NATIONAL COMPANY LAW APPELLATE TRIBUNAL,

PRINCIPAL BENCH, NEW DELHI

Company Appeal (AT) (Insolvency) No.1366 of 2023
(Arising out of Order dated 26.09.2023 passed by the Adjudicating Authority
(National Company Law Tribunal), New Delhi Bench, Court V in Company Petition
(IB) No.995/PB/2020)

IN THE MATTER OF:

Anjani Kumar Prashar
(Suspended Director of
Grandstar Realty Pvt. Limited) ... Appellant

Versus

Manab Datta & Ors…. … Respondents

Present:
For Appellant: Mr. Arun Kathpalia, Sr. Advocate, Ms. Shivani Kher,
Mr. Rakesh Lakra, Ms. Bhavya Sharma, Advocates.

For Respondents: Ms. Pooja Mahajan, Ms. Arveena Sharma, Ms.

Shreya Mahalwan, Advocates.
Mr. Abhishek Anand, Mr. Karan Kohli, Mr. Abhishek
Sinha, Ms. Jasleen Singh Sandha, Advocates for
IRP.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by Suspended Director of the Corporate Debtor has been

filed challenging the order dated 26.09.2023 passed by National Company

Law Tribunal, New Delhi Bench, Court-V admitting Section 7 Application

filed by Respondents – allottees herein. The Appellant aggrieved by the

order admitting Section 7 Application has come up in this Appeal.

2. Brief facts of the case, necessary for deciding this Appeal are:

Company Appeal (AT) (Insolvency) No.1366 of 2023 1

 (i) On 31.10.2003, the land in question was purchased by one

M/s Subros Ltd. from various land holders. On 27.08.2004, a

Notification under Section 4 of Land Acquisition Act, 1894 was

issued by the Govt. of Haryana, proposing to acquire certain

land for setting up Industrial Township. The land in question

was initially part of the above Notification, however, M/s

Subros Ltd. applied to the Government of Haryana for release

of property from land acquisition proceedings and filed a Writ

Petition (CWP) No.2787 of 2006 before the Punjab and Haryana

High Court, challenging the acquisition dated 27.08.2004.

M/s Subros Ltd. received a letter from Govt. of Haryana on

22.08.2007 for release of the land owned by Subros from the

land acquisition proceedings. On that basis, the Writ Petition

filed by M/s Subros Ltd. was withdrawn on 20.09.2007. On

29.01.2010, a decision was taken by Govt. of Haryana to drop/

close the acquisition proceedings.

(ii) On 23.01.2012, M/s Subros Ltd. sold the land along with

licnese to develop to M/s Akme Projects Ltd. vide registered

Sale Deed.

(iii) In 2015, Rameshwar & Ors. Vs. State of Haryana, a SLP was

filed (which was converted into Civil Appeal No.8788 of 2015)

by certain farmers challenging the action of Haryana

Government in initiation and subsequent dropping of land

acquisition proceedings. Before the Hon’ble Supreme Court, it

Company Appeal (AT) (Insolvency) No.1366 of 2023 2

 was contended that due to issuance of Notification on

27.08.2004, farmers were induced to sell their lands to

developers/ builders at cheap prices and subsequently, the

Haryana Government closed the land acquisition proceedings.

On 24.04.2015, the Hon’ble Supreme Court passed an interim

order, directing ban on the construction of the land that was

covered under acquisition proceedings.

(iv) On 12.03.2018, the Hon’ble Supreme Court passed the final

order holding that the state machinery was used to further

private ends and that the decision to withdraw from

acquisition was a fraud on power under the Acquisition Act.

The judgment invalidated all transfers effect from the date of

publication under Section 4, to the date of publication of the

State’s decision to revoke the acquisition i.e. from 27.08.2004

to 29.01.2010.

(v) The Akme Projects Ltd. (“Akme”) has obtained loan from YES

Bank. Default was committed by Akme, due to which YES

Bank initiated proceedings under the SARFAESI Act, 2002 and

in the SARFAESI proceedings, auction sale notice was issued

on 02.04.2016. The Grandstar Realty Pvt. Ltd. (“Grandstar”)

– Corporate Debtor participated in the auction and submitted

a bid of Rs.40.75 Crores. On 17.06.2016 and 19.07.2016, YES

Bank issued Sale Confirmation Advice/ Sale Certificate

respectively after receiving the full payment.

Company Appeal (AT) (Insolvency) No.1366 of 2023 3

 (vi) Akme filed Writ Petition, challenging the auction sale

proceedings, where on 05.10.2016, the Hon’ble High Court of

Delhi directed to maintain the status quo with regard to sale

in favour of the Corporate Debtor.

(vii) A Corporate Insolvency Resolution Process (“CIRP”) was

commenced against Akme, in which Respondent – home

allottees filed the claim on 09.05.2018. The Appellant also

filed proceedings before the Debt Recovery Tribunal in the year

2019 seeking setting aside the Sale Confirmation, which was

dismissed on 07.01.2020. In Writ Petition No.1271 of 2018,

before the Hon’ble Punjab and Haryana High Court, the

Director Town and Country Planning (“DTCP”), was personally

present and made a statement and the said land is covered

within the judgment dated 12.03.2018 passed by the Hon’ble

Supreme Court in Civil Appeal No.8788 of 2015. The Appellant

also challenged the order of DRT before the DRAT by filing

Regular Appeal No.72 of 2020

(viii) The Respondent herein, who are allottees of Project filed an

Application under Section 7 on 25.09.2020 for initiation of

CIRP against the Corporate Debtor for default of INR

78,09,94,385.56/-.

(ix) An Application for clarification was filed by Homebuyers

through their Association in Civil Appeal No.8788 of 2015

Company Appeal (AT) (Insolvency) No.1366 of 2023 4

 before the Hon’ble Supreme Court. On 13.10.2020, the

Hon’ble Supreme Court passed an order clarifying that M/s

Subros Ltd. was not part of the land acquisition and is not

covered within the said restraint, the clarification was issued

on 21.07.2022.

