Vishal Fabrics And Ors. vs AVJ Developers (India) Private Limited

M.M. Kumar, CJ

The 'Financial Creditors'-M/s. Vishal Fabrics and two others have filed the instant petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity the Code') with a prayer to trigger the Corporate Insolvency Resolution Process in the matter of M/s. AVJ Developers (India) Private Limited.

The Corporate Debtor-M/s AVJ Developers (India) Private Limited is a company registered under the provisions of the Companies Act, 1956 and was incorporated on 22.06.2010. The identification number of the Corporate Debtor is U70101DL2010PTC204465 and its registered office is situated at AVJ Business Park, Plot No. C, First Floor, Community Centre, Anand Vihar, Delhi-110092. It is engaged in the business of Construction of various types of Buildings.

The 'Financial Creditors'-Petitioners have proposed the name of Resolution Professional, Mr. Anil Tayal with the address 204, Sagar Plaza, Plot No. 19, District Centre Laxmi Nagar, New Delhi - 110092, email id caaniltayal@gmail.com. His Registration number is IBBI/IPA-001/IP-P01118/2018-19/11818. He has filed his written communication which satisfies the requirement of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 along with the certificate of registration.

The case of the petitioners in nutshell is that the Respondent had approached them for financial help/loan for its project namely AVJ Heights situated at Sector Zeta-1, Plot No. GH-12/2, Greater Noida, U.P. and had promised higher returns on the investments made by the petitioners. Along with higher returns it had also promised some other lucrative offers to the petitioners.

On the repeated request of the Respondent, the petitioners have agreed for the financial help/investment and have invested the following amounts:

Petitioner No. 1 namely M/ s. Vishal Fabrics- Rs. 50,00,000/- by way of Cheque bearing No. 603462 dated 24.07.2014 drawn on Punjab National Bank.

Petitioner No. 2 namely Mr. Dinesh Khaitan - Rs. 2,00,00,000/- by way of Cheque bearing No. 232224 dated 01.08.2014 drawn on Axis Bank Limited.

Petitioner No. 3 namely M/s. Capital Trade Links Ltd. - Rs. 38,00,000/- by way of cheques bearing Nos. 006745 & 006746 dated 24.02.2014

As a collateral security of the aforesaid investment the Respondent has allotted/ sold 3 flats & 9 flats of various categories (1 BHK and 2 BHK) to the petitioner Nos. 1 & 2 respectively in its aforesaid project vide Memorandum of Understanding (MOU) dated 24.07.2014 & 01.08.2014 executed between both the petitioners.

As per clause No. 3 of the aforesaid MOU dated 24.07.2014 the Respondent was to pay interest/profit @2.5% per month on the amount deposited/invested by the petitioner No. 1 for which it issued seven post dated cheques of representing principal and interest amount. As per clause No. 4 the Respondent had the option to refund the amount of Rs. 50,00,000/- received from the petitioner after six months from the date of the execution of the MOU, along with the profits as mentioned therein. Further the terms of the MOU incorporated in clause 11 states that there was a locking period for six months from the date of execution of the MOU which provided that in case the Respondent remains unable to refund the deposited amount along with profit, then the petitioner No. 1 would have the full right to sell the abovementioned flats. The relevant clause Nos. 3, 4 & 11 of the MOU read as under:-

"3. That the party of the First part and the party of the Second part have mutually agreed that from the date of execution of this Memorandum of Understanding, the party of the First Part will pay interest/ profit @ 2.5% per month over the sum deposited by party of the Second part towards the sale consideration for the purchase of the aforesaid flats and whereas the First Party has issued PDC of interest as given below:

S. No.

Name

Cheque No.

Amount

Bank

Date

1

Vishal Fabrics

283144

1,25,000/-

Union bank

24.8.14

2

Vishal Fabrics

283145

1,25,000/-

Union bank

24.9.14

3

Vishal Fabrics

283146

1,25,000/-

Union bank

24.10.14

4

Vishal Fabrics

283147

1,25,000/-

Union bank

24.11.14

5

Vishal Fabrics

283148

1,25,000/-

Union bank

24.12.14

6

Vishal Fabrics

283149

1,25,000/-

Union bank

24.01.15

That the party of the First part has the option to refund the amount received of Rs. 50,00,000/- (Fifty Lakhs Only) from the party of the second part after 6 months from the date of this MOU, along with the profits as mentioned above and the party to the second part has agreed to return all the original signed agreements/doc's, MOU, Receipts to the party of the first part.

