Jaypee Kensington Boulevard Apartments Welfare Association & Ors vs NBCC (INDIA) Ltd. & Ors

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3395 OF 2020

JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE ASSOCIATION & ORS. ……. APPELLANT(S)

VERSUS

NBCC (INDIA) LTD. & ORS. ……. RESPONDENT(S)

WITH

CIVIL APPEAL No.3396 of 2020, T.C (C) Nos. 234, 235, 236, 237, 238, 239, 240, 241, 242, 243 of 2020, Civil Appeal No. 1056 of 2021 @ SLP(C) No. 5144 of 2021@ Diary No. 18129 of 2020, Civil Appeal No. 1057 of 2021 @ SLP(C) No. 10543 of 2020 and Diary No. 20274 of 2020 JUDGMENT

Dinesh Maheshwari, J.

Introductory

Permission to file special leave petition(s) and leave granted in

respective Petition(s) for Special Leave to Appeal.

2. This batch of civil appeals, special appeals and transfer cases

essentially relate to the resolution plan1 in the corporate insolvency Signature Not Verified

resolution process2 under the Insolvency and Bankruptcy Code, 20163 Digitally signed by DEEPAK SINGH Date: 2021.03.24 12:38:36 IST Reason:

1 Hereinafter, at some places, it has also been referred to as ‘the plan’. 2 ‘CIRP’ for short.

3 Hereinafter also referred to as ‘the Code’ or ‘IBC’.

1 concerning the corporate debtor, Jaypee Infratech Limited4, whose

activities do impact a large number of persons/entities, including the

buyers of flats/apartments5 in its real estate development projects.

2.1. As shall be noticed hereafter, CIRP in relation to the corporate

debtor JIL has been entangled in various disputes in the past and even

when the resolution plan submitted by the resolution applicant, NBCC

(India) Limited6 has been approved by the Committee of Creditors 7 by a

substantial majority of 97.36% of voting share of the financial creditors,

several disputes/objections have come up from various stakeholders and

role players, voicing the concerns of their own, like dissenting financial

creditors, dissatisfied homebuyers, displeased land providing agency,

disillusioned creditor of a wholly-owned subsidiary of the corporate debtor

and disappointed minority shareholders. Apart from all these, the holding

company of the corporate debtor, namely, Jaiprakash Associates Limited 8

and its stakeholders have several questions over the resolution process

in question and are particularly concerned with the sum of INR 750

crores, which was deposited by JAL pursuant to the orders passed by this

Court in the first round of litigation.

3. Looking to a multiload of issues arising from variegated

propositions/objections put forward by different parties, it appears

appropriate to draw a brief outline and sketch of the matter at the outset.

4 Hereinafter also referred to as ‘JIL’.

5 Hereinafter generally referred to as ‘the homebuyers’. 6 Hereinafter also referred to as ‘NBCC’.

7 ‘CoC’ for short.

8 Hereinafter also referred to as ‘JAL’.

2 Brief outline and sketch

4. The cases involved in this batch have got assimilated in this Court

in the following circumstances:

4.1. The corporate insolvency resolution process in relation to the

corporate debtor JIL got initiated on 09.08.2017 when the National

Company Law Tribunal9, Allahabad Bench admitted the petition filed by

one of the financial creditors, IDBI Bank Limited, under Section 7 of the

Code. However, when the Interim Resolution Professional10 invited claims

in this CIRP, the treatment of homebuyers became an issue contentious,

because they were treated only as ‘other creditors’, not at par with

financial and operational creditors.

4.2. The aforesaid position led to the proceedings in this Court, which

were dealt with in a batch of petitions led by Writ Petition (Civil) No. 744

of 2017: Chitra Sharma and Ors. v. Union of India and Ors. 11 wherein,

several orders were passed by this Court from time to time, inter alia, with

directions to JAL, the holding company of JIL, for making deposits in the

Court, particularly looking to the claim of refund being made by some of

the homebuyers. While finally disposing of the matters on 09.08.2018,

this Court took note of several factors, including the nature of projects,

interests of a large number of homebuyers and unanimity amongst all the

concerned that liquidation of the corporate debtor shall not be in the 9 Hereinafter also referred to as ‘the Adjudicating Authority’ or ‘NCLT’. As shall be noticed, the matter before the Allahabad Bench was later on transferred to the New Delhi Bench of the Tribunal. These expressions ‘the Tribunal’ or ‘NCLT’ or ‘the Adjudicating Authority’ refer to the said transferee Bench too, as per the given context. 10 ‘IRP’ for short.

11 Final judgment therein has since been reported as (2018) 18 SCC 575.

3 interest of any stakeholder. This Court also took note of the fact that even

the statutorily extended period for concluding the CIRP was over but,

there had been a relevant supervening event where, by way of an

Amendment Ordinance that came into force on 06.06.2018, the doubts

about the status of homebuyers were removed and they were expressly

recognised as financial creditors. Having regard to the facts and

circumstances, this Court issued a slew of directions for ensuring

complete justice in the cause, while exercising its powers under Article

142 of the Constitution of India, by providing for further extended period

for conclusion of CIRP; for constitution of CoC afresh; and permitting the

IRP to invite fresh expressions of interest for the submission of resolution

plans. This Court also provided that the amount of INR 750 crores, ‘which

has been deposited in this Court by JAL/JIL shall together with the

interest accrued thereon’ be transferred to NCLT, which would abide by

the directions as may be issued by NCLT.

4.3. While the proceedings thus restored by this Court were pending,

further question cropped up as to the manner of reckoning the voting

percentage of homebuyers in CoC. Two members of NCLT differed in

their opinion and the matter was referred to the third member. In the

meantime, IDBI Bank sought exclusion, of the period of pendency of the

application for such clarification as to the voting percentage, from the

period of 270 days for completion of CIRP. While this application was

pending, NCLT called upon the concerned parties to file reply on the

4 necessity to proceed further with the CIRP, for considering the resolution

plan received from the bidder, subject to the outcome of the pending

application. The orders passed by NCLT in relation to these aspects were

challenged before the National Company Law Appellate Tribunal, New

Delhi12. The Appellate Authority, by its judgment dated 30.07.2019,

provided for exclusion of 90 days for the purpose of counting the total

period of 270 days and disposed of the appeals with some more

observations. This gave rise to further appeals in this Court, led by Civil

Appeal No. 8437 of 2019 [@ D No. 27229 of 2019]: Jaiprakash

Associates Limited and Anr. v. IDBI Bank Ltd. and Anr.13, which were

decided on 06.11.2019. Therein, this Court found that delay in completion

of CIRP was attributable to the process of law and neither the

homebuyers nor any other financial creditor was to be blamed for

pendency of the proceedings; and under the plenary powers, this Court

passed yet further orders so as to ensure that an attempt was made for

revival of the corporate debtor by submission of revised resolution plans.