(x) Regular Appeal No.72 of 2020 filed by the Corporate Debtor

against the order dated 07.01.2020 before the DRAT, was also

dismissed on 07.06.2021.

(xi) The Adjudicating Authority issued notice in Section 7

Application and after hearing the parties, by the impugned

order dated 26.09.2023, admitted Section 7 Application. The

Appellant aggrieved by the order has come up in this Appeal.

3. We have heard Shri Arun Kathpalia, learned Senior Counsel

appearing for the Appellant; Ms. Pooja Mahajan, learned Counsel

appearing for Respondents and Shri Abhishek Anand, learned Counsel

appearing for IRP.

4. Shri Arun Kathpalia, learned Senior Counsel appearing for the

Appellant submits that Adjudicating Authority committed error in

admitting Section 7 Application. It is submitted that there was no financial

debt owed by the Corporate Debtor. The Corporate Debtor was an auction

purchaser in proceedings under the SARFAESI Act, 2002 and there was no

disbursal in favour of the Corporate Debtor. The Respondents/ Applicants

cannot be held to be Financial Creditors of the Corporate Debtor. The

Company Appeal (AT) (Insolvency) No.1366 of 2023 5

Corporate Debtor is neither the assignee nor successor nor transferee of

Akme Projects Ltd. The only obligation of Corporate Debtor as per the

auction purchase sale certificate is that the Corporate Debtor is to carry

out construction of the said apartments and honour the allotments of the

allottees/ homebuyers on receipt of unpaid portion of consideration of the

allotted flats. It is submitted that there being no transaction between the

Appellant and the Respondents, which can be termed as financial debt, the

Adjudicating Authority committed error in admitting Section 7 Application.

It is further submitted that no default has been committed by the

Appellant, which can be made basis of an Application under Section 7. It

is submitted that Hon’ble Supreme Court in Civil Appeal No.8788 of 2015

passed an order of status quo on 24.04.2015, which continued till

12.03.2018, hence, during this period no construction could have been

carried out by the Corporate Debtor. It is submitted that in Writ Petition

No.9229 of 2016 titled as M/s Akme Projects Ltd. vs. Yes Bank and Anr.,

the Delhi High Court passed an interim order on 05.10.2016, which

continued till 01.09.2017. It is further submitted that before the DRT-II,

Delhi in SA No.148 of 2017 titled as Akme Projects Ltd. vs. Yes Bank Ltd.,

an interim order was passed on 15.09.2017, which continued till

07.01.2020. It is submitted that it was only on 21.07.2022, the Hon’ble

Supreme Court in MA No.50 in Civil Appeal No.8788 of 2015 clarified that

the said property is not covered by its covered dated 24.04.2015. The

learned Senior Counsel for the Appellant also relied on the statement made

on behalf of the DTCP recorded in the order dated 04.03.2020 before the

Company Appeal (AT) (Insolvency) No.1366 of 2023 6

High Court, where the DTCP stated that the matter is covered by judgment

of Rameshwar & Ors. Vs. State of Haryana and Ors. Hence, it was even

the understanding of the DTCP also that land is covered in view of of the

order of the Hon’ble Supreme Court in Civil Appeal No.8788 of 2015.

Hence, there was no question of carrying out any construction or

committing any default by the Corporate Debtor. The land was

subsequently released on 09.05.2023 by an administrative order. Hence,

at no point of time any default is committed by the Corporate Debtor to

initiate the CIRP proceedings. It is further submitted that the Corporate

Debtor is only an auction purchaser and the Corporate Debtor is not party

to Flat Buyers Agreement executed between Akme Projects ltd. and

allottees. The allottees have already filed their claim in the CIRP of Akme

Project Ltd., which clearly indicate that allottees were treating the Akme

Project Ltd. as a Company, who has committed the default. The Corporate

Debtor has spent an amount of INR 40.75 Crores about eight years back

with no returns. It is submitted that the Appellant, however, now deck

being cleared, is willing to carry out construction and obtain necessary

sanctions/ permission for completing the Project.

5. Ms. Pooja Mahajan, learned Counsel appearing for the Respondent

refuting the submissions of the Appellant, submits that the submission of

the Appellant that there was no financial debt cannot be accepted as the

Respondents were allottees of Akme Project Ltd., which project was

mortgaged by the Akme to the YES Bank. In the proceedings under

SARFAESI Act, it was clearly mentioned that all assets and liabilities of

Company Appeal (AT) (Insolvency) No.1366 of 2023 7

Akme Project Ltd. are taken by auction purchaser. The sale of property

was on ‘as is where is’, ‘as is what is’ and ‘whatever there is’ basis. The

Sale Certificate dated 19.07.2016 issued by YES Bank in favour of the

Corporate Debtor provides the list of allottees and notes the allotments

made to the Respondents as an encumbrance over the property. The

Corporate Debtor took over the assets (land, building, right to receive

receivables) along with claims of the homebuyers on the units. The

Corporate Debtor having taken all rights, obligation and liabilities has

obligation to construct and deliver the units to the homebuyers. Once

auction purchaser takes over both rights and liabilities of the original

debtor qua a secured assets, the consequences of the same would flow

under all relevant provisions of law, including the Code. It is submitted

that the Sale Confirmation Advice records that Corporate Debtor will abide

by existing Tripartite Agreements or enter into new Tripartite Agreements;

rights of the allottees are not undergoing any change; and CD will honour

the allotment. The Corporate Debtor, thus, clearly owed a debt to the

Respondents, which debt stood transferred to auction purchaser, who is

the successor of the Corporate Debtor. Disputing the submission of the

Appellant that no default is committed by the Appellant, it is contended

that land in question was never covered by the judgment of the Hon’ble

Supreme Court in Rameshwar case, infact it only covered the transfers

and purchase of the land between 27.08.2004 till 29.01.2010. The Subros

acquired the land before 2003 and the land was sold to Akme in 2012, i.e.

