Corporate Debtor cannot be blamed for delay in delivery of possession when delay occurs due to Force Majeure


Status as on- 10/03/2020

In a recent order passed in Parvesh Magoo Vs. IREO Grace Realtech Private Limited dated 26th February 2020 the NCLAT, New Delhi held that there was no default on the part of the Corporate Debtor and further observed that the financial Creditor has also failed to prove that any debt was due and payable by the Corporate Debtor. The Adjudicating Authority has to see whether the delay in delivering possession is due to the Corporate Debtor & in case the delay is not due to the Corporate Debtor, but force majeure, it cannot be alleged that the Corporate Debtor has defaulted in delivering the possession.


  1. Parvesh Magoo, the Applicant had made a booking of Unit No. 203 in Tower No. A6, having a super area of 1726.91 sq. ft., in the Real Estate project being developed by IREO Grace Realtech Private Limited i.e. the respondent under the name of “The Corridors” which was situated at Sector 67A, Gurgaon, Haryana. 
  2. The Developer issued an Allotment Letter dated 07th August 2013 after collecting Rs.17,00,000/- from Parvesh Magoo and subsequently after a delay of almost a year executed an “Apartment Buyer’s Agreement” on 03rd June 2014. As per clause 13.3 of the terms of the Agreement, the Developer was to deliver the possession of the unit by July 2017 (i.e. 42 months from the date of approval of building plans), which the Developer had grossly failed to deliver. Thus, the Applicant claimed a refund for the amount paid to the Developer along with interest, till the date of refund. 
  3. The Applicant, claimed to have made timely payment of all the installments as per the terms of the agreement, as and when demanded by the Developer, she adhered to the payment schedule and paid a total sum of Rs.1,59,29,016/- to the Developer and despite receiving timely payments the Developer failed to deliver the possession of the allotted unit. Thus, the Applicant/Financial Creditor terminated the Agreement vide e-mail dated 8th December 2018 and sought a refund of the total amount already paid, along with interest, which she was legally entitled to as per the Agreement.
  4. Parvesh Magoo contended that the Developer owed her Rs.2,07,57,385/- as financial debt. Therefore, she filed an Application under Section 7 of the I&B Code for initiation of the Corporate Insolvency Resolution Process (CIRP), which was rejected by the Impugned Order passed by the Adjudicating Authority /National Company Law Tribunal, New Delhi.

Observations of the NCLAT:

The NCLAT while deciding the matter observed that:

The NCLAT noted that in this case, the Developer was to handover the possession of the apartment within 60 months, i.e. 42 months (commitment period) + 6 months grace period + 12 months extended period from the date of approval of building plan and on fulfillment of several pre-conditions imposed.

The Adjudicating Authority/NCLT had rejected the Application as even though the building approval was dated 23rd July 2013, it was subject to several preconditions. The last precondition regarding Fire Safety Scheme approval was granted only on 27th November 2014. Accordingly, the date of handover of possession was to be computed from the date of the grant of Fire Safety Approval. Therefore, the proposed time for handing over the possession, i.e. five years from 27th November 2014, was to expire on 27th November 2019.

Before that, the letter for handing over possession was already issued to the Applicant. The Bench quoted the judgment passed by the Hon’ble Supreme Court in the case of Pioneer Urban Land and Infrastructure Limited & Anr. v. Union of India & Ors and stated that the Adjudicating Authority has to see whether the delay is due to the Corporate Debtor and in case the delay is not due to the Corporate Debtor, but force majeure as the situation, in this case, it cannot be alleged that the Corporate Debtor defaulted in delivering the possession.


The NCLAT held that the proviso inserted in sub-Section (1) Section 7 of the I&B Code, which came to be force since 28th December 2019, though not applicable in this Appeal, the Adjudication Authority was required to take notice of the said provision. The Bench stated that it would be desirable to find out whether the allottees had come to claim the money or to get their apartment by way of resolution. If the intention of the allottees was only for recovery of the money and not for resolution for possession by apartment, then the Developer would bring this to the notice of the Adjudicating Authority. The NCLAT did not find any justification for interfering with the Impugned Order passed by the Adjudicating Authority/NCLT and hence the Appeal was dismissed. 


Disclaimer– The above article is based on the personal interpretation of related laws, which may differ from person to person. The readers are expected to take expert opinion before relying on this article. For more clarification, the readers can be expected at or  

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