4.4. Running parallel to the proceedings noticed hereinabove, there

had been another set of proceedings involving two issues: one, relating to

an application filed by IRP before the Adjudicating Authority seeking

orders for avoidance of the certain transactions, whereby several parcels

of land were put under mortgage with the lenders of JAL, the holding

company of JIL; and second, involving the claim of two of the lender

12 Hereinafter also referred to as ‘the Appellate Authority’ or ‘NCLAT’. 13 Final judgment therein has since been reported as (2020) 3 SCC 328.

5 banks of JAL to be included in the category of financial creditors of JIL.

These two aspects eventually came up for adjudication of this Court in

another batch of appeals led by Civil Appeal Nos. 8512-8527 of 2019:

Anuj Jain, Interim Resolution Professional for Jaypee Infratech

Limited v. Axis Bank Limited etc. etc., which were decided on

26.02.202014. This Court held that six out of seven transactions in

question were preferential within the meaning of Section 43 of the Code

and the directions by NCLT for avoidance of such transactions were

upheld. On the second issue, this Court held that the applicant banks

were not the financial creditors of the corporate debtor JIL and the

respective orders passed in that regard by NCLT were restored.

4.5. We shall be dilating on the relevant attributes of the aforesaid

previous rounds of litigation at the appropriate stage and juncture

hereafter. Suffice it to notice for the purpose of brief outline that the

resolution plans submitted by two applicants were put to vote of the

Committee of Creditors and finally, the resolution plan submitted by

NBCC (India) Limited was approved by the CoC on 17.12.2019, by a vast

majority of over 97% of voting share of the financial creditors. Thereafter,

on 19.12.2019, the Interim Resolution Professional moved an application

before the National Company Law Tribunal, Allahabad Bench, being C.A.

No. 5 of 2020 in CP (IB) No. 77/ALD/2017, for submission and approval

of the resolution plan in terms of Section 30(6) read with Sections 31 and

14 Final judgment therein has since been reported as Jaypee Infratech Ltd. Interim Resolution Professional v. Axis Bank Ltd. and Ors.: (2020) 8 SCC 401.

6 60(5) of the Code and Regulation 39(4) of the Insolvency and Bankruptcy

Board of India (Insolvency Resolution Process for Corporate Persons)

Regulations, 201615. Later on, the proceedings pending before the

Allahabad Bench of the National Company Law Tribunal were transferred

to its Principal Bench at New Delhi wherein, several

objections/suggestions/propositions were submitted by different

stakeholders, going for or against the resolution plan or even off on a

tangent.

4.6. By its order dated 03.03.2020, the Adjudicating Authority (NCLT),

proceeded to approve the resolution plan with some modifications and

certain directions while accepting some of the objections like those of the

dissenting financial creditor bank and the land providing agency but while

rejecting some other, including those of the holding company of JIL and

while leaving a few propositions open for adjudication in the appropriate

forum16.

4.7. The resolution applicant NBCC preferred an appeal against the

aforesaid order dated 03.03.2020 before the National Company Law

Appellate Tribunal, New Delhi, being Company Appeal (AT) (Insolvency)

No. 465 of 2020 wherein the Appellate Authority, while issuing notice to

the unrepresented parties, made an interim order dated 22.04.2020 that

the approved resolution plan may be implemented subject to the outcome

of appeal but at the same time, also provided that IRP may constitute an

15 Hereinafter also referred to as ‘the CIRP Regulations’. 16 A few typographical errors in this order dated 03.03.2020 were corrected by NCLT by its order dated 17.03.2020.

7 ‘Interim Monitoring Committee’ comprising of the successful resolution

applicant (NBCC) and three major institutional financial creditors, who

were the members of CoC.

4.8. As against the aforesaid order dated 22.04.2020, six associations

of homebuyers in the real estate development projects of the corporate

debtor and a few individual homebuyers approached this Court seeking

permission to maintain their appeals under Section 62 of the Code.

Notices were issued on the prayers so made, returnable on 06.08.2020.

4.9. On 06.08.2020, it was urged before us that several appeals

against the said order dated 03.03.2020 were pending before NCLAT; and

the parties agreed that those appeals may be withdrawn to this Court and

be heard alongwith the aforesaid appeals of the associations and

homebuyers to avoid the likelihood of further delay in the matter.

Acceding to the request, we had withdrawn the mentioned appeals for

analogous hearing with the matters pending before us. By way of interim,

while staying the operation of the impugned order dated 22.04.2020, we

had provided that the IRP shall continue to manage the affairs of the

subject company i.e., JIL. Accordingly, the appeals pending before the

NCLAT, being Company Appeal (AT) (Insolvency) Nos. 486, 488, 475,

478, 480, 489, 506, 547, 544 and 630 of 2020 have been transferred to

this Court and are registered as transferred cases. Further to this, three

more matters have been filed directly in this Court, with the respective

petitioners/appellants having different sets of grievances against the

8 NCLT’s order dated 03.03.2020. A few impleadment/intervention

applications have also been filed in these matters with the applicants

seeking to project their own propositions/viewpoints and/or objections in

relation to the resolution plan in question.

5. It is, therefore, apparent that the resolution plan, as approved by

the CoC on 17.12.2019 and the order dated 03.03.2020, as passed by

the Adjudicating Authority (NCLT) in approval of the resolution plan with

certain directions and modifications, are the pivots of the present litigation

and a subsidiary of these pivots is the interim order dated 22.04.2020, as

passed by NCLAT in the appeal filed by the resolution applicant NBCC,

providing for composition of an ‘Interim Monitoring Committee’ while

implementing the resolution plan.

The parties and their respective roles and interests in the matter

6. For what has been noticed in the outline, and in view of the

adjudication required of various issues raised and different reliefs claimed

in these matters, with several parties carrying different roles and status,

worthwhile it would be to narrate, in brief, the relevant particulars of the

key parties involved, with their feasible classification in terms of their

respective interests.17

6.1. The main parties before us in this batch, in terms of their

respective stands, contentions and viewpoints vis-à-vis the

aforementioned pivots could be broadly divided in two categories. One

17 This introduction of persons/entities is to broadly co-relate the parties with the points to be taken up for determination; and is not intended to be an exhaustive list of the parties involved.