after the aforesaid period. The judgment of the Hon’ble Supreme Court in

Company Appeal (AT) (Insolvency) No.1366 of 2023 8

Rameshwar case makes it clear that land is not covered by the proceedings

before the Hon’ble Supreme Court. It is submitted that the Corporate

Debtor took the property in auction in the year 2016 and never took any

steps to start construction or obtain necessary license etc. and it was the

homebuyers, who file an Application before the Hon’ble Supreme Court

seeking a clarification that the land of the Project is not covered by the

direction of the Hon’ble Supreme Court and Hon’ble Supreme Court issued

such clarification on 21.07.2022. Thus, the default was committed by the

Corporate Debtor in not carrying out the construction. The Corporate

Debtor owed debt to the Respondents and there has been default. Hence,

Section 7 Application was rightly filed by the allottees. Order of the High

Court and the DRT, which are relied by the Appellant also did not prohibit

the Corporate Debtor to obtain necessary license and complete the

construction. It is submitted that the Corporate Debtor is enjoying the

possession of the property along with the building, without undertaking

any work. In the real estate Project, the builder is obliged to take steps

with statutory Authorities for license and construction of the Project. It is

submitted that the Appellant has no intention to carry out the delivery of

the units to the allottees. Learned Counsel for the Respondents referring

to the additional affidavit filed by the Appellant on 19.01.2024 submits that

additional affidavit also does not indicate that the Corporate Debtor has

any genuine intent towards the Project. It is submitted that the

homebuyers are waiting for their units to be allotted for more than 10 years

Company Appeal (AT) (Insolvency) No.1366 of 2023 9

and only solution is resolution of the Corporate Debtor to enable the Project

to be completed.

6. We have considered the submission of learned Counsel for the

parties and have perused the record.

7. From the submissions of learned Counsel for the parties and the

materials on record, following questions arise for consideration in this

Appeal:

(I) Whether Grandstar Reality Pvt. Ltd., auction purchaser under

SARFAESI Act, 2002, on 17.06.2016/ 19.07.2016 can be held

to be Financial Creditor of the Respondent allottees, who were

issued allotment letters/ Builder Buyers Agreement by Akme

Projects Ltd. (the predecessor of the Corporate Debtor)?

(II) Whether no default was committed by the Corporate Debtor in

not carrying out the construction due to interim order passed

by the Hon’ble Supreme Court in Civil Appeal No.8788 of 2015

in Rameshwar and Ors. vs. State of Haryana and Ors.; in Writ

Petition No.9229 of 2016 – M/s Akme Projects Ltd. vs. YES

Bank & Anr.; and in SA No.148 of 2017 in Akme Projects Ltd.

vs. YES Bank Ltd. before the DRT-II, Delhi?

Question No.(I)

8. The Builder Buyers Agreement was entered between Akme Projects

Ltd. and the allottees between year 2012 to 2015. Under Builder Buyers

Company Appeal (AT) (Insolvency) No.1366 of 2023 10

Agreement, Home Buyers were to be delivered the flats within three years

from the date of execution of BBA with six months grace period. SARFAESI

proceedings were initiated by the YES Bank. Sale Notice was issued by the

YES Bank, which provided:

“SALE NOTICE (TENDER)

For Immovable Property Under sub rule (6) of rule 8
Whereas the undersigned, being the Authorized Officer {AO}
of YES BANK Limited (‘the Bank') under the Securitization And
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 ('the Act’) and in exercise of the conferred under
Section 13(12) of the Act read with Rule 8 and of the Security Interest
(Enforcement} Rules 2002 {"the Rules"), issued a demand notice
under Section 13(2) of the Act ('Demand Notice’) upon the below-
mentioned borrower and guarantors, on the date mentioned
hereunder, to repay the amount due. As the borrowed guarantors
failed to repay the amount, the Bank took possession of the
mortgaged property mentioned herein below on the date mentioned
against the property. The borrower /mortgagors/ guarantors hereby
requested to repay the outstanding amount as demanded in the said
Demand Notice within 30 Days of publication of this notice, as per
the provisions under the Rules 8 and 9 of the Rules. If the borrower/
guarantors fail to repay the debts, the property (including
encumbrances, if any.) mentioned herein below will be sold on “AS
IS WHERE IS", "AS IS WHAT IS BASIS"; "WHATEVER THERE IS
BASIS" and ‘NO RECOURSE BASIS'. Interested Parties /Persons are
requested to submit their sealed tenders FOR THE PROPERTY up to
the below-mentioned dates during office hours on any business day,
to Authorised Officer, YES BANK Limited, at, D-12, South Extension
Part II, New Delhi - 110049 indicating the details of the property on
the envelop for which tender has been submitted.”

Company Appeal (AT) (Insolvency) No.1366 of 2023 11

9. It is also relevant to notice that in Sale Notice dated 02.04.2016

encumbrances were noticed where a total area 10.881 Acres situated in

Village Lakhnaula, Tehsil Manesar, District Gurgaon Haryana was

mentioned. The Sale Notice also noticed that approximately 220 Units/

Flats were allotted to prospective buyers. Sale Confirmation Advice was

issued on 17.06.2016, which is as follows:

SALE CONFIRMATION ADVICE

(Rule 9(2))
Date: June, 17, 2016
M/s Grandstar Realty Pvt. Ltd.
H-65, Connaught Circus,
New Delhi-10001
Sub: Sale "As is Where is" and "As is What is" basis of Secured Assets
in the case of M/s. Akme Projects Ltd., as per Sale Notice (Tender)
dated April 02, 2016 under the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(SARFAEST Act, 2002).
Sir,
In the auction sale conducted on June 14, 2016, you have been
declared and confirmed as the successful bidder In respect of the
property mortgaged by Akme Projects Ltd and more fully described
in the Schedule hereunder, for a bid amount of Rs. 40.75 Crores
(Rupees Forty Crores Seventy Five Lakhs only).

