Amit Goel vs Ms. Piyush Shelters India Pvt.Ltd. & Ors

Amit Goel ....Appellant Through Power of Attorney Holder Ms. Pooja Chaudhary, D/o Mahipal Singh, R/o 176m Shyam Colony, Ballabhgarh, Faridabad

Versus

Piyush Shelters India Private Ltd. ... Respondent No.1 Through Resolution Professional Shri Swami Deen Gupta, Registered Office: 2/64, VisheshKhand, Gomti Nagar, Lucknow.

Committee of Creditors, ... Respondent No.2 M/s. Piyush Shelters India Private Ltd., Service to be effected through Resolution Professional, Shri Swami Deen Gupta, Registered Office: 2/64, Vishesh Khand, Gomti Nagar, Lucknow.

Shri Naveen Kumar Gupta ... Respondent No.3 R/o H. No. 744, Pocket-E, Mayur Vihar, Phase II, Patparganj, Delhi.

M/s. Maya Buildcon Private Limited ... Respondent No.4 Registered Office: H. No. 744, Pocket-E, Mayur Vihar, Phase II, Patparganj, Delhi. Authorized Signatory Shri Naveen Kumar Gupta, Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 1 of 36 R/o H. No. 744, Pocket-E, Mayur Vihar, Phase-II, Patparganj, Delhi.

Geotech Homz Private Limited ... Respondent No.5 Having its Registered Office at: H. No. 744, Pocket-E, Mayur Vihar, Phase II, Patparganj, Delhi - 110092. Authorized Signatory Shri Naveen Kumar Gupta, R/o H. No. 744, Pocket-E, Mayur Vihar, Phase-II, Patparganj, Delhi.

Present:

For Appellant: Mr. Sanchit Garg, Advocate For Respondent: Ms. Babita Jain, Advocate (RP-R1) Mr. Sanjeev Panda, Advocate (R3-5)

With

Company Appeal (AT) (Ins) No. 761 of 2021

IN THE MATTER OF:

Harjeet Kaur ...Appellant W/o Sh. S. Sukhwant Singh, Financial Creditor of Piyush Shelters India Private Limited, R/o 5-B/1 (B.P.), N.I.T. Faridabad. Haryana

Versus

Mr. Swami Deen Gupta ....Respondent No. 1 Resolution Professional, Piyush Shelters India Private Limited, R/o 2/64, Vishesh Khand, Gomti Nagar, Lucknow. Uttar Pradesh - 226010.

Shri Naveen Kumar Gupta ....Respondent No. 2 R/o H. No. 744, Pocket-E, Mayur Vihar, Phase II, Patparganj, Delhi - 110091.

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 2 of 36 M/s. Maya Buildcon Pvt. Ltd. ....Respondent No. 3 Having its Registered Office at: 744, Pocket-E, Mayur Vihar - II, New Delhi - 110092.

Geotech Homz Private Limited, .....Respondent No. 4 Having its Registered Office at: H. No. 744, Pocket-E, Mayur Vihar, Phase II, Patparganj, Delhi - 110092.

Present:

For Appellant: Dr. Amit Geroge, Mr. Piyo Harold, Mr. Amol Acharya, Mr. Bharat, Mr. Sahil Garg and Mr. Prateek Vats, Advocates For Respondent: Ms. Babita Jain, Advocate (RP-R1) Mr. Sanjeev Panda, Advocate (R2-4)

With

Company Appeal (AT) (Ins) No. 925 of 2021

IN THE MATTER OF:

Shri Bala Pareek ....Appellant No. 1 H.NO. 1361, Sector 9, Faridabad - 121006

Shri Yogesh Chandan ....Appellant No. 2 R/O 882, Sector 21 C, PART - II Faridabad - 121001.

Ms. Pushpa Dwivedi ....Appellant No.3 R/O A-403, Kesar Garden, Sector 48 NOIDA - 201301

Versus

Mr. Swami Deen Gupta .... Respondent No.1 Resolution Professional Piyush Shelters India Private Limited Address :- 2/64, Vishesh Khand, Gomti Nagar, Lucknow - 226010 UP

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 3 of 36 CONSORTIUM OF MEMBERS ....Respondent No. 2 (Represented by Lead Authorized Representative Naveen Kumar Gupta) Address :- H.No. 744, Pocket E, Mayur Vihar, Phase II, Patparganj Delhi - 110091

Present:

For Appellant: Mr. Jayprakash B Somani, Mr. Videh Vaish and Mr. Lalit Mohan, Advocates For Respondent: Ms. Babita Jain, Advocate (RP-R1) Mr. Sanjeev Panda, Advocate (R2)

JUDGMENT

(Date: 18.01.2022) (Virtual Mode)

[Dr. Alok Srivastava, Member (Technical)]

This judgment relates to three appeals, namely Company

Appeal (AT)(Ins) No.700/2021, Company Appeal (AT)(Ins) No.

761/2021 and Company Appeal (AT)(Ins) No. 925/2021, which

have been filed under Section 61(1) of the Insolvency and

Bankruptcy Code, 2016 (hereafter called "IBC") assailing the

judgment dated 14.7.2021 passed in CA No. 371/2019 in

Company Petition No.322/ALD/2018 (hereafter referred to as

"Impugned Order") by the Adjudicating Authority (National

Company Law Tribunal, Allahabad Bench). All the three appeals

have been filed against and assailing the common Impugned

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 4 of 36 Order. Therefore, these appeals are being disposed off through

this common judgment.

