IN THE NATIONAL COMPANY LAW TRIBUNAL,

MUMBAI BENCH, COURT II

INTERLOCUTORY APPLICATION. No. 2903/2023

In
COMPANY PETITION (IB) No. 4302/MB/C-II/2018

Application filed under Section 60(5) of the Insolvency

and Bankruptcy Code, 2016 read with Rule 11 of the
National Company Law Tribunal Rules, 2016.

In the matter of

1. Mr. Hitendra Vishanji Nagda,

2. Mrs. Heena Hitendra Nagda and
3. Mr. Viral Hitendra Nagda
All Residing at: B2, 1403, Kutchi Sarvodaya
Nagar, P.L. Lokhande Marg, ACC Nagar,
Govandi, Chembur, Mumbai-400043.
…Applicants
v/s.

Prime Plaza Premises Co-operative Society Ltd.

Old Carrol Road, Balaseth Madhukar Marg, JV
Patel Compound, Elphinstone, Mumbai-400013
…Respondent No.01
 IN THE NATIONAL COMPANY LAW TRIBUNAL,
MUMBAI BENCH, COURT II
I. A. No. 2903/2023
In
CP No. 4302/MB/C-II/2018

Mr. Fanendra H Munot

Liquidator of M/s. Max Flex & Imaging Systems
Ltd. Having its registered office at: 06th Floor,
Mafatlal House Building, H.T. Parekh Marg,
Backbay Reclamation, Mumbai-400020.

…Respondent No.02

In the matter of:

Dena Bank ….Financial Creditor

v/s

M/s. Max Flex & Imaging Systems Ltd.

…Corporate Debtor

Order Pronounced on: - 23.01.2024.

Coram:
Shri. Anil Raj Chellan : Member (Technical)
Shri. Kuldip Kumar Kareer : Member (Judicial)

Appearances (in Physical Mode) :

For the Applicant : Adv. Meghna Arvind.

For the Respondent No.01 : Adv. Abhishek Pednekar.
For the Respondent No.02 : Adv. Kunal Chheda.

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ORDER

Per: Shri. Kuldip Kumar Kareer, Member (Judicial).

1. This is an application filed by the Applicants under Section 60(5) of the

Insolvency and Bankruptcy Code, 2016 against the Respondents inter alia
seeking following reliefs: a) To restrain the Respondent No.01 from recovering
outstanding dues from the Applicants which were payable by the Corporate
Debtor; b) to be included as the member of the society with immediate effect;
and c) to allow the Applicants to use the parking space which is a part of the
immovable property purchased by them.

Case of the Applicant in brief:

2. The Corporate Debtor was admitted into Corporate Insolvency Resolution

Process (‘CIRP’) on September 08, 2021. The Respondent No.02 was appointed
as the Resolution Professional (‘RP’). Liquidation commenced against the
Corporate Debtor vide Order dated 23.09.2022 and RP was confirmed as the
Liquidator of the Corporate Debtor. Corporate Debtor was the owner of the
property situated at Unit No. 4B-2, Ground Floor, Prime Plaza Society, Old
Carrol Road, Elphinstone, Mumbai- 400013 (hereinafter referred to as the
Immovable Property”) and was a member of “The Prime Plaza Premises Co-
operative Society Limited”.

3. Respondent No. 02 issued Asset Sale Process Memorandum on December 12,

2022 in relation to the sale of the Immovable Property referred to hereinabove.
Respondent No.02 also issued a public announcement of the proposed auction

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of the Immovable Property in Business Standard and Loksatta on 12.12.2022 in

accordance with Regulation 12(3) of the IBBI (Liquidation Process)
Regulations, 2016. E-Auction was conducted on 07.01.2023 and the Applicants
were declared as the highest bidder for the Immovable Property pursuant to
which a Letter of Intent (‘LoI’) was issued by Respondent No.02 in favour of
the Applicants on 09.01.2023 after adjusting the Earnest Money Deposit
(‘EMD’) paid by the purchasers in the bid process.