You have remitted Rs. 40,750,000,.00/- vide D.D. No. 882444, dated
03/05/2016 and Rs. 61,125,000.03/ vide D.D. No. 882444, dated
03/05/2016 aggregating Rs 101,875,000.00/- (Rupees One
Hundred and One Million and Eight Hundred and Seventy Five
Thousand only) and you are advised to remit to balance Rs.
305.625,000.00/- (Rupees Three Hundred Five Milion and Six
Hundred and Twenty Five Thousand only) within 15 days from the
date of this letter Le. on or before June 29, 2016: for issuance of sale
certificate.

Company Appeal (AT) (Insolvency) No.1366 of 2023 12

 You may kindly note that on failure to remit the balance amount
within the specified period i.e. on or before 29th Day of June, the
amount already remitted would be forfeited.
That it is reiterated that 221 number of flats are allotted in the
project as per the record of YES Bank Ltd. Further, out of the said
221 allotment, atleast 38 flats are financed by HDFC Ltd, and 42
flats are financed y different Banks/Financial Institution (FI). That
you have to abide by the existing tripartite agreement executed
between such Banks/FI/HDFC Ltd Akme Projects Ltd. and the
lawful allottees of the said units or required shall enter into a fresh
tripartite agreement with HDFC Ltd/Bank/FT, it is also clarified that
the right of lawful allottees on respective Units flats is not
undergoing any change in the auction process and the successful
bidder will be required to honour and acknowledge all lawful
allotment and such bidder will be entitled to receive the unpaid
portion of the consideration of the allotted flats.
It was further informed that pursuant to the Order dated November
23, 2015 of Honble High Court of Punjab & Haryans in CWP NO.
24714 of 2015, YES Bank Ltd. has not taken the possession of
Flat No.F-1702 allotted to Mr. Akhilesh Kumar and is not a
part of auction proceedings.”

10. The above Sale Confirmation Advice makes it clear that the right of

lawful allottees on respective Units flats is not undergoing any change in

the auction process and the successful bidder will be required to honour

and acknowledge all lawful allotment and such bidder will be entitled to

receive the unpaid portion of the consideration of the allotted flats.

11. YES Bank issued Sale Certificate on 19.07.2016 in favour of the

Grandstar Reality Pvt. Ltd. Description of the immovable property was

mentioned therein. Under ‘List of encumbrances’ following was mentioned:

Company Appeal (AT) (Insolvency) No.1366 of 2023 13

 “1. Nil except flats allotted to respective allottees as per list
attached as Annexure-1.”

12. In the Annexure-1, ‘List of Allottees of flats’ contained 220 names

along with unit details. Thus, in the Sale Certificate, flats allotted to the

respective allottees were encumbrances to the immovable property in

question.

13. The learned Counsel for the Respondent has also relied on a Clause

in Builders Buyers Agreement entered with flat buyers and the Akme

Projects Ltd., which Agreement include its transferee, assignee, successor.

The Appellant has brought on record in the Appeal one of the sample Flat

Buyer’s Agreement dated 28.08.2012 between M/s Akme Projects Ltd. and

one Mahesh Dutt Kala. Akme Ragga Flat Buyer’s Agreement begins as

follows:

“Akme Raaga
Flat Buyer’s Agreement

This Agreement is made at New Delhi this 28th day of Aug 2012

BETWEEN
M/s Akme Projects Ltd., a company duly Incorporated under the
Companies Act 1956, presently having its Registered Office at B-
1/E-3, Mohan Co-operative Industrial Area Ph-I. Delhi-110044.
(hereinafter referred 1o as the ‘company', which expression, unless
excluded by or repugnant to the context or meaning thereof, shall
mean and include its successors, executors, administrators and
assigns) of the FIRST PART.
AND

Company Appeal (AT) (Insolvency) No.1366 of 2023 14

 (FOR INDIVIDUALS)
Shri/Smt./Ms. Mahesh Dutt kala
Son/Daughter/Wife of Mr. Shanker Dutt
Resident of D-40/2, Jangh Vihar,
New Delhi – 110062.”

14. There is definition Clause in the Agreement and the Company has

been defined as follows:

“Company” shall have the meaning as ascribed it in the preamble.

15. The preamble, which refers to the description of the Company, which

provides “(hereinafter referred to as the ‘Company’, which expression, unless

excluded by or repugnant to the context or meaning thereof, shall mean and

include its successors, executors, administrators and assigns)”. Thus, as

per the Flat Buyer’s Agreement successors, executors, administrators and

assignee has also to be treated for the Company for the purposes of Flat

Buyer’s Agreement. Learned Senior Counsel for the Appellant submits

that Grandstar Reality Pvt. Ltd. is not party to the Flat Buyer’s Agreement,

which was between Akme and Flat Buyers, hence, the above description of

Company is not binding on the Appellant. The Appellant has taken the

assets as per auction sale conducted under the SARFAESI Act, 2002. The

Sale Certificate and Sale Confirmation Advice have already been noticed by

us. Sale Confirmation Advice dated 17.06.2016 contained following

stipulation “it is also clarified that the right of lawful allottees on respective

Units flats is not undergoing any change in the auction process and the

successful bidder will be required to honour and acknowledge all lawful

Company Appeal (AT) (Insolvency) No.1366 of 2023 15

allotment and such bidder will be entitled to receive the unpaid portion of the

consideration of the allotted flats”. The above stipulation clearly indicates

that Grandstar Reality Pvt. Ltd., i.e., successful auction purchaser is

obliged to honour and acknowledge all lawful acknowledgment. Thus, the

obligation of Akme towards the allottees has been continued and attached

with the purchase of assets by the Appellant. The obligation under Flat

Buyer’s Agreement is an obligation to be discharged by the Appellant. The

submission of the Appellant that the Appellant’s only obligation is to carry

out construction is not the only obligation, which has been undertaken by

the Grandstar Reality Pvt. Ltd. All obligation under the Flat Buyer’s

Agreement has to be treated to have been taken over and acknowledged by

the Grandstar Reality Pvt. Ltd. Thus, the definition of ‘Company’ as noticed

in the Flat Buyer’s Agreement fully encompasses the Appellant and

Grandstar Reality Pvt. Ltd. has to discharge all obligation, which were the

obligation of Akme with whom flat buyers entered into Agreement.

