Axis Bank Limited vs Shubhkamna Buildtech Private Limited - ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT)(Insolvency) No. 665 of 2021 [Arising out of order dated 17.03.2022 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench, Court No. IV in IA No. 456 of 2019 in C.P.(IB)No. 1059/ND/2018]

IN THE MATTER OF:

Axis Bank Limited .... Appellant

Versus

1. Shubhkamna Buildtech Private Limited & Anr. Through Shri Anand Sonbhadra, 197-E, Pocket-IV, Mayur Vihar, Phase-1 Delhi - 110091. .... Respondent No.1

2. Represented by Mr. Anand Sonbhadra, E-10A, Kailash Colony, Greater Kailashi-1, New Delhi - 110014. (Mr. S.K. Singhal & Mr. S.K. Bansal) ....Respondent No.2

Present:

For Appellant:- Mr. Sharad Tyagi, Ms. K. Gayatri, Advocates.

For Respondent:- Mr. Abhishek Anand, Mr. Nipun Gautam, Mr. Pathik Choudhury, Advocates.

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal, filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ('IBC' in short) by the Appellant, arises out of order

Company Appeal (AT)(Insolvency) No. 665 of 2021 1 dated 17.03.2021 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, New Delhi Bench-

Court No. IV) in IA No. 456/2019 in CP (IB) No. 1059/ND/2018. By the

Impugned Order, the Adjudicating Authority rejected the application filed by the

Appellant seeking directions against the Resolution Professional of Corporate

Debtor, M/s Shubhkamna Buildtech Private Ltd. for admitting his claim in the

Resolution Plan and to be treated as secured Financial Creditor. Aggrieved by

the said Impugned Order, the present appeal has been preferred.

2. The Learned Counsel for the Appellant has also filed I.A. No. 1748/2021

in Company Appeal (AT)(Ins.) No. 665/2021 seeking condonation of 60 days

delay in filing this Appeal. The Hon'ble Supreme Court in Suo Motu Writ Petition

(Civil) No. 3/2020 vide order dated 10.01.2022 extended the prescribed period

of limitation and passed certain directions and as per Clause III of the said

direction in cases where limitation would have expired during the period between

15.03.2020 till 28.02.2022, notwithstanding the actual balance period of

limitation remaining, all persons shall have limitation period of 90 days from

01.03.2022. In this Appeal, the prescribed period of limitation of 30 days expired

on April, 24,2021 i.e. between 15.03.2020 and 28.02.2022. Thus, the Appellant

has limitation period of 90 days from 01.03.2022 and hence, the Appeal is within

limitation.

Company Appeal (AT)(Insolvency) No. 665 of 2021 2

3. The facts of the case, as stated and argued by the Learned Counsel for the

Appellant Bank i.e. Axis Bank Limited is that the said Bank provided loan

aggregating Rs. 30,58,22,625/- (Rupees Thirty Crore Fifty-Eight Lakh Twenty-

Two Thousand Six Hundred and Twenty-Five Only) to certain

Homebuyers/allottees under the housing project of the Corporate Debtor. It has

also been submitted that Corporate Insolvency Resolution Process ('CIRP' in

short) of the Corporate Debtor, a real estate infrastructure company, was

admitted on 26.11.2018 following which the Interim Resolution Professional

('IRP' in short) made the Public announcement and invited claims of the

creditors for constituting the Committee of Creditors ('CoC' in short) and fixed

the last date of filing claim as 12.01.2019.

4. It has been further submitted by the Learned Counsel for the Appellant

that it filed its claim in Form C on 31.12.2018 and sent the same to the IRP by

e- mail, which date was clearly before the last date of submission of claim and

followed it by a reminder e-mail on 07.01.2019 seeking acknowledgement from

the IRP. Another email was sent on 19.01.2019 to the IRP intimating that

supporting documents have also been submitted through google drive and

acknowledgement was sought again from the IRP in this regard. Admitting that

the IRP responded on 03.02.2019 by e-mail, the Appellant has pointed out that

the IRP requested that related documents be submitted in hard copies though

as per public announcement made, the claim and supporting documents were

to be submitted by electronic mode only. It has been further stated that the IRP, Company Appeal (AT)(Insolvency) No. 665 of 2021 3 however, refused to accept the hard copies of the said documents which the

Appellant had endeavoured to submit by visiting the office of the IRP and that

the Appellant sent an email to the IRP on 05.02.2019 stating this position.

