Amit Katyal vs Meera Ahuja

Amit Katyal …Appellant

Versus

Meera Ahuja and others …Respondents

WITH IA NO. 105732/2021(for Impleadment) IA NO. 18679/2022 (for directions on behalf of Respondent Nos. 1-3)

JUDGMENT

M.R. SHAH, J.

1. Interlocutory Application No. 105732/2021(for impleadment) is

allowed in terms of the prayer made and they are ordered to be

impleaded as respondents in the instant appeal.

Signature Not Verified Digitally signed by R Natarajan Date: 2022.03.03 17:23:29 IST Reason: 1 1A. Feeling aggrieved and dissatisfied with the impugned judgment

and order dated 09.11.2020 passed by the National Company Law

Appellate Tribunal, New Delhi (hereinafter referred to as the

‘NCLAT/Appellate Authority’) in Company Appeal (AT) (Insolvency) No.

1380 of 2019, by which the Appellate Authority has dismissed the said

appeal preferred by the appellant herein – Promoter/Majority

Shareholder of the Corporate Debtor – Jasmine Buildmart Pvt. Ltd. and

has confirmed the order passed by the National Company Law Tribunal,

New Delhi (hereinafter referred to as the ‘NCLT/Adjudicating Authority’)

in admitting the petition under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (for short, ‘IBC’), the appellant –

Promoter/Majority Shareholder of the Corporate Debtor has preferred

the present appeal.

2. That respondent no. 4 herein – Corporate Debtor – Jasmine

Buildmart Pvt. Ltd. had come out with a Gurgaon based housing project,

namely, Krrish Provence Estate (hereinafter referred to as the ‘Project’).

That respondent no.4 herein – Corporate Debtor could not complete the

project even after a period of eight years. Therefore, respondent nos. 1

to 3 herein (hereinafter referred to as the ‘original applicants’) who were

the home buyers preferred Section 7 application before the Adjudicating

Authority/NCLT, Delhi being CP No. 1722/ND/2018 seeking initiation of

CIRP against respondent no. 4 – Corporate Debtor. That the original

2 applicants sought refund of an amount of Rs.6,93,02,755/- due to an

inordinate delay in the completion of the project and failure to handover

possession within the stipulated time. The said application was filed on

06.12.2018, i.e., prior to the amendment to Section 7 of the IBC, which

now permits 100 or 10% of the home buyers/allottees to apply under

Section 7 of the IBC.

2.1 That the NCLT/Adjudicating Authority admitted Section 7

application on 28.11.2019 and appointed the Interim Resolution

Professional (for short, ‘IRP’) and declared a moratorium. That the

appellant herein challenged the order of admission of Section 7

application before the NCLAT/Appellate Authority being CA (AT)

(Insolvency) 1380 of 2019. It appears that during the hearing before the

NCLAT/Appellate Authority, the appellant herein tried to settle the matter

with the original applicants, however, the settlement did not go through.

That by the impugned judgment and order, the NCLAT has dismissed

the said appeal and has upheld the admission order and directed

commencement of CIRP.

2.2 The IRP issued the public announcement on 10.11.2020 and

constituted the Committee of Creditors (for short, ‘COC’) on 23.11.2020.

In the meantime, the appellant preferred the present appeal. By order

dated 03.12.2020, this Court, while issuing notice in the appeal, stayed

the operation and implementation of the impugned order, subject to the

3 appellant depositing the amount of Rs.2,75,55,186/- plus interest at the

rate of 6% per annum in the Registry of this Court within two weeks from

that date. It is reported that the appellant had deposited an amount of

Rs. 3,36,02,000/- on 17.12.2020 with the Registry of this Court, which

has been invested in a Fixed Deposit Receipt, which is to mature on

9.3.2022.

2.3 Krrish Provence Flat Buyers Association had filed a caveat before

this Court apprehending that if any order is passed in the present

proceedings, it may affect them as home buyers. Three other home

buyers, namely, Sanjiv Puri, Akshat Seth and Kaustav Mukherjee have

preferred IA No. 105732 of 2021 for impleadment.

