Keywords – NCLT, IBC, Debt recovery, Orris Infrastructure, Assured returns, Settlement
New Delhi, September 21, 2023
The National Company Law Tribunal (NCLT) has emphasized that the Insolvency & Bankruptcy Code (IBC) should not serve as a “tool for recovery.” This assertion came as the NCLT dismissed a petition brought forward by two unit buyers of a commercial complex, adding clarity to the application of the IBC.
The Principal Bench of the NCLT recently heard a plea seeking to initiate insolvency proceedings against Orris Infrastructure, citing an alleged default of Rs 3.60 lakh. However, the NCLT bench noted a crucial distinction between debt recovery and insolvency.
In this specific case, the purchasers of office space/retail units had already received full and final payment from Orris Infrastructure in accordance with the assured returns outlined in their agreement. The amount received exceeded the defaulted sum. The applicants’ counsel acknowledged the receipt of the demand draft from the realty firm, which is currently developing the commercial complex known as Floreal Tower in Sector 83, Gurgaon (Haryana).
The NCLT bench, consisting of President Ramlingam Sudhakar and Avinash Srivastava, emphasized that “in the present case, the applicants already possess demand drafts exceeding the defaulted amount in this petition, and moreover, IBC cannot be used as a tool for recovery, given the settlement reached between the parties.” This perspective led to the dismissal of the insolvency plea against the realty firm.
The applicants had entered into an agreement on April 24, 2010, and subsequently signed a Space Buyers agreement with Orris Infrastructure. According to the agreement, the realty firm would provide monthly assured returns to the applicants for the first 36 months following the building’s completion or until the office space was leased, whichever came earlier. The construction of the Floreal Tower Project building concluded in December 2013, and the occupation certificate was received on August 16, 2017. As a result, the 3-year period for paying assured returns, in line with the occupation certificate, concluded on August 16, 2020.
In light of these facts, the NCLT concluded that the insolvency process was not the appropriate mechanism for debt recovery. The realty firm had issued demand drafts amounting to Rs 6.15 lakh and Rs 1.87 lakh to the two petitioners, exceeding the assured return towards the allocated units’ full and final payment. Despite the dispute over a default amounting to Rs 3.60 lakh, the NCLT’s decision underscored the necessity for a clear distinction between insolvency proceedings and debt recovery efforts under the IBC.
Written by- Shuniti Sinha, College name – Brainware University , Semester- 7th, an intern under Legal Vidhiya
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