5. After the IRP was replaced by the Resolution Professional, Respondent No.

1 in the present case, the Learned Counsel for the Appellant has stated that the

Appellant Bank enquired about the status of its claim as well as the CIRP

proceedings by sending e-mail dated 01.07.2019 to which the Resolution

Professional responded on the same date stating that it had not received any

claim from the Appellant. The Appellant in response sent an e-mail to the

Resolution Professional on 04.07.2019 stating that it had already submitted its

claim on 31.12.2018 and that their claim be considered and the Appellant Bank

be invited to CoC meetings. However, the Appellant has made a submission that

inspite of these communications sent both to the IRP and Resolution

Professional, their claim was not accepted and neither was the Appellant Bank

included in the CoC, and that thereby the Respondent No. 1 contravened

Sections 18(b), 21(1) and (2) of the IBC.

6. The Appellant Bank has further mentioned that a Tripartite Agreement

was signed between the relevant Homebuyers/allottees, the Corporate Debtor

and the Appellant Bank wherein the Homebuyers had subrogated their

respective rights to the Appellant and that 'Permission to Mortgage' their relevant

flat/units was given by the Corporate Debtor to protect the interests of the Company Appeal (AT)(Insolvency) No. 665 of 2021 4 Appellant. Further, it has been submitted by the Appellant that it has filed 24

applications before the Hon'ble Debt Recovery Tribunal, New Delhi ('DRT' in

short) for recovery of its outstanding amount to be paid by the defaulting

Homebuyers and/or the Corporate Debtor on behalf of such Homebuyers. It has

been added that the DRT has already issued Debt Recovery Certificates ('DRC'

in short) against 9 Homebuyers as well as the Corporate Debtor which

authenticates the claim of the Appellant and establishes the Tripartite

Agreement between the relevant Homebuyers, Corporate Debtor and the

Appellant.

7. The Learned Counsel for the Appellant has therefore argued that there has

been failure on the part of the Respondent No. 1/Resolution Professional to

acknowledge the claim of the Appellant. Aggrieved by this unprofessional and

unethical behaviour on the part of the Resolution Professional, the Learned

Counsel for the Appellant has sought relief for being treated as a secured

financial creditor and admittance of his claim in the Resolution Plan placed

before the CoC for approval of the Adjudicating Authority.

8. The Learned Counsel for the Respondent refuting the submissions made

by the Appellant has stated that the Appellant Bank never submitted its claim

to the IRP alongwith supporting documents in the first go. IRP tried to access

the supporting documents, submitted later through google drive by the

Appellant, but it could not be opened. It has been further contended by the Company Appeal (AT)(Insolvency) No. 665 of 2021 5 Learned Counsel of the Respondent that despite written emails sent by the IRP,

the Appellants still did not submit their claim properly and later the Resolution

Professional also clarified to the Appellant Bank on 01.07.2019 that it never

received any claim from the Appellant Bank and therefore not admitted as part

of CoC. It has been further argued by the Learned Counsel of the Respondent

that instead of providing timely clarifications to the queries raised by the

IRP/Resolution Professional on the claim, the Appellant chose to sit over it's

rights during the CIRP of the Corporate Debtor and by belatedly seeking

admittance of their claim now, it is an attempt to derail the CIRP process. It has

also been argued that it was duty on the part of the Appellant to have submitted

on time the clarificatory documents with respect to their claim before the

Resolution Professional and that in the absence of such supporting documents,

the Resolution Professional could not have processed and accepted the claim of

the Appellant.