2. By the Impugned Order dated 14.7.2021, the Adjudicating

Authority has approved the resolution plan submitted by Mr.

Naveen Kumar Gupta as lead member of the consortium of Maya

Buildcon Private Ltd., Geotech Homz Private Ltd. and Naveen

Kumar Gupta, which is the successful resolution applicant.

3. The brief facts of the case as presented and argued by the

appellants is that CIRP was initiated with respect to the corporate

debtor Piyush Shelters India Pvt. Ltd. vide order of Adjudicating

Authority on 03.12.2018 and Shri Swami Deen Gupta was

appointed as the IRP. In August 2019 the final resolution plan

was submitted and before the e-voting could take place on

25.08.2018 the Maya Group withdrew its resolution plan citing

some defects in the lease deed that would hamper the execution of

the resolution plan, if approved. The RP thereafter filed

application before the Adjudicating Authority for rejection of this

resolution plan.

4. The Appellants have stated that later, in the 8th CoC

meeting which took place on 25.09.2019, it was decided to publish

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 5 of 36 the 4th Expression of Interest (EOI) which was published in

Jansatta and Financial Express newspapers on 01.10.2019 with

last date for submitting EOI on 07.10.2019. It is claimed by the

appellants that Maya Buildcon, which had earlier withdrawn its

resolution plan, filed CA no. 282/2019 before Adjudicating

Authority that it be allowed to submit a revised resolution plan.

This application remained pending but the RP allowed a

consortium which included Maya Buildcon to submit a resolution

plan and place it before the CoC for consideration. A revised plan

was subsequently approved by the CoC in e-voting held on 6/7

November 2019. While the resolution plan was pending

consideration of the Adjudicating Authority an applicant Vishal

Saxena, who could not file his claim in time. obtained order of the

Adjudicating Authority in CA No. 12/2020 on 3.2.2020, for

admission and consideration of his claim. The appellants have

further stated that while Vishal Saxena‟s claim and other claims

that were filed after delay were admitted/accepted by the RP, the

resolution plan approved by the CoC and the Adjudicating

Authority the Impugned Order has created two separate categories

of financial creditors in class - one of „claimants who filed their

claims in time, and the other of „non-claimants‟ who could not file

their claims in time. The two categories have received different

shares in the approved resolution plan, and so while the

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 6 of 36 „claimants‟ have received possession of the booked properties, the

„non-claimants‟ have got just 10% of their booked amount after

verification of their claims within one month, and thereafter all

such claims would stand extinguished.

5. The appellants have also stated that the Authorized

Representative of the Homebuyers/allottees, who are financial

creditors in class did not seek the views of the allottees prior to

CoC meeting as is required in Section 25A, but the voting by

allottees took place alongside the e-voting on the resolution plan in

CoC thereby flouting the provision of section 25A in letter and

spirit and as a result, the interests of the majority of

homebuyers/allottees have been compromised.

6. The Appellants in the three appeals have assailed the

Impugned Order on the following grounds: -

(i) The Learned Adjudicating Authority has passed the

Impugned Order in CA No. 371/2019 while an earlier

CA No. 282/2019 filed by the Resolution Applicant for

consideration of his resolution plan was pending

before the Adjudicating Authority. Since no orders

have been passed in CA No. 282/2019, the Committee

of Creditors (CoC) could not have considered the

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 7 of 36 resolution plan submitted by the consortium.

(ii) In the ninth meeting of CoC held on 1.11.2019, the

CoC failed to consider the circumstances under which

the earlier resolution plan of the Maya Group was

withdrawn and revised resolution plan was being

considered

(iii) Section 25-A of the IBC clearly stipulates that the

authorized representative of the financial creditors in

class (in this case homebuyers) shall attend the

meeting of CoC on their behalf and vote in accordance

with prior instructions of the financial creditors in

class. In the present case the e-voting of the financial

creditors in class took place along with e-voting on the

resolution plan by the CoC which is evident from the

results of e-voting. Thus, no prior voting by the

financial creditors in class was organized by the

authorized representative, thereby contravening

provisions of Section 25A of the IBC.

(iv) The Resolution Professional should have considered

maximization of value of the assets of the Corporate

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 8 of 36 Debtor which was not done and the liquidation value

is not sufficient to cover the amounts owed to financial

creditors and other creditors.

(v) Only 222 homebuyers/allottees, out of a total of 473

homebuyers/allottees, have filed claims before the RP

and claims of remaining 251 allottees have been

almost extinguished with the approval of the

resolution plan. The 251 homebuyers/allotees could

not file their claims because wide publicity was not

given to the CIRP as the newspapers in which the

public notices appeared are published from New Delhi,

whereas the project is situated in District

Faridabad(Haryana) and registered office of Corporate

Debtor is in Meerut (UP).

7. The arguments presented by Learned Counsels for

Appellants, RP and Successful Resolution Applicant were heard by

us and records perused.