16. The learned Senior Counsel for the Appellant in support of his

submission that there is no financial debt has relied on the judgment of the

Hon’ble Supreme Court in (2019) 8 SCC 416 – Pioneer Urban Land and

Infrastructure Limited and Anr. vs. Union of India and Ors.

Paragraphs 70 to 75, which have been relied, are as follows:

“70. The definition of “financial debt” in Section 5(8) then goes on to

state that a “debt” must be “disbursed” against the consideration for
time value of money. “Disbursement” is defined in Black's Law
Dictionary (10th Edn.) to mean:

Company Appeal (AT) (Insolvency) No.1366 of 2023 16

 “1. The act of paying out money, commonly from a fund or in
settlement of a debt or account payable. 2. The money so
paid; an amount of money given for a particular purpose.”

71. In the present context, it is clear that the expression “disburse”

would refer to the payment of instalments by the allottee to the real
estate developer for the particular purpose of funding the real estate
project in which the allottee is to be allotted a flat/apartment. The
expression “disbursed” refers to money which has been paid against
consideration for the “time value of money”. In short, the “disbursal”
must be money and must be against consideration for the “time
value of money”, meaning thereby, the fact that such money is now
no longer with the lender, but is with the borrower, who then utilises
the money. Thus far, it is clear that an allottee “disburses” money in
the form of advance payments made towards construction of the real
estate project. We were shown the Dictionary of Banking Terms (2nd
Edn.) by Thomas P. Fitch in which “time value for money” was
defined thus:
“present value : today's value of a payment or a stream of
payment amount due and payable at some specified future
date, discounted by a compound interest rate of discount
rate. Also called the time value of money. Today's value of a
stream of cash flows is worth less than the sum of the cash
flows to be received or saved over time. Present value
accounting is widely used in discounted cash flow analysis.”
(emphasis supplied)

That this is against consideration for the time value of money is also
clear as the money that is “disbursed” is no longer with the allottee,
but, as has just been stated, is with the real estate developer who is
legally obliged to give money's equivalent back to the allottee, having
used it in the construction of the project, and being at a discounted
value so far as the allottee is concerned (in the sense of the allottee
having to pay less by way of instalments than he would if he were to
pay for the ultimate price of the flat/apartment).

Company Appeal (AT) (Insolvency) No.1366 of 2023 17

 72. Shri Krishnan Venugopal took us to ACT Borrower's Guide to
the LMA's Investment Grade Agreements by Slaughter and May (5th
Edn., 2017). In this book “financial indebtedness” is defined thus:
“Definition of Financial Indebtedness (Investment Grade
Agreements)
“Financial indebtedness” means any indebtedness for or in
respect of:
(a) moneys borrowed;
(b) any amount raised by acceptance under any acceptance
credit facility or dematerialised equivalent;
(c) any amount raised pursuant to any note purchase facility
or the issue of bonds, notes, debentures, loan stock or any
similar instrument;
(d) the amount of any liability in respect of any lease or hire
purchase contract which would, in accordance with GAAP, be
treated as a balance sheet liability [(other than any liability in
respect of a lease or hire purchase contract which would, in
accordance with GAAP in force [prior to 1-1-2019/prior to/
have been treated as an operating lease];
(e) receivables sold or discounted (other than any receivables
to the extent they are sold on a non-recourse basis);
(f) any amount raised under any other transaction (including
any forward sale or purchase agreement) of a type not referred
to in any other paragraph of this definition having the
commercial effect of a borrowing;
(g) any derivative transaction entered into in connection with
protection against or benefit from fluctuation in any rate or
price [and, when calculating the value of any derivative
transaction, only the marked to market value (or, if any actual
amount is due as a result of the termination or close-out of
that derivative transaction, that amount) shall be taken into
account];
(h) any counter-indemnity obligation in respect of a
guarantee, indemnity, bond, standby or documentary letter

Company Appeal (AT) (Insolvency) No.1366 of 2023 18

 of credit or any other instrument issued by a bank or financial
institution; and
(i) the amount of any liability in respect of any guarantee or
indemnity for any of the items referred to in Paras (a) to (h)
above.”

73. When compared with Section 5(8), it is clear that Section 5(8)
seems to owe its genesis to the definition of “financial indebtedness”
that is contained for the purposes of investment grade agreements.
Shri Venugopal argued that even insofar as derivative transactions
are concerned, it is clear that money alone is given against
consideration for time value of money and a transaction which is a
pure sale agreement between “borrowers” and “lender” cannot
possibly be said to fit within any of the categories mentioned in
Section 5(8). He relied strongly on the passage in Slaughter and
May's book which is extracted hereinbelow:
“Any amount raised having the “commercial effect of a
borrowing”
A wide range of transactions can be caught by Para (f),
including for example forward purchases and sales of
currency and repo agreements. Conditional and credit sale
arrangements could also be covered here as could certain
redeemable shares.
The precise scope of this limb can be uncertain. Ideally, from
the borrower's perspective, if there are additional categories
of debt which should be included in “financial indebtedness”,
these should be described specifically and this catch-all
paragraph, deleted. A few strong borrowers do achieve that
position. Most, however are required to accept the “catch all”
and will therefore need to consider which of their liabilities
might be caught by it, and whether specific exclusions might
be required.”
74. What is clear from what Shri Venugopal has read to us is that a
wide range of transactions are subsumed by para (f) and that the
precise scope of para (f) is uncertain. Equally, para (f) seems to be a
“catch all” provision which is really residuary in nature, and which

Company Appeal (AT) (Insolvency) No.1366 of 2023 19

 would subsume within it transactions which do not, in fact, fall
under any of the other sub-clauses of Section 5(8).

