Jaypee Greens Krescent Home Buyers ... vs Jaypee Infratech Ltd. Through Anuj ...

[arising out of Order dated 6th May, 2019 by National Company Law Tribunal, Allahabad Bench in C.A. No. 115 of 2019 in CP(IB) No. 77/ALD/2017]

IN THE MATTER OF:

IDBI Bank Ltd., ....Appellant Vs. Mr. Anuj Jain Interim Resolution Professional, Jaypee Infratech Ltd. & Anr. ....Respondents

With Company Appeal (AT) (Ins) No. 708 of 2019 IN THE MATTER OF:

Jaypee Greens Krescent Home Buyers Welfare Association & Ors. ....Appellants Vs. Jaypee Infratech Ltd. Through Mr. Anuj Jain, Interim Resolution Professional ...Respondent Present:

Mr. Ramji Srinivasan, Sr. Advocate with Mr. Bishwajit Dubey, Mr. Uday Khare, Mr. Aditya Marwah, Ms. Sylona, Ms. Surabhi Khattar, Mr. Aditya Marwah, Ms. Visalakshmi, Mr. R.K. Sinha and Mr. Nikhil, Advocates for IDBI Bank & Secured Financial Creditors

Mr. L.K. Bhushan, Advocate for Fixed Deposit Holder Mr. Mahesh Agarwal and Mr. Rajeev Kumar, Advocates for Adani Infra (I) Ltd.

Mr. Sumant Batra, Ms. Niharika Sharma, Ms. Jannhvi Bhasin and Mr. Sanjay Bhatt, Advocates for Resolution Professional 2

Mr. Mohit Singh and Ms. Mitakshara Goyal, Advocates for Jaypee Green Krescent 'Home Buyers Welfare Association'.

Mr. Ronvijay Gohain, Advocate for NBCC India Ltd.

Mr. M.L. Lahoty, Mr. Amit K. Mishra, Mr. Shivam Pandey and Mr. Anchit Sripat, Advocates for Home Buyer

Mr. Hemant Kumar Singh, Advocate for Home Buyer

Mr. Anupam Lal Das, Sr. Advocate with Mr. Vishal Gupta, Mr. Sumeet Sharma and Mr. Divyanshu Gupta, Advocates for Jaiprakash Associates Ltd.

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

As both the appeals relate to 'Corporate Insolvency Resolution Process'

against 'Jaypee Infratech Limited' (Corporate Debtor) they were heard together

and disposed of by this common order.

2. The relevant facts of the case are as follows.

The 'Corporate Insolvency Resolution Process' was initiated against

'Jaypee Infratech Limited' pursuant to an application under Section 7 of the

'Insolvency and Bankruptcy Code, 2016 (for short, 'the I&B Code') filed by the

'IDBI Bank Limited' which was admitted with respect to same 'Corporate

Debtor'. One 'Chitra Sharma' moved before the Hon'ble Supreme Court, in

'Chita Sharma Vs. Union of India' wherein the Hon'ble Supreme Court by

its judgement reported in '2018 SCC OnLine SC 874' (decided on 9th August,

2018) passed the following order and directions "

"55. We, accordingly, issue the following directions:

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 3

(i) In exercise of the power vested in this Court

under Article 142 of the Constitution, we direct

that the initial period of 180 days for the

conclusion of the CIRP in respect of JIL shall

commence from the date of this order. If it

becomes necessary to apply for a further

extension of 90 days, we permit the NCLT to

pass appropriate orders in accordance with the

provisions of the IBC;

(ii) We direct that a CoC shall be constituted

afresh in accordance with the provisions of the

Insolvency and Bankruptcy (Amendment)

Ordinance, 2018, more particularly the

amended definition of the expression "financial

creditors";

(iii) We permit the IRP to invite fresh expressions of

interest for the submission of resolution plans

by applicants, in addition to the three short-

listed bidders whose bids or, as the case may

be, revised bids may also be considered;

(iv) JIL/JAL and their promoters shall be ineligible

to participate in the CIRP by virtue of the

provisions of Section 29A;

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 4

(v) RBI is allowed, in terms of its application to this

Court to direct the banks to initiate corporate

insolvency resolution proceedings against JAL

under the IBC;

(vi) The amount of Rs. 750 crores which has been

deposited in this Court by JAL/JIL shall

together with the interest accrued thereon be

transferred to the NCLT and continue to remain

invested and shall abide by such directions as

may be issued by the NCLT."