9 category is of the parties who stand for the resolution plan, as approved

by the CoC but who state grievance against a few parts of the aforesaid

orders dated 03.03.2020 and 22.04.2020, insofar as providing for

modification of the resolution plan and modified mechanism for its

implementation. The other category is of the parties who carry grievances

against the resolution plan for one or more of its prescriptions or

omissions; and/or who are dissatisfied with the order dated 03.03.2020

insofar as their objections have either been rejected or not taken into

account; and/or who are dissatisfied with the order dated 22.04.2020 for

the reasons different than those of the parties of first part.

The parties standing for the resolution plan

7. The two entities who need not, as such, be aligned with any of the

other contesting parties but for practical purposes, stand for the resolution

plan as approved by CoC are: (i) the corporate debtor company in whose

relation the resolution plan has been adopted and approved; and (ii) the

Interim Resolution Professional. They may be introduced as under:

7.1. Jaypee Infratech Limited (JIL):

It is the corporate debtor company in whose relation CIRP has

been taken up and the resolution plan has been made and approved.

This company was essentially set up as a special purpose vehicle18 after

its holding company Jaiprakash Associates Limited (JAL) was awarded

the rights for construction of an Expressway from Noida to Agra; and a

18 ‘SPV’ for short.

10 Concession Agreement19 was entered into with the Yamuna Expressway

Industrial Development Authority20. With setting up of this company JIL,

apart from other projects, housing plans were envisaged for construction

of real estate projects in two locations of the land acquired, one in Wish

Town, Noida and another in Mirzapur. A substantial mass of disputes in

the present matters has its roots in the dealings of this company JIL with

the real estate development projects as also in its dealings with the

homebuyers and the lending institutions.

7.2. The Interim Resolution Professional Anuj Jain (IRP):

He is the Interim Resolution Professional in CIRP concerning JIL.

He has taken steps and proceedings from time to time as envisaged by

the Code, including dealing with the claims of a variety of creditors;

making an application for avoidance of certain transactions as being

preferential, which was finally dealt with and accepted by this Court in the

aforementioned judgment dated 26.02.2020; presenting the resolution

plans for voting by CoC; and submitting the approved resolution plan to

the Adjudicating Authority. In relation to the order dated 03.03.2020 as

passed by NCLT, the appeal filed by him before NCLAT, essentially

questioning the jurisdiction of NCLT to modify the resolution plan and to

change the mode of payment to the dissenting financial creditors, being

Company Appeal (AT) (Insolvency) No. 486 of 2020, stands transferred to

19 ‘CA’ for short.

20 ‘YEIDA’ for short.

11 this Court and is registered as T.C. (C) No. 234 of 2020. He is respondent

in almost all other cases.

8. The major set of parties who stand for the approved resolution

plan and seek its implementation while stating objections/grievances

against the modification parts of the order dated 22.04.2020 as passed by

NCLAT and the order dated 03.03.2020 as passed by NCLT are the

following:

8.1. NBCC (India) Limited (NBCC):

NBCC (India) Limited is the resolution applicant and had prepared

the resolution plan for JIL, which was approved by a majority of 97.36% of

the voting share of the CoC. NBCC seeks setting aside of those parts of

the order dated 03.03.2020 where the NCLT has modified some of the

terms of resolution plan and/or has issued certain directions. The appeal

filed by this company, being Company Appeal (AT) (Insolvency) No. 475

of 2020, stands transferred to this Court and is registered as T.C. (C) No.

236 of 2020. This company is also the respondent in various other

appeals/petitions and has comprehensively opposed the objections raised

against the resolution plan.21

8.2. IDBI Bank Limited:

This bank is standing in the capacity of an institutional financial

creditor of the corporate debtor JIL. The corporate insolvency resolution

process in relation to the corporate debtor JIL, which has culminated in

21 This company has introduced itself in its resolution plan as “Navratna” status Central Public Sector Enterprise, under the aegis of Ministry of Housing and Urban Affairs, Government of India, having diversified its areas of operation in various segments including real estate.

12 the approval of the resolution plan submitted by NBCC, got initiated

pursuant to an application moved by this bank under Section 7 of the

Code before the NCLT. This bank leads a set of nine institutional financial

creditors including itself, who have voted in favour of the resolution plan in

question; and stands in support of the resolution plan while opposing the

contentions urged on behalf of the parties on the other side.

8.3. Jaypee Kensington Boulevard Apartments Welfare Association and 5 others:

They are the associations of homebuyers who have invested in

the housing projects floated by JIL. They are appellants in Civil Appeal

No. 3395 of 202022, questioning the order dated 22.04.2020 as passed by

NCLAT and essentially submit that the resolution plan as approved by

NCLT deserves to be implemented.

8.4. Ishwar Jha and 6 others:

They are individual homebuyers of the flats in the development

projects initiated by JIL. They are appellants in Civil Appeal No. 3396 of

202023, questioning the order dated 22.04.2020 as passed by NCLAT and

they also essentially submit that the resolution plan as approved by NCLT

deserves to be implemented without further delay.

8.5. Krishna Dev Mishra and 2 others:

They are also individual homebuyers of the flats in the

development projects initiated by JIL. They are applicants of I.A. No.

87967 of 2020 in Civil Appeal No. 3395 of 2020 and similarly submit that

22 @ Civil Appeal Diary No. 14741 of 2020.

23 @ Civil Appeal Diary No. 15061 of 2020.

13 the resolution plan as approved by NCLT deserves to be implemented

without further delay.

8.6. Major General Praveen Kumar and Colonel V.S. Gaur:

They are the homebuyers who have moved applications for

impleadment/intervention in Civil Appeal No. 3395 of 2020, being I.A.

Nos. 73323 of 2020 and 73330 of 2020 respectively, essentially seeking

directions to NBCC to complete the remaining works on priority basis in

Tower Nos. 5 to 12 and 14 to 16 in Kensington Park – 1, Jaypee Greens,

Noida so that the possession of flats could be handed over to the buyers.

The objectors

9. The persons/entities who carry grievance/s against the resolution

plan for one reason or the other; and/or who are dissatisfied with the

order passed by the NCLT and/or by the NCLAT, may be grouped with

reference to the objections/propositions they stand for.

10. The first set of objectors consists of such persons/entities who

otherwise belong to the class of ‘homebuyers’ but have their own

grievances in relation to the resolution plan and the subsequent orders.

