Dismissed

In the matter of Rein Constructions Private Limited (IB)-2836 (ND)2019

NCLT18 May 2023

Case brief

AI extract

What is this about?

The Tribunal dismissed the Section 9 IBC application seeking CIRP against the corporate debtor. The court held that the claim derived from a settlement agreement regarding past investment, not supply of goods or services, and was thus not an operational debt. Additionally, the application was barred by limitation.

What did the court decide?

The application under Section 9 of the IBC, 2016 was dismissed.

In the matter of Rein Constructions Private Limited… — Insolvency and Bankruptcy | NCLT (2023)

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NATIONAL COMPANY LAW TRIBUNAL: NEW DELHI SPECIAL BENCH (COURT-III)

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(IB)-2836 (ND)2019

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IN THE MATTER OF:

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M/s Welldone Estate Projects Private Limited

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Having correspondence and Halwasiya Market, 4th Floor, Flat No. 6, Hazratganj Lucknow UP 226001 … Applicant/Operational Creditor

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VERSUS

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M/s REIN Constructions Private Limited

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Having correspondence and Registered office at: 2nd Floor, C-3, Pocket-8, Vasant Kunj, Delhi - 110070 … Respondent

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Section: 9 of the IBC, 2016

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Order Delivered on: 18.05.2023

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CORAM:

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SH. BACHU VENKAT BALARAM DAS, HON’BLE MEMBER (J) SH. L. N. GUPTA, HON’BLE MEMBER (T)

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PRESENT:

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For the Applicant : Mr. Sumit Babbar, with Mr. Saubhagya Aggarwal, Advocates.

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For the Respondent

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: Mr. Sougat Advocate.

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ORDER

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1 . The present petition has been filed by M/s Welldone Estate Projects Pvt. Ltd. (Applicant) under Section 9 of the IBC, 2016 with the prayer to initiate CIRP against M/s Rein Constructions Pvt. Ltd., (Corporate

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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Debtor), declare the Moratorium and appoint an Interim Resolution Professional.

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2 . It is stated by the Applicant in Part IV of the application that the total amount of Operational Debt is Rs. 2,99,00,000/- along with interest @ 12% per annum, which is due and payable by the Corporate Debtor to the Applicant, consequent upon a settlement agreement arrived at between M/s. Arora Associates and Infradevelopers Private Limited, M/s. Arora and Associates Realty Limited, Mr. Kanwarjeet Arora, Mr. Rajesh Arora and M/s. Rein Constructions Private Limited on the one part and M/s. Welldone Estate Projects Private Limited and Welldone Infrastructure Private Limited on the other part.

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3 . The Applicant has claimed that amount towards interest @ 12% per annum from the date it became due is Rs. 2,85,07,562/- up to the date of issuance of notice. The Corporate Debtor is liable to make the payment from the date of the settlement agreement dated 11.01.2012. As such the debt became due from the date of the settlement agreement i.e., from 11.01.2012. It is submitted that the Corporate Debtor has made part payment of debt on various dates i.e., 12.01.2012, 04.08.2012, 09.12.2013 & 16.12.2013, and also as per the latest order dated 14.05.2019 passed by the Hon’ble Allahabad High Court, Lucknow Bench, and thus acknowledged the outstanding debts from time to time and therefore, the debt has been crystallized in terms of the settlement made earlier.

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4 . The Corporate Debtor has filed a reply. The main objections raised by the Respondent are as follows:

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I. There is no debt due and outstanding to be paid by the Respondent to the Applicant.

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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II. The entire application is based on a settlement agreement dated 11.01.2012. It is not disputed that the Respondent is a party to the said agreement. The narrations in Clause 7, 8 and 9 of the settlement agreement dated 11.01.2012 would show that the Applicant had invested a sum of Rs. 5,19,00,000/- and booked an area in the complex in Ludhiana City Centre. Further, a suit for recovery of Rs. 5,19,00,000/- has been filed before the Hon’ble High Court of Delhi in Suit CS(OS) No. 2601/2008 by M/s Welldone Estate Projects Pvt. Ltd. against M/s. Today Homes and Infrastructures Private Limited (Defendant No. 1), One G.K. Gambhir (Defendant No. 2), Mr. Rajesh Arora (Defendant No. 3), and Ludhiana Improvement Trust (Defendant No. 4) for recovery a sum of Rs. 7,95,69,000/-. The Applicant has averred in the plaint that a sum of Rs. 5,19,00,000/- was paid by the Applicant in a Joint Escrow Account/Designated Bank Account namely “Today Homes Infrastructure Private Limited” – City Centre – LIT and the said amount was duly received and utilized by Defendant Nos. 1 to 4. The said suit was dismissed by the Hon’ble High Court of Delhi vide order dated 16.10.2017, since, the Applicant/Plaintiff failed to produce any evidence to prove the averments made in the plaint.

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III . Further, the Hon’ble High Court of Delhi has held in the said order that no materials are on record to infer as to what terms and conditions, the plaintiff had agreed to pay the huge amount of Rs. 5,19,00,000/- to Defendant No. 1. Thus the Applicant has failed to prove the factum of payment of Rs. 5,19,00,000/- on which the basis of the settlement agreement dated 11.01.2012 was executed.

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IV. Since the Applicant has failed to prove the factum of payment in OS(OS) 2601/2008, the Respondent is not liable to pay any amount to the Applicant.