8. The Appellant-Harjeet Kaur in Company Appeal (AT) (INS)

No. 761 of 2021, is an allottee in the project of the Corporate

Debtor. Similarly, the Appellant in Company Appeal (AT) (Ins) No.

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 9 of 36 925 of 2021, Shri Bala Pareek and others are also allottees of the

Corporate Debtor. The Learned Counsels for Appellants in CA 761

of 2021 and CA 925 of 2021 have claimed that the approved

resolution plan gives unequal treatment to the same category of

financial creditors thus discriminating between financial creditors

of the same class. The final resolution plan provides as follows in

its Para V(7) (at Pg. 153 of the Appeal Paperbook in Company

Appeal No. 700 of 2021):-

"The allottees with MOU, who have not filed their claim till the

last date of filing resolution plan, shall not be entitled for any

relief or claim for possession over the property, whether paid

in full or part. However, resolution applicant make an offer for

them to take 10% of the verified amount within a period of one

month and thereafter their claim shall be treated as

abandoned."

9. The Learned Counsels for Appellants in all the appeals have

argued that the authorized representative of financial creditors in

class did not follow the provision of Section 25A of the IBC in letter

and spirit and so he held the e-voting for financial creditors in

class alongwith e-voting on the resolution plan in the CoC, which

did not allow the homebuyers/allottees to consider and discuss

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 10 of 36 between themselves various aspects of the proposed resolution

plan as a class of financial creditors. They have also argued that

CoC, in the ninth meeting, while considering the revised resolution

plan submitted by the resolution applicant, issued notice on

5thNovember 2019 for e-voting to take place on 6th and 7th

November 2019, and thus there was insufficient time provided to

the financial creditors in class for giving due consideration to

various aspects of the resolution plan. He has also argued that the

resolution plan is based on liquidation value of Rs. 40 Crores,

which is approximately 30% of the total resolution debt and,

therefore, insufficient to cover the amount owed to financial

creditors in full and any payments to operational creditors or other

creditors, including statutory due holders would be nil. Such

meager or no payments would be gross injustice to the creditors.

10. Thus, The Ld. Counsels for Appellants Harjeet Kaur, Bala

Pareek and others have claimed, the plan imposes a 90% haircut

on the legitimate claims of Appellant Harjeet Kaur and 33 similarly

based allottees solely on the ground that the claims of the

Appellant were received after approval of the resolution plan by the

CoC. He has also claimed that even though the Appellants

Harjeet Kaur, Bala Pareek and others had filed their claim

belatedly, they were accepted and admitted by the Resolution

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 11 of 36 Professional and included in the list of claims of financial

creditors. He has further adverted to the order dated 3.2.2020

passed by the Adjudicating Authority in CA No. 12/2020, which is

an application filed by an investor Vishal Saxena whose claim had

earlier been rejected by the Resolution Professional on the ground

of delay by which the Adjudicating Authority directed the RP to

admit and consider the claim stating that a claim cannot be

rejected by RP solely on the ground of delay by the Applicants in

filing their claim. He has argued that all similarly situated

claimants should be get their due claims.

11. The Ld. Counsel for Appellants in CA No. 761/2021 has

further claimed that thus no information was given to the

Appellants regarding the CIRP, and moreover the approved

resolution plan is not fair and equitable to financial creditors of the

same class and unequal treatment has been meted out to them.

He has referred to the judgment of Hon‟ble Supreme Court in

Committee of Creditors of Essar Steel India Limited versus

Satish Kumar Gupta (Civil Appeal No.8766-67 of 2019) that

equitable treatment has to be given to creditors who are similarly

situated.

12. The Learned Counsels for Appellants Harjeet Kaur, Bala

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 12 of 36 Pareek and others have also claimed that the publication of the

public announcement was done in two newspapers, namely

„Financial Express‟ and „Jansatta‟, both published from New Delhi,

which do not have wide circulation in either Meerut (where the

registered office of Corporate Debtor was located) or Faridabad

(where the project under question was being developed) and

therefore, more than 50% of the homebuyers/allottees could not

file their claims before the Resolution Professional in time. While

clarifying, he has further stated that out of 473 number of

allottees, only 222 have filed their claims before the RP while the

claims of 251 allottees could not be filed in time leading to the

extinguishing of their claims in the resolution plan. He has also

claimed that the e-voting of the financial creditors in class has

taken place along with e-voting on the resolution plan on 6th and

7th of November 2019, which is not in accordance with the

requirement of Section 25-A of the IBC, where financial creditors

in class have to be consulted „prior‟ to the actual voting in the CoC,

where the Authorized Representative has to present the views of

the financial creditors in class. Since all the financial creditors

voted alongside the CoC members, a legal fiction was created

which was against the spirit of Section 25A. Therefore, grave

injustice will be caused to the large number of homebuyers/

allottees, who have more than 79% vote share in the CoC, and

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 13 of 36 hence the Impugned Order should be set aside.