4. In compliance with the terms and conditions stipulated in the Asset Sale Process
Memorandum, the Applicants have paid the entire sale consideration of INR
3,41,77,500/- (Rupees Three Crores, Fourty-One Lakhs, Seventy-Seven
Thousand and Five Hundred Only) on 04.01.2023 and 30.01.2023 towards the
Immovable Property. Pursuant thereto, the Applicants and the Respondent
No.02 executed a Deed of Sale dated 30th January, 2023 (“Deed of Sale”).

5. Subsequent to the Deed of Sale, the Applicants wrote a Letter dated 07th
February, 2023 through an Advocate stating that the Applicants are now the
rightful owner of the Immovable Property and sought for the process to be
included as the member of the society. The Applicants clearly in their
aforementioned letter stated that any outstanding dues, maintenance or
liabilities of the Immovable Property prior to 30th January, 2023 shall be claimed
from the Corporate Debtor or from the Liquidator of the Corporate Debtor and
the Applicants are liable to pay the maintenance dues and outstanding taxes
from 30th January, 2023 only.

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6. The Respondent No.01 addressed to the Applicants a Letter dated 29th March,
2023. The aforesaid letter states that an amount of Rs. 17,17,711/- is due from
the Corporate Debtor which must be cleared by the Applicants since the
Applicants are the current purchasers of the Immovable Property. Thereafter,
the Respondent No.01 served a copy of Dispute Application No. 273 of 2023
filed against the Applicants before the Hon’ble Co-operative Court No. III,
Mumbai seeking to recover the outstanding maintenance dues which were
payable by the previous owner along with interest to the tune of Rs. 23,19,220/-
from the Applicants since the Applicants are the purchasers of the Immovable
Property. Respondent No.01 wrote a Letter dated June 05, 2023 to the
Applicants that the Applicants had been illegally parking the cars/vehicles
which are solely reserved for the members of the society. In response thereto,
the Applicants had addressed a Letter dated June 06, 2023 to the Respondent
No.01 stating that the Applicants are the rightful owners of the Immovable
Property and they are not liable to pay the previous dues of the Corporate Debtor
in view of various provisions of IBC.

7. The Respondent No.01 had informed the Applicants vide Letter dated June 13,
2023 that the Applicants are not shareholders of Unit No. 4B-2 in the Prime
Plaza Society as there are pending maintenance dues of society and that the
society has not transferred the share certificates in the name of the Applicants.
Further, the Respondent No.01 informed that since the Applicants are not the
members of the society, they are not allowed to park their vehicles in the parking
space of society premises. The Applicants state that the Respondent No.01 has

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also obstructed the goods truck from entering and being parked in the parking
space of the society.

8. Being aggrieved by the aforesaid acts of the Respondent No.01, the Applicants
herein are constrained to file this application. Hence this application.

Reply of the Respondent No.01:

9. The Applicants have purchased the Immovable Property through E-Auction by

executing the Sale Deed on ‘As Is, Where Is, Whatever There Is and Without
Recourse Basis’ and hence, any pending dues left by the previous owner would
have to be paid by the Applicants. It was the duty of the Applicants to inquire
with the Respondent No.01 society regarding dues before participating in the
auction and purchasing the Immovable Property.

10. There are other auction purchasers who too participated in the E-auction and
purchased other units of the Corporate Debtor in the society of the Respondent
No.01 who have peacefully complied with by paying the pending maintenance
dues without obstructing and objecting to the society.

11. The Applicants are not the members of the Respondent No.01 and therefore, the
Applicants are not entitled to use the parking space of the society.

ANALYSIS AND FINDINGS

12. We have heard the Counsel for the parties and have gone through the records.

13. It has been argued by the Ld. Counsel for the Applicant that the Applicant
purchased the property in question, which was previously owned by the

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Corporate Debtor who was a member of the Respondent No. 1 Society vide
Share Certificate no. 34 for five shares of Rs. 50 each bearing no. 16 and 170, in
an open auction conducted by the Liquidator. The Applicant paid an EMD of
Rs. 34,17,750/- on 04.01.2023 and further paid a sum of Rs. 3,41,77,500/- after
he was declared the highest bidder. The sale deed was executed by the
Liquidator and the property in question was conveyed to the Applicant. The Ld.
Counsel for the Applicant has further argued that Respondent No. 1 has filed
Application no. 273 of 2023 before the Co-operative society for recovery of Rs.
23,19,220/- with interest. The society also wrote to the Applicant restraining
him from parking cars/vehicles which are reserved for the members of the
society. Thus, according to the Counsel for the Applicant, the Respondent
society is not treating the Applicant owner/member.