3. After the decision of the Hon'ble supreme Court, during the 'Corporate

Insolvency Resolution Process', the 'Home Buyers Association' preferred an

application before the Adjudicating Authority (National Company Law

Tribunal), Allahabad Bench on 17th September, 2018 seeking clarification as

to what will be the manner in which the voting percentage of allottees

(Financial Creditors) has to be calculated.

4. On 13th December, 2018 the Hon'ble Members of Adjudicating Authority

(National Company Law Tribunal), Allahabad Division Bench expressed

difference of opinion, as under :

Question of law raised in the order of NCLT, Allahabad Division Bench :

i. The question of law that has been raised in

both applications, one by Nine Home Buyers

Association and other by eight Financial

Creditors, all of them being the members of the

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 5

Committee of Creditors (CoC) is whether the

various threshold voting share fixed for the

decision of the CoC under various sections of

the I & B Code needs to be followed literally or

whether they are directory, and if so, what

procedure has to be followed in determining the

voting percentage among the CoC to pass a

particular resolution.

Decision of Hon'ble Member (Judicial)

ii. Therefore, in order to advance the object

of I& B Code and the Amendment Act 2

of 2018 and with a view to safeguard the

interests of all classes of creditors and all

stakeholders, I am of the considered

view, "That in case where the CoC

comprise Real Estate Class of creditors

upto 50% of voting share or more than

when there is a dead lock in passing the

resolutions, the highest number of voting

share in favour of the resolution has to

be taken into consideration without

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 6

looking into the threshold limit provided

under various provisions of the I&B

Code, except for the purpose of

withdrawal of the petition, the approval

of the resolution plan, and liquidation i.e

under Section 12A, 30(4) and 33(2)

respectively, so that CIRP would

continue for the time being in the

meanwhile the Central Government may

bring amendment to the relevant

provisions of the I&B Code and CIRP

regulations prescribing the procedure to

be followed in determining the voting

share for passing various resolutions

where CoC comprise of Real Estate Class

of Creditors 50% or more and when there

is dead lock in passing the resolutions,

or else the CIRP which remained static

continue to be the same not only in this

case, but in the cases of similar nature

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 7

where Real Estate/Home Buyers as a

class that comprise majority percent

voting share abstain from voting."

Decision of Hon'ble Member (Technical)

iii) In the case on hand, even if all Banks and

17% of Home Buyers vote in favour of the

Resolution Plan, it will still not sail through as

it would not receive mandatory voting

percentage of 66%. Therefore, required

important/crucial decisions will still fail u/s

12A, 30(4) and 33(2), bringing CIRP to a halt

at these crucial stages. Therefore, the lasting

solution to the problem of dead lock can only

be found by treating Home Buyers as a class

and their voting pattern taken with reference

to total voting share of the class, to reflect the

will of the class."

5. The matter was referred to the President, National Company Law

Tribunal, Principal Bench, New Delhi to place the matter before the third

Hon'ble Member, who by impugned order dated 24th May, 2019 observed:

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 8

"To sum up based on the above, this

reference Bench of the Tribunal is hence of the

considered view that

i) the Committee of Creditors (COC), taking

into consideration Section 21(2) of IBC,

2016, shall comprise of all financial

creditors and must be construed as one

and cannot be segmented class wise

particularly for the purpose of computation

of voting share;

ii) The voting share as are prescribed and

required to be achieved under the respective

provisions of IBC, 2016 are mandatory in

nature and cannot be held to be directory;

iii) For the computation of voting share required

to be achieved as prescribed in IBC, 2016,

class wise voting of financial creditors, be it

home buyers or lenders or otherwise and to

treat the majority vote of that particular class

in relation to a resolution, particularly by

adding the voting share of those financial

creditors who had abstained, as the will and

vote of the entire class in the COC cannot be

accepted;"

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 9

6. The aforesaid order dated 24th May, 2019 is under challenge in

'Company Appeal (AT )(Insolvency) No. 708 of 2019' preferred by 'Jaypee

Green Krescent House Buyers Welfare Associations & Ors.'