2.4 The present appeal was adjourned from time to time on the ground

that the dispute between the appellant and respondent Nos. 1 to 3

herein (original applicants) is being settled and that the

appellant/Corporate Debtor is prepared to complete the project within a

period of nine months, if the home buyers make payments, as

scheduled.

2.5 When the present appeal was taken up for further hearing on

04.02.2022, it was reported by the learned Senior Advocates/counsel for

the respective parties including the impleaders and the Association that

the original applicants/respondent Nos. 1 to 3 herein as well as 79 other

home buyers have settled the dispute with the Corporate Debtor and a

4 settlement has been entered into, under which, it is agreed that the

Corporate Debtor shall complete the entire project and hand over the

possession to the home buyers (who want the possession), within a

period of one year. It was also submitted on behalf of the original

applicants that they have also settled the dispute with the

appellant/Corporate Debtor and the appellant had agreed to refund the

amount of Rs.3,36,02,000/- with applicable/accrued interest to the

original applicants. Therefore, it was requested to record the settlement

and permit the original applicants to withdraw CIRP proceedings pending

before the NCLT/Adjudicating Authority. This Court passed the following

order on 04.02.2022:

“IA Nos. 131763/2020 and 130570/2021 stand disposed of with liberty in favour of the applicant(s) to avail any other remedy which may be available to them, as permissible under the law to protect their rights.

It is reported that out of 128 home buyers of 176 units, 79 + 3 (i.e. 82) home buyers have settled the dispute with the corporate debtor including the original applicants/respondent nos. 1 to 3 herein who have initiated the IBC proceedings. It is reported that the original applicants/respondent nos.1 to 3 herein as well as 79 home buyers have settled the dispute with the corporate debtor and a settlement has been entered into under which it is agreed that the corporate debtor shall complete the entire project and hand over the possession to the home buyers (who wants the possession) within a period of one year from today.

In that view of the matter, it is requested to dispose of the matter. As the respondent nos. 1 to 3 want to withdraw the original proceedings in view of the settlement and in the peculiar facts and circumstances of the case and considering the fact that the order passed by the NCLT has been stayed by this Court pursuant to the earlier interim order dated 3.12.2020 and the corporate debtor has deposited the entire amount as directed by this Court which is lying with the Registry and considering the provisions of Section 12-A of the IBC read with Section 2 (11), let the respondent nos.1 to 3 herein/original applicants before the NCLT who has initiated the

5 proceedings under Section 7, file an application for withdrawal of the proceedings.

Put up on 16.02.2022.”

2.6 Pursuant to order dated 4.2.2022, the original applicants have

preferred IA No. 18679 of 2022 under Article 142 of the Constitution of

India read with Rules 11 and 12 of the National Company Law Tribunal

Rules, 2016, praying for permitting the original applicants to withdraw

CIRP proceedings on their being paid a sum of Rs.3,36,02,000/- along

with applicable interest, out of the amount deposited by the appellant in

the Registry of this Court. It is also further prayed to dismiss all matters

pending between the appellant and respondent Nos. 1 to 3 herein

(original applicants) mentioned in paragraph 7 of IA No. 18679 of 2022

and close the CIRP proceedings of respondent No. 4 – Corporate Debtor

initiated by respondent Nos. 1 to 3 herein (original applicants).

3. Shri Kapil Sibbal, learned Senior Advocate has appeared on behalf

of the appellant, Shri Lokesh Bhola, learned Advocate has appeared on

behalf of respondent Nos. 1 to 3 herein, Shri K.V. Vishwanathan, learned

Senior Advocate has appeared on behalf of the three impleaders (IA No.

105732/2021), Shri Nakul Diwan, learned Senior Advocate has

appeared on behalf of the Krrish Provence Flat Buyers Association, Mr.

