In the matter of Sivana Reality Private Limited

For the Respondent: Mr. Amir Arsiwala, Advocate a/w Ms. Nidhi shah and Ms. Nupur Shah (R1)

Per: Kuldip Kumar Kareer, Member (Judicial)

ORDER The present Application is filed by the Applicant, namely, Kashyap Kanaiyalal Mehta HUF, under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“Code”) read with rule 11 of the National Company Law Tribunal Rules, 2016 (“NCLT Rules”) impugning the Resolution Plan filed by Respondent No. 3 as the Applicant has been wrongly classified as an “Affected Party/Home Buyer”, which is being violative of the provisions of the Code and the CIRP Regulations. The Applicant has prayed for the following reliefs: (i) declare that the transaction of the Applicant is prior in time to the loan availed by the Corporate Debtor from LICHFL and therefore there is no requirement of NOC from LICHFL.

(ii) declare as arbitrary and discriminatory those portions of the impugned resolution plan which classifies the financial creditors in a class of Homebuyers into 'affected' and 'unaffected' allottees.

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I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 (iii) direct that provisions have to be made in the resolution plan for 'affected' allottees similar to the provisions made in the resolution plan for unaffected allottees.

(iv) direct that the resolution plan should be made fair and equitable towards the various stakeholders. Reject the resolution plan of Respondent No. 5 in entirety in the present form and direct the parties involved to consider and put for approval a resolution plan consistent with the provisions of the Code.

Facts of the Case:-

1. The Applicant submits that he entered into agreement dated 29/05/2017 to purchase Flat D-401 from the Corporate Debtor. The purchase of Flat No D-401 from the Corporate Debtor is prior in date to LICHFL coming on the scene as a lender to the Corporate Debtor. Subsequently the Applicant got flat No D-401 replaced with flat No D- 1403 by the Corporate Debtor and paid the substantial difference of Rs 55,25,000/- as demanded by the Corporate Debtor. The allotment of Flat D-1403 owes its genesis to the original transaction, i.e., letter of reservation dated 29/05/2017, which was entered much prior to the sanctioning of loan from LICHFL. The transaction between the Corporate Debtor and LICHFL is subsequent to the allotment of flat in the name of the Applicant.

2. The transaction of the Applicant for Flat No D-1403 predates the loan taken by the Corporate Debtor from LICHFL. Therefore, there was no question of any NOC. from LICHFL in respect of Flat no 1403. The Respondent No 3 could not have classified the Applicant as an Affected Party" which has not obtained a NOC form LICHFL.

3. While appraising the loan proposal of the Corporate Debtor, LICHFL must have as part of a mandatory procedure obtained from the Corporate Debtor a list of flats sold/earmarked as on the date of such Page 3 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 appraisal. It is pertinent to note that the Corporate Debtor received Rs. 28.58 Lakhs as an advance towards Flat D-401 on 29/05/2017 and 30/07/2017. This means that while sanctioning the loan to the Corporate Debtor, LICHFL was in the know that flat no. D-401 has been sold to and reserved for the Applicant.

4. The purpose of seeking NOC from the lender is just to ensure that any proceeds from sale of such property be first utilized to settle the loan advanced by the lender. The Applicant submits that by virtue of allotment letter, dated 29/05/17 for Flat No D-401 and the Allotment Letter dated 30.07.2018 for Flat No D-1403 lieu of Flat D-401 the Applicant has a vested right interest in Flat D-1403. The vested right of the Applicant is substantive in nature that cannot be taken away by a procedural requirement of obtaining NOC of LICHFL which, in fact, was not required to be taken in the case of the Applicant.

5. The impugned resolution plan considers financial creditors in a class who do not have NOC from LICHFL as 'affected' allottees and financial creditors in a class who have NOC from LICHFL as 'non-affected/unaffected' allottees and goes further to discriminate in providing for the two classes of financial creditors in a class. Such discrimination is not in keeping with the judgment passed by the Hon'ble Appellate Tribunal in the matter of Rajputana Properties Pvt. Ltd. versus Ultratech Cements Ltd. and Ors. (Company Appeal AT INS No. 188 of 2018) wherein it is held that resolution plan that discriminates some of the financial creditors who are equally situated and does not balance the other stakeholders is discriminatory and is liable to be rejected. It is clear that the two categories of financial creditors in a class, i.e., affected parties and unaffected parties, have been treated differently in the approved resolution plan as it offers substantially reduced area to the affected allottees and full area to the unaffected allottees and such discrimination cannot be permitted.