14. The Counsel for the Applicant has further contended that the Respondent
society is not entitled to claim any dues pertaining to pre-CIRP period regarding
which it has already lodged the claim with Liquidator which would be treated
and decided as per Section 53 of the IB Code, 2016. In support of his arguments,
the Counsel for the Applicant has relied upon Haryana State Industrial and
Infrastructure Development Corporation Limited vs. AAR AAR Technoplast Private
Limited and another (Company Appeal (AT) (Insolvency) No. 606 of 2021 decided
on 06.09.2022, whereby it has been held that after the completion of the sale by
the Liquidator any claim relating to such property for dues prior to auction
cannot be raised against the auction purchaser specially when the Company is
in Liquidation and the dues were already claimed by the said party as an
Operational Creditor during the CIRP process. The Counsel for the Applicant

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has further relied upon Chinar Steel Segments Centre Pvt. Ltd. vs. Sameer Kumar
Agarwal and other (Company Appeal (AT)(Insolvency) No. 1355 of 2022 decided on
11.10.2023, whereby it has been held that the claim of the Appellant to realise
the pre-CIRP dues from the successful auction purchaser is clearly in conflict of
the statutory scheme as laid down in the Court. In the light of the law laid down
in the aforecited cases, it has been urged by the Counsel for the Applicant that
the application deserves to be allowed.

15. On the other hand, the Counsel for the Respondent No. 1 has argued that the
Application is without any merit and deserves dismissal. According to the
Counsel for the Respondent No. 1 that it is a registered society under the
Maharashtra Co-operative Societies Act, 1960. A commercial unite was
developed by Respondent No. 1 in the year 1946. The Corporate debtor
purchased certain units in Respondent No. 1 society. Subsequently, the
Corporate Debtor was admitted into Insolvency and Liquidation. The
Liquidator auctioned the property in question on “as is where is basis whatever
is without recourse basis”. The Applicant is the Successful Bidder of Unit No. 4
B/2 situated on the ground floor and the sale deed was also executed in favour
of the Applicant on 30.01.2023. According to the Counsel for the Respondent
No. 1, as the property was purchased by the Applicant ‘as is where is’ basis, he
is liable to pay the outstanding dues on the said property. In support of his
contentions, the Ld. Counsel for Respondent No. 1 has relied upon K C Ninan
vs. Kerala State Electricity Board and others whereby the Hon’ble Supreme Court
has held that where sale is conducted on ‘as is where is’ basis, the purchaser
would be acquiring all its existing rights, obligations and liabilities and all such

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encumbrances on the property stand transferred to the purchaser upon the sale.
It was further held that the auction purchaser is expected to exercise due
diligence.

16. The Ld. Counsel for the Respondent No. 1 has further argued that the dispute
with regard to the past outstanding dues pertaining to the property in question
is pending before the Co-operative Court in the shape of Dispute Applicant No.
273 of 2023 and the Hon’ble Co-operative Court has the exclusive jurisdiction
to adjudicate the matter. As regards the parking space, it has been argued by
Respondent No. 1 that there is no mention of any parking space in the sale deed
dated 30.01.2023 and the Applicant is illegally demanding the parking space. It
has also been contended by the Counsel for the Respondent No. 1 that the
provisions of IBC are not applicable to a Co-operative Society registered under
the Co-operative Societies Act, in this regard a reliance has been placed upon
The Solapur District Central Co-operative Bank Limited vs. Sangola Taluka Sahkari
Sakhar Karkhana Limited (decided by this Tribunal on 04.02.2022) whereby an
Application u/s 7 of the Code was dismissed on the ground that the Co-
operative was not a corporate person nor the provisions of the IB are applicable
to a Co-operative society. The Counsel for the Respondent No. 1 has further
contended that the remedy available with the Applicant is to pursue its case
before the Co-operative Court where the dispute is pending, and the present
Application is not maintainable and deserves to be dismissed.