This set of parties could be introduced as follows:

10.1. Wish Town Home Buyers Welfare Society:

This is a society of homebuyers in the projects of JIL who seeks

implementation of the projects but carries reservations on some of the

terms of the resolution plan, where the requisite compensation in relation

to the delayed implementation of the projects by JIL has not been

14 provided, particularly in terms of Section 18 of the Real Estate

(Regulation and Development) Act, 201624. It has also been suggested

that the plan of another resolution applicant Suraksha Realty was far

better than that of NBCC. This society also has the grievance that NBCC

has failed to specify in the resolution plan the treatment and utilisation of

the sum of INR 750 crores received from JAL as also 758 acres of land

that had come to JIL after the judgment of this Court dated 26.02.2020.

This society had filed Company Appeal (AT) (Insolvency) No. 506 of 2020

before NCLAT against the said order dated 03.03.2020 that stands

transferred to this Court and is registered as T.C. (C) No. 243 of 2020.

This society has also moved an application, I.A. No. 72707 of 2020 in

Civil Appeal No. 3395 of 2020 with the submissions against continuation

of NBCC in the proposed ‘Interim Monitoring Committee’.

10.2. Jaypee Aman Owners Welfare Association:

This is an association of homebuyers in one of the projects of JIL

namely, Jaypee Greens Aman in Sector 151 Noida. This association

maintains that in substance, ‘Project Aman’ stands completed; that Offer

of Possession25 has already been issued to the allottees of 22 Towers;

that delayed penalty ought to be allowed in relation to Tower Nos. 23 and

24 for which, OOP has been issued by IRP; and that IRP ought to take

steps for OOP for flats in Tower Nos. 25 and 27 for which, the application

for Occupancy Certificate26 has already been moved. This association is

24 Hereinafter also referred to as ‘RERA’.

25 ‘OOP’ for short.

26 ‘OC’ for short.

15 aggrieved of the projected date/s of completion and proportional increase

in delay, as provided in the resolution plan. As against the said order

dated 03.03.2020, this association had filed Company Appeal (AT)

(Insolvency) No. 480 of 2020 before NCLAT that stands transferred to this

Court and is registered as T.C. (C) No. 240 of 2020.

10.3. Ashish Mohan Gupta & Anr.:

These are the homebuyers who seek to oppose the resolution

plan while raising questions over the proceedings of the Committee of

Creditors as also on various other grounds, which may be running

common to the grounds urged by the homebuyers/associations who are

objecting to the plan and its approval. They had filed Company Appeal

(AT) (Insolvency) No. 489 of 2020 before NCLAT that stands transferred

to this Court and is registered as T.C. (C) No. 242 of 2020.

10.4. Jaypee Orchard Resident Welfare Society:

This is another society of homebuyers in the projects of JIL who

seeks implementation of the projects of JIL but has its own reservations

on the terms of the resolution plan where the requisite compensation in

relation to the delayed implementation of the projects by JIL has not been

provided in terms of RERA. This society has not filed the appeal before

NCLAT but in view of other appeals having been withdrawn to this Court,

has preferred the petition for special leave to appeal, being SLP Diary No.

18129 of 2020 in this Court, seeking to challenge the said order dated

03.03.2020.

16 10.5. Ishwar Kewalramani and 76 Others:

These are the applicants of another impleadment application

being I.A. No. 88795 of 2020 in Civil Appeal No. 3395 of 2020; they are

homebuyers of the projects undertaken by JIL and are aggrieved by the

order dated 03.03.2020 insofar as NCLT has failed to specify the use of

758 acres of unencumbered land now available with JIL; and another

grievance is that NBCC has violated the statutory provisions by not

providing compensation to the homebuyers due to delayed possession.

10.6. Ashok Chandra:

He is another homebuyer who has moved I.A. No. 84309 of 2020

in Civil Appeal No. 3395 of 2020 and seeks direction to determine

adequate and fair amount of compensation to be paid to the homebuyers

due to the unreasonable delay in completion. He has also suggested that

different mechanism is required to be provided for dealing with the CIRP

in question, in displacement of the resolution plan of NBCC.

11. Other objectors to the resolution plan and the order of NCLT dated

03.03.2020 could be broadly sub-divided into three: one being the holding

company of the corporate debtor JIL and the persons/entities related with

these companies; second being the dissenting institutional financial

creditor of the corporate debtor JIL; and third being the other

stakeholders.

12. In the first sub-sect of objectors, the main parties before us are as

follows:

17

12.1. Jaiprakash Associates Limited (JAL):

It is the holding company of the corporate debtor JIL; it had

approximately 71.64% equity shareholding in JIL as on 31.03.2017. This

company had deposited the sum of INR 750 crores as per the orders

passed by this Court in the case of Chitra Sharma (supra). Apart from a

few other objections, this company JAL is seeking refund of INR 750

crores with accrued interest; and it is contended that the said amount is

not the property of the corporate debtor JIL and it cannot be utilised for

the CIRP of JIL. This holding company had filed Company Appeal (AT)

(Insolvency) No. 478 of 2020 before NCLAT against the said order dated

03.03.2020 that stands transferred to this Court and is registered as T.C.

(C) No. 238 of 2020.

12.2. Pankaj Sharma and 3 others:

They are homebuyers of the projects being developed by JAL and

are similarly contending that the said sum of INR 750 crores with accrued

interest cannot be utilised for the CIRP of the corporate debtor JIL. They

too had filed an appeal before NCLAT against the said order dated

03.03.2020, being Company Appeal (AT) (Insolvency) No. 544 of 2020

that stands transferred to this Court and is registered as T.C. (C) No. 237

of 2020.

12.3. Knights Court Social Welfare Association:

This is an association representing the homebuyers in the ‘Knights

Court’ project of JAL who are aggrieved by the fact that the project has

18 been left incomplete by JAL and who are equally aggrieved by the

provision made in the resolution plan of JIL for utilisation of the said

amount of INR 750 crores. This association has directly challenged the

said order of NCLT dated 03.03.2020 in this Court by way of Special

Leave Petition (Civil) No. 10543 of 2020.

12.4. Manoj Gaur, suspended MD of corporate debtor JIL:

He is the suspended Managing Director of the corporate debtor

JIL and has also stated himself to be the Executive Chairman of JAL. He

has been arrayed as third respondent in the appeal filed by IRP. It is also

noticed that he, along with the holding company JAL, filed an

impleadment application (I.A. No. 1508 of 2020) in the appeal filed by

NBCC that was allowed by NCLAT on 15.07.2020 and that is how he

became the seventh respondent in the appeal of NBCC. According to his

submissions, the IRP failed to ensure that the resolution plan did not

contravene the law for the time being in force; and that approval by CoC

leaves much to be desired. Several of the stipulations and prescriptions in

the resolution plan of NBCC are put to question by him.