9. In respect of the Tripartite Agreement entered between the allottees/

Homebuyers, Appellant Bank and the Corporate Debtor, the Learned Counsel

for the Respondent while admitting that such agreement had actually been

entered into, however, added that the Appellant was required to act upon the

enforceable rights provided under the agreement and establish the claim which

was not done by the Appellant. Moreover, it has been also contended that the

title of the housing units was to be submitted to the Appellant Bank, as per the

agreement, only after the units are registered and executed, which having not Company Appeal (AT)(Insolvency) No. 665 of 2021 6 taken place, the claim of the Appellant Bank is without any basis. On the DRCs,

given by DRT, it has been contended by the Respondent that the same have no

legal sanctity in respect of those DRCs issued after the initiation of the CIRP

process and that DRCs issued prior to CIRP have no relevance as they were not

submitted by the Appellant Bank before the Resolution Professional as proof of

their claim.

10. The Learned Counsel for the Respondent has further submitted that the

successful Resolution Plan of the Corporate Debtor was passed by the CoC

members with a voting percentage of 87.57% in favour following which the

Resolution Plan Approval Application had been filed by the Resolution

Professional in October 2019 with the Adjudicating Authority and thus nothing

remains with regard to an undecided claim.

11. We have duly considered the detailed arguments and submissions

advanced by the Learned Counsel for both the parties and perused the records

carefully.

12. The two broad issues which arise for our consideration are:-

(i) Whether the Appellant has shown due diligence in

submitting the claim before the IRP/Resolution Professional and

whether sufficient reasons/grounds exist to admit the claim at a

Company Appeal (AT)(Insolvency) No. 665 of 2021 7 time when the Resolution Plan has already been approved by the

CoC and is pending consideration of the Adjudicating Authority.

(ii) Whether the Tripartite Agreement between the Appellant,

Corporate Debtor and the borrowers/Homebuyers which has been

validated by the Hon'ble DRT by issue of DRCs provides

enforceable rights in favour of the Appellant Bank.

13. Coming first to the issue relating to submission of claim by the Appellant

and whether due diligence was exercised, we notice that the IRP had made the

public announcement in conformity with Regulation 6 of the Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016 ('CIRP Regulations' in short) alongwith stipulation of the last

date of submission of claim. It remains undisputed that the Appellant Bank

submitted the claim on 31.12.2018 in Form C by e-mail to the IRP which was

well before the last date of submission. However, admittedly it was not

accompanied with supporting documents. The supporting documents were later

submitted by the Appellant Bank on 07.01.2019 through google drive but not

being able to access these documents sent through google drive, the IRP

accordingly informed the Appellant Bank on 03.02.2019 and sought hard

copies of the same. This request was again reiterated by IRP on 05.02.2019.

The Appellant Bank thereafter sent an e-mail to the IRP on 05.02.2019 stating

that documents in support have been sent through google drive and that hard Company Appeal (AT)(Insolvency) No. 665 of 2021 8 copies of the same could also be arranged. However, hard copies were not

submitted by the Appellant Bank to the IRP. It is also noticed that from

05.02.2019 onwards till 01.07.2019, there was no further correspondence made

by the Appellant Bank with the IRP/Resolution Professional. Infact during this

aforesaid period, the Appellant Bank did not remain in touch with the IRP or

Resolution Professional and made no endeavours to remain updated about the

status of the claims or the CIRP process.

14. It is, therefore, clear that the Appellant Bank did not submit the claim

with supporting documents to the IRP. The logical corollary that follows therefore

is that the IRP cannot be expected to process and verify the claims of a creditor

without supporting documents. Moreover, from the exchange of e-mails which

are placed at Appeal Paper Book (pg 160-174), it transpires that the Appellant

Bank did not pay much heed to the difficulty being faced by the IRP in not being

able to open the google drive and did not alternatively provide the IRP with hard

copies of supporting document even after being prompted to do so. We are,

therefore, of the view that the conduct of IRP in this regard therefore does not

appear to be unreasonable or wanting in cooperation as has been argued by the

Learned Counsel for the Appellant. There is no material before us to either believe

that the IRP/Resolution Professional acted in a manner to hurriedly wrap up the

CIRP proceedings or willfully tried to stall the claim of the Appellant.