17. We have weighed the contentions raised by the Counsel for the parties and have
gone through the records.

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18. By way of this Application, the Applicant seeks exemption from payment of
outstanding dues payable, if any, to Respondent No. 1 society and also that the
Applicant be included/joined as the member of the society and further the
Respondent society be restrained from preventing the Applicant from using the
parking space. It has been claimed by the Applicant that he has purchased the
property in question in an open auction conducted by the Liquidator for the total
sale consideration of Rs. 3,41,77,500/- and the entire sale consideration is stated
to have been paid on 30.01.2023. The sale deed was also executed by the
Liquidator on 30.01.2023.

19. Now the question arises as to whether or not the Applicant is liable to pay the
outstanding dues of Respondent No. 1 prior to the execution of the sale deed in
his favour executed by the Liquidator on 30.01.2023.

20. To prove his case, the Counsel for the Applicant has relied upon Haryana State
Industrial and Infrastructure Development Corporation Limited (supra). It was held
by the Hon’ble NCLAT that any claim relating to such property for dues prior
to the auction cannot be raised against the auction purchaser specially when the
company is in liquidation and the dues were already claimed by the said party
as an Operational Creditor during the CIRP process and claim Form B was also
filed with the Liquidator. In the cited case also, the property was sold in auction
on ‘as is where is’ basis. On the basis of the law laid down in this case by the
Hon’ble NCLAT, in our considered view, it can be safely held that Respondent
No. 1 society cannot recover the arrears of the dues pertaining to the period prior
to execution of the sale deed in favour of the auction purchaser.

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21. So far as the law laid down in K C Ninan vs. Kerala State Electricity Board and
others (supra) is concerned, which has been relied upon by the Counsel for the
Respondent society, the same cannot be applied to the facts and circumstances
of the instant case as the property in the cited case was not sold under the
provisions of the IB Code, 2016 and it was a case of simple sale by way of an
auction on ‘as is where is’ basis.

22. The Counsel for Respondent No. 1 Society has further argued that Respondent
No. 1 has already filed a Dispute Application No. 273 of 2023 before the Co-
operative Court under the Maharashtra Co-operative Society Act, 1960 as the
matter in dispute falls within the purview and jurisdiction of the Co-operative
Court. It has also been argued on behalf of the Respondent No. 1 that this
Authority is not empowered to adjudicate the matter in the light of the law laid
down in Asset Reconstruction Company (India) Limited vs. Precision
Fasterners Limited in CP(IB) No. 1339/NCLT/MB/2017, whereby it was held
that jurisdiction to grant reliefs of recovery of rent from tenant and eviction of
the tenant lies in the exclusive domain of the Civil Court and cannot be dealt
with by the Adjudicating Authority by invoking the provisions of 60(5) of the
Code. Even this contention raised on behalf of the Respondent No. 1 society
cannot be said to be tenable nor the case law cited by the Counsel for the
Respondent can be applied to the facts and circumstances of the present case.

23. Counsel for Respondent No. 1 Society has further argued that the society is not
a Corporate person and, therefore, the provisions of the IBC would not applied
to it. Even this contention raised on behalf of the Respondent is appears to be
misconceived. In this regard, it is worthwhile to mention that Section 238 of the

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IB Code provides that provisions of this Code shall have effect, notwithstanding
anything inconsistent therewith contained in any other law for the time being in
force or any instrument having effect virtue of any such law.

24. In the light of the above brief discussion, we hold that Respondent No. 1 is not
entitled to recover the past arrears in respect of the unit purchased by the
Applicant in auction from the Liquidator of the Corporate Debtor.

25. Accordingly, we allow the Application to the extent, directing the Respondent
not to claim/recover the past dues pertaining to the prior to the execution of the
sale deed in favour of the Applicant by the Liquidator. However, this will not
preclude the Respondent society from claiming any transfer fees or other charges
which are usually charged by the society from the transferee members. The
Applicant shall also be liable to pay all charges leviable/payable in respect of the
period post the execution of the sale deed in his favour. The Application is
accordingly allowed to the extent indicated above.

Sd/- Sd/-

ANIL RAJ CHELLAN KULDIP KUMAR KAREER

(MEMBER TECHNICAL) (MEMBER JUDICIAL)

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