75. And now to the precise language of Section 5(8)(f). First and
foremost, the sub-clause does appear to be a residuary provision
which is “catch all” in nature. This is clear from the words “any
amount” and “any other transaction” which means that amounts
that are “raised” under “transactions” not covered by any of the other
clauses, would amount to a financial debt if they had the commercial
effect of a borrowing. The expression “transaction” is defined by
Section 3(33) of the Code as follows:

3. (33) “transaction” includes an agreement or arrangement

in writing for the transfer of assets, or funds, goods or
services, from or to the corporate debtor;

As correctly argued by the learned Additional Solicitor General, the

expression “any other transaction” would include an arrangement in
writing for the transfer of funds to the corporate debtor and would
thus clearly include the kind of financing arrangement by allottees
to real estate developers when they pay instalments at various
stages of construction, so that they themselves then fund the project
either partially or completely.”

17. Another judgment relied by learned Senior Counsel for the Appellant

is judgment of the Hon’ble Supreme Court in Anuj Jain, IRP for Jaypee

Infratech Ltd. vs. Axis Bank Ltd. & Ors. – (2020) 8 SCC 401. Reliance

has been placed on paragraphs 46 to 48, which are as follows:

“46. Applying the aforementioned fundamental principles to the

definition occurring in Section 5(8) of the Code, we have not an iota
of doubt that for a debt to become “financial debt” for the purpose of
Part II of the Code, the basic elements are that it ought to be a
disbursal against the consideration for time value of money. It may
include any of the methods for raising money or incurring liability
by the modes prescribed in clauses (a) to (f) of Section 5(8); it may
also include any derivative transaction or counter-indemnity

Company Appeal (AT) (Insolvency) No.1366 of 2023 20

 obligation as per clauses (g) and (h) of Section 5(8); and it may also
be the amount of any liability in respect of any of the guarantee or
indemnity for any of the items referred to in clauses (a) to (h). The
requirement of existence of a debt, which is disbursed against the
consideration for the time value of money, in our view, remains an
essential part even in respect of any of the transactions/dealings
stated in clauses (a) to (i) of Section 5(8), even if it is not necessarily
stated therein. In any case, the definition, by its very frame, cannot
be read so expansive, rather infinitely wide, that the root
requirements of “disbursement” against “the consideration for the
time value of money” could be forsaken in the manner that any
transaction could stand alone to become a financial debt. In other
words, any of the transactions stated in the said clauses (a) to (i) of
Section 5(8) would be falling within the ambit of “financial debt” only
if it carries the essential elements stated in the principal clause or
at least has the features which could be traced to such essential
elements in the principal clause. In yet other words, the essential
element of disbursal, and that too against the consideration for time
value of money, needs to be found in the genesis of any debt before
it may be treated as “financial debt” within the meaning of Section
5(8) of the Code. This debt may be of any nature but a part of it is
always required to be carrying, or corresponding to, or at least
having some traces of disbursal against consideration for the time
value of money.

47. As noticed, the root requirement for a creditor to become

financial creditor for the purpose of Part II of the Code, there must
be a financial debt which is owed to that person. He may be the
principal creditor to whom the financial debt is owed or he may be
an assignee in terms of extended meaning of this definition but, and
nevertheless, the requirement of existence of a debt being owed is
not forsaken.

48. It is also evident that what is being dealt with and described in
Section 5(7) and in Section 5(8) is the transaction vis-à-vis the
corporate debtor. Therefore, for a person to be designated as a
financial creditor of the corporate debtor, it has to be shown that the

Company Appeal (AT) (Insolvency) No.1366 of 2023 21

 corporate debtor owes a financial debt to such person. Understood
this way, it becomes clear that a third party to whom the corporate
debtor does not owe a financial debt cannot become its financial
creditor for the purpose of Part II of the Code.”

18. The above judgments notices the essentials for financial debt and

Financial Creditor. Financial Creditor is defined in Section 5, sub-section

(7), which is as follows:

“5(7) “financial creditor” means any person to whom a financial debt

is owed and includes a person to whom such debt has been legally
assigned or transferred to;”

19. The definition of Financial Creditor means that any person to

whom a financial debt is owed and includes a person to whom such

debt has been legally assigned or transferred to. The crucial word in

the definition is “any person to whom a financial debt is owed”

becomes a Financial Creditor. Further, the expression “includes a

person to whom such debt is legally assigned or transferred to” is only

incidence of further elaboration of person to whom the financial debt

is owed. In the facts of the present case, there can be no denying that

financial debt, which was owed by Akme to the allottees is now the

debt owed by Grandstar Reality Pvt. Ltd. The Grandstar Reality Pvt. Ltd.

is fully covered by the definition of Section 5, sub-section (7), who owed the

debt towards the allottees. The judgment of the Hon’ble Supreme Court in

Pioneer Urban Land and Infrastructure Limited and Anuj Jain, IRP

(supra) lays down the essentials to be proved for a financial debt. There is

Company Appeal (AT) (Insolvency) No.1366 of 2023 22

no issue that the allottees were Financial Creditor to the Akme and when

the Grandstar Reality Pvt. Ltd. has taken obligation of Akme, the financial

debt is also owed by Grandstar Reality Pvt. Ltd. towards the allottees. The

judgments relied by the Appellant, thus, in no manner support the

submission of the Appellant that Grandstar Reality Pvt. Ltd. is not the

Financial Creditor of the allottees. The financial debt can be owed in more

than one manner. Assignment or transfers are two modes, which has been

expressly included in the definition. In cases of amalgamation and

demerger under the Companies Act, 2013 of a Corporate Debtor with

another entity is obviously considered as Corporate Debtor on account of

transfer/ vesting of assets and liabilities to the amalgamated/ transferee

Company. Transferee Company cannot be permitted to escape the rigours

of the Code by claiming that disbursement was not done to it directly. In

the present case, where Grandstar Reality Pvt. Ltd. has taken over the

Project under the SARFAESI Act, cannot escape the rigours of the Code

and defeat the rights of the homebuyers under the Code. We, thus, are

satisfied that there is a financial debt and the filing of the Application by

the allottees under Section 7 cannot be faulted on this ground.