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That both the party have mutually agreed that after 06 Months as per issued date in this MOU, in any case or circumstances the party of the first part is not able to refund the deposited amount along with the profit, then in that case party of the second part will have the full right to sell the above mentioned flats and first party will transfer the same to the prospective buyer without any obstacles."

As per clause No. 8 of the aforesaid MOU dated 01.08.2014 the Respondent was to Buy Back the flats allotted to the Petitioner No. 2, placed as security of his investment within one year from the date of execution of the MOU at a total value of Rs. 2,33,96,904/-, payable in 12 equal monthly instalments for which it issued twelve post dated cheques. It was also agreed between the parties that the petitioner No.2 would return the entire original signed BBA/MoU/Doc's/Receipts etc. to the Respondent proportionately after paying monthly principal amount at quarterly basis. Further the terms of the MOU incorporated in clause 12 provides that the Respondent in case or due to any reason, if remains unable to honour any of the cheques mentioned in the MOU then in that case the petitioner No. 2 without prejudice to other rights available to him, would have the full right to sell the flats disclosed in the MOU and the Respondent would be under obligation to transfer the same to the prospective buyer without any obstacles. Clause 13 contained in the MOU was inscribed for the purpose that in case of default on the part of the Respondent, it would be liable to pay a penalty @ Rs. 10,000/- per day per default apart from applicable interest and the legal expenses. At this stage it would be profitable to read clauses 8, 9, 11 to 13 of the said MOU which are as under:

"8. That the party of the First part and the party of the Second part have mutually agreed that the party of the first part shall buy back the Flats from the party of the first part anytime within 12 months from the date of execution of this Memorandum of Understanding at a total value of 2,33,96,904/- (Rs. Two Crores thirty three lacs ninety six thousand nine hundred four only) which shall be paid through Post Dated Cheques (PDC) of 12 monthly equal instalments as under:

S. No.

Name

Amount

Cheque No.

Bank

Date

1

Dinesh Khetan

283075/-

283283

Union bank

1/9/2014

2

Dinesh Khetan

283075/-

283284

Union bank

1/10/2014

3

Dinesh Khetan

283075/-

283285

Union bank

1/11/2014

4

Dinesh Khetan

283075/-

283286

Union bank

1/12/2014

5

Dinesh Khetan

283075/-

283287

Union bank

1/1/2015

6

Dinesh Khetan

283075/-

283288

Union bank

1/2/2015

7

Dinesh Khetan

283075/-

283289

Union bank

1/3/2015

8

Dinesh Khetan

283075/-

283290

Union bank

1/4/2015

9

Dinesh Khetan

283075/-

283291

Union bank

1/5/2015

10

Dinesh Khetan

283075/-

283292

Union bank

1/6/2015

11

Dinesh Khetan

283075/-

283293

Union bank

1/7/2015

12

Dinesh Khetan

283075/-

283295

Union bank

1/8/2015

S. No.

Name

Amount

Cheque No.

Bank

Date

1

Dinesh Khetan

16,66,667/-

284660

Axis Bank

1/9/2014

2

Dinesh Khetan

16,66,667/-

284661

Axis Bank

1/10/2014

3

Dinesh Khetan

16,66,667/-

284662

Axis Bank

1/11/2014

4

Dinesh Khetan

16,66,667/-

284663

Axis Bank

1/12/2014

5

Dinesh Khetan

16,66,667/-

284664

Axis Bank

1/1/2015

6

Dinesh Khetan

16,66,667/-

284665

Axis Bank

1/2/2015

7

Dinesh Khetan

16,66,667/-

284666

Axis Bank

1/3/2015

8

Dinesh Khetan

16,66,667/-

284667

Axis Bank

1/4/2015

9

Dinesh Khetan

16,66,667/-

284668

Axis Bank

1/5/2015

10

Dinesh Khetan

16,66,667/-

284669

Axis Bank

1/6/2015

11

Dinesh Khetan

16,66,667/-

284670

Axis Bank

1/7/2015

12

Dinesh Khetan

16,66,667/-

284671

Axis Bank

1/8/2015

That the party of the First part and the party of the Second part have mutually agreed that the party of the second part shall return the entire original signed BBA/doc's/MOU/Receipts and etc to the party of the first part proportionately after paying monthly principal amount at quarterly basis.

