Debashis Sinha vs M/S R.N.R Enterprise - If complaints were to be spurned on the specious ground that the consumers knew what they were purchasing, the object and purpose of the enactment would be defeated.

 SCI (09.02.2023) In Debashis Sinha vs M/S R.N.R Enterprise [Civil Appeal No. 3343 of 2020;] held that;

• It was the duty of the NCDRC to ascertain, based on the materials on record, whether if at all and to what extent facilities and amenities as promised were offered and/or whether there was any deficiency of service.

• If complaints were to be spurned on the specious ground that the consumers knew what they were purchasing, the object and purpose of the enactment would be defeated.

• Any deficiency detected post-purchase opens up an avenue for the aggrieved consumer to seek relief before the consumer fora.

• Whether the appellants had been provided what the respondents had promised did survive for consideration, which does not get reflected in the impugned order.

Excerpts of the order; 

# 1. This appeal under section 23 of the Consumer Protection Act, 1986 (hereafter ‘the C.P. Act’, for short) calls in question the order dated 21st August, 2020 passed by the National Consumer Disputes Redressal Commission, New Delhi, (hereafter ‘NCDRC’, for short). By the impugned order, the NCDRC has dismissed the consumer complaint lodged by the appellants.

# 2. The multiple appellants are owners of flats in different blocks of a housing complex at 1, Kailash Ghosh Road, Kolkata – 700008 Signature Not Verified (hereafter ‘housing complex’, for short). Digitally signed by Harshita Uppal Date: 2023.02.09 15:49:20 IST Reason:

# 3. Aggrieved by the failure of the respondents - the developers of the housing complex - to provide services as promised, the jurisdiction of the NCRDC was invoked by the appellants in 2008. They alleged that despite paying full consideration amount as per market rate and despite execution and registration of deeds of conveyance in their favour, the respondents had failed, inter alia, to provide the ‘Completion Certificate’, which is their statutory obligation as per the rules of the Kolkata Municipal Corporation (hereafter ‘KMC’, for short); and, in the absence of such a certificate, their occupation of the respective flats has been rendered precarious. According to the appellants, the respondents also failed to provide them common amenities and facilities viz., playground, community hall-cum-office room, 33-feet wide concrete road, and supply of water from the KMC. It was their further complaint that the respondents had adopted unfair trade practices by promising a playground on a land which actually belonged to a local club as well as attracted buyers by showing in the brochure/ advertisement a ‘beautified lake’, which never came into existence. Also, finding that there were constructional defects, a valuer from the list of approved valuers maintained by the Calcutta High Court had been engaged by the appellants. The report of such valuer revealed constructional defects of the nature delineated therein. Based on the complaint that was lodged before the NCDRC, the appellants sought direction to the respondents to provide the completion certificate of the project and to set right the constructional defects as pointed out by the valuer. Further, they claimed that direction be issued for providing other facilities such as community hall, landscape gardening, generator, multi-gymnasium, water filtration plant, and gas pipeline. Additionally, compensation of Rs.1,80,00,000/- (Rupees one crore eighty lakh only) together with litigation cost of Rs.50,000/- (Rupees fifty thousand only) was claimed.

# 4. The complaint lodged by the appellants was contested by the respondents by filing a written statement. Apart from objecting to the maintainability of the complaint on the grounds that the same was time barred and that a joint complaint could not have been lodged by 36 (thirty-six) flat owners, it was contended that the appellants have not paid the full consideration amounts, that certain common facilities/amenities could be provided only if all the members of the housing complex contribute for the same and that the compensation claimed was vague and imaginary. It was also contended in the written statement that most of the appellants had taken possession of the flats in 2006 without raising any objection at the material time; hence, lodging of a complaint after 2 (two) years of possession being delivered is motivated. Insofar as the issue of obtaining the completion certificate is concerned, it was contended that the flats having already stood transferred to the appellants by way of conveyance/sale deed(s), it was for the appellants to apply before the KMC for obtaining such certificate. The respondents also contended that since KMC had completed assessment of the flats of the appellants, it was not possible for the respondents to now apply and obtain completion certificate for the flats.

# 5. Considering the pleadings before it as well as upon hearing the parties, the NCDRC returned findings that the respondents had shown a very casual approach and were guilty of unfair trade practice as well; yet, it was observed that the appellants had not been able to establish their claim. It also appears from the impugned order that the NCDRC suspected that the purpose of the complaint was to pressurize the respondents into paying some compensation and/or not insisting upon extra payment for the extra facilities and amenities. Also, it was held that the respondents had been able to successfully urge that the fault for not obtaining the completion certificate of the project could not be attributed to them. In this regard, the NCDRC returned a finding that reading of section 403 of the Kolkata Municipal Corporation Act, 1980 (hereafter ‘KMC Act’, for short) makes it clear that it was incumbent on both the respondents as well as the appellants to not occupy the premises in the absence of the completion certificate. As a result thereof, a finding was further returned that both the parties had violated the law; as such, no deficiency could be attributed to the respondents on this account. Based on broadly these findings, the complaint of the appellants failed before the NCDRC.

