Alok Sharma Vs. M/s. IP construction Pvt. Ltd. Through RP Anju Agarwal- (D.O.J 17.06.2022)
In the instant case, the allottees were given possession prior to commencement of CIRP, however the sale deed thereto was not executed. In furtherance of the same, an Application was filed by the allottees before the Hon’ble NCLT to pass appropriate directions to the RP to execute duly registered sale deed in favour of the applicant after taking balance amounts remaining to be paid by the Applicants. However, the Hon’ble NCLT while dismissing the said Application held that while the CD is undergoing CIRP, the RP is not expected to create rights in favour of somebody indeed to maintain status quo until resolution plan is approved or liquidation is recorded. Aggrieved by the same, an Appeal was field before the Hon’ble NCLAT
Whether under the real estate project Revenue from sale of such constructed spaces/houses will be considered under the caption “Asset” sale or will it be considered as “Revenue from operations” under Schedule -III, Part-II of the Companies Act, 2013?
The Hon’ble NCLAT observed that in case of a Real estate company, when such constructed spaces/ houses are sold, the sale price of the houses will appear in the credit side of the profit and loss accounts as “Revenue from Operations”. Therefore, the same is not an asset in case of a real estate company as it is recurrent business activity for the company & it is its business for continuation of its operation as a going concern even during CIRP. Further, the registration of houses is a procedural requirement in case of real estate companies.
However, in case of an Industrial/ manufacturing company when such constructed spaces/ houses are sold, the sale from such houses will appear in the Balance Sheet of the Company as per Schedule- III Part-I (II Assets) of the Companies Act, 2013. That any profit or loss from such sale will reflect to the extent of profit or loss on sale of this assets only in the profit and loss account under the heading “other income” and the cost value of the assets will be reduced from the assets side of the ‘Balance Sheet’.
Further, the Hon’ble NCLAT relied on Bikram Chatterjee & Ors. Vs. Union of India & Ors. 2019 SCC SC 901, Flat Buyer’s Association Winter Hills – 77 Gurgaon Vs. Umang Realtech Pvt. Ltd. through the Resolution Professional – CA(AT) (Ins) No. 926 of 2019 wherein the interests of allotees were protected.