13. The second sub-sect of objectors to the resolution plan consists of

the institutional financial creditor of the corporate debtor JIL, being ICICI

Bank Limited.

13.1. The directions issued by NCLT in modification of the resolution

plan in regard to the claim of this bank for payment, in its capacity as the

dissenting financial creditor of JIL, is one of the major grounds of

19 challenge by the persons/entities standing in favour of the resolution plan

in question. This bank has also objected to the clauses in the resolution

plan in regard to the treatment of the said sum of INR 750 crores. In its

another capacity as the lender of JAL and having mortgage over the land

of JIL in security of such lending to JAL, this bank has levied another

challenge to the resolution plan in regard to the release of its security

interest. This bank had challenged the said order dated 03.03.2020

before NCLAT in Company Appeal (AT) (Insolvency) Diary No. 21936 of

2020 and has moved Transfer Petition (C) Diary No. 20274 of 2020 in this

Court, seeking transfer of its appeal before NCLAT for analogous hearing

with the present batch of matters.

14. The third sub-sect of the objectors to the resolution plan

comprises of different entities/persons, mostly carrying their own

claims/grievances. They are as follows:

14.1. Yamuna Expressway Industrial Development Authority:

This Authority, constituted under Section 3 of the Uttar Pradesh

Industrial Area Development Act, 197627 was initially called Taj

Expressway Industrial Development Authority28; subsequently it was

renamed as Yamuna Expressway Industrial Development Authority 29 by a

notification dated 11.07.2018. It had been the land provider for execution

of various projects by JAL/JIL under the Concession Agreement. The

provisions in the resolution plan for dealing with the available parcels of

27 Hereinafter also referred to as the ‘U.P. Act of 1976’. 28‘TEA’ for short.

29 ‘YEIDA’ for short.

20 land and for meeting with the contingent liability (as regards payment of

additional compensation towards acquisition of land) are the main areas

of concern of this Authority, who had filed its objections to the resolution

plan. The directions issued in modification of the resolution plan in regard

to YEIDA is also one of the major grounds of challenge by the

persons/entities standing in favour of the resolution plan.

14.2. YES Bank Limited:

This bank is the financial creditor of a wholly-owned subsidiary of

JIL, being Jaypee Healthcare Limited30. This bank asserts that the assets

of JHL, said to be mortgaged with it, are not within the purview of CIRP of

JIL to be disposed by NBCC; and it seeks modifications in the resolution

plan accordingly. This bank filed an appeal before NCLAT against the said

order dated 03.03.2020, being Company Appeal (AT) (Insolvency) No.

488 of 2020 that stands transferred to this Court and is registered as T.C.

(C) No. 235 of 2020.

14.3. Rajesh Gupta and 2 others:

These three persons, said to have entered into respective

agreements with the corporate debtor, carry their own grievance against

the prescription in the resolution plan where the resolution applicant has

reserved its right to cancel such agreements/sub-lease deeds. They seek

direction for entering into sale deed/s of plot/s in Jaypee Greens Wish

Town or for refund. They had also filed an appeal before NCLAT against

the said order dated 03.03.2020, being Company Appeal (AT) 30 ‘JHL’ for short.

21 (Insolvency) No. 547 of 2020 that stands transferred to this Court and is

registered as T.C. (C) No. 241 of 2020.

14.4. Raman Prakash Mangala and 29 others:

They are minority shareholders of JIL and their assertion is that

the resolution plan approved by CoC ought to consider the interests of

minority shareholders by giving fair market value of the equity shares held

by them. Their appeal against the order dated 03.03.2020 before NCLAT,

being Company Appeal (AT) (Insolvency) No. 630 of 2020, also stands

transferred to this Court and is registered as T.C. (C) No. 239 of 2020.

14.5. Gyanendra Kumar Raveendra:

He is also a minority shareholder of JIL and has moved an

application for impleadment in Civil Appeal No. 3395 of 2020, being I.A.

No. 89429 of 2020. He is similarly aggrieved by the action of NBCC to

extinguish the right of the minority shareholders without giving them a ‘fair

value’ of their shares.

Points for determination

15. Having drawn a brief sketch and outline of the matter and having

introduced the principal parties to this litigation with their respective

interests, we may now indicate the major points, which arise for

determination in view of diverse propositions advanced before us,

coupled with the stipulations in the resolution plan in question and the

modifications ordered by NCLT and NCLAT by way of the orders

impugned. The principal points calling for determination in this batch are:

22

A. What is the extent of, and limitations over, the powers and

jurisdiction of the Adjudicating Authority while dealing with the

resolution plan approved by the Committee of Creditors?

B. As to whether approval of the resolution plan of NBCC is

vitiated because of simultaneous voting over two resolution

plans in the Committee of Creditors?

C. (i) As to whether the Adjudicating Authority has erred in not

approving the stipulations in the resolution plan for meeting

with the contingent liability of additional amount of land

acquisition compensation; and has also erred in modifying

these stipulations?

(ii) As to whether the Adjudicating Authority has erred in

not approving the mechanism provided in the resolution plan

for transfer, of the concessionaire’s rights and obligations

under the Concession Agreement with YEIDA, to the SPVs

proposed to be incorporated; and has also erred in modifying

the relevant stipulations?

(iii) As to whether the Adjudicating Authority has erred in

not approving the reliefs and concessions sought for in the

resolution plan in relation to YEIDA?

D. As to whether the Adjudicating Authority has erred in not

approving the treatment of dissenting financial creditor like

ICICI Bank Limited in the resolution plan, as being not in

23 accord with Section 30(2)(b) of the Code read with

Regulation 38(1)(b) of the CIRP Regulations; and has erred

in modifying the terms of resolution plan and in directing

payment to the dissenting financial creditor in monetary

terms?

E. As to whether the Adjudicating Authority has erred in

modifying the step provided in the resolution plan in regard to

the fixed deposit holders and in directing the resolution

applicant to make provision towards the dues of unclaimed

fixed deposit holders also?

F. (i) As to whether the resolution plan unauthorisedly

purports to deal with the assets of Jaypee Healthcare

Limited?

(ii) As to whether the Adjudicating Authority has erred in

assuming that YES Bank Limited had agreed for constitution

of a committee to take forward the disinvestment process of

Jaypee Healthcare Limited?

G. As to whether the stipulation in the resolution plan for

cancellation of certain agreements/sub-leases is unfair and

the Adjudicating Authority has erred in not modifying the

same?

H. As to whether the minority shareholders are entitled to

state their claims/objections despite having not approached

24 the Adjudicating Authority; and as to whether the resolution

plan does not provide fair treatment to the minority

shareholders?