Yogesh Mittal, learned Advocate has appeared on behalf of the

6 Resolution Professional and Ms. Radhika Gupta, learned Advocate has

appeared on behalf of the intervenors.

3.1 Shri K.V. Vishwanathan and Shri Nakul Diwan, learned Senior

Advocates appearing on behalf of the three impleaders – respective

home buyers and the Association and Shri Kapil Sibal, learned Senior

Advocate appearing on behalf of the appellant have jointly submitted

that a majority of the home buyers and the appellant and Corporate

Debtor have settled the disputes and a joint statement regarding

proposed settlement plan signed by the respective parties is filed under

which, the appellant and respondent No.4 (Corporate Debtor) have

undertaken that they shall complete the entire project within one year

from the date of settlement and offer possession of the flats to the home

buyers. Under the said agreement, the appellant and respondent No.4

(Corporate Debtor) have undertaken before this Court as under:

“That the appellant and respondent No.4 (Company) shall undertake before the Hon’ble Court the following: -

1. Complete the entire project within 1 year from the date of settlement and offer the possession to the Homebuyers.

2. Complete the entire project including all the apartments, common areas, amenities, etc. as specified in the ABA.

3. All demands be raised and timely paid, strictly in terms of ABA.

4. Company commits to continue the provisions of all maintenance services as per the ABA.

5. Company will make the application for obtaining Occupancy Certificate within 6 months, before the Competent Authority.

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4. Learned counsel on behalf of the respective parties have reported

that out of the total 128 home buyers of 176 units, 79 + 3 home buyers

have settled the dispute with the Corporate Debtor and have accepted

the joint statement regarding proposed settlement plan dated 3.2.2022

and have agreed to the proposal/undertaking by the appellant and the

Corporate Debtor that they shall complete the project and hand over the

possession to the home buyers within a period of one year. Learned

counsel appearing on behalf of the respective parties therefore have

prayed to exercise the powers under Article 142 of the Constitution of

India read with Rules 11 and 12 of the National Company Law Tribunal

Rules, 2016 and permit the original applicants to withdraw the CIRP

proceedings which shall be in the larger interest of the majority of the

home buyers who want the possession and under the settlement they

will get now the possession after waiting for eight to nine years.

4.1 Learned counsel appearing on behalf of the respective parties

have also submitted that after the COC was constituted on 23.11.2020

by the IRP, no further steps are taken either by the IRP and/or even the

COC and even the first meeting of the COC has also not been convened

and before any further CIRP proceedings are proceeded, this Hon’ble

Court has stayed the impugned order. It is submitted therefore that there

8 shall not be any impediment in permitting the original applicants to

withdraw the CIRP proceedings.

4.2 Learned counsel for the respective parties have heavily relied upon

paras 82 to 87 of the decision of this Court in the case of Swiss Ribbons

Private Limited and Another v. Union of India and others, reported in

(2019) 4 SCC 17 and one another order passed by this Court in the case

of Kamal K. Singh v. Dinesh Gupta & Another (Civil Appeal No. 4993 of

2021, decided on 25.08.2021), in which this Court has permitted the

original applicants before the Adjudicating Authority to withdraw the CIRP

proceedings in view of the settlement entered into between the parties.

5. We have heard learned counsel for the respective parties at length.

5.1 The original applicants (respondent Nos. 1 to 3 herein) now have

moved before this Court by way of an interlocutory application No.