13. In arguments, the Learned Counsel for RP has claimed that

the appeals have been filed after the stipulated period of 30 days

after passing of the Impugned Order on 14.7.2021 and, therefore,

they are barred by limitation. The Learned Counsel for the

Resolution Professional has also argued that the Appellant Amit

Goel(in Company Appeal (AT)(Ins) No. 700 of 2021) is not an

aggrieved person as he is a suspended director of the erstwhile

Corporate Debtor, and hence does not have locus standi for filing

this appeal. She has further claimed that Impugned Order

approving the resolution plan can only be appealed against under

Section 61(3) of the IBC on grounds of material irregularity but the

Appellant has not been able to show any material irregularity in

the resolution plan. She has further argued that the extended

CIRP period was coming to end on 13th November 2019, and

therefore, the resolution process had to be completed within this

time period.She has added that the reason why the CoC did not

await the decision of the Learned Adjudicating Authority in CA No.

282 of 2019 filed by Maya Buildcon was because RP‟s efforts were

focused on obtaining a workable resolution plan rather than to put

the corporate debtor in liquidation and RP was working under

constraint of time in the extended CIRP. She has further claimed

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 14 of 36 that the resolution plan has been approved by the CoC in its

commercial wisdom, and therefore, such action of CoC is beyond

judicial review.

14. In support of this contention, she has cited the judgment of

Hon‟ble Supreme Court in the case of Committee of Creditors of

Essar Steel India Limited versus Satish Kumar Gupta (2020 8

SCC 531). She has also cited Hon‟ble Supreme Court's judgment

in Swiss Ribbons (P) Ltd. versus Union of India (2019 4 SCC 17)

to emphasize that liquidation of the Corporate Debtor should be

allowed only as a last resort and all efforts should be made for

obtaining a successful resolution plan.

15. The Learned Counsel for Resolution Professional has further

stated that after the approval of the resolution plan by the CoC, it

has been accorded approval by the Adjudicating Authority, and

hence all claims, that are not included in the resolution plan stand

extinguished, as has been held by the Hon‟ble Apex Court in

Ghanshyam Mishra and Sons Pvt. Ltd. versus Edelweiss Asset

Reconstruction Company Ltd. (Civil Appeal No. 8129 of 2019,

decided on 13.4.2021). She has further clarified that the

resolution plan, which was earlier withdrawn, was actually

submitted by a consortium of "One City Infrastructure Private

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 15 of 36 Limited" and "APM Infrastructure Private Limited" and not

submitted by the Maya Group as has been alleged by the

Appellant, and hence no special favour is being shown to the Maya

Group.

16. The Learned Counsel for the Resolution Professional has

with regard to appeals CA Nos. 761 of 2021 and 925 of 2021,

stated that the CoC, which includes real estate allottees being

creditors in class has approved the resolution plan by giving more

than 50% votes in e-voting held on 6/7th November 2019, and so

the creditors in class do not now have any locus to challenge the

approved plan as has been held by Hon‟ble Supreme Court in the

matter of JP Kensington Boulevard Apartments Welfare

Association and Others versus NBCC (India) Limited and

Others (Civil appeal no. 3395 of 2020). Moreover, the Learned

Counsel has urged that the real issue before the Resolution

Professional was to avoid liquidation of the Corporate Debtor as

that would mean certain corporate death of the Corporate Debtor,

and therefore the Resolution Professional took quick steps to

obtain a workable resolution plan and get it approved by the CoC

and thereafter put it up before the Adjudicating Authority for final

approval before the extended CIRP would be over on 13 November

2019.

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 16 of 36

17. He has also urged that the Adjudicating Authority, in

application CA 12/2020, filed by Vishal Saxena, has directed that

the claim of Applicant was to be accepted and verification and

determination based on material produced before it was to be done

by the Resolution Professional. Thus 33 belated claims, including

the claim of the Appellant, was accepted by the Resolution

Professional as per directions of Adjudicating Authority in order

dated 3.2.2020 in application CA 12/2020. But since they were

included as non-claimants in the information memorandum,

which was the basis for preparation of resolution plan, the

Resolution Professional offered 10% of the claim amount, and this

provision was approved by the CoC in its commercial wisdom in e-

voting held on 6/7.11.2019.

18. All the three appeals under consideration assail the

Impugned Order dated 14.7.2021, and all were filed before

2.10.2021. Hon‟ble Supreme Court in Miscellaneous Application

No. 665/2021 in SMW (C) No. 3/2020 has passed a suo moto order

that in computing the period of limitation for any suit, appeal,

application or proceeding, the period from 15.3.2020 till 2.10.2021

shall stand excluded from limitation period. Since the Impugned

Order was passed on 14.7.2021 and all the appeals were filed

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 17 of 36 before 2.10.2021, therefore, they are all within limitation by virtue

of the above stated suo moto order of Hon‟ble Supreme Court.