Question No.(II)

20. The learned Senior Counsel for the Appellant submits that there is

no default committed by the Appellant due to various orders passed by the

Hon’ble Supreme Court, Hon’ble High Courts and DRTs, due to which the

Grandstar Reality Pvt. Ltd. had no opportunity to carry out the

Company Appeal (AT) (Insolvency) No.1366 of 2023 23

construction. It is submitted that when there was a restraint by the judicial

order, no default can be found with the Grandstar Reality Pvt. Ltd. in not

carrying out the construction.

21. We have noticed above the judgment of the Hon’ble Supreme Court

in Rameshwar and Ors. vs. State of Haryana and Ors. – (2018) 6 SCC

215 has been relied by learned Senior Counsel for the Appellant. The

judgement of the Hon’ble Supreme Court in Rameshwar’s case, which was

decided by the Hon’ble Supreme Court on 12.03.2018 needs to be noticed

to find out, which were the lands, which were covered under the judgment.

The final directions issued by the Hon’ble Supreme Court are contained in

paragraph 42, which is relevant to notice, is as follows:

“42. Having bestowed our attention to various competing elements

and issues we deem it appropriate to direct:
42.1. The decisions dated 24-8-2007 and 29-1-2010 referred to
hereinabove are set aside as being brought about by mala fide
exercise of power. In our considered view, those decisions were clear
case of fraud on power and as such are annulled.

42.2. The decision dated 24-8-2007 was taken when the matters
were already posted for pronouncement of the award on 26-8-2007.
Since all the antecedent stages and steps prior thereto were properly
and validly undertaken, and since the decision dated 24-8-2007 has
been held by us to be an exercise of fraud on power, it is directed
that an award is deemed to have been passed on 26-8-2007 in
respect of lands:

(i) which were covered by declaration under Section 6 in the

present case, and
(ii) which were transferred by the landholders during the
period 27-8-2004 till 29-1-2010.

Company Appeal (AT) (Insolvency) No.1366 of 2023 24

 The lands which were not transferred by the landholders during the
period from 27-8-2004 till 29-1-2010 are not governed by these
directions.

42.3. Subject to the directions issued hereafter, the lands covered

under aforementioned Direction 42.2 shall vest in HUDA/Hsiidc, as
may be directed by the State of Haryana, free from all
encumbrances. HUDA/Hsiidc may forthwith take possession
thereof. Consequently, all licences granted in respect of lands
covered by the deemed award dated 26-8-2007 will stand
transferred to HUDA/HSIDC.”

22. We have noticed above that Subros Ltd. has purchased the land in

the year 2003 and Akme Projects Ltd. has purchased the land from Subros

Ltd. in 2012. The above transaction, thus, was not clearly covered by

judgment of the Hon’ble Supreme Court. The Hon’ble Supreme Court has

annulled the transactions/ transfers made by land holders during the

period 27.08.2004 to 29.01.2010. The Appellant’s submission that the

land in question was covered by the judgment of the Hon’ble Supreme

Court does not appeal to reasons. The learned Senior Counsel has placed

reliance on the statement made by Counsel on behalf of DTCP before the

Punjab and Haryana High Court, where the Counsel stated that land is

covered under the Rameshwar’s case. There was no direction or

declaration by Punjab and Haryana High Court that the land was covered

under the Rameshwar’s case. Any statement of the Counsel cannot be

accepted as against the express content of the judgment of the Hon’ble

Supreme Court. It is further relevant to notice that no steps at all were

taken by Grandstar Reality Pvt. Ltd. to carry on the construction or to take

the Project forward. The judgment of the Hon’ble Supreme Court was

Company Appeal (AT) (Insolvency) No.1366 of 2023 25

delivered on 12.03.2018, hence, after the said date any doubt or dispute

regarding the content of the order passed in Rameshwar’s case, came to

an end and there was no reason for the Appellant not to proceed any further

towards the construction of the Project, which was the obligation

undertaken by the Grandstar Reality Pvt. Ltd. in auction purchase. It is

further relevant to notice that it was the flat buyers themselves, who

approached the Hon’ble Supreme Court by filing an Application before the

Hon’ble Supreme Court for clarification and Hon’ble Supreme Court issued

the clarification in MA No.50 of 2019 filed by Akme Flat Buyer’s

Association. The said order was passed on 21.07.2022. Paragraphs 46 to

50 of the judgment are relevant, which are as follows:

“46. M/s. R.P. Estates Pvt. Ltd. (hereinafter, “R.P. Estates”) owned
2.9875 acres of land, and M/s. Subros Ltd. (hereinafter, “Subros”)
owned 10.881 acres. The lands of both these concerns were included
in the notification under Section 4 as well as the declaration under
Section 6. The State decided to release these lands, as indicated by
its letter to Subros dated 22.08.2007. This stand was reiterated by
the State in these proceedings, where it was submitted that as there
were no sale transactions with respect to these lands, it was decided
not to include them in the deemed award. It was also stated that no
developmental rights were parted by them.

47. Learned counsel appearing for both the entities reiterated the
State’s submissions, that the lands were vested in these two
concerns and continued to be so vested. In the circumstances, R.P.
Estates and Subros had to be treated as bona fide land owners, since
they did not enter into any transactions during the suspect period.

48. In three applications (i.e., I.A. Nos. 111557 of 2020, 111562 of

2020 and 111563 of 2020) in M.A. No. 2067 of 2020, R.P. Estates
further submitted that it applied for license from the DTCP much

Company Appeal (AT) (Insolvency) No.1366 of 2023 26

 after the date of the deemed award and was granted License No. 82
of 2009 on 08.12.2009. It also disclosed that developmental rights
were thereafter transferred to another enterprise called M/s. Elan
Ltd. in 2013-14. The application and pleadings show that the project
was completed on 14.01.2020 and the application for grant of
occupation certificate was thereafter made, with 305 units allotted
to third parties out of a total of 362.