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Whereas the Party of the first Part undertakes that he shall not sell/resell the aforesaid Flats to anyone without payment/clearance of above PDC in favour of the party of the first part.

That both the party mutually agree that if in any case or circumstances or due to any reason, any of the abovementioned cheques are not paid, then in that case party of the second part, without prejudice to the other rights available to him, will have the full right to sell the abovementioned flats and first party will transfer the same to the prospective buyer without any obstacles.

That both the parties agree that in case of default or delay in the due payment by the first party to the second party, the first party shall be liable to pay a penalty at the rate of Rs. 10,000/-(Rs. Ten thousand only) per day per default apart from applicable interest and the legal expenses."

Further the pleaded case of the petitioner No. 3 is that two Sale-cum-Buy Back Agreements dated 24.02.2014 [Annexure-I (colly)] were executed between the petitioner No. 3 and the Corporate Debtor. Subsequently a Memorandum of Understanding (MOU) dated 24.10.2014 (at pgs. 56-60) was also executed between both of them whereby two flats admeasuring 2100 sq. fts. at the rate of Rs. 1809/- per sq. ft. in the Respondent's project namely AVJ-Heights' at Sector Zeta-I, Plot No. (GH-12/2), Greater Noida (U.P.) were allotted and sold to the petitioner No. 3 by the Respondent. Petitioner No. 3 has paid a sum of Rs. 38,00,000/- vide two cheques bearing Nos. 006745 & 006746 dated 24.02.2014. being earnest money towards the sale consideration. As per clause 5 of the said MOU the Respondent undertook to handover the possession of the said flats to the petitioner No. 3 within one year from the date of execution of the same. Further clause 8 provided that the Respondent would buy back the allotted flats from the petitioner No. 3 anytime within four months from the date of execution of the MOU at a total value of Rs. 40,89,211/- which was to be paid through Post Dated Cheques of four monthly equal instalments. Clause Nos. 11 to 13 as stipulated in aforesaid MOU dated 01.08.2014 and described in preceding para 7, were also formulated in MOU dated 24.10.2014.

The petitioners have further claimed that the Respondent was not regular in payment of interest/profit as promised to them from the inception. There was delay and every time the cheques were handed over to them, a request would be made to lodge the same after some time. Then the petitioners have placed reliance on the letters dated 22.01.2015 & 22.02.2015 [Annexure I-C (colly)], 27.10.2015 [Annexure I-D (colly)] sent by the Respondent for extension of time for payment of loan amount. Apart from seeking extension, said letters also clearly speak about the acceptance of liability of debt being due and the assurance that the dues would be paid and cleared along with interest.

However, upon presentation the said cheques (which were given time and again and mentioned in the aforesaid agreements/MOU with the banker), the same bounced back with the endorsement 'Payment stopped by drawer' [Annexure I-E (colly)]. Feeling aggrieved, the petitioners served legal notices [Annexure I-F (cony)] under Section 138 of Negotiable Instrument Act upon the Corporate Debtor and proceedings in that regard are pending adjudication before the Court of Metropolitan Magistrate at Karkardooma Court, Delhi.

The petitioners then submitted copies of the statement of bank accounts [Annexure I-B (cony)] showing payments made to the Respondent.

The precise case of the Petitioners is that the total amount in default due and payable by the Corporate Debtor to the respective petitioners is Rs. 1,02,43,544/-, Rs. 2,03,90,233/- 86 Rs. 75,41,936/- inclusive of interest till 25th February 2019.

Learned counsel for the Corporate Debtor has opposed the admission of the petition by asserting that:-

(i) The petitioner namely Mr. Dinesh Khaitan is the key person behind the operations of other alleged two petitioners who is engaged in the business and profession of money lending in an unlawful manner.

(ii) In the year 2014, due to weak market in respect of real estate, the Respondent was introduced with Petitioner No.2-Mr. Dinesh Khaitan, who represented himself to be a financier and agreed to lend the money. Mr. Dinesh Khaitan committed to provide a loan of Rs. 3,00,00,000/-and towards the same, he provided the entire financial assistance of Rs. 2,88,00,000/- through himself and his associates firms i.e. Petitioner Nos. 1 & 3 and got various documents executed from the Respondent towards security inclusive of Builder Buyer Agreements, MOU, blank signed cheques and blank signed documents.