7. In the meantime, the 'Resolution Professional, filed an application in

'C.A. No. 115 of 2019' in 'CP No. (I&B) 77/ALD/ 2017' for seeking exclusion of

the period of pendency of the application for clarification for counting the total

period of 270 days of 'Corporate Insolvency Resolution Process', i.e. the period

during which the matter remained pending for adjudication as to how voting

share of the Allottees (Financial Creditors) will be counted.

8. The Adjudicating Authority (National Company Law Tribunal)

Allahabad Bench by impugned order dated 6th May, 2019 asked the

authorised representative of the Allottees and other learned counsel

appearing on behalf of the Allottees to file respective replies with the following

observation :

"It is further brought to our notice that

the third Member of Single Bench of the NCLT

is considering the issue of the voting

threshold of Financial Creditors including

(Home Buyers) which is still sub-judice

before it and has not yet been decided.

Therefore, we feel appropriate that it is need

of the hour that COC and RP must be allowed

to proceed further with the CIRP process in

accordance with law for considering the

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 10

Resolution Plan under consideration in

respect of Corporate Debtor Company,

which, however, shall be subject to outcome

of pending IA.

List the matter on 21st May, 2019."

9. The aforesaid order dated 6th May, 2019 has been challenged before

this Appellate Tribunal by the 'IDBI Bank Limited' in 'Company Appeal

(AT)(Insolvency) No. 536 of 2019'.

10. When the matter was taken up, learned counsel appearing on behalf of

all the parties requested to exclude the period during which the matter

remained pending before the Adjudicating Authority to decide the manner in

which the voting share of the Allottees will be counted so as to enable a

successful 'Corporate Insolvency Resolution Process' in the interest of

Allottees.

11. Having noticed that the 'Committee of Creditors' were considering the

'Resolution Plan' of 'NBCC' and voting was in process, by order dated 17th May,

2019 this Appellate Tribunal while observed that the part of voting as already

taken place is annulled, allowed the 'Committee of Creditors' to first

renegotiate the matter with the NBCC by 30th May, 2019 and thereafter to start

voting of members of 'Committee of Creditors' from 31st May, 2019 onwards.

Liberty was given to the 'Committee of Creditors' to approve the plan if it is in

accordance with law. However, subsequently it was informed that the

'Committee of Creditors' by majority voting share refused to accept the plan

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 11

but have not passed any order of rejection because of pendency of these

appeals.

12. This Appellate Tribunal, taking into consideration that the business of

the 'Corporate Debtor' is 'real estate business' primarily for construction of

building for the Allottees, for keeping the company as a going concern and

maximization of the assets, observed that the 'Corporate Insolvency Resolution

Process' in the case of 'real estate business', which is meant for Allottees

should be looked into from different angle than the 'Corporate Insolvency

Resolution Process' against other 'Corporate Debtors'. It was observed that

the maximization of the assets was to be of the Allottees and other financial

creditors.

13. In connected case - 'Company Appeal (AT)(Insolvency) No. 708 of 2019'

this Appellate Tribunal on 12th July, 2019 observed that projects are

temporary in nature as the asset of the 'Corporate Debtor' i.e. infrastructure

stands transferred after sale/ allotment to the Allottees. It was also observed

that phrase of "hair-cut" as normally used by the learned counsel cannot

apply to Allottees for getting their flats and shops.

14. In such peculiar circumstances, this Appellate Tribunal observed that

the 'Committee of Creditors' while considering the viability and feasibility of

the 'resolution plan' may not reject plans only on the ground of insufficient

upfront payment, if the plan is otherwise viable and feasible and in the interest

of the Allottees. However, the issue has been left open for decision in an

appropriate case, as the only argument is advanced with prayers to exclude

the period aforesaid.