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I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 6. The Applicant has acquired the status of an Allottee as defined as per sec 2(d) of The Real Estate (Regulation and Development) Act, 2016 (herein after referred to as RERA) and all the requirements of RERA have been complied with by the Applicant. The allottee has protection of RERA.

7. The Applicant submits that the Applicant has vested rights in flat NO 1403 vide letter of allotment issued in favour of the Applicant against which full consideration has been paid by the Applicant to the Corporate Debtor. It is beyond the scope of any resolution plan to provide for taking away such vested rights in the property of the Applicant. As per Article 300A of the Constitution of India, no person shall be deprived of its property save by authority of law. The impugned resolution plan as proposed in compliance with the provisions of the Code cannot be in derogation do the provisions of Article 14 of the Constitution of India which promises equality to all.

8. The Respondent No. 5 does not have the authority to re-determine/re-classify, in the resolution plan, the claim of the Applicant which is already accepted by the IRP/RP and informed to the Respondent No. 5 vide Information Memorandum provided by Respondent No.1. The Respondent No. 5 has sought to re-determine/re-classify the claim of the Applicant which cannot be permitted.

9. The Applicant submits that LICHFL has preferred I.A. No 41241 of 2021 assailing the admission of claims of RA Homebuyers without NOC of LICHFL, including that of the Applicant, which is currently sub-judice and therefore, the illegal classification of the Applicant as an affected Homebuyer by Respondent No. 3 is bad in law and is not required.

10. The Applicant submits that a secured creditor such as financial institutions/banks, like LICHFL, cannot be provided with the asset, i.e., the flats, by preference over the allottees who have paid full value of the flats to the Corporate Debtor. The Homebuyers who have filed their Page 5 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 claims to get their flats, including the Applicant, can only be offered their flats in question and nothing else.

11. The Applicant submits that the CoC, while exercising its commercial wisdom to approve a resolution plan, cannot approve a resolution plan which is not in conformity with the provisions of the Code. The commercial wisdom of the COC in regard to the viability and feasibility of resolution plan which lacks fairness of distribution amongst similarly situated creditors calls for interference where creditors belonging to a class being similarly situated are denied fair and equitable treatment.

12. The Applicant submits that the Hon'ble Tribunal, while looking into the feasibility and viability of a resolution plan approved by the COC, can always go into the question of whether similarly situated creditors are given the same treatment in the resolution plan. The Applicant submits that the impugned resolution plan does not confirm to the test of section 30 (2) of the Code and is discriminatory against similarly situated creditors being creditors belonging to the class of Homebuyers.

13. The Applicant states that it has a strong case in its favor against the Respondents and the balance of conveniences overwhelmingly is in favor of the Applicant as against the Respondents.

14. The Applicant states that if the reliefs as claimed in this Application are not granted, grave and irreparable prejudice and harm will be caused to the Applicant. In case the reliefs as prayed are granted no harm and prejudice would be caused to the Respondents.

REPLY FILED BY THE RESPONDENT

15. The Applicant is seeking a declaration from this Hon’ble Tribunal that it is not an “affected allottee” as the transaction between itself and the Corporate Debtor pre-dated the loan agreement between the Corporate Page 6 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 Debtor and the secured financial creditor. In this regard, it is submitted that a perusal of the present Application itself shows that ths allegation cannot be sustained. While it is true that the original transaction between the Applicant and the Corporate Debtor was prior to the loan agreement with LICHFL, it is an admitted position that the transaction/ allotment was cancelled/ novated. The Applicant cancelled that allotment in the year 2018 (i.e., after the loan agreement with LICHFL) and sought allotment of a different unit. At the time D-403 was allotted to the Applicant, a NOC from LICHFL became a necessity under the terms of the agreement between it and the Corporate Debtor. Thus, there is not merit to this submission. Even otherwise, it is ultimately its responsibility to collate and verify claims received by him. The claims received, verified, and collated by him are independent of the issue of whether or not a claimant is in possession of a NOC from LICHFL. The issue of whether or not a claimant has an NOC from LICHFL is not related to the claims and is, therefore, not an aspect of the matter which is subject to judicial review. The different treatment of allottees as “affected allottees” and “unaffected allottees” is a commercial decision taken by the Resolution applicant which has been approved by the CoC in its commercial wisdom. Being a commercial aspect, is not open to judicial review.