19. It is admitted by the Resolution Professional in its reply to

Company Appeal (AT)(Ins) 700/2021 that even though the

Resolution Applicant(Consortium led by Naveen Kumar Gupta) had

not submitted its resolution plan within the stipulated time limit,

the Resolution Professional went ahead to seek CoC approval of its

resolution plan through e-voting on 6/7 November 2019 since the

CIRP period was to come to an end on 13.11.2019.He has also

admitted in sub-para (xiv)in para-wise reply (page 39 of reply of

Resolution Professional in CA No. 700/2021) that CA

282/2019,which was filed by Maya Buildcon seeking permission to

submit a resolution plan since it had not participated in the

process of invitation of EOI, was pending before the Adjudicating

Authority. Thus, it is quite clear that having once refused to allow

the consortium, of which Maya Buildcon was a partner, to

participate in the resolution process, and on which Maya Buildcon

filed CA282/2019to seek Adjudicating Authority‟s order for

permission to participate in the resolution process, the Resolution

Professional decided on his own to obtain resolution plan from a

consortium which had not through the EOI route in time and place

it before the CoC for consideration. This plan was later approved

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 18 of 36 by the CoC vide voting on 6th and 7th November 2019. Thus we do

not think that the way this entire process was carried out was in

accordance with legal provisions. We feel that a new round of

Expressions of Interest should have been invited, which should

have been done after wide publicity with sufficient time for

resolution applicants to apply. Short-circuiting the process to

include an applicant who did not apply in the EOI stage is not in

accordance with legal provisions.

20. We also consider the objections raised by the Learned

Counsel for Resolution Professional regarding there being no locus

or entitlement of the suspended director Amit Goel, who is

Appellant in CA No. 700 of 2021, in preferring the appeal. We feel

that a suspended director of the former Corporate Debtor does

have interest in the successful resolution of the corporate debtor

with which he was earlier connected. Company Appeal No. 761 of

2021 and Company Appeal No. 925 of 2021, both of which are filed

by the homebuyers/allottees who are financial creditors in class

but whose claims have not been accepted, are interested parties

who have stake in successful resolution of the Corporate Debtor

and therefore they are entitled to prefer appeal.

21. In Company Appeal (AT)(INS) Nos. 761/2021 and 925 of

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 19 of 36 2021, the Appellants Harjeet Kaur, Bala Pareek and others are

Memorandum of Understanding holders (also called „MoU holders‟)

of the erstwhile Corporate Debtor and Shri Bala Pareek has been

appointed as authorized representative of the Appellants for filing

the appeal. The Appellants have claimed that as MoU holders of

the Corporate Debtor they have been placed in the category of

„Non- Claimants‟ in the approved resolution plan. Their claim is

that the „Non-Claimants‟ category has been decided without the

Appellants being made a part of the resolution process. Thus, their

claim as well as debt owed by the Corporate Debtor has been

extinguished in the successful resolution plan. They have further

claimed that the effect of the approved resolution plan would be

that the Appellants shall lose their right over the properties which

were supposed to be handed over to Appellants as the documents

such as the MoU executed by the Corporate Debtor and the

amounts received by the Appellants for depositing various

amounts have been declared null and void with the approval of the

resolution plan, and within one month, the properties that were

supposed to be handed over to the Appellants will automatically

become an asset of the Successful Resolution Applicant. Even

otherwise, if the non-claimants submit their documents for

verification within one month of the approval of plan they will

receive just 10% of their deposited amount. The Appellants have

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 20 of 36 claimed that this is denial of natural justice to them as the rights

for their properties called their properties has been extinguished

without hearing them in the preparation/approval of the resolution

plan. The Appellants have further claimed that there has been a

differential treatment in the resolution plan wherein claimants

have been given their properties subject to certain conditions and

MoU holders have been made non-claimants with just no requests

to the properties booked by them.

22. We now examine the allegation of the Appellants that the provisions of Section 25A were not complied with in letter and spirit of the IBC. Section 25A of the IBC is as hereunder -

"Section 25A: Rights and duties of authorised representative of financial creditors.

25A. (1) The authorised representative under sub-section (6) or sub-section (6A) of section 21 or sub-section (5) of section 24 shall have the right to participate and vote in meetings of the committee of creditors on behalf of the financial creditor he represents in accordance with the prior voting instructions of such creditors obtained through physical or electronic means.

(2) It shall be the duty of the authorised representative to circulate the agenda and minutes of the meeting of the committee of creditors to the financial creditor he represents.

(3) The authorised representative shall not act against the interest of the financial creditor he represents and shall always act in accordance with their prior instructions:

Provided that if the authorised representative represents several financial creditors, then he shall cast his vote in respect of each financial creditor in accordance with

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 21 of 36 instructions received from each financial creditor, to the extent of his voting share:

Provided further that if any financial creditor does not give prior instructions through physical or electronic means, the authorised representative shall abstain from voting on behalf of such creditor.

(3A) Notwithstanding anything to the contrary contained in sub-section (3), the authorised representative under sub-

section (6A) of section 21 shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote:

Provided that for a vote to be cast in respect of an application under section 12A, the authorised representative shall cast his vote in accordance with the provisions of sub-section (3).]

(4) The authorised representative shall file with the committee of creditors any instructions received by way of physical or electronic means, from the financial creditor he represents, for voting in accordance therewith, to ensure that the appropriate voting instructions of the financial creditor he represents is correctly recorded by the interim resolution professional or resolution professional, as the case may be.

Explanation.- For the purposes of this section, the "electronic means" shall be such as may be specified."

23. The Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016

(hereafter called "Insolvency Process Regulations") lays down the

following regarding Authorised Representative, circulation of

agenda to creditors in a class and Meetings of the Committee of

Creditors:

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 22 of 36 "16A. Authorised representative

Xxx xxxxxx

(5) The interim resolution professional or the resolution professional, as the case may be, shall provide an updated list of creditors in each class to the respective authorized representative as and when the list is updated.