18679/2022, praying for permitting them to withdraw the CIRP

proceedings initiated by them against respondent no.4 – Corporate

Debtor by submitting, inter alia, that the appellant has agreed to pay to

the original applicants Rs.3,36,02,000/- with applicable/accrued interest

thereon and they do not propose to thereafter proceed further with the

insolvency proceedings. Similarly, 82 (79+3) home buyers out of the total

128 home buyers, who are also represented before this Court, have

stated that they are satisfied with the undertaking given by the appellant

9 and respondent no.4 before this Court recorded in the joint statement

regarding the proposed settlement plan dated 3.2.2022, under which the

appellant and respondent No.4 (Corporate Debtor) have undertaken to

complete the project within a period of one year and to hand over the

possession to them. Thus, out of 128 home buyers of 176 units, 82

home buyers + three original applicants have agreed to the settlement

and agreed to withdraw the CIRP proceedings and/or have no objection

if the CIRP proceedings initiated by respondent Nos. 1 to 3 herein are

permitted to be withdrawn.

6. As observed hereinabove, immediately on constitution of COC, this

Court has stayed the impugned order. No further steps are taken by the

IRP/COC pursuant to the admission of the CIRP proceedings except the

IRP was appointed and the COC was constituted. Under Section 12A of

the IBC which has been inserted by the Insolvency and Bankruptcy

(Second Amendment) Act, 2018 with retrospective effect from

06.06.2018, the Adjudicating Authority may allow the withdrawal of

application admitted under Section 7 or Section 9 or Section 10, on an

application made by the applicant with the approval of ninety per cent

voting share of the COC, in such manner as may be specified. The

rationale behind the insertion of Section 12A is contained in the

Insolvency Law Commission Report, which is as under:

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“29.1 Under Rule 8 of the CIRP Rules, NCLT may permit withdrawal of the application on a request by the applicant before its admission. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdrawal post admission of a CIRP application. It was observed by the Committee that there have been instances where on account of settlement between the applicant creditor and the corporate debtor, judicial permission for withdrawal of CIRP was granted. [….] Thus, it was agreed that once CIRP is initiated, it is no longer a proceeding only between the applicant creditor and the corporate debtor but is envisaged to be a proceeding involving all creditors of the debtor. The intent of the Code is to discourage individual actions for enforcement and settlement to the exclusion of the general benefit of all creditors.”

7. It is true that the procedure for preferring an application under

Section 12A of the IBC is contained in Regulation 30A of the CIRP

Regulations, 2016. However, as per the decision of this Court in the

case of Brilliant Alloys Pvt. Ltd. v. S. Rajagopal, 2018 SCC Online SC

3154, the said provision is held to be directory, depending on the facts of

each case.

7.1 In the case of Swiss Ribbons Pvt. Ltd. (supra), it is held that at any

stage before a COC is constituted, a party can approach

NCLT/Adjudicating Authority directly and the Tribunal may in exercise of

its powers under Rule 11 of the NCLT Rules, allow or disallow an

application for withdrawal or settlement. Therefore, in an appropriate

case and where the case is being made out and the NCLT is satisfied

about the settlement, may permit/allow an application for withdrawal or

settlement.

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8. In the present case, as observed hereinabove, although the COC

was constituted on 23.11.2020, there has been a stay of CIRP

proceedings on 3.12.2020 (within ten days) and no proceedings have

taken place before the COC. It is to be noted that the COC comprises

91 members, of which 70% are the members of the Flat Buyers

Association who are willing for the CIRP proceedings being set aside,

subject to the appellant and the Corporate Debtor – company honouring

its undertaking given to this Court as per the settlement plan dated

3.2.2022.

9. Therefore, in the peculiar facts and circumstances of the case,

where out of 128 home buyers, 82 home buyers will get the possession

within a period of one year, as undertaken by the appellant and

respondent No.4 – Corporate Debtor, coupled with the fact that original

applicants have also settled the dispute with the appellant/Corporate

Debtor, we are of the opinion that this is a fit case to exercise the powers

under Article 142 of the Constitution of India read with Rule 11 of the

NCLT rules, 2016 and to permit the original applicants to withdraw the

CIRP proceedings. We are of the opinion that the same shall be in the

larger interest of the home buyers who are waiting for the possession

since more than eight years.