# 6. We have heard Mr. Sharma, learned counsel for the appellants. None appeared before us on behalf of the respondents on the previous 2 (two) occasions the appeal was heard and even today.

# 7. We have also perused the impugned order of the NCDRC and considered the materials on record.

# 8. What has struck us first is the time taken by the NCDRC to decide the complaint after it reserved the same for passing orders. It took the NCDRC in excess of 10 (ten) months to dismiss the complaint. As our discussion hereafter would unfold, we are of the clear view that the long delay in passing the order on the complaint did have its own effect on the ultimate decision of the NCDRC.

# 9. The complaint of the appellants was that the respondents have not provided playground, community hall, beautified lake, landscape gardening, generator backup, multi-gymnasium, etc. as mentioned in the brochure/advertisement pursuant to which they expressed interest to purchase flats in the project and, thus, defaulted in providing services in relation to housing construction.

# 10. One entire paragraph in the order has been devoted by the NCDRC to highlight that the project was not that huge and talk of common areas and facilities on a grand scale was quite misplaced. An admission made by the appellants themselves in the complaint has been referred to but we have not been able to trace any admission of the complainants that the respondents promised not to deliver substantial common areas and common facilities. Be that as it may, what the NCDRC omitted to bear in mind was that the appellants were allured to purchase flats of the nature and kind together with facilities and amenities as attractively published in the brochure/advertisement; hence, whether the project was huge or otherwise was absolutely beside the point. It was the duty of the NCDRC to ascertain, based on the materials on record, whether if at all and to what extent facilities and amenities as promised were offered and/or whether there was any deficiency of service. We have not found any categorical findings in this regard, although there are unambiguous findings that the NCDRC disapproved the conduct of the respondents.

# 11. The conduct of the respondents, the NCDRC recorded in the impugned order, was far too casual and on the face of it, the respondents are guilty of “unfair trade practice” within the meaning of section 2(1)(r) of the C.P. Act. After so recording, the NCDRC held that this does little to rescue the complainants. The reason assigned therefor defies logic. We have failed to comprehend as to what the NCDRC meant when it observed that the appellants “ought to have known what they were purchasing”. More often than not, the jurisdiction of the consumer fora under the C.P. Act is invoked post- purchase. If complaints were to be spurned on the specious ground that the consumers knew what they were purchasing, the object and purpose of the enactment would be defeated. Any deficiency detected post-purchase opens up an avenue for the aggrieved consumer to seek relief before the consumer fora. The reasoning of the NCDRC is, thus, indefensible. Indeed, the appellants had purchased their respective flats on payment of consideration amounts as per market rate and there was due execution and registration of the deeds of conveyance preceded by agreements for sale and these instruments did indicate, inter alia, what formed part of the common facilities/amenities; however, the matter obviously could not have ended there. Whether the appellants had been provided what the respondents had promised did survive for consideration, which does not get reflected in the impugned order.

# 12. NCDRC, in our opinion, might have missed to appreciate the present day realities of life. Now-a-days, flat owners seldom purchase flats with liquid cash. Flats are purchased on the basis of finances being advanced by banks and other financial institutions. Once a flat is booked and the prospective flat owner enters into an agreement for loan, instalments fall due to be paid to clear the debt irrespective of whether the flat is ready for being delivered possession. The usual delays that are associated with construction activities result in undue anxiety, stress, and harassment for which many a prospective flat owner, it is common knowledge, even without the project/flat being wholly complete is left with no other option but to take possession. Whether, upon taking possession, a flat owner forfeits his/her right to claim such services which had been promised but are not provided resulting in deficiency in services is a question that the NCDRC ought to have adverted to. Once the NCDRC arrived at a finding that the respondents were casual in their approach and had even resorted to unfair trade practice, it was its obligation to consider the appellants’ grievance objectively and upon application of mind and thereafter give its reasoned decision. If at all, the appellants had not forfeited any right by registration of the sale deeds and if indeed the respondents were remiss in providing any of the facilities/amenities as promised in the brochure/advertisement, it was the duty of the NCDRC to set things right.

# 13. That the appellants had genuine reasons to feel aggrieved was clearly documented in the report of the valuer dated 11 th July, 2008 which was even acknowledged by the NCDRC, yet, a peculiar approach was adopted and the respondents absolved of their obligations by an order which appears to us to be unjustified on facts and in the circumstances.

# 14. We have found from the impugned order that it speaks of certain facilities to be made available by the respondents on payment of extra money. However, there is no such clear-cut description of facilities/amenities which the respondents asserted would be provided on payment of extra money by the appellants. NCDRC would have done well to indicate the same with clarity.

# 15. Finally, we cannot resist but comment on the perfunctory approach of the NCDRC while dealing with the appellants’ contention that it was the duty of the respondents to apply for and obtain the completion certificate from the KMC and that the respondents ought to have been directed to act in accordance with law. The observation made by the NCDRC of the respondents having successfully argued that it was not their fault, that no completion certificate of the project could be obtained, is clearly contrary to the statutory provisions.