Company Appeal (AT)(Insolvency) No. 665 of 2021 9

15. On the other hand, the conduct of the Appellant Bank is found to be

remiss as due diligence was not made to satisfy the prescriptive requirement

of submitting supporting documents along with the claim. The Appellant Bank

ought to have been more careful and vigilant particularly since the IRP had

stated twice that electronic transmission of documents had failed and they were

requested to submit hard copies. Moreover, for nearly five months since

February, 2019, the Appellant Bank made no efforts to follow up with the IRP on

the status of their claims. It has, therefore, been correctly observed by the

Adjudicating Authority in the impugned order that the Appellant had sat on their

unsubstantiated claim for long owing to which their claim could not be verified.

In the light of the fact that the Appellant Bank remained slack and lackadaisical

in submission of their claim, we are not persuaded to believe that there are any

mitigating factors in their favour.

16. This brings us to the question as to whether at this belated stage there are

sufficient grounds to admit the claim. From material on record, it is abundantly

clear that a lot of time has lapsed since the date of issue of public announcement

inviting claim. We also take cognizance of the fact that the time period allowed

for submission of claim with proof is on or before the ninetieth day of insolvency

commencement date as provided in Regulation 12(2) of CIRP Regulations and

that this time period stands expired. The claim submitted by the Appellant Bank

could not be verified by IRP as endeavours made by the Appellant Bank to

electronically transmit supporting document did not fructify. More importantly, Company Appeal (AT)(Insolvency) No. 665 of 2021 10 the Resolution Plan has already been approved by the CoC with 87.57% voting

share and has been filed for approval before the Adjudicating Authority.

17. Given this background, the Adjudicating Authority while rejecting the plea

of the Appellant Bank to admit the claim belatedly, has relied on the judgement

of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India

Limited Vs. Satish Kumar Gupta and Ors : 2019 SCC Online SC 1478 which

held:

"107. For the same reason, the impugned NCLAT judgment

in holding that claims that may exist apart from those

decided on merits by the resolution professional and by the

Adjudicating Authority / Appellate Tribunal can now be

decided by an appropriate forum in terms of Section 60(6) of

the Code, also militates against the rationale of Section 31

of the Code. A successful resolution Applicant cannot

suddenly be faced with "undecided" claims after the

resolution plan submitted by him has been accepted as this

would amount to a hydra head popping up which would

throw into uncertainty amounts payable by a prospective

resolution Applicant who would successfully take over the

business of the corporate debtor. All claims must be

submitted to and decided by the resolution professional so

that a prospective resolution Applicant knows exactly what Company Appeal (AT)(Insolvency) No. 665 of 2021 11 has to be paid in order that it may then take over and run

the business of the corporate debtor. This the successful

resolution Applicant does on a fresh slate, as has been

pointed out by us hereinabove. For these reasons, the

NCLAT judgment must also be set aside on this count".

18. We, therefore, agree that the ratio which emerges in the above-mentioned

judgement is fully applicable in the present matter. Since the Resolution Plan

has not only been accepted by the CoC but also placed before the Adjudicating

Authority for approval, accepting any belated claim at this stage, will put paid

to the efforts achieved so far by the Resolution Professional in completion of

CIRP process. In IBC, where time-lines are well laid down, any indulgence shown

by way of belated admittance of claim is likely to jeopardise the CIRP and set the

clock back which certainly is not the intent and purpose of the IBC.

19. Coming to the second issue, we notice that the Appellant has claimed that

the Homebuyers have already transferred their respective rights under the flat/

unit in favour of the Appellant as substantive consideration amount for

purchasing the flat has been paid by the Appellant Bank to the Corporate

Debtor through the allottees/Homebuyers and that this position is also

substantiated by the DRCs issued by Hon'ble DRT against respective

Homebuyers and the Corporate Debtor. It has also been contended that

Corporate Debtor had also issued 'Permission to Mortgage', pursuant to which, Company Appeal (AT)(Insolvency) No. 665 of 2021 12 it has marked a lien in favour of the Appellant Bank on the flats financed by it.

It has been urged that in a Tripartite Agreement, once an allottee/Homebuyer

subrogates the rights under the asset in favour of a transferee, the Homebuyers

as transferror is not entitled to file the claim and such right to file the claim can

only be exercised by the transferee. The judgement of Hon'ble Supreme Court

in the matter of Dena Bank (Now Bank of Baroda) Vs. C. Shivakumar Reddy

& Ors. : (2021) 10 SCC 330 has also been relied upon to support the contention

that a final judgment and/or decree of any Court or Tribunal or any Arbitral

Award for payment of money, if not satisfied, would fall within the ambit of a

financial debt, enabling the creditor to initiate proceedings under Section 7 of

the IBC.

