Non payment of Assured Returns – Delhi HC orders winding up of Company

Assured return in Indian Real Estate is the fixed monthly return given by the builder on the amount invested by a person. This is mostly given on under construction commercial properties such as space in Business Park/IT Park, Malls, Shopping Plaza or Studio/ Service Apartments etc. We had warned our readers on the issues related to Assured Returns. If you missed it, you can read about it here: Beware of assured returns schemes in real estate.

Recently, when the developer failed to fulfil his commitment of payment of assured returns, the buyer filed a complaint in Delhi High Court and sought the winding up of the company. A winding up order is a Court order that forces an insolvent company into compulsory liquidation – a process in which the Court appoints an Official Receiver (OR) to liquidate all of the company’s assets in order to repay creditors.

Case Study

This is the case of Universal Buildwell Pvt. Ltd which offered an Assured Return scheme for its commercial project. As per the Builder Buyer Agreement, a sum of Rs. 4,81,148/- is due and payable to the buyer. However, the developer did not fulfil his commitments. Aggrieved by the behaviour of developer, buyer filed a complaint in Delhi High Court. The court ordered to prepare a complete inventory of all the assets of the developer company when the same are taken over; and the premises in which they are kept shall be sealed by him.

Buyer Claims

The pointed out the clause of Builder Buyer Agreement.  Clause Return on completion of the project and letting-out of space reads as under;

  • That on the completion of the project, the space would be let-out by the Developer at his own cost to a recognized lessee which would bring at a minimum rental of Rs. 60/- per sq.ft. per month less income tax at source.
  • In the event of the Developer being unable to finalise the lease arrangements, it shall pay the Minimum Guaranteed Return/Rent at Rs. 60/- per sq. ft. to the Purchaser as Minimum Guaranteed Return/Rent for the first 36 months after the date of completion of the project or till the date the said flat/space is put on lease or the liability of the Developer to pay assured return to the Allottee every month will cease/stop on handing over the physical possession to the Allottee, whichever is earlier.
  • However, if for any reason, the Developer is able to tie-up lease agreement at lower than Rs. 60/- per sq. ft. per I month, in that case the Developer shall be bound to pay minimum rent of Rs. 60/- per sq. ft. per month to the Purchaser as Minimum Guaranteed Rent for a period of 36 months after the completion of the building and after completion of 3 years actual rent would be paid subjected to lessee paying rent to Developer.

Developers Arguments

Developer did not respond to various notice from court for long. Counsel stated that there is likelihood of the matter to be settled between the parties. The counsel for the developer sought another adjournment on the ground that an offer of settlement is being made to the buyer and that they were serious to settle the matter.

Court’s Observations

Despite promised out of court settlement, It is the case of the buyer that the aforesaid amount remains unpaid. Counsel for the buyer states that no offer of settlement had been received from the developer. Counsel for the buyer further states that Rs. 4,81,148/- is due and payable as per BBA.

The Order 

  • The petition is admitted and the Official Liquidator attached to this Court is appointed as the Provisional Liquidator.
  • He is directed to take over all the assets, books of accounts and records of the company forthwith.
  • The Official Liquidator shall also endeavour to prepare a complete inventory of all the assets of the respondent company when the same are taken over; and the premises in which they are kept shall be sealed by him.
  • The developer-company, as well its directors, are restrained from alienating, encumbering, or otherwise parting with possession of the assets of the company without the leave of Court.

What happened afterwards

Developer swiftly settled the matter out of court and paid all dues to the customer. Buyer acknowledges receipt of advance cheques payable on different dates up to 10th October, 2015 for a total amount of Rs.10,39,500/-. Managing Director of the developer-company undertakes, that all the cheques mentioned therein shall be duly honoured on presentation. Court the accepts the undertaking and matter was disposed.

Conclusion

In case your assured return cheques are not being honoured by developers, you may choose this route. Keep in mind that being a commercial property buyer, you shall not be able to approach Consumer Forums in such cases.

Case N0: CO.PET. 640/2014  / THE HIGH COURT OF DELHI | Order Copy:- Universal Developers High Court Judgement followed by CO.PET. 306/2015 and CA No. 1404/2015

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