# 16. Sub-section (2) of section 403 of the KMC Act was referred to by the NCDRC in the impugned order. Sub-section (1) thereof, which finds no reference therein, requires every person giving notice under section 393 or section 394 or every owner of a building or a work to which the notice relates to send or cause to be delivered or sent to the Municipal Commissioner a notice in writing of completion of erection of building or execution of work within one month of such completion/erection, accompanied by a certificate in the form specified in the rules made in this behalf as well as to give to the Municipal Commissioner all necessary facilities for inspection of such building or work.

# 17. Section 393 mandates every person, who intends to erect a building, to apply for sanction by giving notice in writing of his intention to the Municipal Commissioner in such form and containing such information as may be prescribed together with such documents and plans. Similarly, section 394 also mandates every person who intends to execute any of the works specified in clause (b) to clause (m) of sub-section (1) of section 390 to apply for sanction by giving notice in writing of his intention to the Municipal Commissioner in such form and containing such information as may be prescribed.

# 18. It is, therefore, evident on a conjoint reading of sections 403, 390, and 394 of the KMC Act that it is the obligation of the person intending to erect a building or to execute works to apply for completion certificate in terms of the rules framed thereunder. It is no part of the flat owner’s duty to apply for a completion certificate. When the respondents had applied for permission/sanction to erect, the Calcutta Municipal Corporation Buildings Rules, 1990 (hereafter ‘1990 Rules’, for short) were in force. Rule 26 of the 1990 Rules happens to be the relevant rule. In terms of sub-rules (1) to (3) of rule 26 thereof, the obligation as cast was required to be discharged by the respondents. Evidently, the respondents observed the statutory provisions in the breach.

# 19. Curiously enough, the NCDRC referred to sub-section (2) of section 403 of the KMC Act only to permit the respondents to wriggle out of such obligation and arrived at a completely erroneous finding that no deficiency in service could be attributed to the respondents since both the respondents and the appellants had acted in violation of law. True it is, the appellants ought not to have taken possession without the completion certificate; however, that was not a valid ground not to direct the respondents to apply for and obtain the completion certificate as required by law. The mere fact that the flat owners were being assessed by the KMC affords no reason to the respondents for breaching section 403(1) read with rule 26 of the 1990 Rules. Of course, once a completion certificate is issued by the KMC upon conducting appropriate inspection and tests of the building that has since been erected, it would stand to reason that the same amounts to a certification that the building does not suffer from any violation of the building plan sanctioned for the purpose under section 390 of the KMC Act or that its constructional quality is not of the desired level for which it is unsafe for human habitation. We are constrained to observe that the respondents have been let off by the NCDRC in a manner contrary to law.

# 20. For such infirmities, as noticed above, this is an appropriate case where the complaint of the appellants ought to be remitted to the NCDRC for taking a relook into the complaint in accordance with law. It is ordered accordingly.

# 21. Since it is found that the appellants while praying for monetary compensation of Rs.1,80,00,000.00 have failed to give detailed particulars and/or provide the basis therefor, and undoubtedly, they have also been on the wrong side of law by taking possession of their respective flats without the completion certificate, whatever might be the compulsion, we are not inclined to direct the NCDRC to decide on the compensation component. That chapter stands closed. The remand is directed only with a view to secure adherence to the promises that the respondents had made in the brochure and/or advertisement, as the case may be, and thereby cover up deficiency in service, if any, as well as the mandatory statutory provisions.

# 22. The appeal stands disposed of on terms as aforesaid, with no orders as to costs.

# 23. Since the complaint is more than 15 (fifteen) years old, it would be desirable if the NCDRC decides the same as early as possible and preferably within a year of service of an authenticated copy of this order.

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Kotak Mahindra Bank Ltd. Vs. RP of Universal Buildwell Pvt. Ltd. - There are various rights under the agreement as well as under RERA. The agreement entered into at the time of allotment is the basis of the investment in the projects made by homebuyers, it cannot be said to be a scrap of paper. It is their valuable investment which is required to be protected and cannot be permitted to be taken away by builder or secured creditors in an illegal manner.

 NCLAT (11.04.2023) In Kotak Mahindra Bank Ltd. Vs. RP of Universal Buildwell Pvt. Ltd. [Company Appeal (AT) (Insolvency) No.661 of 2021] held that;

• There are various rights under the agreement as well as under RERA. The agreement entered into at the time of allotment is the basis of the investment in the projects made by homebuyers, it cannot be said to be a scrap of paper. It is their valuable investment which is required to be protected and cannot be permitted to be taken away by builder or secured creditors in an illegal manner.

• The provisions of Section 17 of the Registration Act no doubt provide that a document of title requires compulsory registration, no doubt registered document has to be executed that also has to be taken care of by the Court so as to protect the interest of homebuyers.

• Hon’ble Supreme Court had observed that in the facts and circumstances of the case, rights or interest of the allottees are not affected by the mortgage created by the Bankers.