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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V. The Applicant has issued the demand notice after a period of over seven years on the basis of a settlement agreement dated 11.01.2012 and relying on the order dated 14.05.2019 passed by the Hon’ble High Court of Judicature at Allahabad in Company Appeal No. 3/2009 vide which the appeal filed by One Welldone Infrastructure Private Limited against one Arora and Associates Infra Developers Private Limited was disposed of as settled and neither the Applicant nor the Respondents are parties to the said appeal. Therefore, the disposal of the said appeal based on the settlement between the parties therein does not accrue any fresh cause of action in favour of the Applicant herein.

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VI. It is submitted that there is no acknowledgment of debt that is claimed by the Applicant in the present application. The Respondent has received payment of Rs. 2.95 crores from one M/s. Universal Buildwell Private Limited who was then interested in the project and the Respondent has advanced the said payment to the Applicant (to the extent of Rs.2.20 crores) and another entity namely M/s. BNB Construction Pvt. Ltd. (Rs. 75 Lakhs). No payment was received from M/s. Universal Buildwell Pvt. Ltd. in view of the disputes in the project which could not be revived by M/s. Ludhiana Improvement Trust and Today Homes. The Respondent cannot be forced to buy out the Applicant on the basis of the said Settlement Agreement more so when the Applicant itself has been unable to prove its investment of Rs. 5.19 crores in the said project.

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VII. The Respondent also contended that the present petition is barred by limitation.

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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5 . We have heard the submissions made by Mr. Sumit Babbar, Learned Counsel appearing for the Applicant as well as Mr. Sougat Sinha, Learned Counsel appearing for the Corporate Debtor and perused the records.

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From a perusal of Part IV of the application, it is observed that there is no mention of any supply of goods or the rendering of services by the Applicant to the Respondent. In fact, the entire claim of the Applicant is arising out of the settlement deed dated 11.01.2012 and the very same date has been relied as the date of default by the Applicant.

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It is a matter of record that the present application is filed on 22.10.2019, which is much after the limitation period of three years from the date of default i.e., 11.01.2012. Since the date of default itself is arising on the basis of a settlement agreement, we would first like to examine whether the settlement agreement is based on any “Operational Debt” subsisting in the present application. Accordingly, we refer to the settlement agreement dated 11.01.2012 (annexed at pages no. 16 to 27 of the application), the relevant extracts of which are reproduced below:

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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On perusal of the above extracts of the agreemement, it is observed that the Settlement Agreement was executed between 07 parties namely, Arora and Associates Infradevelopers Private Limited, Arora and Associates Realty Limited, Welldone Infrastructure Private Limited, Welldone Estate Projects Private Limited, Mr. Kanwarjeet Arora, Mr. Rajesh Arora and Rein Constructions Private Limited. Further, clause 7 of the agreement reflects that M/s Welldone Estate had invested a sum of Rs.5,19,00,000/- and booked area in the complex in “Ludhiana City Centre” and due to disputes between the Promoters, M/s Today Homes and Infrastructure Private Limited and Ludhiana Improvement Trust with regard to the development of “Ludhiana City Centre”, which is still stated to be pending.

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We further notice that the Settlement Agreement is based on an investment of Rs.5,19,00,000/- by M/s Welldone Estate in Ludhiana City Centre and pursuant to clause 9 of the settlement agreement, the Respondent shall have no liability towards the Applicant on the payment of the aforesaid amount.

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In order to determine, whether the aforesaid transaction can be constituted to be an “operational debt”, we refer to Section 5(21) of IBC, 2016, which reads thus:

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“5. Definitions. –

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(21) “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the 2 [payment] of dues arising under any law for the time being in force 11

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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and payable to the Central Government, any State Government or any local authority”

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From the perusal of the above, it is evident that the debt in order to be constituted as an Operational Debt must be a claim in respect of provisions of the goods or services.

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In the instant case, neither in the settlement agreement nor in Part IV of the Application, we do not find any instance of supply of goods or services between the parties. The investment made by the Applicant and the resultant Settlement Agreement will not categorize the claim of the Applicant as an Operational Debt.

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The Applicant has stated in Part IV of the application that the Respondent made the last part payment on 16.12.2013. Further, the Applicant has annexed extracts of the balance sheets of the Respondent for the Financial Year 2017-2018 to show acknowledgment of liability. However, we do not find any conclusive proof of part payment on 16.12.2013 viz Bank Statements on record, which could extend the period of limitation for another three years from the date of default on 11.01.2012. Further, the balance sheet for the year 2017-18 cannot be taken into account for extending the limitation since neither there is any proof of part payment nor any acknowledgment of debt between 2012 and 2015. Thus, we find the present application also barred by limitation.

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

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Accordingly, we conclude that the claim of the Applicant is neither an Operational Debt nor the present application is filed within the limitation period. The application is accordingly dismissed .

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Sd/-

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(L. N. GUPTA)

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MEMBER (T)

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Sd/-

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(BACHU VENKAT BALARAM DAS) MEMBER (J)

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Company Petition No. IB-2836(ND)/2019 Date of order: 18.05.2023

In the matter of Rein Constructions Private Limited (IB)-2836 (ND)2019

Case brief

What is this about?

What did the court decide?

In the matter of Rein Constructions Private Limited (IB)-2836 (ND)2019

Case brief

What is this about?

What did the court decide?

What the court decided

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