16. Additionally, the amounts which were to be realized from the sale of Flat No. D-1403, were to be routed through the escrow account by the Corporate Debtor, at the instructions of LICHFL. However, the entire consideration amount of Rs. 2,07,48,000/- received on the sale of Flat No. D-1403 by the Corporate Debtor were immediately transferred to another group entity namely, Mayurpankh Properties Pvt Ltd, a group company of Appliant. Moreover, an additional amount of approximately Rs. 36 crores, inclusive of the consideration amount of Rs. 2,07,48,000/- was also transferred to Mayurpankh Properties Pvt Ltd. In this regard, an interlocutory Application No. 91 of 2021, has been filed and is pending adjudication before this Hon’ble Tribunal. Page 7 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 17. Furthermore, the Applicant through its Karta, who was in management and control of the Corporate Debtor, is well aware of the units which he has mortgaged with LICHFL and even the mortgage document has been signed by Mr. Kashyap Mehta and therefore, he cannot feign ignorance that he was not aware that D-1403 flat was not mortgaged with LICHFL.

18. Thus, the Applicant, through the present application, is also seeking to impugn the Resolution Plan approved by the Committee of Creditors at its 18th Meeting, which was approved by 99/96% voting share. The Applicant is assailing the Resolution Plan on multiple grounds.

19. The only noteworthy resolution passed at the 10th meeting of the COC (which appears to be the source of concern for the Applicant) was condoning the delay in filing Expression of Interest by one of the resolution applicants.

20. However, this objection must be treated to be purely academic, as the COC subsequently decided to call for fresh Expressions of Interest by publication of a fresh Form G. This decision was taken at the 13th meeting of the COC. Therefore, the resolutions passed at the 10 meeting of the COC had no bearing on the CIRP of the Corporate Debtor.

21. The Applicant contends that the approved Resolution Plan contemplates a sub-classification between the homebuyers which is not in accordance with law. Under the terms of the approved Resolution Plan, the allottees are divided into two categories: "affected allottees" and "unaffected allottees". The treatment to "affected allottees" and "unaffected allottees" is different under the terms of the approved Resolution Plan.

22. At the very outset, it is important to note that the homebuyers have overwhelmingly voted in favour of the Resolution Plan. In fact, only for the sake of clarity. He has also calculated the voting percentage amongst the "affected allottees" and the "unaffected allottees" Page 8 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 individually as if they are separate classes even though, they are not separate classes of creditors. Even taken separately, the majority of "affected allottees" and "unaffected allottees" have approved the Resolution Plan in accordance with law.

23. It is submitted that no legal distinction has been made between the "affected allottees" and "unaffected allottees". Allottees in either category are financial creditors belonging to the same class having all rights afforded to them under law. There has been no discrimination between members of the class of creditors being allottees. However, in order to make the Resolution Plan viable and feasible, there is different treatment to the "affected allottees" and the "unaffected allottees".

24. It is submitted that the law is very clear that a Resolution Plan is a commercial document which is to be approved by the COC in their commercial wisdom. A Resolution Plan is not meant to be "equitable" but is meant to be a workable and viable solution to rescue a failing company from liquidation. It is now settled law that a resolution applicant may seek to provide differential treatment to members of the same category of creditors, if it is necessary in order to make the Resolution Plan viable and feasible.

25. The determination of whether the treatment of creditors is viable and feasible is the sole prerogative of the COC and is not subject to judicial review. The Resolution Applicant has proposed treatment of creditors to be in a certain manner and the COC has approved that scheme in its commercial wisdom. Therefore, there is no scope of judicial review in this regard. Therefore, the challenge to the approved Resolution Plan made by the Applicant on this ground cannot be sustained.

26. It is submitted that the fundamental nature of a resolution plan is to novate the terms of the agreements between the Corporate Debtor and its stakeholders. It is for this reason that section 31 of the IBC makes a resolution plan binding upon the stakeholders narrated therein. If a Page 9 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 Resolution Applicant would be compulsorily bound by the terms of all arrangements / agreements between the Corporate Debtor and third parties, then it would never be able to come up with a viable or feasible resolution plan. This is because the existing arrangements entered into by the Corporate Debtor being unviable would have been the reason behind its insolvency in the first place. C. It is also submitted that the Hon'ble Supreme Court of India has held that the provisions of the IBC prevail over the provisions of the Real Estate (Regulation and Development) Act, 2016. On this count also, the objections taken by the Applicant cannot be sustained.

27. It is submitted that the purpose of section 31 of the IBC would be defeated if objections of this nature are sustained. The concept of a resolution plan is to the restructure / novate / alter the rights and liabilities of the stakeholders of the Corporate Debtor.