• As per statutory scheme under the CIRP Regulations and the IBC Code, the liquidation value arrived by the valuers serves an important factor in the entire resolution process. The liquidation value fixed by the Valuers cannot be ignored in the resolution process.

• It is true that CoC on any valid reason can take a call to ask for any fresh valuation due to any relevant circumstances, but the valuation done by the Registered Valuers and average of liquidation value taken up by the Valuers serves the specific purpose and cannot be allowed to be disregarded by the CoC.

• In event, it is accepted that the CoC can change the liquidation value on its own, that may lead to unsatisfactory results. We, thus, are of the view that liquidation value found by the Registered Valuers cannot be allowed to be changed by the CoC.

Excerpts of the order; 

This Appeal has been filed against the order dated 11.06.2021 passed by National Company Law Tribunal, New Delhi Bench-II in IA No.1550 of 2019 and others IAs in CP(IB) 456 (ND)/2018.

# 2. The Corporate Debtor – Universal Buildwell Pvt. Ltd. was admitted in insolvency by an order dated 03.07.2018 on an Application filed by Pallavi Joshi Bakhru under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”). The Appellant Nos.1 and 2 submitted their claim in Form-C to the Resolution Professional (“RP”) on 18.07.2018. The claim of Appellant No.1 was admitted for an amount of INR 13,82,73,227/- and Appellant No.2 for an amount of INR 37,34,83,401/- Voting share allocated to Appellant No.1 was 1.59% and 4.27% to Appellant No.2 in the Committee of Creditors (“CoC”).

# 3. The RP appointed two Valuers namely – Adroit Technical Services Private Ltd. and Sapient Services Private Limited in August 2018. The RP invited Expression of Interest (“EOI”) in Form-G. The RP shared the Valuation Report with Appellant Nos.1 and 2 vide email dated 27.07.2019. In response to fresh EOI issued by RP, six prospective Resolution Applicants including Welfare Association Consortium – Respondent No.2 submitted EOI. The 14th CoC Meeting was held on 01.11.2019 and the 15th Meeting was on 11.11.2019, in which Resolution Plan submitted by Welfare Association Consortium – Respondent No.2 was approved by 70.44% voting share. Both the Appellants voted against the Resolution Plan.

# 4. Pursuant to approval of Resolution Plan, an IA No.1550 of 2019 was filed by RP under Section 30 sub-section (6) of the Code before the Adjudicating Authority for approval of the Resolution Plan. Both the Appellants aggrieved by the treatment provided to them by the Resolution Applicant in the Resolution Plan filed objections. The Adjudicating Authority vide order dated 11.06.2021 decided the plan approval Application as well as objections filed by the Appellants. The Adjudicating Authority vide impugned order remitted the Resolution Plan to the CoC for modification in terms of the payments as specified in the order. The objections raised by the Appellants regarding the NIL liquidation value ascribed to the Appellant with respect to project Universal Business Park was rejected. Aggrieved by the order impugned, specifically directions issued in paragraph 49 and 50, this appeal has been filed by the Appellants.

# 5. The Resolution Plan, which was submitted by the Resolution Applicant was in two parts. The first part of the Resolution Plan dealt with the three residential projects, i.e. Universal Aura, Universal Green and Universal Business Park. Part-2 of the Plan dealt with other projects including the Pavilion. The Promoters of the projects have obtained financial facilities from the Appellant, creating a charge/ mortgage with respect to projects Universal Business Park and the Pavilion. The Resolution Plan dealt with secured creditors, unsecured creditors and other stake holders with respect to the projects Universal Aura, Universal Green and Universal Business Park. With regard to all other projects, including Pavilion, the Plan permitted the secured creditors to realise their security.

In the present Appeal, no issue has been raised with regard to security interest of the Appellants in Pavilion, which security they have been permitted to realise. The issues raised in the Appeal relates to only the liquidation value of security interest of the Appellant in project Universal Business Park. The Plan has earmarked an amount of Rs.3 crores to the Appellants with regard to Universal Business Park and liquidation value ascribed to the Appellant with respect to Universal Business Park is NIL.

# 6. Before we proceed further, we may notice paragraph 49 and 50 of the impugned order, which paragraphs have been prayed to be set aside by the Appellant. The Appellants have also prayed for a direction to the CoC to consider the Valuation Report submitted by the Registered Valuers while determining the valuation of assets of the Corporate Debtor and computing the liquidation value payable to the Appellant Nos.1 and 2. Paragraph 49 and 50 of the impugned order is as follows:

• “49.  . . . . .  It is seen that while deciding the amounts in the instant case, the CoC has considered the liquidation value placed by the Resolution Professional as well as the Resolution Applicant as mentioned in aforementioned paragraphs. Since the units, that have already been sold, are no longer an asset of the Corporate Debtor and consequently cannot be liquidated, their liquidation value has been provided as NIL. The COC after considering the same, approved the amounts proposed to be paid to Kotak Mahindra Bank Limited, Kotak Mahindra Prime Limited and similarly, to DHFL. Hence, we find, no force in the contention raised by the Ld. Counsel for the Objectors that the amounts which are proposed to be paid to the DHFL, Kotak Mahindra Bank Limited and Kotak Mahindra Prime Limited are contrary to the provision of Section 30(2)(b) of the IBC read with Section 53(1) of the IBC, 2016.