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10. If the original applicants and the majority of the home buyers are

not permitted to close the CIRP proceedings, it would have a drastic

consequence on the home buyers of real estate project. If the CIRP

proceedings are continued, there would be a moratorium under Section

14 of the IBC and there would be stay of all pending proceedings and

which would bar institution of fresh proceedings against the builder,

including proceedings by home buyers for compensation due to delayed

possession or refund. If the CIRP is successfully completed, the home

buyers like all other creditors are subjected to the pay outs provided in

the resolution plan approved by the COC. Most often, resolution plans

provide for high percentage of haircuts in the claims, thereby significantly

reducing the claims of creditors. Unlike other financial creditors like

banks and financial institutions, the effect of such haircuts in claims for

refund or delayed possession may be harsh and unjust on homebuyers.

On the other hand, if the CIRP fails, then the builder-company has

to go into liquidation as per Section 33 of the IBC. The homebuyers

being unsecured creditors of the builder company stand to lose all their

monies that are either hard earned and saved or borrowed at high rate of

interest, for no fault of theirs.

11. Even the legislative intent behind the amendments to the IBC is to

secure, protect and balance the interests of all home buyers. The

13 interest of home buyers is protected by restricting their ability to initiate

CIRP against the builder only if 100 or 10% of the total allottees choose

to do so, all the same conferring upon them the status of a financial

creditors to enable them to participate in the COC in a representative

capacity. Being alive to the problem of a single home buyer derailing the

entire project by filing an insolvency application under Section 7 of the

IBC, the legislature has introduced the threshold of at least 100 home

buyers or 10% of the total home buyers of the same project to jointly file

an application under Section 7 of the IBC for commencement of CIRP

against the builder company. The Insolvency Bankruptcy Code (Second

Amendment) Bill, 2019 that proposed the amendment to Section 7

contained a statement of object and reasons, inter alia, stated as follows:

“2. A need was felt to give the highest priority in repayment to last mile funding to corporate debtors to prevent insolvency, in case the company goes into corporate insolvency resolution process or liquidation, to prevent potential abuse of the Code by certain classes of financial creditors, to provide immunity against prosecution of the corporate debtor and action against the property of the corporate debtor and the successful resolution applicant subject to fulfilment of certain conditions, and in order to fill the critical gaps in the corporate insolvency framework. It has become necessary to amend certain provisions of the Insolvency and Bankruptcy Code, 2016.”

12. In the present case, as observed hereinabove, out of the total 128

home buyers of 176 units, 82 homebuyers are against the insolvency

proceedings and the original applicants have also settled their dispute

with the appellant and corporate debtor. Even the object and purpose of

14 the IBC is not to kill the company and stop/stall the project, but to ensure

that the business of the company runs as a going concern.

13. In view of the aforesaid facts and circumstances, more particularly

when the withdrawal of the CIRP proceedings initiated by the original

applicants is allowable by the NCLT in exercise of its powers under Rule

11 of the NCLT rules, 2016 and in the peculiar facts and circumstances

of the case, instead of relegating the original applicants to approach the

NCLT/Adjudicating Authority by moving an application under Section 12A

of the IBC, we are of the opinion that this is a fit case to exercise powers

under Article 142 of the Constitution of India as the settlement arrived at

between the home buyers and the appellant and corporate debtor –

company shall be in the larger interest of the home buyers and under the

settlement and as undertaken by the appellant/corporate debtor, out of

128 home buyers, 82 home buyers are likely to get possession within a

period of one year, for which they are waiting since last more than eight

years after they have invested their hard earned money. This shall be in

furtherance of the object and purpose of IBC.

14. In view of the above and for the reasons stated above, IA No.

18679/2022 in Civil Appeal No. 3778/2020 filed by respondent Nos. 1 to

3 herein (original applicants before the NCLT/Adjudicating Authority) is

allowed.