49. Subros had initially challenged the acquisition by filing a writ

petition before the Punjab & Haryana High Court.11 However, after
it received a letter from the DTCP, communicating recommendation
for withdrawal from acquisition, Subros withdrew its petition.
Thereafter, it applied for license, and was granted the same on
13.06.2008. Subros did not enter into any collaboration agreement
or sell its rights during the suspect period - it sold the lands to one
Akme Projects Ltd. much later on 23.01.2012.

50. Having regard to the overall circumstances, this Court is of the

opinion that the lands owned by both R.P. Estates and Subros
should be excluded from the deemed award. The judgment of the
Court dated 12.03.2018 is therefore clarified to the above extent. I.A.
No. 111557/ 2020; I.A. No. 111562/2020; and I.A. No. 111563/
2020 of M.A. No. 2067/2020; I.A. No. 116120/2021; I.A. No.
116128/2021 and I.A. No. 123690/2021 of M.A. No. 50/2019 are
disposed off accordingly.”

23. No steps were taken by the Grandstar Reality Pvt. Ltd. to start the

construction or to seek any clarification or direction, clearly indicate

inaction of the Grandstar Reality Pvt. Ltd., which is nothing but default

committed by Grandstar Reality Pvt. Ltd. in proceeding to carry out its

obligation under the auction purchase.

24. The learned Senior Counsel for the Appellant has also relied on order

passed by Delhi High Court and orders passed by DRT. The Appellant has

Company Appeal (AT) (Insolvency) No.1366 of 2023 27

referred to order of the status quo passed by Delhi High Court in M/s Akme

Projects Limited vs. Yes Bank & Anr. in Writ Petition (C) No.9229/2016

from 05.10.2016 to 01.09.2017. According to own showing of the

Appellant, the said order came to an end on 01.09.2017. The DRT by its

interim order on 15.09.2017 on an Application filed by Akme Projects Ltd.

has directed “respondent no.2/ Auction Purchaser is hereby restrained to

create any 3rd parte interest qua the property in question”. The above order

passed by DRT in no manner precluded the Grandstar Reality Pvt. Ltd. to

take steps towards the completion of the Project. In any view of the matter

after 07.01.2020 there was no dispute nor any interim order was passed by

the DRT, which continued thereafter. Thus, the submission of the

Appellant that due to order passed by Hon’ble Supreme Court, Delhi High

Court and the DRT, it could not have carried out the construction, cannot

be accepted. The assets were handed over to the Grandstar Reality Pvt.

Ltd. in July 2016, who was in possession of the assets without undertaking

any work. In the real estate Project, which was taken over by the Grandstar

Reality Pvt. Ltd., it was the obligation of the Grandstar Reality Pvt. Ltd. to

take steps with the statutory Authorities. The learned Counsel for the

Respondent is right in her submission that even in additional affidavit filed

on 19.01.2024 by the Appellant, no such facts have been stated, which may

indicate that Grandstar Reality Pvt. Ltd. has been taking steps for

completion of the Project. In the additional affidavit, the Appellant has

placed reliance on letter dated 09.05.2023 issued by Tehsildar in terms of

the order No.17/LAC dated 12.04.2023 passed by District Revenue Officer

Company Appeal (AT) (Insolvency) No.1366 of 2023 28

cum Land Acquisition Collector Gurugram. When we look into the said

letters/ orders, it is clear that said orders were issued on a request made

by one Om Prakash Yadav in the Rameshwar’s case. Hence, order of the

District Revenue Officer dated 12.04.2023 and letter dated 09.05.2023 by

Tehsildar are not relevant for the present case. The judgment of the Hon’ble

Supreme Court in the Rameshwar’s case has already clarified the position.

More so, there is nothing on record that at any point of time the Grandstar

Reality Pvt. Ltd. has taken steps to initiate construction and taken steps

for seeking necessary permissions for carrying out construction or shown

any order stopping the Grandstar Reality Pvt. Ltd. for carrying out

construction, further was passed. We, thus, are satisfied that in the facts

of the present case default was clearly proved on the part of the Grandstar

Reality Pvt. Ltd. and the findings recorded by the Adjudicating Authority

that Section 7 Application is complete and deserved to be admitted, does

not warrant any interference.

25. The learned Senior Counsel for the Appellant has also submitted that

in the CIRP of Akme Project, allottees have also filed their claim. The said

arguments was rejected by the Adjudicating Authority in paragraph-19 of

the order, which is as follows:

“19. As regards to the Corporate Debtor‟s contention that CIRP has

already been initiated against the Original Borrower and the
Applicants had submitted their claims in the CIRP of the Original
Borrower, this Adjudicating Authority is of the view that the
admissibility of the Applicants claim in the CIRP of the Original
Borrower shall not preclude the claim of the Applicants against the
Corporate Debtor, as the Corporate Debtor herein is now in the

Company Appeal (AT) (Insolvency) No.1366 of 2023 29

 ownership as well as in the physical possession of the Project land
and also undertaken the liability to complete construction and
deliver possession by receiving the unpaid portion of the
consideration from the Allottees.”

26. We find substance in the submission of learned Counsel for the

Respondent that since the Project has been taken over by the Grandstar

Reality Pvt. Ltd. in 2016 and it is now the obligation of Grandstar Reality

Pvt. Ltd. to continue the Project, the filing of the claim by the allottees

against the CIRP of Akme Project, cannot preclude the allottees from

agitating their claim by filing Application under Section 7 against the

Grandstar Reality Pvt. Ltd., who has taken over the Project.

27. In view of the foregoing discussions and conclusions, we are satisfied

that there is no error in the order of the Adjudicating Authority admitting

Section 7 Application. The Appeal is dismissed.

[Justice Ashok Bhushan]

Chairperson

[Barun Mitra]
Member (Technical)

NEW DELHI

14th March, 2024

Ashwani

Company Appeal (AT) (Insolvency) No.1366 of 2023 30