Insolvency & Bankruptcy Code cannot be used as tool for recovery: NCLT

Insolvency & Bankruptcy Code (IBC) cannot be used as a "tool for recovery", the NCLT observed on Tuesday while dismissing a plea by two unit buyers of a commercial complex.

The Principal Bench of the National Company Law Tribunal (NCLT) was hearing the plea for initiating insolvency against Orris Infrastructure over an alleged default of Rs 3.60 lakh.

The NCLT bench observed that the purchaser of the Office space/Retail Unit has already received full and final payment from Orris Infrastructure in lieu of the assured returns towards the allotted unit, as per the agreement.

The amount has been paid in excess of the default amount and counsel for the applicant has also acknowledged the receipt of the demand draft from the realty firm, which was developing a commercial building complex, known as Floreal Tower, at Sector 83, Gurgaon (Haryana), said insolvency tribunal.

"We are of the view that in the present case, the applicants are already having demands drafts of the amount exceeding the defaulted amount in this petition and moreover IBC cannot be used as a tool for recovery; the settlement has arrived between the parties," said the NCLT bench comprising President Ramlingam Sudhakar and Avinash Srivastava while dismissing the insolvency plea against realty firm.

The applicants entered into an agreement on April 24, 2010, and the Space Buyers agreement was signed with Orris Infrastructure.

It was mutually agreed between the parties that the realty firm would pay monthly assured returns to the applicants up to the first 36 months after the completion of the building or till the date the office space is put on lease, whichever is earlier.

The construction of the building for the Floreal Tower Project was completed by December 2013 and thereafter occupation certificate was received on August 16, 2017.

Therefore, the 3-year period for the purpose of paying assured return in terms of the occupation certificate ends on August 16, 2020.

"We also take note of the fact that earlier on two occasions also settlement deed had been entered into between the parties for settling the default in payment of the assured return," said NCLT.

NCLT observed that the realty firm had issued demand drafts amounting to Rs 6.15 lakh and Rs 1.87 lakh to the two petitioners,424/- in lieu of full and final payment of the assured return towards the allotted unit.

Both the petitioners had filed a plea to initiate insolvency against Orris Infrastructure claiming a default of Rs 3.60 lakh.