• 50. However, we notice there is significant differences between the liquidation value submitted by the Two Valuers and valuation assessed by the Resolution Professional and Resolution Applicant, therefore, we think it proper, to leave the matter upon the COC to reexamine this issue and if the properties/ infrastructure in the projects of the corporate debtor is available for sale/ disposal, the COC may consider taking steps for suitable correction of the Liquidation value of all the projects and subsequently, ask the Resolution Applicant to account for the same in the Resolution Plan.”

# 7. The learned Counsel for the Appellants challenging the directions issued in paragraph 49 and 50 of the impugned order, submitted that the total average liquidation value for Corporate Debtor as assessed by the Registered Valuers was INR 299.23 crores and the liquidation value assessed by the Registered Valuers for Universal Business Park is Rs.51,32,34,718/-. The Appellant having pari-passu charge the liquidation value of the security interest in the Universal Business Park, comes to INR 23.09 Crores and the RP and Resolution Applicant have wrongly treated the liquidation value of the Appellants as NIL, which is not in accordance with law. The valuation given by Registered Valuers as per the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016 (hereinafter referred to as the “CIRP Regulations”) is a statutory valuation, which cannot be tinkered with by the RP or the Resolution Applicant. Allocation of Rs.3 crores to the Appellant in the Resolution Plan is not in accordance with the amount, which the Appellants were entitled as per their liquidation value, which is INR 23.09 crores. The Resolution Plan, thus, is not in accordance with Section 30, sub-section (2) and ought not to have been approved. It is further submitted that the liquidation value, which has been determined by the two Registered valuers cannot be interfered with by the Resolution Applicant or the CoC. The CoC under the Code, does not have power to re­examine the liquidation value of the assets of the Corporate Debtor. The role has been clearly assigned to the Registered Valuers. The Appellants have raised the issue of liquidation value attributable to them in the 14th Meeting of CoC, which objection was disregarded. Respondent No.2 relied upon a misplaced and incorrect premise that the entire area under the Universal Business Park has been sold and no asset remains with the Corporate Debtor. The Appellant Nos.1 and 2 collectively hold 46% charge over the Universal Business Park project. In any event, 89,025 sq. ft. area available with the Corporate Debtor has not been legally transferred as execution of Builder Buyer Agreement does not amount to transfer/sale. The decision of the RP and the CoC that Appellants have no liquidation value, since there was no transferrable area available with the Corporate Debtor in the Universal Business Park, is misconceived and untenable. The Appellants having voted against the Plan, they are entitled to minimum liquidation value in the allocation as per sub-section (2) of Section 30 of the Code read with Section 53(1).

# 8. The learned Counsel for the RP refuting the submission of the Appellants submits that Appellants are being provided INR 3 crores and further being provided the project ‘The Pavilion’ having liquidation value of INR 27.24 crores. The claim of security interest over Universal Business Park is based on mortgage executed in September 2010 over land and unsold super-built-up area. The fact of the matter is that in September 2010 at the time of creation of mortgage, the Promoters and Corporate Debtor had already sold area in excess of the total super area available in the project. By September 2010, the area of 1,65,115 sq. ft. had been sold by Builders Buyer’s Agreement (“BBA”) and an area of 90,606 sq. ft. have been sold by way of Conveyance Deed . No unsold inventory is available as a security claimed by the Appellant, hence, the liquidation value of the Appellants have been treated as NIL. As per the definition of ‘liquidation value’ contained in Regulation 2(k) of the CIRP Regulations, no estimated realizable value of the assets of the corporate debtor could be determined as on date, since no inventory was available for the same. Thus, liquidation value has rightly been held to be NIL, which has been accepted by the Adjudicating Authority in the impugned order. The entire super area of Universal Business Park was conveyed by Conveyance Deed as well as BBA in September 2010, rather area sold was in excess of total super area and there was no super area available, which could be monetized in favour of the Corporate Debtor. Thus, in the project Universal Business Park, no liquidation value could have been ascribed to the Appellants, which have been done so rightly.

# 10. We have considered the submissions of learned Counsel for the parties and have perused the records.

# 11. The main thrust of arguments of the Appellants relate to the liquidation value to which Appellants are entitled in the resolution process. The CIRP Regulations defines the ‘liquidation value’ under Regulation 2(k), which is to the following effect:

• “2(k) liquidation value” means the estimated realizable value of the assets of the corporate debtor, if the corporate debtor were to be liquidated on the insolvency commencement date.”