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 12

15. All the parties, including the 8 Associations of Allottees having more

than 5000 Members, 'Resolution Professional', members of the 'Committee of

Creditors' requested to exclude the period, when the matter remained pending

for decision before the Adjudicating Authority to decide the question as to how

the voting share of the Allottees will be counted.

16. One individual buyer - 'Mr. Hemant Kr. Singh, who claimed to be an

authorised representative appeared in person without any petition and raised

various allegations relating to default by the 'Interim Resolution Professional',

'Committee of Creditors' etc. but he has not given any substantive suggestion.

17. Mr. Anupam Lal Das, learned Senior Advocate appeared and submitted

that he intends to appear on behalf of 'Jaiprakash Associates Ltd.' who is not

a party to any of the appeal nor filed an application for intervention nor shown

as to how 'Jaiprakash Associates Limited' can raise any issue. A written

submissions has been filed by the counsel objecting to the prayer for exclusion

of period, which shows that 'Jaiprakash Associates Limited' wants

'Liquidation' of 'Corporate Debtor' to derive advantage during the 'liquidation

process'.

18. Learned counsel for the Appellants submitted that the 'Jaiprakash

Associates Limited' is a related party and is ineligible under Section 29A of the

I&B Code. We find that the Hon'ble Supreme Court in 'Chitra Sharma' (Supra)

allowed RBI to ask for insolvency resolution proceeding against 'Jaiprakash

Associate Limited'. Therefore, we are not dealing with their submission.

19. The only question arises for consideration in these appeals is whether

in the facts and circumstances of the case and the interest of the Allottees,

which is of primary importance in this 'Corporate Insolvency Resolution

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 13

Process', the 'Jaypee Infratech Ltd.' (Corporate Debtor) should be allowed to

go for 'Liquidation' on the ground that 270 days has expired on 6th May, 2019

or the period from '17th September, 2018 to 4th June, 2019' during which the

matter remained pending for consideration before the Adjudicating Authority

relating to voting share of the Allottees should be excluded for the purpose of

counting 270 days in the light of the decision "Quinn Logistics India Pvt. Ltd.

vs. Mack Soft Tech Pvt. Ltd. & Ors." - 'Company Appeal (AT)(Insolvency) No. 185

of 2018' wherein this Appellate Tribunal observed:

"9. From the decisions aforesaid, it is clear that if

an application is filed by the 'Resolution

Professional' or the 'Committee of Creditors' or 'any

aggrieved person' for justified reasons, it is always

open to the Adjudicating Authority/Appellate

Tribunal to 'exclude certain period' for the purpose

of counting the total period of 270 days, if the facts

and circumstances justify exclusion, in unforeseen

circumstances.

10. For example, for following good grounds and

unforeseen circumstances, the intervening period

can be excluded for counting of the total period of

270 days of resolution process:-

(i) If the corporate insolvency resolution process

is stayed by 'a court of law or the

Adjudicating Authority or the Appellate

Tribunal or the Hon'ble Supreme Court.

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 14

(ii) If no 'Resolution Professional' is functioning

for one or other reason during the corporate

insolvency resolution process, such as

removal.

(iii) The period between the date of order of

admission/moratorium is passed and the

actual date on which the 'Resolution

Professional' takes charge for completing the

corporate insolvency resolution process.

(iv) On hearing a case, if order is reserved by the

Adjudicating Authority or the Appellate

Tribunal or the Hon'ble Supreme Court and

finally pass order enabling the 'Resolution

Professional' to complete the corporate

insolvency resolution process.

(v) If the corporate insolvency resolution process

is set aside by the Appellate Tribunal or order

of the Appellate Tribunal is reversed by the

Hon'ble Supreme Court and corporate

insolvency resolution process is restored.

(vi) Any other circumstances which justifies

exclusion of certain period.

However, after exclusion of the period, if

further period is allowed the total number of

days cannot exceed 270 days which is the

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 15

maximum time limit prescribed under the

Code."

