Can a Creditor initiate CIRP against a Builder on default by Home Buyer in Home Loan Repayment

South Indian Bank Ltd. Vs. Magic Info Solutions Pvt. Ltd.
NCLT New Delhi Bench Court-III
11-Aug-23
(2023) ibclaw.in 477 NCLT

Facts of the case

• This Application has been filed by M/s. South Indian Bank Ltd., Financial Creditor/Applicant under Section 7 of the IBC for initiating the CIRP against the Corporate Debtor/Respondent viz. M/s. Magic Info Solutions Pvt. Ltd. on the ground that the Corporate Debtor has committed default in repaying the Financial Debt of a sum of Rs. 1,91,91,056.55/- (along with @9.30% p.a. monthly interest and penal Interest @2% p.a.).
• The Applicant-Bank sanctioned a loan of Rs. 2,50,00,000/- under the Home Loan Scheme of the Bank after execution of the Loan Agreement dated 10.05.2019 by Mr. Amit Tyagi and Mrs. Priyanka Tyagi (Home Buyer/Principal Borrower). A Tripartite Agreement dated 10.05.2019 was executed between M/s. Magic Info Solutions Pvt. Ltd. (Builder), Mr. Amit Tyagi (Borrower) and M/s. South Indian Bank Limited (Bank). The Builder agreed that as soon as the registration formalities are completed, the Registry documents will be sent to the Applicant Bank. The Builder also undertook to note the lien of the Applicant Bank on the aforesaid residential premises and to hand over the original sale deed of the said flat to the Applicant Bank directly as and when it is registered.
• However, despite receipt of the consideration from the Applicant Bank, the Corporate Debtor failed to execute and register the sale deed in favour of the Home buyer and/or hand over the sale deed to the Applicant Bank as per the terms of the tripartite agreement. The Corporate Debtor failed to adhere to the terms of the tripartite agreement and other documents executed amongst the parties in favour of the Applicant Bank.
• On 09.02.2021, the Homebuyer sent an email to the Corporate Debtor stating inter-alia, to revoke his Provisional allotment and to refund the loan amount to the Applicant Bank to foreclose the loan account as per the tripartite agreement dated 10.05.2019.
• Pursuant to the meeting held on 05.06.2021, the Corporate Debtor sent an email dated 08.06.2021 to the Applicant Bank whereby the Corporate Debtor again acknowledged its liability to repay the loan amount to the Applicant Bank and proposed a new repayment schedule.
• The Applicant Bank has filed the present application under Section 7 of the Code seeking initiation of CIRP against M/s. Magic Info Solution Pvt Ltd., who is the Builder presumably on the ground that Mr. Amit Tyagi and Mrs. Priyanka (Home Buyer/Principal Borrower) revoked the provisional allotment vide email dated 09.02.2019 and requested to refund the loan amount to the Applicant Bank and close the loan account as per the Tripartite Agreement dated 10.05.2019.

Decision of the Adjudicating Authority

• The debt in question may be considered as a debt defined under Section 3(11) of the Code and cannot be called as a Financial Debt. Learned Counsel for the Corporate Debtor has relied on a judgment in the case of Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited versus Axis Bank Limited [2020] ibclaw.in 06 SC wherein the Hon’ble Supreme Court of India distinguished a financial debt from other type of debts and has held that only institutions directly disbursing loan against consideration of time value of money is entitled and has the locus standi to prefer a petition for invoking the CIRP as such financial institution will invariably be interested in resurrection of such Corporate Debtor as against any other financial institution not having any financial debt, who shall only be interested in recovery of its dues.
• We have come to view that the principal creditors in the present case are Mr. Amit Tyagi and Mrs. Priyanka Tyagi (Home Buyer/Principal Borrower) to whom the Financial Debt is owned and not the Corporate Debtor, M/s. Magic Info Solution Pvt Ltd. We are of the considered view that the amount involved in the present case cannot be considered as a Financial Debt within the definition of sub-section 8 of Section 5 of the Code. 
• We have heard the Ld. Counsels appearing for both parties and also perused the documents on record. We hold that the present application under Section 7 is not maintainable. The Application bearing (IB)–136(ND)/2023 filed by the Applicant/Financial Creditor, under section 7 of the Code read with Rule 4 of the Adjudicating Authority Rules for initiating CIRP against the Respondent/Corporate Debtor is dismissed.