Debt-Option/derivatives/speculation

Test of genuine Homebuyers v/s Speculative Homebuyers is relevant only at the stage for the admission of CIRP under Section 7 of the IBC – Everlike Real Estate & Developers Pvt. Ltd Vs. Mr. Mohit Goyal, CA RP of Aadi Best Consortium Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) The Code or the RERA Act, 2016 do not differentiate anywhere between the Homebuyers who purchase units for his own consumption or the Homebuyers or unit purchaser who purchase the multiple units for commercial purposes.
(ii) The issue regarding the genuine Homebuyers v/s Speculative Homebuyers is relevant only at the stage for the admission of CIRP under Section 7 of the Code.
(iii) It becomes clear that whether the homebuyer/ allottee is genuine homebuyer or genuine allottee or speculative homebuyers/ allottee but if he has paid the money for acquisition of such properties or given the advance, such allottee/ homebuyer shall be treated as Financial Creditor in terms of Section 5(8)(f) of the Code.
(iv) No individual homebuyers has any locus to challenge resolution plan if the Resolution Plan which has been approved by voting of more than 50% of voting shares of homebuyers as a class.

Test of genuine Homebuyers v/s Speculative Homebuyers is relevant only at the stage for the admission of CIRP under Section 7 of the IBC – Everlike Real Estate & Developers Pvt. Ltd Vs. Mr. Mohit Goyal, CA RP of Aadi Best Consortium Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

Advance paid by a speculative buyer in Real Estate does not fall within the purview of Section 5(8) of the IBC – Naman Infradevelopers Pvt. Ltd. Vs. Metcalfe Properties Pvt. Ltd. – NCLAT New Delhi

In this case, in agreement for purchase of residential plots, it was one of the conditions in case the seller fails to execute the sale deed in favour of the purchaser, then the seller shall be liable to return the entire amount received alongwith interest @ 24% per annum from the date of payment of the amount till the actual payment. The Appellant had made advance payment. The Corporate Debtor failed to effect the Registry and proposed to convert the outstanding amount as loan.

On default in repayment, CIRP application filed by FC was rejected by AA.

Hon’ble NCLAT held that the judgement in Venkat Rao Marpina v. Vemuri Ravi Kumar and Anr. (2023) ibclaw.in 570 NCLAT as relied upon by the Appellant does not relate to the facts of the case as the Appellant was never an allottee or a home buyer but was a speculative buyer, hence would not fall within the purview of Section 5(8) of the Code.

Advance paid by a speculative buyer in Real Estate does not fall within the purview of Section 5(8) of the IBC – Naman Infradevelopers Pvt. Ltd. Vs. Metcalfe Properties Pvt. Ltd. – NCLAT New Delhi Read Post »

A Trading Member of National Stock Exchange is a Financial Service Provider in terms of Section 3(17) of IBC 2016, CIRP u/s 7, 9 & 10 cannot be initiated – Globe Capital Market Ltd. Vs. Narayan Securities Ltd. – NCLT New Delhi Bench Court-II

In this important judgment, the Adjudicating Authority held that mere holding of a Decree/Award per se by an individual will not make its debt fall within the ambit of “Financial Debt”. Following points to be considering in the decree/award:
a) a Decree/Award of the Court/Tribunal is a measure of debt,
b) mere holding of a Decree per se by an individual will not make its debt fall within the ambit of “Financial Debt”,
c) it is the underlying claim under a decree that will decide the nature of the debt, whether it is Financial or Operational debt.
In our considered view, the amount claimed by the Applicant out of the Arbitral Award dated 24.09.2021 is neither based on any transaction having the time value of money nor the commercial effect of borrowing. At the most, the claims of the Applicant (other than brokerage, fee, etc.) could be in the nature of “damages” which do not fall within the ambit of Financial Debt.
The Respondent was providing “Financial Services” in terms of Section 3(16)(d) of IBC 2016. the Respondent was registered with SEBI, which is evident from the “Clearing Member – Trading Member Agreement dated 09.03.2017”. Since, the Respondent was registered with SEBI, the Services of the Respondent could be regulated by SEBI, which is covered under the definition of “Financial Sector Regulator” under Section 3(18) of IBC 2016.

A Trading Member of National Stock Exchange is a Financial Service Provider in terms of Section 3(17) of IBC 2016, CIRP u/s 7, 9 & 10 cannot be initiated – Globe Capital Market Ltd. Vs. Narayan Securities Ltd. – NCLT New Delhi Bench Court-II Read Post »

The RERA is to be read harmoniously with the Code | Home buyers under IBC | Definition of Financial Debt – Pioneer Urban Land and Infrastructure Limited & Anr. Vs. Union of India & Ors.-Supreme Court

This judgment covers: A. Background. B. IBC vis-à-vis RERA. C. The Article 14 Challenge (I): Discrimination. C.1 The Legislature’s right to experiment in matters economic. C.2 Allotee vs. Operational Creditor. C.3 Home buyers/allottees with other individual financial creditors like debenture holders and fixed deposit holders. C.4 Why are Home buyers not within “other creditors”? D. The Article 14 Challenge (II): Manifest arbitrariness; Article 19(1)(g) and Article 300A. D.1 The Code is a beneficial legislation. D.2 UNCITRAL Legislative Guide. E. Interpretation of Section 5(8)(f) of the Code. E.1 Meaning of Debt, Claim and Default. E.2 Disbursement and Time Value of Money under Section 5(8). E.3 Sub-clause (f) of Section 5(8) is residuary provision which is catch all in nature?. E.4 The expression “commercial effect” in Sub-clause (f) Section 5(8). E.5 The expression “means and includes” used in Section 5(8). E.6 Is Section 5(8)(f) to be construed noscitur a sociis with sub-clauses (a) to (e) and (g) to (i). E.7 The effect of a deeming fiction. E.8 Does an explanation enlarge the scope of the original section. F. Duty of NCLT in case of Allottee is himself a defaulter or a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment. G. Timelines contained in the provisos to Section 7(5), Section 9(5) and Section 10(4) of the Code are all directory and not mandatory. H. Challenge to Section 21(6A) and 25A of the Code. I. Conclusion.

The RERA is to be read harmoniously with the Code | Home buyers under IBC | Definition of Financial Debt – Pioneer Urban Land and Infrastructure Limited & Anr. Vs. Union of India & Ors.-Supreme Court Read Post »

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