(iii) Subsequent to abovesaid transfers, on the request of Mr. Dinesh Khaitan, the Respondent had transferred an amount of Rs. 25,00,000/- in the account of Petitioner No. 1-Vishal Fabrics vide bank transfer dated 05.08.2015 and an amount of Rs. 85,47,143/- in the account of Mr. Dinesh Khaitan during the period 02.08.2014 to 05.08.2015.

(iv) There was another financial assistance obtained for the financial need of the company against one property bearing No. 2486, Block C, Sushant Lok-I, Gurugram, Haryana. It was discussed and agreed between the parties that the said property would be purchased by Mr. Dinesh Khaitan and his associates namely Mr. Neeraj Kumar and Mr. Krishan Kumar for a sale consideration of Rs. 4,00,00,000/-. On such assurances of Mr. Dinesh Khaitan, one time settlement process initiated with the Bank, whereupon the said Bank consented for one time settlement for an amount of Rs. 2,56,00,000/-. Towards obtaining the one time settlement, an amount of Rs. 6,00,000/- was transferred by Mr. Dinesh Khaitan to the Bank. Afterwards taking undue advantage of circumstances of the Respondent, said persons turned hostile and stated that they have got the agreement drafted and printed on stamp paper for an amount of Rs. 3,90,00,000/- which was accepted by the Respondent being having stuck with circumstances, and having no other option.

(v) On many follow-ups, aforesaid persons transferred an amount of Rs. 1,15,00,000/- though his operated company namely 'Solid Hotels & Resorts Pvt. Ltd.' in the account of Ms. Asha Jain, Director of the Respondent Company with the assurance to make the payment separately to the Bank and rest of the consideration separately. On the. other part on same day Mr. Dinesh Khaitan took over the entire money from the Respondent by way of amount of Rs. 45,00,000/-, Rs. 40,00,000/- Rs. 30,00,000/- into the account of one of his company namely Goldensight Vinimay Pvt. Ltd., in his personal account and in the account of Petitioner No. 3 respectively with the assurance to reconcile the same at later stage.

(vi) Once again said persons taken a diametrically opposite stand and proposed to purchase the said property for Rs. 3,71,00,000/- which was refused by the Respondent.

(vii) During demonetization Mr. Dinesh Khaitan showed some financial constraints and requested the Respondent to provide an amount of Rs. 80,00,000/- which was transferred by it in two tranches i.e. on 11.12.2016 and 14.12.2016 in the company namely Amici Electronica Pvt. Ltd. claimed to be owned by Mr. Dinesh Khaitan and his associates. During said days, said persons stated that they will not be able to purchase the property but assured to pay off/ reimburse losses to the Respondent, if any occurred in disposing the property to someone else. With best efforts the said property was sold out in the month of May, 2017 for an amount of Rs. 3,05,79,300/- (Annexure A-8).

(viii) On various occasions the Respondent through its Directors approached said persons to settle the accounts but the said persons had delayed the same on one or other excuses and ultimately not paid any amount in the shape of loss caused to the Respondent of Rs. 98,20,000/-.

(ix) A chart pertaining to the amounts received from the petitioners and their incorporated shell firms and companies as well as payments made to them have also been drawn at pgs. 9-11.

(x) The petitioners and their associates have filed a false and frivolous complaint against the Respondent and its Directors before the Police Station Anand Vihar, New Delhi.

(xi) Against the unlawful deeds and attempts of the petitioners and their associates, the Official/Director of Respondent Company preferred complaints dated 10.11.2018 and 15.11.2018 before the Police Station Anand Vihar, New Delhi as well as Deputy Commissioner of Police (Annexure A-10). Thereafter Complaint Case bearing No. 5826 of 2018 titled as `Asha Jain v. Dinesh Khaitan 86 Ors.' (Annexure A-11) was preferred before the Court of Chief Metropolitan Magistrate, Karkardooma Court, New Delhi which is pending adjudication.

A rejoinder to the reply has been filed by the Financial Creditors reiterating the submissions made in the petition and controverting the assertions in the reply.

We have heard learned counsel for the parties and have also perused the record.

Having heard learned counsel for the parties we are of the considered view that the Financial Creditor has succeeded in establishing a case for triggering the Corporate Insolvency Resolution Process.