Clarification: The authorized representative shall have no role in receipt or verification of claim of creditors of the class he represents.

xxx xxxxxx

(9) The authorized representative shall circulate the agenda to creditors in a class and announce the voting window at least twenty hours before the window opens for voting instructions and keep the voting window open for at least twelve hours.

19. (1) Subject to this Regulation, a meeting of the committee shall be called by giving not less than five days‟ notice in writing to every participant, at the address it has provided to the resolution professional and such notice may be sent by hand delivery, or by post, but in any event, be served on every participant by electronic means in accordance with Regulation 20."

24. As the provision under sub-section 3 of section 25A clearly

lays down, the Authorized Representative shall always act with

the „prior instructions‟ of the financial creditors he represents.

Furthermore, sub-section 4 of section 25A provides that the

Authorized Representative shall file with the Committee of

Creditors any instructions received from Financial Creditors to Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 23 of 36 ensure that appropriate instructions of the financial creditors he

represents is correctly recorded by the Resolution Professional. The

import of sub-sections 3 and 4 of section 25A is very clear that the

views of financial creditors in class should be sought in an

appropriate manner by the Authorized Representative prior to the

CoC Meeting. Provision for receiving "prior instructions", and filing

them with the Committee of Creditors beforehand so that it is

recorded properly, is included in the procedure to ensure that the

views of creditors in class are appropriately sought, received and

conveyed to the Committee of Creditors through the Resolution

Professional. Furthermore, the use of word "prior‟ also implies

that the financial creditors in class shall have sufficient time to

consider collectively the issue/s before them and after voting

which is recorded by the Authorized Representative, the result is

conveyed to the Committee of Creditors.

25. In the present case, we further find that the instructions for

e-voting on the agenda item relating to the approval of the

resolution plan was sent by the RP vide e-mail dated November 5,

2019 addressed to the Authorized Representative of financial

creditors in class (attached at pp. 248 - 250 of the Appeal

paperbook in Company Appeal 700/2021).The instructions include

information about the voting period, which is to begin on 6th

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 24 of 36 November 2019 at 6 pm and close on 7th November 2019 at 1 pm

(page 249 of appeal paper book, Company Appeal 700/2021). Thus

an e-mail was sent to the Authorised Representative by the RP at

4:35 pm on November 5, 2019 informing of the start of voting on

6thNovember at 6 pm was hardly 25.5 hours in advance.

Regulation 19 of Insolvency Process Regulations stipulates that

notice of the CoC meeting shall be given at least five days in

advance which was not done in the present case. Furthermore,

sub-regulation (9) of Regulation 16A requires the authorized

representative to circulate the agenda and give voting instructions

to creditors in class he represents at least twenty hours in advance

and keep the voting window for creditors in class open for at least

twelve hours. In the present case separate voting among the

financial creditors in class was not organized by the authorized

representative. Thus the provisions laid down for organizing

voting among financial creditors in class of homebuyers /allottees

were not followed. We thus find that neither the RP organized the

CoC meeting in the manner laid down in Insolvency Process

Regulations and the Authorized Representative also failed to

organize prior consultation with the homebuyers/allottees as is

required under Section 25A.

26. We find that on the contrary the e-voting on the proposed

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 25 of 36 resolution plan by the financial creditors in class was held

simultaneously with the e-voting on the resolution plan by the

members of the CoC, as is clear from pp. 238 - 240 of the Appeal

paperbook in Company Appeal of 700/2021. The e-voting among

homebuyers/allottees was thus carried out but not in accordance

with the provisions of Insolvency Process Regulations, in a fashion

which can be called vitiated and against the letter and spirit of law.

It did not provide sufficient time to the financial creditors to

consider the various aspects of the proposed resolution plan, meet

together to discuss and vote upon it and thereafter for the

Authorized Representative to present the views of financial

creditors in class to the CoC. Moreso, when the financial creditors

in class (homebuyers/allottees) constitute more than 79% of total

voting rights in the CoC, following such a slipshod procedure is

nothing short of creating a legal fiction without conforming to the

letter and spirit of section 25A of IBC and Insolvency Process

Regulations.

27. We now turn our attention to the allegation of the Appellants

that due to inadequate publicity regarding the initiation of CIRP of

the Corporate Debtor, they were not aware of the public

announcement, and hence could not file their claims with

Resolution Professional in time. The replies on behalf of Resolution

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 26 of 36 Professional submitted in CA No. 700 of 2021 at page 26, para 30

mentions that,

"That it is respectfully submitted, that, the erstwhile resolution

professional did not get any cooperation from the Appellant as

was statutorily required from him for discharge of duties by

the resolution professional during the CIRP of Corporate

Debtor, further, the registered office of the Corporate Debtor at

Meerut was closed and the only principal place of business at

Faridabad as per MCA records -Piyush Global situated at Plot

5, YMCA Chowk, Delhi Mathura Road, Faridabad (HR) which

was sealed by the secured financial creditor - HDB Financial

Services Limited (HDBFS) under SARFAESI Act, 2002 and

Municipal Corporation of Faridabad (MCF) since prior to start

of CIRP on 3rd December,2018. Further, all the employees of

the Corporate Debtor had left and no employees of the

Corporate Debtor were on the rolls of the corporate debtor as

on insolvency commencement date on 3rdDecember 2018. All

the business operation of the Corporate Debtor was also

closed."