I. (i) As to whether, after approval of the resolution plan of

NBCC by the Committee of Creditors, where homebuyers as

a class assented to the plan, any individual homebuyer or

any association of homebuyers could maintain a challenge to

the resolution plan and could be treated as a dissenting

financial creditor or an aggrieved person?

(ii) As to whether the stipulations in the resolution plan

stand in violation of the provisions of the Real Estate

(Regulation and Development) Act, 2016?

(iii) As to whether the resolution plan is violative of the

requirements of CIRP Regulations?

(iv) As to whether any housing project which has been

completed or is nearing completion ought to be kept out of

the purview of the resolution plan?

J. (i) As to whether the amount of INR 750 crores, which was

deposited by JAL pursuant to the orders passed by this Court

in the case of Chitra Sharma, and accrued interest

thereupon, is the property of JAL and stipulation in the

resolution plan concerning its usage by JIL or NBCC is

impermissible?

25

(ii) As to whether any amount is receivable by JIL and/or

its homebuyers from JAL; and the accounts between JAL and

JIL need reconciliation?

K. (i) As to whether Clause 23 of Schedule 3 of the resolution

plan providing for extinguishment of security interest of

lenders of JAL could not have been approved by the

Adjudicating Authority?

(ii) As to whether adequate provision is required to be

made in the resolution plan as regards utilisation of the land

bank of 758 acres, that has become available to JIL in terms

of the judgment dated 26.02.2020 by this Court?

L. What should be the appropriate orders on the other issues

raised by the resolution applicant seeking

clarification/directions?

M. As to whether the Appellate Authority was justified in

providing for an Interim Monitoring Committee for

implementation of the resolution plan in question during the

pendency of appeals?

N. What should be the final order and relief?

Relevant factual and background aspects

16. For determination of the points so arising, we need to examine the

relevant provisions contained in IBC and CIRP Regulations and apply the

same to the process related with consideration and approval of the

26 resolution plan in question; and to the terms, prescriptions and

stipulations of the impugned resolution plan as also to the modifications,

as ordered (or as declined) by the Adjudicating Authority (NCLT) in the

impugned order dated 03.03.2020. However, in the given set of facts and

circumstances, before examining the relevant provisions and before

dilating on the relevant features of the resolution plan and the order

impugned, it is expedient to take note of the crucial background aspects

relating to the present CIRP and key attributes of the orders passed by

this Court in previous rounds of litigation concerning this very CIRP.

17. For a clearer picture of the subject matter of this litigation, a few

glimpses of the relevant history shall be apposite.

17.1. By way of a notification dated 24.04.2001, the Government of

Uttar Pradesh, in exercise of its powers under Section 3 of the U.P. Act of

1976, proceeded to set up Taj Expressway Industrial Development

Authority (‘TEA’) for anchoring development of Taj Expressway Project,

being that of a six-lane 160 km long Super Expressway with service roads

and associated facilities connecting Noida and Agra, passing through a

so-called virgin area along the river Yamuna.

17.2. At the initial stages, the said Taj Expressway Industrial

Development Authority invited bids for selecting the entity for execution of

the project. In this process, ultimately, the company known as Jaiprakash

Industries Limited came out as the successful bidder. This company,

27 Jaiprakash Industries Limited, is now named as Jaiprakash Associates

Limited (‘JAL’).

17.3. After the said bidding process, a Concession Agreement dated

07.02.2003 was executed between the principal TEA and the successful

bidder Jaiprakash Industries Limited, who came to be referred to as the

“concessionaire”. Various terms and stipulations of this Concession

Agreement form the subject matter of one segment of dispute in the

present litigation, as discussed at the relevant stages hereafter. At the

present stage, worthwhile it is to notice that under this CA, the

concessionaire was to be provided land for constructing Expressway and

its allied facilities; and was also to be provided other land for

development. In this regard, the concessionaire was given lease of

Expressway land with a right to collect toll from the users of the road for

36 years; and the land adjacent to the road was provided to the

concessionaire for commercial exploitation on a lease for 90 years. As

regards premium for the land being so transferred, the stipulations in the

CA had been to the effect that such premium shall be equivalent to

acquisition cost plus a lease rent of INR 100 per hectare per year. In

Clause 18.1 of CA, it was also agreed to between the parties that in case

the concessionaire and TEA would consider it necessary to transfer the

rights and obligations of concessionaire to a special purpose vehicle

(‘SPV’), the concessionaire would do so in a reasonable time for which,

documents as may be required shall be executed amongst the

28 concessionaire, the TEA and the SPV. For accomplishment of the project,

the Government of Uttar Pradesh proceeded to acquire land for laying of

the Expressway; and also proceeded to acquire additional land along the

road for development of the same for commercial, amusement, industrial,

institutional and residential purposes.

17.4. Coming on the heels of this project and in terms of the said Clause

18.1 of CA, the corporate debtor Jaypee Infratech Limited (‘JIL’) was set

up as a special purpose vehicle by the concessionaire and thereafter, the

rights and obligations under CA were transferred to JIL by way of an

assignment agreement dated 19.10.2007 and deed of agreement dated

27.11.2007. In this manner, the corporate debtor JIL came to be accepted

as the concessionaire. Later on, by way of a notification dated

11.07.2008, Taj Expressway Industrial Development Authority was

renamed as Yamuna Expressway Industrial Development Authority

(‘YEIDA’). The net result of the dealings aforesaid has been that the rights

and obligations under the said Concession Agreement dated 07.02.2003

now relate to the corporate debtor JIL as the concessionaire and YEIDA

as the land providing agency.

17.5. As noticed, the corporate debtor JIL was set up as the SPV by the

original concessionaire JAL; and JAL had approximately 71.64% equity

shareholding in JIL as on 31.03.2017. Admittedly, JAL had been the

holding company of JIL. When JIL was set up as an SPV for the purpose

of execution of the project/s under the said CA, finances were obtained

29 from a consortium of banks against the partial mortgage of land acquired

and a pledge of 51% of the shareholding held by JAL. Accordingly, JIL

took up those two projects; the Expressway was laid and JIL also started

developing real estate projects in two locations of the land acquired, one

in Wish Town, Noida and another in Mirzapur.

17.6. However, JIL defaulted in several of its obligations, including those

in completion of the real estate projects as proposed and in payment of

dues of the lender financial institutions.

18. The default on the part of JIL in payment of its dues led the lender

bank, IDBI Bank Limited, instituting a petition under Section 7 of the Code

before the NCLT, for initiation of the corporate insolvency resolution

process against JIL. The applicant bank alleged that JIL had committed a

default in repayment of its dues to the tune of INR 526.11 crores. JIL filed

its objections to the petition but later on, withdrew the objections and

furnished its consent for resolution plan under the provisions of the Code.