28. In the end, a prayer for dismissal of the application has been made.

FINDINGS: -

29. We have heard the Counsel for the Parties and have gone through the record.

30. The above IA 370 of 2022 has been filed by the Applicant i.e. Kashyap Kanaiyalal Mehta, HUF through its karta namely Kashyap K. Mehta. The Applicant is stated to be falling the under the class of Home Buyers/Allottee of the Corporate Debtor. The Applicant agreed to buy a residential flat bearing No. 401 on 4th Floor in Wing-D of Phase-1 from the Corporate Debtor for an agreed sale consideration of Rs. 1.30 Crores. A Reservation Letter dated 29.05.2017 was issued to the Applicant. Later on, the Applicant requested for re-allotment of a Flat on a higher floor and the Corporate Debtor vide letter dated 15.07.2018 offered Flat No. 1403 for a total consideration of Rs. 1,85,25,000/-. The entire payment was made by the Applicant. Since no NOC in respect of Page 10 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 the flat had been obtained by the Corporate Debtor from LICHFL, the Applicant has been kept in the category of Affected Buyers. Accordingly, the Resolution Plan has been impugned by the Applicant on the ground that it wrongly and illegally reduces the area allotted to the affected home buyers who do not have NOC from LICHFL and the Applicant is being offered an area of 442 sq. ft. as against its entitlement of 836 sq. ft.

31. Now the question arises as to whether or not a Home Buyer individually oppose/object to the Resolution Plan when the Home Buyers as a class have voted by a majority in favour of the Plan.

32. The answer to the aforesaid question can be found in Jaypee Kensington Boulevard Apartments Vs. NBCC (India) Limited and others (2022) 1 SCC 401, wherein the Hon’ble Supreme Court has categorically held as follows:

(i) “Every individual allottee does not become an independent financial creditor of the corporate debtor if the number of allottees are 10 or more, in terms of the meaning assigned to the expression "class of creditors" in the CIRP Regulations 130. (The allottees, like the homebuyers of JIL, falling within clause (f) of sub-section (8) of Section 5, do carry the status of financial creditors but they would be falling in a class collectively; and the voting share of that class would be in terms of the financial debt owed to that class as a whole.

(ii) Specific provisions have been made for voting on behalf of a class of creditors in terms of clause (b) of sub-section (6-A) of Section 21 by the authorised representative. The rights and duties of the authorised representative of financial creditors are also delineated in Section 25-A of the Code and any doubt, as to how he would vote and how his vote is counted, is put to rest by insertion of sub-section (3-A) to Section 25-A. which provides that notwithstanding Page 11 | 14

I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 anything to the contrary contained in sub-section (3), the AR 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".

(iii) It is made explicit 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.

(iv) 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 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.

(v) There is no scope for any homebuyer suggesting himself to be a dissenting financial creditor merely because he was not with majority within the class. His dissatisfaction does not partake the legal character of a dissenting financial creditor.

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I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 (vi) The suggestion about the so-called statutory right of appeal has only been noted to be rejected. The homebuyers as a class shall be deemed to have voted in favour of approval of the resolution plan of NBCC; and once having voted so, any particular constituent of that class cannot be heard in opposition to the plan by way of objection or appeal. The statute, that is IBC, has itself provided for estoppel against any such attempted opposition to the plan by a constituent of the class that had voted in favour of approval.

(vii) To sum up this part of discussion, in our view, after approval of the resolution plan of NBCC by CoC, where homebuyers as a class assented to the plan, any individual homebuyer or association cannot maintain any challenge to the resolution plan nor could be treated as carrying any legal grievance.”

33. In the light of what has been held by the Hon’ble Supreme Court in the afore-cited judgment it becomes abundantly clear that Home Buyers can vote for or against the Plan only as a class and if there are some Home Buyers pitted against the Resolution Plan, who are otherwise in minority, have absolutely no locus to oppose the Plan in the capacity of dissatisfied Home Buyers. It is also abundantly clear that such dissenting minority segment within the class of Home Buyers cannot arrogate themselves to be dissenting Financial Creditors. That being the legal position, which is explained in unequivocal terms by the Hon’ble Supreme Court in Jaypee Kensingtons case (supra), in our considered view, any objections raised by the so-called minority Home Buyers including the Applicant raising objection against the Plan, which have been approved by them as a class, cannot be entertained and are liable to be rejected at the very threshold without going through the merit of such objections. Therefore, the objections raised in the IA are liable to be dismissed as the Applicant has no locus to maintain any such objections against the Resolution Plan.

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I.A. 370 OF 2022 IN C.P.(IB) No. 3169/MB/2019 34. As a result of the above discussions, the above IA No. 370 of 2022 is hereby summarily dismissed.

Sd/- Sd/- ANURADHA SANJAY BHATIA KULDIP KUMAR KAREER MEMBER (TECHNICAL) MEMBER (JUDICIAL)

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