Houses constructed by builder corporate debtor weren’t its assets: NCLAT

Case Details: Alok Sharma v. I P Construction (P.) Ltd. - [2022] 142 taxmann.com 298 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • M. Venugopal, Judicial Member & Dr Ashok Kumar Mishra, Technical Member
  • Ms Varsha Banerjee & Ms Smriti Dua, Advs. for the Appellant.
  • Abhishek Anand & Karan Kohli, RP for the Respondent.

Facts of the Case

In the instant case, the appellants – allottees/buyers invested in the real estate project of the corporate debtor and the corporate debtor gave them possession. Thereafter, the corporate debtor went into the CIRP and the Resolution Professional (RP) was appointed.

The appellant approached the RP and stated that they had released all the payments in respect of commercial spaces to the corporate debtor and requested the corporate debtor to execute the sale deed in their favour, however, the sale deed was not executed.

The appellant filed an application before the Adjudicating Authority (NCLT) seeking directions to the RP to execute the sale deed, however, the said application was dismissed by the NCLT. Thereafter, the appellants filed an instant appeal to the NCLAT against the assailing order passed by the NCLT.

The RP contended that execution of the sale deed would be in violation of the moratorium in terms of section 14 of the IBC.

NCLAT Held

The NCLAT held that since houses so constructed were the business of the corporate debtor and the value of the sale of such houses would always appear in the credit side of the profit and loss account as ‘revenue from operations’. Hence, the same were not assets and were the corporate debtor’s business for the continuation of its operation as a going concern even during the CIRP.

Therefore, the rights of the appellants couldn’t be affected adversely in the CIRP and the order of the NCLT was to be set aside with a direction to the RP to execute the sale deeds of the appellants.

List of Cases Reviewed

• • Order of NCLT (New Delhi) in C.A No. 2265 [PB]/2019 in CP [IB] No. 593[PB]/2018, dated 16-1-2020 (para 6) reversed.

List of Cases Referred to

• • Narandas Karsondas v. S.A. Kamtam [1977] 3 SCC 247 (para 5)
  • K. Sashidhar v. Indian Overseas Bank [2019] 102 taxmann.com 139/152 SCL 312 (SC) (para 5)
  • V. Nagarajan v. SKS Ispat and Power Ltd. [2021] 131 taxmann.com 258 (SC) (para 6)
  • Gurharan Singh v. State Trading Corporation of India Ltd. [2021] 129 taxmann.com 15 (NCLAT – New Delhi) (para 6)
  • Suraj Lamp and Industries (P.) Ltd. v. State of Haryana [2011] 14 taxmann.com 103/202 Taxman 607/[2012] 340 ITR 1 (SC) (para 6)
  • Bikram Chatterjee v. Union of India [2019] 107 taxmann.com 345 (SC) (para 6)
  • Flat Buyer’s Association Winter Hills – 77 Gurgaon v. Umang Realtech (P.) Ltd. [2020] 119 taxmann.com 50 (NCLAT – New Delhi) (para 6)
  • Pioneer Urban Land & Infrastructure Ltd. v. Union of India [2019] 108 taxmann.com 147/155 SCL 622 (SC) (para 6).