28. Thus we see that the homebuyers/allottees could not have

had access to either the registered office of the corporate debtor or

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 27 of 36 the principal place of business at Faridabad since both were

closed. Moreover, without the meeting/getting together by the

homebuyers/allottees, it was not easy for them to discuss and

convey their views to the Authorized Representative who would

then represent their views in the CoC. When we see that out of a

total of 473 home buyers/allottees only 222 allottees could file

claims in time before the Resolution Professional and 251 allottees

could either not do so or did so belatedly, we feel that exclusion of

more than 251 i.e. about 53% of total homebuyers/allottees

cannot lead to a fair and just resolution of the Corporate Debtor.

We also feel that the providing 10% of the claimed amounts to

homebuyers/allottees who could not file their claims in the

circumstances of this case is an unfair and inadequate treatment

of the financial creditors.

29. The Learned Counsel for Appellant in Company Appeal No.

761 of 2021 has stated that the Adjudicating Authority had

through an order dated 3.2.2020 in CA No. 12/2020 in CPIB

322/ALD/2018 directed the Resolution Professional to accept the

claim of the Applicants and consider them on merits subject to

proper verification. He has further claimed that since this order

was not appealed against, it has become final, and therefore it was

incumbent upon the Resolution Professional to admit claims which

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 28 of 36 had been submitted with delay for consideration. The Learned

Counsel has also contended that the approved resolution plan

considers such financial creditors in class who have filed claim

within the prescribed time limit and those financial creditors in

class who could not, for various reasons, file their claims inside as

"claimants and non-claimants" and such a discrimination is not in

keeping with the judgment passed by this Hon‟ble Tribunal in the

matter of Rajputana Properties Pvt. Ltd versus Ultratech

Cements Ltd. and Others [Company Appeal AT INS No. 188 of

2018] wherein it is held that the resolution plan that discriminates

some of the financial creditors were equally situated and not

balance the other stakeholders, such as operational creditors is

discriminatory and, therefore liable to be rejected.

30. A perusal of the order dated 3.2.2020 in CA No. 12 of 2020

in CP (IB) 322/ALD/2018 (attached at pp. 57 - 59 in the reply of

Respondent No.1 in Company Appeal (AT) (INS) No. 761 of 2021),

that the Adjudicating Authority has passed an order as follows: -

"7. In view of the facts of the case on hand and of the judgments referred, this Adjudicating Authority is of the view that it is the settled law that a claim cannot be rejected by RP solely on the ground of delay by the Applicants in filing their claims. Moreover, sufficient reason has been shown for delay occurred in filing claim by the Applicants before RP and the RP can be directed to accept claim of the Applicants to be considered by it on its merits and subject to proper

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 29 of 36 verification, which will only be in consonance with purpose sought to be achieved by the IBC."

This Tribunal has taken the view in the matter of Rajputana

Properties Pvt. Limited (supra), which is as follows: -

"43. From the two „resolution plans‟, it will be clear that the „Rajputana Properties Pvt. Ltd.‟ in its „resolution plan‟ has dissimilated some of the „financial creditors‟ who are equally situated and not balanced the other stakeholders, such as „operational creditors‟. Therefore, the Adjudicating Authority has rightly held the „resolution plan‟ submitted by „Rajputana Properties Pvt. Ltd‟ to be discriminatory."

31. A perusal of the resolution plan shows that the

MoU/agreement holders who could not file their claim within the

prescribed time have been labeled as „non-claimants‟ whereas

those that have filed their claims in time have been labeled as

„claimants‟. It is also clear that both these categories of financial

creditors in class (homebuyers/allottees) have been treated

differently in that the claimants have been offered possession of

the allotted premises, whereas non-claimants have been given only

10% of their total amount deposited, that too after due verification

and within one month of the approval of the resolution plan.

32. The order of the Adjudicating Authority dated 3.2.2020

(supra) and the treatment meted out to the claimants and non-

claimants among financial creditors in class of

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 30 of 36 homebuyers/allottees, we find that the order of 3.2.2020 has not

been complied with by the Resolution Professional in an

appropriate manner. The claims that were filed belatedly were

admitted and considered but thereafter the „claimants‟ and „non-

claimants‟ have been accorded different treatment under the

resolution plan. If the claims filed with delay had been admitted

and considered in the spirit of order dated 32.2020 in CA No.

12/2020, different treatment of two different categories i.e.

claimants and non-claimants in the approved resolution plan

would not have resulted. The judgment of this Hon‟ble Tribunal in

the matter of Rajputana Properties Pvt. Limited (supra) also lays

down that there should be no discrimination between financial

creditors belonging to the same class. Hence, once the question of

filing claims even with delay is accepted, there should not be two

different categories of claimants and non-claimants. This issue

also gains significance because only 222 out of 473

homebuyers/allottees have filed their claims in time, whereas 251

allottees have seen their claim being extinguished with the

approval of the resolution plan as their claims were either not filed

or filed with delay. When more than 53% of homebuyers/allottees

are thus left out, we cannot consider the resolution of the

Corporate Debtor to be done in the spirit of the IBC.