18.1. In view of the above, on 09.08.2017, NCLT initiated the CIRP in

respect of JIL. An order of moratorium was issued under Section 14 of the

Code by which, the institution of suits and continuation of pending

proceedings, including execution proceedings, were prohibited and an

Interim Resolution Professional was appointed. On 14.08.2017, IRP, in

pursuance of the order of NCLT, called for submissions of claims by

financial creditors in Form-C, by operational creditors in Form-B, by the

workmen and employees in Form-E and by other creditors in Form-F. On

30 16.08.2017, the Insolvency and Bankruptcy Board of India31 made an

amendment to its Regulations whereby, Regulation 9(a) was inserted to

include the claims by other creditors; and then, on 18.08.2017, the Board

released a press note that the homebuyers could fill in Form-F, as they

could not be treated at par with financial and operational creditors.

19. The aforesaid position led to several petitions in this Court,

particularly by the aggrieved homebuyers. As noticed, those petitions

were dealt with by this Court as a batch, led by the case of Chitra

Sharma (supra). Several orders were passed by this Court in the said

batch of petitions from time to time, inter alia, to the effect that IRP was

permitted to take over the management of JIL and was directed to ensure

that necessary provisions were made to protect the interests of

homebuyers. Various orders were also made with directions to JAL, as

holding company of JIL, for making deposits in the Court, particularly

looking to the claim of refund being made by some of the homebuyers.

While finally disposing of the matters, this Court took note of the interests

of homebuyers as also the creditors of JAL and JIL; and also took note of

the status of proceedings and the statutory provisions as then obtaining,

including the fact that the statutory period of 180 days, and even the

extended period of 90 days, for concluding the CIRP had come to an end

but then, by way of the Insolvency and Bankruptcy (Amendment)

Ordinance, 2018, which came into force on 06.06.2018, the doubts about

the status of homebuyers were removed and they were expressly 31 Hereinafter also referred to as ‘the Board’.

31 recognised as financial creditors of the corporate debtor. In the given set

of facts and circumstances, this Court provided a reprieve to the CIRP in

question while making further orders in the interests of homebuyers and

other creditors.

19.1. The proceedings and the orders passed by this Court in the said

case of Chitra Sharma are of material bearing in the present case and,

therefore, may be usefully recounted in necessary details.

Orders and directions in the case of Chitra Sharma

20. As noticed, this Court was moved in the case of Chitra Sharma

(supra) essentially for the reason that a large number of homebuyers,

who had invested in the real estate projects proposed by JAL and JIL,

were feeling distressed in the wake of the proposed CIRP concerning JIL

and who were likely to be left in the lurch because, at the given stage,

while IBC recognised three categories of stakeholders namely, (i)

corporate debtors; (ii) financial creditors; and (iii) operational creditors but,

the homebuyers, otherwise having a direct and substantial interest in

CIRP with investment of lifetime, were being treated only as ‘other

creditors’. In the given scenario, on being moved, this Court issued notice

on 04.09.2017 in the said batch of petitions; the proceedings before the

NCLT at Allahabad were stayed until further orders; a copy of the

proceedings was ordered to be served on the office of the learned

Attorney General for India; and the applications for impleadment and

intervention were allowed.

32 20.1. Thereafter, on 11.09.2017, while dealing with an application

moved by IDBI Bank Limited for vacation of the ad-interim order dated

04.09.2017, several facets of the matter and ramifications of the stay

order passed by this Court were projected with reference to the scheme

of the provisions contained in the Code. On the other hand, it was argued

on behalf of the homebuyers that they were of lower and middle income

groups, who had invested their life savings with JIL and JAL and their

interests were required to be protected. It was argued that if CIRP was

restored, there should be a representative from the homebuyers or the

Court may appoint someone on CoC to espouse the interests of the

homebuyers.

20.1.1. Taking note of the submissions so made and in order to safeguard

the interests of stakeholders, this Court modified the earlier order dated

04.09.2017 and issued material directions, inter alia, to the effect that: (i)

IRP shall take over the management of JIL and formulate interim

resolution plan with necessary provision to protect the interests of

homebuyers; (ii) Mr. Shekhar Naphade, learned senior counsel along with

Ms. Shubhangi Tuli, AOR shall participate in the meetings of CoC to

espouse the cause of the homebuyers and to protect their interests; the

Director or Managing Director of JIL or JAL on the date of institution of

insolvency proceedings as also on the date of order, except the nominee

Directors of lending institutions, shall not leave the country without prior

permission of the Court; and all the suits and proceedings against JIL

33 shall remain stayed in terms of Section 14(1)(a) of the Code. In addition,

this Court also directed JAL to deposit a sum of INR 2,000 crores and

provided that if any assets or property of JAL had to be sold for the

purpose, that should be done after obtaining prior approval of this Court.

For its relevance, the aforesaid order dated 11.09.2017, carrying

significant observations and material directions of this Court, which are of

bearing on a substantial part of the present litigation, could be extracted,

in extenso, as under: -

“All the applications for intervention/impleadment are allowed.

IA No. 87575 of 2017 in SLPs (C) Nos. 24001- 24002 of 2017 (D. Nos. 27277, 27579 and 27624 of 2017)

The present interlocutory application has been filed by the IDBI Bank Ltd. in the special leave petitions which have been registered as SLPs (C) Nos. 24001 and 24002 of 2017.

This is an application for vacating/modification of the order dated 4-9-2017. On that day, this Court while issuing notice, had passed the following order:

“2. …..In the meantime the impugned order(s) passed by the National Company Law Tribunal, Allahabad shall remain stayed until further orders. A copy of the special leave petition be served on the office of learned Attorney General for India. All applications for impleadment/intervention stand allowed.” Mr K.K. Venugopal, learned Attorney General for India appearing for Respondents 1 and 2 submitted that the order passed by this Court on 4-9-2017 needs to be vacated or modified because the consequence of the stay would be that the Management of Respondent 3, Jaypee Infratech Ltd. would stand restored. This was not a consequence intended by this Court. It is urged by him that if the erstwhile Management of the said company continues, it will affect the rights of the creditors and the consumers as well.

In the course of the hearing, we have been informed that after the order of stay was passed by this Court, the Interim Resolution Professional (IRP) has handed over records to Respondent 3, Jaypee Infratech Ltd. (“JIL”). It is submitted by Mr K.K. Venugopal, learned Attorney General that some time should be granted to the

34 IRP to formulate at least a preliminary scheme so that the interest of all stakeholders is protected. He has also shown his concern for the interest of the homebuyers.

