Earth Buyers Association For Justice vs Akash Singhal & Ors

[Arising out of Order dated 08.06.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Division Bench, Delhi, Bench III in CA- 914/2019, I.A. No. 5/2020 in IB- 401(ND)/2017]

In the matter of:

Earth Buyers Association for Justice ....Appellant Vs. Mr. Akash Singhal, Resolution Professional for Earth ...Respondents Infrastructure Limited & Ors. For Appellant: Mr. Nishant Awana and Mr. Devansh Malhotra, Advocates. For Respondents: Mr. Ashish Makhija and Ms. Akanksha Vasudeva, Advocates for R-1.

JUDGMENT

(12th October, 2022)

Ashok Bhushan, J.

1. This Appeal has been filed by 'Earth Buyers Association For Justice'

challenging the order of the Adjudicating Authority dated 08.06.2021

approving the Resolution Plan submitted by 'M/s. Alpha Corp Development

Private Limited', the Respondent No.2 herein. Brief facts necessary for

deciding this Appeal are:-

Corporate Insolvency Resolution Process (CIRP) commenced against the

Corporate Debtor- 'M/s. Earth Infrastructure Limited' by order dated

06.06.2018. The Resolution Professional issued Form-G inviting Resolution

Plans for the Corporate Debtor as a whole and project-wise also. In response,

three Resolution Plans were received, of which two for Projects TOWNE & 2

ICONIC were approved. Committee of Creditors (CoC) had taken a decision in

8th meeting, on 20.05.2019, for issuing Form-G inviting project specific

resolution in addition to Resolution Plan for the Corporate Debtor as a whole.

Revised Resolution Plan was submitted by Respondent No.2 on 15.10.2019

in respect of three projects of the Corporate Debtor with declaration to the

effect that Resolution in respect of Earth Iconic Project shall be implemented

in accordance with separate Resolution Plan submitted by Respondent No.2

in CIRP proceeding of Celestial Estates Pvt. Ltd. Resolution Plan was put

before the CoC in 18th meeting held on 18.10.2019 where it was resolved to

put the plan to vote. Resolution Plan was put to vote in the 19th meeting of

the CoC dated 11.11.2019 where it was approved by 99.97% votes. The

Application was filed before the Adjudicating Authority being CA- 914/2019

for approval of the Resolution Plan submitted by the Respondent No.2 which

plan came to be approved by the impugned order of the Adjudicating

Authority. Aggrieved with the order approving the Resolution Plan, this Appeal

has been filed by 'Earth Buyers Association For Justice'.

2. On a liberty granted by this Tribunal, the Appellant has filed an I.A No.

3164 of 2022 praying for addition of 35 names of homebuyers/Financial

Creditors in a class on the record in support of the Appeal. The Application

was objected by the Respondents alleging that out of 35 persons who sought

to be brought on record 29 did not vote on the Resolution Plan. It was further

stated in the reply that the persons sought to be brought on record belong to

class of voters who have to go by the majority of votes as per Section 25A (3A)

Company Appeal (AT) (Insolvency) No. 283 of 2022 3

of the Code. Respondents further objected that the Appeal need not be

entertained by this Tribunal.

3. We have heard Learned Counsel for the parties and reserved the

judgment on 26.09.2022. While reserving the judgment, liberty was granted

to the Counsel for the Successful Resolution Applicant to refer to relevant

clauses in the written synopsis which according to the Counsel for the

Successful Resolution Applicant take cares of all the homebuyers.

4. Learned Counsel for the Appellant challenging the impugned order

submits that the voting on the Resolution Plan was not conducted project-

wise whereas voting ought to have been conducted project-wise and due to

the said error of not conducting voting project-wise, the order approving the

plan is vitiated. It is further submitted that there are several procedural

violations committed by the Resolution Professional and Authorised

Representative, hence, the plan approval be set aside.

5. Learned Counsel for the Resolution Professional as well as Successful

Resolution Applicant refuting the submission of the Appellant submits that

even 35 Applicants who sought to be brought on record were members

belonging to class of voters and they cannot be allowed to question the

majority votes. Majority of homebuyers having decided to approve the plan by

99.97%, a miniscule of homebuyers cannot be allowed to challenge the plan.

Statutory scheme does not permit minority of homebuyers to challenge the

plan. It is further submitted that there was no procedural violation and

Authorised Representative after obtaining the majority of votes of homebuyers

Company Appeal (AT) (Insolvency) No. 283 of 2022 4

has participated in the CoC meeting. Learned Counsel for the Successful

Resolution Applicant submits that in any view of the matter, the Resolution

Plan submitted with regard to all the projects amply protect the interests of

all the homebuyers, hence, there is no such grievance in the present Appeal

so as to interfere with the order approving the Resolution Plan.

6. We have considered the submissions of the Counsel for the Appellant

and perused the record.

7. There is no dispute to the fact that the Resolution Plan has been

approved by 99.97% of vote shares of CoC. The Appellant- 'Earth Buyers

Association For Justice' itself is not member of the CoC. The 35 homebuyers

who were sought to be brought on record, 29 homebuyers have not voted for

the plan and the class of homebuyers have to sail with the majority of the

votes of the homebuyers. Section 25A (3A) provides as follows:-

"25A. Rights and duties of authorised representative of financial creditors. - xxx xxx xxx

[(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

Company Appeal (AT) (Insolvency) No. 283 of 2022 5

representative shall cast his vote in accordance with the provisions of subsection (3)."