20. There is a need to take a close look at the terms of the Tripartite Agreement

whereby the Appellant Bank sanctioned and released housing loans to some

allottees /Homebuyers for purchase of flats in the project floated by the

Corporate Debtors. The first noteworthy feature is that the liability to repay the

loans is on the individual Homebuyers. Secondly, the following excerpts of the

Tripartite Agreement clearly reflects that the title of the unit shall be submitted

to the Appellant Bank once the same is registered and executed as reflected in

the Tripartite Agreement:

"Builder would deliver to the Bank the Sale Deed

relating to the flat in question as and when executed and

registered and shall also inform the Bank in writing at Company Appeal (AT)(Insolvency) No. 665 of 2021 13 least a week in advance regarding the time date &

venue of registration so that Bank can send its

representative to collect the original Sale deed on

registration. The Borrowers expressly and irrevocably

authorizes Builder and the Bank in this regard. Builder

shall not deliver and/or cause to deliver the Sale Deed

as and when executed and registered to the Borrower/s

without the written consent of the Bank."

21. Against the backdrop of these two salient features of the Tripartite

Agreement, we find that the decision of this Tribunal in Axis Bank Ltd. Vs. Value

Infracon India Pvt. Ltd. & Ors. in Company Appeal (AT)(Ins.) No. 582 of 2020

which has been relied upon by the Learned Counsel for the Respondent wherein

a similar Tripartite Agreement was signed and entered between the Homebuyers,

Corporate Debtor and the Bank is fully attracted in the present case and the

relevant portions extracted below:--

"10. It is clear from the principles laid down

by the Hon'ble Supreme Court in 'Pioneer Urban

Lands & Infrastructure Ltd. & Anr.' (Supra) that it

is the Home Buyer who should be considered as

'Financial Creditors' of the 'Corporate Debtor'

whether he has self-financed his flat or has Company Appeal (AT)(Insolvency) No. 665 of 2021 14 exercised his choice of taking a loan from the

Bank.

11. Additionally, we are of the considered view that

as per Section 77 of the Companies Act, 2013 every

security interest has to be registered with the

Registrar within 30 days of its creation and

admittedly no 'charge' has been created against

any of the property of the 'Corporate Debtor' in

favour of the Appellant.

**** *****

17. Be that as it may, we are of the considered view

that this subject matter cannot be viewed from such

a narrow compass. It is definitely not the scope and

objective of the Code to include Banks/Financial

Institutions which have advanced loans to Home

Buyers to be considered as 'Financial Creditors'

and included in the CoC, specifically in the light of

the fact the liability to repay the Home Loan is on

the individual Home Buyers. This would defeat the

very spirit and objective of the Code aiming at

Resolution and maximization of the assets of the

'Corporate Debtor'. Presence of a mere tri-partite Company Appeal (AT)(Insolvency) No. 665 of 2021 15 Agreement does not change the character of the

amount borrowed by the Home Buyer vis-à-vis the

Bank and vis-à-vis the 'Corporate Debtor'.....".

22. We find substance in the contention of the Learned Counsel for the

Respondent that mere permission to mortgage is of no relevance in the absence

of not having registered a charge. Furthermore, we also agree that being merely

in possession of enforceable rights under Tripartite Agreement is not enough.

The claimant was required to act upon those rights and establish the claim

before the Resolution Professional which having not been done, nothing remains

in respect of the undecided claim.

21. In the light of the above discussion, we are thus of the clear view that

the Adjudicating Authority has committed no error in passing the Impugned

Order. We find no cogent reason to interfere with the Impugned Order. The

appeal being devoid of merit is dismissed. There is no order as to costs.

[Justice Anant Bijay Singh] Member (Judicial)

[Barun Mitra] Member (Technical) Place: New Delhi Date: 30.08.2022 shashi

Company Appeal (AT)(Insolvency) No. 665 of 2021 16