# 12. Regulation 27, sub-regulation (1), requires appointment of two Registered Valuers to determine the ‘fair value’ and the ‘liquidation value’ of the Corporate Debtor. Regulation 27, sub-regulation (1) is as follows:

• “27. Appointment of Professionals.— (1) The resolution professional shall, within seven days of his appointment but not later than forty-seventh day from the insolvency commencement date, appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35.”

# 13. The RP appointed two Registered Valuers, namely – Adroit Technical Services Private Ltd. (“Adroit”) and Sapient Services Private Limited (“Sapient”). The Valuation Report submitted by both the Registered Valuers have been brought on record in the reply filed on behalf of Respondent No.1.  . . . . . . . .

# 19. The Valuation Report of both the Valuers, thus, indicate that they have valued the super area available in the project Universal Business Park excluding the area which was covered by Conveyance Deed. The Valuers proceeded on the assumption that areas, which have been conveyed no title is left with the Corporate Debtor and rest of the area can be included in the valuation. The RP in its reply in the Appeal as well as in the reply before the Adjudicating Authority has brought the facts on the record, indicating that apart from conveying of the super area, the Corporate Debtor has also entered into Builder Buyer’s Agreement with the allottees and the BBA with the allottees with regard to super area in Universal Business Park was 1,65,115 sq. ft. In the reply filed by RP in the Appeal in paragraph 8, detailed facts have been reported, which is to the following effect:

• “8. As per the records of the Corporate Debtor, Builder Buyer’s Agreements (“BBA”) have been executed in respect of 165,115.53 sq. ft. in the said Project prior to September 2010 i.e., date of creation of mortgage in favour of Kotak Prime (i.e. 20.01.2011). In addition to this, an area of 90,606 sq. ft. has been conveyed by the Corporate Debtor by way of conveyance deeds. Therefore, the area covered under the Agreements to Sell taken together with Conveyance Deed exceeds the total saleable area and therefore, no realizable value can be attached to the Corporate Debtor from the Universal Business Park project. A table capturing details of the total available Super Built Up Area in Universal Business Park and area sold under conveyance Deeds and BBAs is annexed herewith as ANNEXURE R-1.”

# 20. In the rejoinder affidavit filed by the Appellants, paragraph 8 of the reply has not been specifically answered and in paragraph 42 of rejoinder affidavit, reply of paragraph 2 to 22 has been given in following words:

• “42. That the contents of Para 2 to 22 are misplaced, misconceived and vehemently denied. The Appellant No.1 and Appellant No.2 relies on the submissions made in preliminary submissions and is not repeating herein for the sake of brevity.”

# 21. In the rejoinder, however, the Appellants have given certain details in paragraph 12 to 14, which are as follows:

“12. From a bare perusal of the working provided by the Respondent No.1, the following emerges:

Universal Buildwell Private Limited- Universal Business Park Project
Total Saleable Area assumed by the Resolution Professional based on the mortgage deed provided by the Objector	2,15,915 Sq. Ft.
Blaze Promoters Private Limited share of 20% in the total area not to be included	43,183 Sq. Ft
Balance Area	1,72,732 Sq. Ft.
Total area averred to be sold through conveyance deed	89,706 Sq. Ft.
Net remaining area	89,025 Sq. Ft.

13. The Respondent No.1 has although averred that the conveyance deed in favour of the allottees aggregated to 89,706 Sq. Ft., however, no documentary evidence has been presented by the Respondent No.1 with the CoC members to end the controversy, in absence of any documentary evidence, the liquidation value payable to the Appellant No.1 and the Appellant No.2 cannot be treated as ‘NIL’ as claimed by the Respondent No.1 and Respondent No.2.

14. Further the Appellant No.1 and the Appellant No.2 holds 46% percent charge over the Universal Business Park Project, therefore, any alleged conveyance deed that has been issued by the Corporate Debtor shall not include the 46% percent of the charged assets belonging to the Appellant No.1 and the Appellant No.2. Furthermore, without in any manner admitting the averments made by the Respondent No.1 in respect of liquidation value of the Appellant No.1 and the Appellant No.2, if the working sheet provided by the Respondent No.1 is taken into consideration, in any event 89,025 Sq. Ft. area available with the Corporate Debtor has not been legally transferred as execution of Builder Agreement does not amount to transfer/sale under the provisions of the Transfer of Property Act, 1882 read with the provisions of the Registration Act, 1908. Therefore, averment of Respondent No.1 and Respondent No.2 that the security interest of the Appellant No.1 and the Appellant No.2 does not have any liquidation value on account of alleged sale of all area, is on the fact of it is misconceived and untenable.”