8. The Authorised Representative represent the voters of the class after

taking decision by vote of more than 50% of the voting of the Financial

Creditors. From the above fact, it is clear that there is no dispute that majority

of homebuyers have approved the Resolution Plan, Resolution Plan having

been approved by 99.97% votes. The Hon'ble Supreme Court in "Jaypee

Kensington Boulevard Apartments Welfare Association and Ors. vs.

NBCC (India) Ltd. and Ors.- 2021 SCC OnLine SC 253" has already held

that the allottees, even if not a homogeneous group, they could vote only either

to approve the resolution plan or to disapprove the same. Divergence of the

views within their own class may exist but, when coming to the vote in the

Committee of Creditors, their vote would be that of a class. In paragraph 426

and 427, following has been laid down:-

"426. Having regard to the scheme of IBC and the law declared by this Court, it is more than clear that once a decision is taken, either to reject or to approve a particular plan, by a vote of more than 50% of the voting share of the financial creditors within a class, the minority of those who vote, as also all others within that class, are bound by that decision. There is absolutely no scope for any particular person standing within that class to suggest any dissention as regards the vote over the resolution plan. It is obvious that if this finality and binding force is not provided to the vote cast by the authorised representative over the resolution plan in accordance with the majority decision of the class he is

Company Appeal (AT) (Insolvency) No. 283 of 2022 6

authorised to represent, a plan of resolution involving large number of parties (like an excessively large number of homebuyers herein) may never fructify and the only result would be liquidation, which is not the prime target of the Code. In the larger benefit and for common good, the democratic principles of the determinative role of the opinion of majority have been duly incorporated in the scheme of the Code, particularly in the provisions relating to voting on the resolution plan and binding nature of the vote of authorised representative on the entire class of the financial creditor/s he represents.

427. To put it in more clear terms qua the homebuyers, the operation of sub-section (3A) of Section 25A of the Code is that their authorised representative is required to vote on the resolution plan in accordance with the decision taken by a vote of more than 50% of the voting share of the homebuyers; and this 50% is counted with reference to the voting share of such homebuyers who choose to cast their vote for arriving at the particular decision. Once this process is carried out and the authorised representative has been handed down a particular decision by the requisite majority of voting share, he shall vote accordingly and his vote shall bind all the homebuyers, being of the single class he represents."

9. We, thus, are of the clear opinion that even if some of the homebuyers

have not voted in favour of the plan they have to sail with the majority. The

procedural violations which were sought to be urge before us are not sufficient

enough to interfere with the order approving the Resolution Plan.

Company Appeal (AT) (Insolvency) No. 283 of 2022 7

10. Learned Counsel for the Respondent No.2 in his written submissions

as per liberty granted by this Court has brought on record certain clauses of

the Resolution Plan with regard to Project Earth Copia, Project Earth Sapphire

Court and Project Earth Techone. It is sufficient to refer to clauses 2.5 and

4.1 of Part-III of the Resolution Plan for Project Earth Copia, which is as

follows:-

"2.5 Further, the Resolution Applicant shall in no manner be liable to pay any claim towards interest and/or assured return to any Allottee of Earth Copia Project whether admitted or pending admission with the RP."

"4.1 From the perusal of the list of claims fled, the Resolution Applicant has an understanding that the claims admitted in respect of Earth Copia Project as on 01.11.2019 amount to Rs. 2,478,140,223/- representing the principal amount (excluding interest and assured return, if any).

a) The Resolution Applicant proposes to satisfy all the Admitted Claims in respect of Earth Copia Project by completing the pending construction activities and handing over the possession to the Allottee, in the manner as proposed, and subject to the terms and conditions contained, herein.

Any and all claims will also be subject to re-

verification on the basis of review of all necessary information/documents as will be required to be reviewed by the Resolution Applicant for such purpose with a view to identify

Company Appeal (AT) (Insolvency) No. 283 of 2022 8

any anomaly/ differences in respect of the claims as well as underlying claim amounts including but not restricted to the relevant Unit numbers, payment plan and such other details under the existing ABA.

Any and all existing Allottees of Earth Copia Project shall not have the right to surrender / cancel the allotment of Units and/or claim refund of any amounts from the Resolution Applicant whether paid by them or due to them from or in connection with EIL, Aurochem or the Earth Copia Project Provided that, the Allottee shall have a right to transfer/assign Units allotted to them to prospective buyers / transferees subject to the condition that such prospective buyers / transferees shall agree to the terms and conditions of this Resolution Plan by executing necessary transfer documents provided by the Resolution Applicant as well as payment of transfer charges as provided for in this Resolution Plan in respect of the relevant Unit. Such transfer shall be subject to the transfer charges payable as per this Resolution Plan in respect of the Allottee's Unit. If as per the ABA, first transfer to any prospective buyer is free, then the Resolution Applicant shall not change any transfer fees from the prospective buyers and/or Allottees, provided, the said first transfer has not happened."

11. To the similar effect is the Resolution Plan with regard to other two

projects, the plan clearly mention that Resolution Applicant proposes to

satisfy all the admitted claims in respect of the project by completing the

Company Appeal (AT) (Insolvency) No. 283 of 2022 9

pending construction activities and handing over possession to the allottees,

in the manner as proposed, and subject to terms and conditions mentioned

in the Resolution Plan.

12. The above clause of the Resolution Plan does substantial justice with

the homebuyers- allottees. After taking aforesaid clauses on the record, we

are of the view that no good grounds have been made out to interfere with the

impugned order approving the Resolution Plan. Subject to above, the Appeal

is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

New Delhi Anjali

Company Appeal (AT) (Insolvency) No. 283 of 2022