Realtor-to-owner loan is operational debt: Tribunal
Real Estate

Realtor-to-owner loan is operational debt: Tribunal

In a precedent-setting verdict, the National Company Law Tribunal (NCLT) has deemed that a real estate company's advance to a property's owner for the proposed development qualifies as an operational debt under the Insolvency and Bankruptcy Code (IBC).

NCLT admitted a petition filed by Sunteck Realty against Goodwill Theatres for initiating a corporate insolvency resolution process and has also declared a moratorium under Section 14 of the IBC.

As per the terms, the termination could be avoided if both the parties mutually extend the pact in writing and the landlord or corporate debtor repays the advance along with interest.

The term sheet was terminated for some reason, and the development management agreement was never executed between the parties. However, according to the petition filed by Sunteck Realty, the advance paid to the corporate debtor was not returned despite repeated reminders.

A demand notice was also issued to recover nearly Rs 3.06 crore including interest, and after this, the developer moved the NCLT against Goodwill Theatres.

Goodwill Theatres responded by denying the term sheet's termination and asserted that Sunteck Realty was not an operational creditor within IBC as it had not provided any goods or services to it.

It was also pointed out that the term sheet was not a binding agreement and was just an agreement to enter into an agreement.

Sunteck claimed that under the term sheet, the property owner had agreed to appoint and engage the company for the performance of the services and the advance paid for availing goods and services was debt under IBC.

Goodwill Theatres had claimed that the developer relied upon a specific date in October 2018, as the date of termination.

However, there was no communication regarding such termination on that date, and hence the petition needed to be dismissed.

As part of its order, NCLT stated that under the binding term sheet, the property owner or corporate debtor had agreed to appoint the developer as its project manager for the performance of the project's services.

The court also concluded that Rs 2.51 crore paid to Goodwill Theatres was part of the service rendered by Sunteck Realty to the landlord and therefore qualified as operational debt in terms of Section 5(21) IBC.

In a precedent-setting verdict, the National Company Law Tribunal (NCLT) has deemed that a real estate company's advance to a property's owner for the proposed development qualifies as an operational debt under the Insolvency and Bankruptcy Code (IBC).NCLT admitted a petition filed by Sunteck Realty against Goodwill Theatres for initiating a corporate insolvency resolution process and has also declared a moratorium under Section 14 of the IBC. As per the terms, the termination could be avoided if both the parties mutually extend the pact in writing and the landlord or corporate debtor repays the advance along with interest. The term sheet was terminated for some reason, and the development management agreement was never executed between the parties. However, according to the petition filed by Sunteck Realty, the advance paid to the corporate debtor was not returned despite repeated reminders. A demand notice was also issued to recover nearly Rs 3.06 crore including interest, and after this, the developer moved the NCLT against Goodwill Theatres. Goodwill Theatres responded by denying the term sheet's termination and asserted that Sunteck Realty was not an operational creditor within IBC as it had not provided any goods or services to it. It was also pointed out that the term sheet was not a binding agreement and was just an agreement to enter into an agreement. Sunteck claimed that under the term sheet, the property owner had agreed to appoint and engage the company for the performance of the services and the advance paid for availing goods and services was debt under IBC. Goodwill Theatres had claimed that the developer relied upon a specific date in October 2018, as the date of termination. However, there was no communication regarding such termination on that date, and hence the petition needed to be dismissed. As part of its order, NCLT stated that under the binding term sheet, the property owner or corporate debtor had agreed to appoint the developer as its project manager for the performance of the project's services. The court also concluded that Rs 2.51 crore paid to Goodwill Theatres was part of the service rendered by Sunteck Realty to the landlord and therefore qualified as operational debt in terms of Section 5(21) IBC.

Next Story
Real Estate

Bennet & Bernard Unveil Dutch-Inspired ‘Casa El Toledo’ in Goa

Bennet & Bernard Group, Goa’s leading luxury real estate developer, has launched its newest project, Casa El Toledo, in Assagao. The enclave features 18 ultra-luxury 4 BHK Dutch-style villas blending European charm with tropical elegance. Each villa includes a private pool, double-height ceilings, open courtyards, alfresco dining areas, and English-inspired landscaping. The interiors are curated by noted Dutch designer Kelly Marie.   Reflecting the grandeur of the Dutch Golden Age, Casa El Toledo harmonises heritage aesthetics with modern sensibilities. Expansive interiors flow..

Next Story
Equipment

Godrej Delivers Heaviest Ecolaire Surface Condenser to US Project

Godrej Enterprises Group’s Process Equipment business has manufactured and delivered its heaviest Ecolaire® Surface Condenser to date, weighing nearly 450 metric tonnes, for a power-generation project in the United States. The project, powered by natural gas and partly designed for hydrogen compatibility, marks another step in advancing clean energy systems. Produced at the company’s GreenCo-certified Dahej facility in Gujarat, the equipment demonstrates India’s growing engineering capabilities and reinforces Godrej’s ‘Make in India for the World’ vision.  Hussain S..

Next Story
Infrastructure Energy

India, Brazil Discuss Energy Ties And Oil Investments

Union Minister for Petroleum and Natural Gas Hardeep Singh Puri held discussions with Celso Luis Nunes Amorim, Special Advisor to the President of Brazil, and senior Brazilian officials to strengthen bilateral cooperation in the oil, gas, and energy transition sectors. The talks took place during a dinner hosted by Kenneth H da Nobrega, Ambassador of Brazil to India, at his residence in New Delhi.Mr Puri said the meeting focused on Indian investments in Brazil’s oil and gas sector, as well as expanding collaboration in energy transition and biofuels. “The enriching conversation revolved ar..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?