New Delhi, July 13, 2021: Providing relief to a residents’ welfare association, the National Company Law Tribunal (NCLT) has initiated insolvency proceedings against Vipul Limited after confirming that there is default of payment by the real estate developer, as it has failed to refund interest bearing security deposit collected from flat buyers from 2007 onwards.
After many rounds of arguments and hearings in the matter, the Coram of Abni Ranjan Kumar Sinha and L.N. Gupta found that money was borrowed against the payment of interest and that amount was raised from the allottees under a real estate project.
The NCLT was of the considered view that the amount raised by Vipul Ltd, now the corporate debtor, comes under the definition of ‘financial debt’ and the petitioner, who is representing 300 flat buyers of that project, is the ‘financial creditor’ in terms of Sec 5(7) of IBC, 2016.
Going by the background of the case, Vipul Greens Resident Welfare Association (VGRWA), the RWA looking after the maintenance of over 500 flats & 2000 residents for a project known by the name of Vipul Greens in Sector-48 Gurugram, had preferred an application under section 7 of the IBC, 2016 on account of the failure on part of Vipul Limited to refund Interest Bearing Security Deposit collected by it in 2007 and onwards from flat owners under the guise of the maintenance agreement.
The petition was filed by Lexstone Group and argued by Advocates Rajiv K. Virmani, Gaurav Jain, Karan Valecha and Anuj Malhotra for almost two years.
Citing the decision of the Supreme Court in Innoventive Industries versus ICICI bank, the NCLT stated that the moment the Applicant satisfies the Adjudicating Authority that there is a financial debt or there is any default of payment, the application is complete under section 7(2) of the Insolvency and Bankruptcy Code (IBC), 2016 and there are no disciplinary proceedings pending against the proposed Insolvency Resolution Professional (IRP), the Adjudicating authority has to admit the application under section 7(5)(a) of the IBC, 2016.
On the issue of requirement of Section 7, IBC proviso, the NCLT said the Applicant had fulfilled such requirement, as it is representing 300 flat buyers out of total 644 flats.
In short, the crumbling infrastructure of the society owing to the funds being stuck with Vipul Limited precipitated action in the form of Corporate Insolvency Resolution Process (CIRP) proceedings against Vipul Limited, now the Corporate Debtor.
“It is admitted by the Corporate Debtor that the maintenance is being carried out by the Petitioner Association w.e.f April 01, 2018. Therefore, as per the agreement clause, the Corporate Debtor was bound to refund the amount, the day when the Association was formed. Since it is admitted by the Corporate Debtor that the Association has been carrying out the maintenance work w.e.f April 01, 2018, the date of default is April 01, 2018”, observed the Coram.