In para 6 of the written objections submitted by the respondent, a loan of Rs. 2,88,00,000/- paid by the petitioners in the year 2014 has been candidly admitted by it. It is not disputed by the Respondent that the Builder Buyer agreements, MOU, cheques and other signed documents were executed between the parties. However, with regard to aforesaid cheques and some other documents defence has been taken by it that same were given as blank. Reliance may be placed on the letters dated 22.01.2015 & 22.02.2015 [Annexure I-C (colly)], 27.10.2015 [Annexure I-D (cony)] sent by the Respondent for extension of time for payment of loan amount. Apart from seeking extension, said letters also clearly speak about the acceptance of liability of debt being due and the assurance that the dues would be paid and cleared along with interest.

According to the relevant clauses of the MOU's executed between the parties, the Respondent undertook to hand over the peaceful 86 vacant possession of the said flats within one year from the date of execution of the MOU's but same has not been handed over so far. It also appears that the Financial Creditors have not been paid any amount of interest/profit as assured by the Respondent. It is also pertinent to mention that the cheques which were given by the Respondent to extinguish its liability taken through MOU's and other documents, upon presentation were dishonoured as per the endorsement of the bank 'Payment stopped by drawer' and thereafter the proceedings initiated by the petitioners under Section 138 of Negotiable Instrument Act, 1881 are pending before the Court of Chief Metropolitan Magistrate, East Delhi, Karkardooma Courts, Delhi.

The transactions alleged to have taken place between the Respondent and the Petitioners as placed on record as Annexure 2 of the written objection are not supported by any banking transaction as to when and where the cheques were drawn by the Respondent in favour of the Petitioners. These are only bald averments made and no document has been placed on record in support thereof. On the basis of these bald averments no finding could be recorded in these summary proceedings to conclude that any amount has ever been given to the Petitioners as pleaded in the written objections. For the aforesaid reasons we reject the version of the Corporate Debtor which has so many holes that by no thread it could be repaired.

The Tribunal is not an adjudicating authority to ascertain the quantum of amount of default or to pass decree as to how much amount is actually due to the Petitioners-Financial Creditors. The Code requires the adjudicating authority to only ascertain and record satisfaction in an adjudication under Section 7 of the Code as to the occurrence of default before admitting the petition. Besides in a petition under Section 7 of the Code, it does not matter that the debt is disputed so long as the debt is due and payable.

We further find that the provisions of Section 7(2) and Section 7(5) of IBC have been complied with as discussed in detail in our order dated 27.11.2018 rendered in the case of ECL Finance Limited vs. Digamber Buildcon Pvt. Ltd. (IB1039(PB)/2018).

After a reading of Section 7 of the Code along with Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, we are satisfied that a default has occurred and the application under sub section 2 of Section 7 is complete. The IRP proposed does not have any disciplinary proceedings pending against him.

As a sequel to the above discussion, this petition is admitted and Mr. Anil Tayal is appointed as an Interim Resolution Professional.

In pursuance of Section 13(2) of the Code, we direct that Interim Insolvency Resolution Professional to make public announcement immediately with regard to admission of this application under Section 7 of the Code.

We also declare moratorium in terms of Section 14 of the Code. It is made clear that the provisions of moratorium are not to apply to transactions which might be notified by the Central Government. Additionally, the supply of essential goods or services to the Corporate Debtor as may be specified is not to be terminated or suspended or interrupted during the moratorium period. These would include supply of water, electricity and similar other supplies of goods or services as provided by Regulation 32 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

We direct the Financial Creditors to deposit a sum of Rs. 2 lacs with the Interim Resolution Professional to meet out the expenses to perform the functions assigned to her in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done within three days from the date of receipt of this order by the Financial Creditors. The amount however be subject to adjustment by the Committee of Creditors. The amount must be accounted for by Interim Resolution Professional and shall be paid back to the Financial Creditors.

Directions are also issued to the Ex-Management/Auditors etc. to provide all the documents in their possession and furnish every information in their knowledge as required under Section 19 of the Code to the Interim Resolution Professional within a period of one week from today otherwise coercive steps to follow.

Before parting we must notice the complaint made against Financial Creditors in the form of discrepancies in the statement of account. We cannot in summary proceedings determine the amount due. This function is required to be performed by the Information Utility which is not yet fully functional. Therefore, Resolution Professional may ask the ex-promoter/director of the Corporate Debtor for any such correction if need be and act accordingly by placing it before the Financial Creditors as it is only fai to do so.

The office is directed to communicate a copy of the order to the Financial Creditors, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, NCR, New Delhi at the earliest but not later than seven days from today. The Registrar of Companies shall update its website by updating the status of 'Corporate Debtor' and specific mention regarding admission of this petition must be notified.