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 31 of 36

33. The Learned Counsel of Resolution Professional has cited the

judgments of Hon‟ble Supreme Court in the following cases:

(i) Committee of Creditors Essar Steel India Limited versus

Satish Kumar Gupta (Supra),

(ii) Kridhan Infrastructure Private Limited (Supra) and

(iii) K Sashidhar versus Indian Overseas Bank and Ors (Civil

Appeal No. 10673 of 2018)

wherein the principle, that the commercial wisdom of CoC is not

subject to judicial review and shall be binding and applicable on

the other creditors, is laid down. In the instant case, we are not

questioning or reviewing the commercial decision of the CoC but

rather the procedure adopted by the Resolution Professional in

organizing e-voting as well as eliciting the views of the financial

creditors in class on the revised resolution plan by the Authorized

Representative. We have also noted that since the e-voting of the

financial creditors in class which is a requirement of section 25A

and the e-voting by the CoC have taken place simultaneously we

do not feel such a procedure takes care of the use of the financial

creditors in an appropriate and adequate manner.

34. The Ld. Counsel for RP has cited the judgment of Hon‟ble

Supreme Court in India Resurgence ARC Private Limited vs

M/S Amit Metaliks Limited &Anr (Civil Appeal No. 1700 of

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 32 of 36 2021) wherein it is held that „what amount is to be paid to

different classes or sub-classes of creditors in accordance with

provisions of the Code and the related Regulations, is essentially

the commercial wisdom of the Committee of Creditors, and a

dissenting secured creditor like the appellant cannot suggest a

higher amount to be paid to it with reference to the value of the

security interest.‟ This judgment can be distinguished from the

present case in that we are not questioning the payments to be

made in the approved resolution plan to various creditors but the

question raised in these appeals is about Section 25A and how it

was put in operation. We have found lacunae in the way the

provision of Section 25A was operationalized. Therefore, what has

resulted from the erroneous operation of Section 25A has been

found to be erroneous. Thus we have found the actions of the RP

and Authorized Representative of Financial Creditors in Class

falling foul of law and we are not questioning the commercial

decision of the CoC.

35. We also note the judgment of Hon‟ble Supreme Court in

Ghanshyam Mishra and Sons Private Limited (supra)cited by

the Ld. Counsel for RP wherein it is held that all statutory dues

etc. would stand extinguished once the resolution plan is

approved. In the present case since we are looking at the way that

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 33 of 36 the Section 25A was operationalized and submission of claims by

financial creditors took place, leading to simultaneous e-voting on

the final resolution by the financial creditors in class and the

members of CoC, we feel that due procedure was not followed.

Thus the process was vitiated and what has resulted out of such

vitiated procedure as approved resolution plan cannot be termed

as fair and just to the creditors.

36. The Ld. Counsel for RP has also cited the judgment of

Hon‟ble Apex Court in Maharashtra Seamless Limited vs

Padmanabhan Venkatesh & Ors (Civil Appeal no. 4242 of 2019)

wherein it is held as follows:

"28......Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which the Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation...."

37. The Maharashtra Seamless judgment (supra) is

distinguished on the basis that there were flaws in operationalizing

the provision of Section 25Awhich is for the benefit of financial

creditors in class when the Authorized Representative did not do Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 34 of 36 „prior consultation‟ with the homebuyers/allottees who he sought

to represent. Thereafter, the RP allowed e-voting on the final

resolution plan wherein all the homebuyers participated, not as a

class represented by the Authorized Representative alongwith the

other members of CoC. All this means that section 30(2)(e) of the

IBC was infringed and the resolution plan is therefore liable to be

rejected on such a ground.

38. The argument of the Learned Counsel of Resolution

Professional that liquidation of the Corporate Debtor, which

implies corporate death, should be the last resort as is held by

Hon‟ble Apex Court in the matter of Swiss Ribbons Pvt. Ltd.

(Supra). We, therefore, feel that once the procedure is properly

followed, there is a realistic possibility of getting a successful

resolution which would take care of the interests of the

stakeholders and creditors leading to avoidance of liquidation of

the corporate debtor and hence there is no conflict with the Swiss

Ribbons judgment.

39. In light of the aforementioned discussion, we set aside the

impugned order dated 14.7.2021 and direct that the process be

started afresh with claims of homebuyers/allottees accepted by the

Resolution Professional by giving them realistic time limit for

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 35 of 36 submission of claims, in keeping with the order of the Adjudicating

Authority in CA 12/2020, leading to a revised information

memorandum, which should then be used for inviting Expressions

of Interest. In the CIRP, the views of the financial creditors in

class should be elicited by the Authorized Representative prior to

CoC meetings in letter and spirit of section 25A of IBC. Thereafter,

the CoC shall consider the resolution plans so received in

accordance with the provisions laid down in law. For this entire

exercise, we allow a period of 90 days to the CoC from the date of

this order to complete the entire exercise.

40. With the above-stated directions to the Committee of

Creditors, these appeals are disposed off. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Justice Jarat Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical) New Delhi 18th January, 2022

/aks/

Company Appeal (AT) (Ins) Nos. 700, 761 & 925 of 2021 Page 36 of 36