequently filed his claim in Form CA on 06.04.2021, including the RERA order as supporting documentation. Upon query by the Respondent, he refiled the claim in Form C. The Resolution Plan of the Successful Resolution Applicant (SRA) was approved in 2021. Homebuyers had also filed an appeal before the Supreme Court in Vishal Chelani & Ors. vs. Debashis Nanda (Civil Appeal No. 3806 of 2023), wherein homebuyers who had obtained a decree from UP RERA were not treated as financial creditors by the Resolution Professional. The Supreme Court allowed the appeal on 06.10.2023, declaring the appellant in that case a financial creditor alongside other homebuyers. Relying on this Supreme Court decision, Gaurav Jindal filed IA No. 2413 of 2024 seeking a direction to the Respondent to accept his claim at par with other homebuyers. However, his application was rejected by an order dated 10.06.2024.
Arguments of the Parties
The Appellant contended that his claim had been accepted as an 'unsecured financial creditor' while he was entitled to be treated as a homebuyer. He further argued that he should receive the benefit of the Supreme Court judgment in Vishal Chelani & Ors.
On the other hand, the Respondent submitted that the Appellant’s claim was rightly categorized as that of an 'other creditor' since he had voluntarily requested the cancellation of the unit. Additionally, the amount paid by the Appellant to the bank had not been brought to the notice of the Resolution Professional and the SRA during the CIRP. The Respondent further contended that in the interest of justice, the amount paid by the Appellant to the bank should be reimbursed to him from the amount reserved in the Resolution Plan.
Observations of the Tribunal
The NCLAT carefully examined the facts and noted that the Appellant had himself requested the cancellation of his unit and subsequently sought a refund for the amount paid towards allotment. The Tribunal observed: "The present is a case where Appellant on his own request got his unit cancelled and he has filed the claim with respect to the amount which was paid to the corporate debtor towards allotment of the unit. As noted above, allotment was made on 04.06.2015 and the entire amount was paid by the UCO Bank to the corporate debtor. No payment was made by the Appellant to the Corporate Debtor."
Further, the Tribunal noted that the Appellant had already reached a settlement with the bank by paying Rs. 17 lakhs, leading to the dismissal of the bank’s case against him. The Tribunal referred to the Debt Recovery Appellate Tribunal’s order dated 10.02.2021, which stated: "In view of the submissions made by the Ld. counsel for applicant bank, this IA is hereby allowed and OA No.617/2018 is hereby dismissed as withdrawn. Original documents be returned to the applicant bank as per procedure."
Based on these findings, the NCLAT concluded that since the Appellant had already settled his dues with the bank, no outstanding bank dues remained for the unit in question. The Tribunal directed the Resolution Professional to ensure that Rs. 17 lakhs paid by the Appellant should be reimbursed to him from the amount reserved in the Resolution Plan.
Decision of the Tribunal
The NCLAT dismissed the appeal but directed the Respondent to make payment of Rs. 17 lakhs to the Appellant within 60 days. It held: "Considering the facts of the present case, we are of the view that the ends of justice be served in disposing of the appeal directing the Respondent to make payment of amount of Rs.17 lakhs which was paid by the Appellant to the bank for arriving at settlement with the bank regarding amount paid by the bank towards unit in question. No further order is required in the facts of the present case. The said payment shall be paid to the Appellant within a period of 60 days from today."
Appearance
For Appellant: Mr. Rakesh K. Bajaj, Ms. Arohi Bhalla, Advocates.
For Respondents: Mr. Sumant Batra, Mr. Sarthak Bhandari, Advocates for RP. Ms. Anuja Pethia, Mr. Rishabh Govila, Advocates for SRA.
Cause Title: Gaurav Jindal Versus Debashish Nanda, RP Bulland Buildtech Pvt. Ltd.
Case No: Company Appeal (AT) (Insolvency) No. 2076 of 2024 & I.A. No. 7357 of 2024
Coram: Justice Ashok Bhushan [Chairperson], Barun Mitra [Member (Technical)]
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