20. Admittedly, no regulation was framed under the 'Insolvency and

Bankruptcy Code' as to how the voting share of thousands of Allottees will be

counted, all of whom come within the meaning of 'Financial Creditors' and

thereby are members of the 'Committee of Creditors'. It was in this

background the Allottees Association preferred the application before the

Adjudicating Authority (National Company Law Tribunal), Allahabad Bench

on 17th September, 2018 to decide such issue. The two Hon'ble Members of

NCLT differed on the principle on 13th December, 2018 as noticed above and

referred the matter to the Principal Bench for placing the matter before Third

Hon'ble Member who has delivered its decision by the order dated 24th May,

2019. In the meantime, 270 days lapsed, if counted from the date the

proceeding was remitted by the Hon'ble Supreme Court, i.e. 6th May, 2019.

21. This is an extra-ordinary situation when the law was silent and there

was no guideline, which caused difference of opinion between the two Hon'ble

Members and finally decided by the Third Hon'ble Member. In 'Quinn

Logistics India P. Ltd. Vs. Macksoft Tech P. Ltd.' taking into consideration

different situations including extra ordinary situation, this Appellate Tribunal

held that certain period can be excluded while counting the total period of

270 days. The aforesaid principle has also been followed by the Hon'ble

Supreme Court in the Case of 'Arcelormittal India Private Limited vs.

Satish Kumar Gupta & Ors.' - (2019) 2 SCC 1 as also in the case of 'Chitra

Sharma'(Supra).

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 16

22. In view of aforesaid extra ordinary situation, we are of the view that the

period from 17th September, 2018 i.e the date of application filed by the

Association of the allottees for clarification for the order and till the final

decision i.e. 4th June, 2019 i.e. the date the matter was finally decided by the

Third Hon'ble Member (Total 260 days), can be excluded for the purpose of

counting the 270 days. However, as the matter is pending since long, we are

not inclined to exclude the total period of 260 days and instead in the interest

of the Allottees, we exclude 90 days for the purpose of counting the period of

270 days of 'Corporate Insolvency Resolution Process', which should be

counted from the date of receipt of the copy of this order.

23. The aforesaid period is excluded to enable the 'Resolution

Professional'/'Committee of Creditors' to call for fresh 'resolution plans' and

to consider them, if so required after negotiations pass appropriate order

under sub-section (5) of Section 30 of the I&B Code preferably within a period

of 45 days. Rest of the period of 45 days margin is given to remove any

difficulty and appropriate order as may be passed by the Adjudicating

Authority.

The voting share of the allottees should be counted in terms of 'I & B

Code' as existing on the date of voting/'Regulation' and/or in accordance with

majority decision of the Adjudicating Authority.

24. It is made clear that all the earlier 'resolution plan(s)' including the plan

submitted by the 'NBCC', cannot be considered, having been rejected by the

'Committee of Creditors'. However, it will be open to the 'NBCC' to file a fresh

improved 'resolution plan. It is informed that 'Adani Infra (I) Ltd.' also

proposed to file 'resolution plan' but we are not expressing any opinion with

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019 17

regard to the same. We have given opportunity to all the eligible persons to

file 'expression of interest'/ (improved) 'resolution plan', individually or jointly

or in concert with any person, but those who are ineligible in terms of Section

29A, are barred from filing such plan. No liberty is given to 'Jaiprakash

Associates Ltd.', in view of the aforesaid observation and decision of Hon'ble

Supreme Court in 'Chitra Sharma' (Supra)

25. In view of the aforesaid observations, we are not inclined to interfere

with the impugned order dated 26th May, 2019. Order of exclusion having

already passed by this Appellate Tribunal, C.A. No. 115 of 2019 in C.P. No.

(IB) 77/ALD/2017 preferred by the 'Resolution Professional' and the order

dated 6th May, 2019 as impugned in 'Company Petition (AT) (Insolvency) No.

536 of 2019' are declared infructuous.

Both the appeals stand disposed of with aforesaid observations and

directions.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

New Delhi

30th July, 2019

/ns/

Company Appeal (AT) (Ins) No. 536 of 2019 & I.A. No. 1857 of 2019 & Company Appeal (AT)(Insolvency) No. 708 of 2019