# 22. From the materials brought on record, it is clear that area which is covered by Conveyance Deed was 89,706 sq. ft., whereas total saleable area of the Universal Business Park was 2,15,915 sq. ft. Pleadings of RP was categorical that by BBA, area of 165,115.53 sq. ft. was allocated, which facts have not been disputed by the Appellants. The Appellants case rather is that execution of BBA does not amount to transfer/ sale under the provisions of the Transfer of Property Act, which plea has been specifically taken in paragraph 14 as extracted above. There can be no doubt about legal position that title is conveyed when Conveyance Deed is executed, but certain rights accrue to homebuyers under the BBA, which rights have been recognized by law Courts including the Hon’ble Supreme Court. Promoter, who has entered into a BBA with allottee and allotted a particular flat and received the payment has no right to transfer the same. Hence, the said unit is not available for the Corporate Debtor to again transfer and realise its value. From the pleadings on record, we thus, are of the view that allocation area of 165,115.53 sq. ft. is a matter of record and has to be accepted, since no other facts or material come on record.

# 23. We have noticed that in the Valuation Report, both the Valuers have proceeded to value the super area, which was left after deducting the area conveyed. The Valuers proceeded on the premise that the Corporate Debtor has no ownership with respect to the area, which has been conveyed and rest of the area can be valued for the purpose of valuation of the Corporate Debtor. On the record, the RP has given details of name of allottees, which were given BBA with the date of BBA. Annexure R-1 to the reply contains the details of BBA of Ground Floor and other Floors with the name of allottees and the date of BBA. All the BBA, which have been captured in Annexure R-1 are prior to September 2010. The details of areas sold through Conveyance Deed has also been given, which areas have already taken note by the Valuers. The stand taken by the RP and Resolution Applicant is that liquidation value of the Appellant has been treated as NIL, since on the date, the valuation was done, there was no super area left, which could be monetized for the Corporate Debtor. The Corporate Debtor has sold excess area both by Conveyance Deed and BBA. We are satisfied that by the BBA, executed prior to September 2010, when the charge and mortgage was created by Promoters in the project Universal Business Park, all areas were sold. The Valuers, technically were right in taking a view that those areas, which has been conveyed by Promoters, they do not have ownership, however, the Valuers proceeded to take into consideration the areas with regard to which no Conveyance Deed was executed to be the assets of the Corporate Debtor.

# 24. When we look into reality, which is apparent from the materials on record, it is clear that with regard to Universal Business Park, entire area was sold by Conveyance Deed and by BBA to the allottees and the Promoters have received the money through the Conveyance Deed and BBA and after execution of the BBA, the allottees acquired the right to receive possession of the units for which payments have been made.

# 25. In this context, we may notice the judgment of the Hon’ble Supreme Court, where the Hon’ble Supreme Court had occasion to consider the nature of right, which accrue through a BBA to allottee and the protection, which homebuyers are required from the Courts of Law. We may refer to the judgment of the Hon’ble Supreme Court in Bikram Chatterji v. Union of India (2019) 19 SCC 161, where the Hon’ble Supreme Court had occasion to consider housing and real estate allotment, Sale Deed, transfer of flats by builders/ developers to homebuyers. The Hon’ble Supreme Court was considering the real estate Project namely – Amrapali Group. Writ petitions under Article 32 were filed by homebuyers praying for various reliefs from the Hon’ble Supreme Court. In the above context Hon’ble Supreme Court while considering the BBA made following observation in paragraph 133 and 134 of the judgment:

“133. The agreement initially executed in favour of homebuyers to purchase flats may not create any right in the property in praesenti, it will be only on the execution of the registered document that title is going to be perfected, but investment in project is only of homebuyers. In this case, as they have paid money invested in projects, it is for the courts to do complete justice between the parties and to protect the investment so made and interests of homebuyers and to ensure that they get the perfect title and the fruits of their hard earned money and lifetime savings invested in the projects.

134. On behalf of Bank of Baroda, learned Senior Counsel submitted that the agreement of promoter/ builder with homebuyers is unregistered as such, no right has been created in the immovable property in view of the provisions contained in Section 49 of the Registration Act. The submission ignores and overlooks the provisions of RERA which intends to prevent such frauds on homebuyers and ensure completion of projects and that of the agreement between promoters and buyers. There are various rights under the agreement as well as under RERA. The agreement entered into at the time of allotment is the basis of the investment in the projects made by homebuyers, it cannot be said to be a scrap of paper. It is their valuable investment which is required to be protected and cannot be permitted to be taken away by builder or secured creditors in an illegal manner. The provisions of Section 17 of the Registration Act no doubt provide that a document of title requires compulsory registration, no doubt registered document has to be executed that also has to be taken care of by the Court so as to protect the interest of homebuyers.”

