SHORT NOTES OF THE CASES

 Nikhil Mehta & Sons (HUF) & Others v AMR Infrastructure Limited

Facts-

 In the given case, the Applicants-Appellants had signed a Memorandum of

Understanding with the Respondent, wherein the Appellants would purchase properties
from the Respondent. In return for a substantial portion of the total money paid upfront,
the Respondent promised to pay monthly "assured returns" from the time of signing of
the MOU till the time the possession was delivered to the Appellants.
 After paying these assured returns for some time, the Respondent defaulted on its
payments. Following this, the Appellants filed an application under section 7 of the IBC.

Issue-

 The question to be decided was whether this arrangement was a simple sale transaction
and the Appellants were mere buyers or, whether the Appellants were financial creditors
under section 5(7) read with section 5(8) of the IBC and therefore, were allowed to make
an application under section 7 of the IBC.

Judgement-

 the NCLT concluded that the present transaction was a simple sale transaction and the
mere payment of "assured returns" was not enough to bring it under sections 5(8) of the
IBC as there was no "consideration for the time value of money".
 On appeal, the NCLAT upheld the NCLT's observation regarding section 5(8) and "time
value of money" being an essential requirement of a financial debt. However it took a
different view with respect to the Appellants' status as financial creditors.
 The NCLAT observed that in the MOU signed between the Appellants and the
Respondent, the Appellants were referred to as "Investors". Thus, the Appellants were
"investors" who were investing in a "committed returns plan" whereas, the Respondent
agreed to pay a monthly committed return to their Investors. Logically, it followed that
committed returns would be in the nature of "debt" under section 3(11) of the IBC.
  Chitra Sharma & Ors Vs. Union of India & Ors VII (2018) SLT 37

 In this case grave concerns were pointed out for protection of Home buyers on following
amongst various grounds-
(1) Homebuyers haven’t been included in IBC and it has discriminated their
Fundamental Right as “Right to Life” as recognized by SC – M/s Shantistar Builders Vs.
Narayan Khimala Totame, 1990 (1) SCC 520.
(2) Being not included either as “Financial Creditor” or “Operational Creditor” has
prejudiced and render disentitle to be part of Committee of Creditor (COC) while
homebuyers are biggest contributor of Finance in real estate project by way of advance
money, instalments and in some case full payment, leaving them at mercy of COC
without having any say.
(3) If moratorium is granted under Section 13 & 14 of IBC in some proceedings they are
not party of, different remedies initiated by homebuyers before the Consumer Forums,
Civil Court and Real Estate Regulatory Authority (RERA) shall be stayed, which will
result into lesser amount of remedy at all forums. In August 2017, the regulations under
the Code were amended to classify homebuyers as ‘other creditors’ who would have the
right to file claims before the liquidator, but the amendment did not elaborate on other
rights available to them (i.e., whether ‘other creditors’ could initiate IRP or participate in
the COC, whether their claims would be protected under the resolution plan approved by
the COC etc.)

Rules-

 Section 21- Insolvency and Bankruptcy Code, 2016

 Section 29A -Insolvency and Bankruptcy Code, 2016

Issues-

 Should the Corporate Insolvency Resolution Process be initiated against the

Respondent in the present case in light of protecting the interests of the
homebuyers?

Judgement-

 the Court held that the Corporate Insolvency Resolution Process should be
revived and Council of Creditors reconstituted as per the amended provisions to
include the home buyers.
 the Court has to decide upon the protection of rights of home buyers which were
not protected under IBC initially. However, by the Insolvency and Bankruptcy
 (Amendment) Ordinance, 2018 which came into force on 6 June 2018, the
homebuyers came to be recognized as financial creditors.
 Due to the amendment, amounts raised from allottees under real estate projects
are statutorily regarded as financial debts.
 Such allottees are brought within the purview of the definition of ‘financial
creditors’. Section 7 of the IBC creates a statutory right in favour of financial
creditors to initiate the corporate resolution process. Being financial creditors
under the IBC, allottees in real estate projects necessarily constitute a part of the
CoC as per Section 21. Financial creditors are entitled to a voting share
proportionate to the extent of the financial debt owed together with an 8% interest
per annum.

 Alchemist Asset Reconstruction Company Limited vs. M/s Hotel Gaudavan Private
Limited

It is a relevant judgment regarding the matter of Moratorium under Section 14 of the Insolvency
and Bankruptcy Code, 2016

Judgement-

 The Court observed that the mandate of the Code is that the moment an insolvency
petition is admitted, the moratorium period stands initiated under Section 14 (1) (a) of the
Code, and then it bars any admission of fresh proceedings or continuation of any pending
suit against a Corporate Debtor. Hence, the present appeal was dismissed
 The Supreme Court repeated, the order of the Insolvency and Bankruptcy Code, 2016, of
endless supply of a ban under Section 14 (1) (a) of the Code, no new suit or assertion
procedures can be started against the substance under ban. Besides, continuation of any
suit or legitimate continuing is disallowed
 The present case laid down the clarification of the provision of section 14 as incorporated
under the Code.
 The court held that, when the moratorium period is imposed then in such case certain
activities as prescribed under the Act has been kept on stay i.e., during this time the
corporate debtor shall not initiate the arbitration proceeding.
 In other words, that when the imposition of moratorium takes place then during that time
the corporate debtor will not be allowed to invoke the provisions of remedy available
under various different provisions. The finding made by the court was on Section 14 of
the code.
 Therefore, the code specifies that when the moratorium period is imposed by the
adjudicating authority, all the proceedings during this period shall stand stayed.
 Therefore, section 14 of the code will not apply to the proceedings which will be
beneficial for the corporate debtor as these cannot be labelled as the debt recovery action

Pioneer Urban Land and Infrastructure Ltd. and Anr. v. Union of India and Ors.

 In this case, upholds the constitutional validity of Section 5(8)(f) of the Insolvency &
Bankruptcy Code, 2016 (hereinafter as the 'Code').
 This judgment is seen as a major win for the homebuyers, who will now not only be
allowed to invoke the Code but will also be a part of the committee of creditors with the
same footing as banks and other financial institutions. This will certainly put an embargo
which will act as a deterrent upon the fraudulent real estate companies and developer,
who have failed in completing the projects despite taking huge chunks of money from
the homebuyers.

The Hon'ble Supreme Court concluded the judgment in the following terms:

i. The Amendment Act to the Code does not infringe Articles 14, 19(1)(g) read with Article
19(6), or 300-A of the Constitution of India.

ii. The RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It
is only in the event of a conflict that the Code will prevail over the RERA. Remedies that are
given to allottees of flats/apartments are therefore concurrent remedies, such allottees of
flats/apartments being in a position to avail of remedies under the Consumer Protection Act,
1986, RERA as well as the triggering of the Code.

iii. Section 5(8)(f) as it originally appeared in the Code being a residuary provision, always
subsumed within it allottees of flats/apartments. The explanation together with the deeming
fiction added by the Amendment Act is only clarificatory of this position in law.