15 As agreed, respondent Nos. 1 to 3 shall be paid an amount of

Rs.3,36,02,000/- along with accrued interest, out of the amount

deposited by the appellant, pursuant to the earlier order passed by this

Court dated 3.12.2020. Respondent Nos. 1 to 3 herein (original

applicants before the Adjudicating Authority) are permitted to withdraw

the application filed by them under Section 7 of the IBC, 2016 bearing

CP No. 1722/ND/2018 pending before the NCLT, New Delhi. Hence, CP

No. 1722/ND/2018 pending before the NCLT, New Delhi stands

dismissed as withdrawn. Consequently, all the orders passed by the

NCLT, New Delhi, including appointment of IRP and constitution of COC

are hereby quashed and set aside. Consequently, the impugned

judgment and order passed by the NCLAT also stands quashed and set

aside. As agreed between respondent Nos. 1 to 3 herein, the appellant

and the corporate debtor, Consumer Case bearing CC No. 984 of 2019,

filed by respondent Nos. 1 to 3 herein, which is pending before the

National Consumer Disputes Redressal Commission, New Delhi and

Criminal Complaint being Case No. 540/2021 filed by respondent Nos. 1

to 3 herein, pending before the learned Chief Metropolitan Magistrate,

SED, New Delhi are hereby dismissed as withdrawn/quashed. Either of

the parties to place a copy of the present order before the National

Consumer Disputes Redressal Commission, New Delhi and in the Court

16 of Chief Metropolitan Magistrate, SED, New Delhi to complete the record

of the Courts.

15. The joint statement regarding the settlement plan dated

27.01.2022/03.02.2022 along with the list of the members of the Krrish

Provence Flat Buyers Association who have accepted and agreed to

take possession of the respective apartments, signed by the appellant,

impleaders Akshat Seth, Sanjiv Puri & Kaustav Mukherjee and the office

bearers of the Krrish Provence Flat Buyers Association are directed to be

taken on record. It is directed that if the original of the joint statement

regarding the settlement plan dated 27.01.2022/3.2.2022 signed by the

respective parties and their advocates is not placed on record, the same

be placed on record of the present proceedings, within a period of one

week from today. The appellant herein and respondent No.4 – Jasmine

Buildmart Pvt. Ltd. are directed to file separate undertakings before this

Court, within a period of one week from today, specifically stating and

undertaking that:

(1) they shall complete the entire project within one year from

01.03.2022 and offer the possession to the respective home buyers;

(2) they shall complete the entire project including all the

apartments, common areas, amenities, etc. as specified in the ABA;

(3) all demands be raised and timely paid, strictly in terms of ABA;

17 (4) Company shall continue the provisions of all maintenance

services as per the ABA; and

(5) Company will make the application for obtaining Occupancy

Certificate within six months, before the competent authority.

The aforesaid undertakings shall be backed by the Resolution of

the Company, which shall also be placed on record along with the

undertakings.

15.1. The appellant and respondent No.4 – Jasmine Buildmart Pvt. Ltd.

shall abide by the settlement plan recorded hereinabove and the

undertakings to be filed within a period of one week from today. Any

breach on the part of the appellant and respondent No.4 – Jasmine

Buildmart Pvt. Ltd. shall be viewed very seriously. Liberty is reserved in

favour of the home buyers and the Krrish Provence Flat Buyers

Association to approach this Court, in case of any difficulty.

16. To do the complete justice in the matter and considering the fact

that after the admission of the CIRP proceedings, IRP was appointed

and COC was constituted by the IRP and it is reported by the IRP that he

had incurred some expenditure, we direct the appellant to pay a sum of

Rs.6,00,000/- to the IRP, to be paid towards the expenditure that might

have been incurred by the IRP and also the litigation costs, which shall

18 be paid to the IRP by way of a Demand Draft within a period of two

weeks from today.

17. The present proceedings stand disposed of accordingly, in terms of

the above order. All other pending Interlocutory Applications stand

disposed of.

………………………………J. [M.R. SHAH]

NEW DELHI; ……………………………….J. MARCH 03, 2022. [B.V. NAGARATHNA]

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