# 26. In the above case before the Hon’ble Supreme Court, the Banks, who had security interest contended that they have agreements with the Promoters. In reference to the claim of the Banks regarding mortgage, Hon’ble Supreme Court had observed that in the facts and circumstances of the case, rights or interest of the allottees are not affected by the mortgage created by the Bankers. In paragraph 136 of the judgment, following has been held:

“136. The learned Senior Counsel on behalf of Bank of Baroda submitted that the provisions of Section 11(4)(h) of RERA provides that the promoter, after he executes an agreement for sale for any apartment, plot or building, cannot mortgage or create a charge on such an apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be. The provision has a non obstante clause. As the provision has given an overriding effect by non obstante clause, the provision is of no help to the banks as the agreement had been by promoters with homebuyers entered into earlier in point of time to the creation of the mortgage. There could not have been any mortgage created subsequently and even if validly created, it would not affect the right and interest of the allottee as intended by RERA. Thus, the right and interest of the allottee are safeguarded by virtue of the provisions contained in Section 11(4)(h). As the project was pending, the provision intends to confer a right on the allottee and save the allottees and also their interests from such liability. Even if the provision is held not applicable on the ground that RERA came into force later, since there was no valid mortgage as held by us, it was incapable of affecting the right or interest of the allottee. Had it been ensured that the money due to Noida and Greater Noida Authorities was paid by the promoters to the authorities, the fraud of siphoning of money would not have taken place to the extent it has been done. Moreover, the money borrowed from banks has not been invested in the projects. In fact, projects required no funding. It would be iniquitous to charge the allottees with the bankers’ money. Thus, in the peculiar facts and circumstances of the case, we hold that rights or interests of the allottees are not at all affected by the mortgage created by the bankers or by the dues of the Noida or Greater Noida Authorities.”

# 27. When we revert to the facts of the present case, it is clear that the  entire super area of Universal Business Pak was conveyed by Sale Deeds and by BBA, rather, the facts indicate that total area conveyed/ allotted was more than total area of Ground Floor and all the Floors. When area has been allotted to homebuyers, who have also paid the amount as per the agreement, homebuyers get an interest to receive the possession of the unit.

# 28. The Adjudicating Authority after considering the facts in the impugned order has considered all aspects of the matter and has noted the facts and circumstances, which were brought by the parties on record. The Adjudicating Authority has also noticed and extracted the summary of the Resolution Plan in its order. In paragraph 41 of the impugned order, following has been observed:

“41. So far as the Kotak Mahindra Bank Limited and Kotak Mahindra Prime Limited are concerned, they are proposed to be paid Rs.3 crores on the ground that the entire area under the Universal Business Park project has been sold and there are no assets belonging to the Corporate Debtor left under this project. Accordingly, the liquidation value of the assets belonging to the Corporate Debtor under this project is shown as Nil in the Part-I of the Resolution Plan. It is also mentioned that they have mortgage right over the land, on which the project namely, “the Pavillion” is situated in Sector 70A, Mauza Palra, Tehsil & Distt. Gurugram, Haryana. As shown in the Part-II of the Resolution Plan, the project is yet to be started and they will get realization of the amount in the manner as stated in Part-II of the Plan.”

# 29. We have also noticed the caveats given by the Valuers in their Report. The valuation of the different projects including project Universal Business Park was with the caveats as noted above. The Valuers did not enter into issue of encumbrance over the assets. The finding has been recorded by the Adjudicating Authority in paragraph 49 that since the units have already been sold, are no longer the asset of the Corporate Debtor, hence, the liquidation value of the Universal Business Park project is NIL. The Adjudicating Authority has rightly come to the above conclusion after considering the facts and circumstances of the present case. We fully concur with the observations made by the Adjudicating Authority in paragraph 49.

# 30. Now, we come to the submission of the learned Counsel for the Appellants that the Adjudicating Authority committed error in directing the CoC to re-examine the issue of significant differences between the liquidation value submitted by the two Valuers . As per statutory scheme under the CIRP Regulations and the IBC Code, the liquidation value arrived by the valuers serves an important factor in the entire resolution process. The liquidation value fixed by the Valuers cannot be ignored in the resolution process. It is true that CoC on any valid reason can take a call to ask for any fresh valuation due to any relevant circumstances, but the valuation done by the Registered Valuers and average of liquidation value taken up by the Valuers serves the specific purpose and cannot be allowed to be disregarded by the CoC. In event, it is accepted that the CoC can change the liquidation value on its own, that may lead to unsatisfactory results. We, thus, are of the view that liquidation value found by the Registered Valuers cannot be allowed to be changed by the CoC. We, thus, are satisfied that direction by Adjudicating Authority to CoC to re-examine the issue of significant differences between liquidation value submitted by two Valuers was uncalled for. We may however, hasten to add that in the present case, liquidation value, which was to be ascribed to the Appellant was an issue, which cannot be said to have determined by the Valuers in their Valuation Report. Valuers in their Valuation Report has added a caveat, which we have already noticed, which clearly left the issue to be determined while allocating the amounts to be paid to the dissenting Financial Creditors. Thus, in the facts of present case, we having concurred with the finding of the Adjudicating Authority that liquidation value of the Appellant was NIL, we see no reason to maintain the direction issued in paragraph 50.

# 31. In view of the foregoing discussions, we are of the view that observations and directions in paragraph 49 needs to be affirmed, whereas directions issued in paragraph 50, deserves to be deleted. We are further of the view that relief (b) and other reliefs claimed in the Appeal by the Appellants cannot be granted.

# 32. In result of the foregoing discussions, we dismiss the Appeal subject to deletion of paragraph 50 of the impugned order dated 11.06.2021. Parties shall bear their own costs.

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