Moratorium under IBC does not exempt promoter from pre-deposit requirement under RERA: Delhi High Court

The Delhi High Court has held that the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), does not exempt a promoter from complying with the mandatory pre-deposit requirement under Section 43(5) of the Real Estate (Regulation & Development) Act, 2016 (RERA).

The court observed that the moratorium applies only to the specific project under insolvency proceedings and does not extend to other projects. It was further clarified that the Interim Resolution Professional (IRP), acting on behalf of the company, represents the 'Promoter' and is bound by the obligations under Section 43(5). The provision does not allow for substituting the pre-deposit requirement with a security. 

Umang Realtech Pvt. Ltd. filed an appeal under Section 58 of RERA challenging the order passed by the Real Estate Appellate Tribunal, which dismissed the appellant's application offering a flat as security in lieu of the pre-deposit mandated under Section 43(5). The appellant argued that the moratorium granted by the NCLT in an earlier insolvency proceeding exempted it from the pre-deposit requirement. It was also contended that the IRP could not be treated as a 'Promoter' for the purposes of the appeal and that offering a security fulfilled the spirit of Section 43(5). 

The respondents submitted that the NCLAT had clarified that the insolvency proceedings against the appellant were limited to a specific project and did not affect other projects. Therefore, the moratorium could not be extended to exempt the appellant from complying with Section 43(5) of RERA. The respondents relied on the judgment of the Supreme Court in New Tech Promoters and Developers Pvt. Ltd. vs. State of Uttar Pradesh & Ors., which upheld the mandatory nature of the pre-deposit requirement. 

The court referred to Section 43(5) of RERA, which mandates that no appeal by a promoter shall be entertained without first depositing at least thirty percent of the penalty or the total amount payable to the allottee, including interest and compensation. It observed that the provision leaves no scope for exemption or substitution of the pre-deposit with any other form of security. The court also noted that the IRP, representing the company, is considered the 'Promoter' for the purpose of complying with Section 43(5). 

The court dismissed the appeal, holding that the moratorium under the IBC does not exempt a promoter from the statutory obligation of making the pre-deposit under Section 43(5) of RERA. The court granted liberty to the appellant to seek relief before the Real Estate Appellate Tribunal.

Assistant Commissioner CGST & Central Excise, Kadi Division v. Pradeep Kabra, RP of Cengres Tiles Ltd.,  

Company Appeal (AT) (Ins) No. 844 of 2024