Dr Abhishek Manu Singhvi, learned Senior Counsel appearing for IDBI Bank Ltd., (Respondent 6 in the writ petition) submits that under the statutory scheme, the IRP has to take over otherwise the letter and spirit of the Act is likely to be affected. The learned counsel appearing for the homebuyers, in contra, submits that they belong to the lower and middle income group and have invested life savings with JIL and with its holding company, Jai Prakash Associates Ltd. (“JAL”). It has been assiduously urged that the investments of flat purchasers are with JIL and JAL and, therefore, the interest of the purchasers may be protected. It is also argued that if the IRP is restored, there should be a representative from the homebuyers or this Court may appoint someone on this Committee of Creditors and espouse the interests of the homebuyers.

Having heard the learned counsel for the parties at length, in modification of the order dated 4-9-2017, we issue the following directions:

a) The IRP shall forthwith take over the Management of JIL. The IRP shall formulate and submit an interim resolution plan within 45 days before this Court. The interim resolution plan shall make all necessary provisions to protect the interests of the homebuyers;

b) Mr Shekhar Naphade, learned Senior Counsel along with Ms Shubhangi Tuli, Advocate-on-Record, shall participate in the meetings of the Committee of Creditors under Section 21 of the Insolvency and Bankruptcy Code, 2016 to espouse the cause of the homebuyers and protect their interests;

c) The Managing Director and the Directors of JIL and JAL shall not leave India without the prior permission of this Court;

d) JAL which is not a party to the insolvency proceedings, shall deposit a sum of Rs 2000 crores (Rupees two thousand crores) before this Court on or before 27-10-2017. For the said purpose, if any assets or property of JAL have to be sold, that should be done after obtaining prior approval of this Court.

Any person who was a Director or Managing Director of JIL or JAL on the date of the institution of the insolvency proceedings against JIL as well as the present Directors/Managing Director shall also not leave the country without prior permission of this Court. The foregoing restraint shall not apply to nominee Directors of lending institutions (IDBI/ICICI/SBI);

35

e) All suits and proceeding instituted against JIL shall in terms of Section 14(1)(a) remain stayed as we have directed the IRP to remain in Management.

Be it clarified that we have passed this order keeping in view the provisions of the Act and also the interest of the homebuyers. IA stands disposed of accordingly.

The matter be listed at 2.00 p.m. on 13-11-2017.

The prior date given by this Court i.e. 10-10-2017 stands cancelled.” (emphasis in bold supplied)

20.1.2. It could be readily noticed that in formulating the directions

aforesaid, this Court initiated steps to protect the interests of homebuyers

essentially for the reason that, at the given stage, homebuyers were not

regarded as financial creditors and they were not represented in the CoC.

Significantly, while evolving a workable and protective mechanism, this

Court also took note of the crucial background aspects and the fact that

JIL was essentially an alter ego of JAL; and thus, even while consciously

noting that JAL was not a party to the insolvency proceedings, directed

that JAL shall deposit a sum of INR 2,000 crores and restraints were also

put over disposal of assets or property of JAL and over the movement of

the Directors/Managing Directors of JIL or JAL away from the country.

20.2. JAL moved an application (I.A. No. 102471 of 2017) for

modification/recall of the aforesaid direction for deposit of INR 2,000

crores or for a modification that would enable it to transfer the rights under

the Concession Agreement in respect of the Yamuna Expressway. This

application was considered and rejected by the Court on 25.10.2017 after

36 noticing the submissions in opposition by the learned Attorney General as

also by the learned counsel appearing on behalf of IDBI Bank and YEIDA.

It was also submitted by the counsel for IRP that the rights under the

Concession Agreement belonged to JIL, which was subject to

proceedings under the IBC and therefore, such a request could not be

granted. However, the time for depositing INR 2,000 crores was extended

until 05.11.2017. The relevant part of order dated 25.10.2017 reads as

under: -

“It is submitted by Mr Kapil Sibal and Mr Mukul Rohatgi, learned Senior Counsel appearing for the applicant that JAL may be permitted to transfer its rights under the concession agreement in respect of Yamuna Expressway. The same is seriously opposed by Mr K.K. Venugopal, learned Attorney General for India, Dr Abhishek Manu Singhvi, learned Senior Counsel appearing for the IDBI Ltd. and Mr Ravindra Kumar, learned counsel appearing for the Yamuna Expressway Industrial Development Authority.

It is also submitted by Mr Parag P. Tripathi, learned Senior Counsel representing the Interim Resolution Professional (IRP) that the rights under the concession agreement in respect of Yamuna Expressway are of Jaypee Infratech Ltd. (JIL), which is subject to proceeding under the Insolvency and Bankruptcy Code and, therefore, it cannot be transferred. Mr Ravinder Kumar, learned counsel appearing for the Authority has submitted that the rights under the concession agreement, are non-transferable.

We have also heard Mr Ajit Kumar Sinha, learned Senior Counsel appearing for some of the homebuyers. There are other counsel who are representing the homebuyers who are interested in having their flats. We do not want to address the said aspect today.

We are not inclined to entertain the application for modification of the order dated 11-9-2017. However, we extend the time to deposit the sum of Rs 2000 crores (Rupees two thousand crores) till 5-11-2017.”

20.3. Then, on 13.11.2017, this Court appointed learned counsel Mr.

Pawanshree Agarwal as the amicus curiae, who was to open a web portal

on which details of homebuyers could be uploaded. All the Directors of

37 JAL, except institutional Directors were ordered to remain present before

the Court on the next date with the affidavits disclosing their personal

assets. This order dated 13.11.2017 reads as under: -

“All the applications for impleadment/intervention stand allowed. The homebuyers are directed to approach Mr Pawanshree Agarwal, learned counsel, who is appointed as the Amicus Curiae in the matter to assist the Court and he shall open a web portal so that the homebuyers can give their details to Mr Pawanshree Agarwal. Let the matter be listed on 22-11-2017. On that day, all the Directors except institutional Directors of Jaiprakash Associates Ltd. (JAL) shall remain personally present in the Court with the affidavits disclosing their personal assets.”

20.4. On the next date, 22.11.2017, eight independent Directors and five

promoter Directors were present before the Court. On a statement made

on behalf of JAL, this Court permitted JAL to deposit INR 275 crores

during the course of the day and directed further deposit, of INR 150

crores by 13.12.2017 and INR 125 crores by 31.12.2017. A restraint was

imposed on the alienation of properties and assets of the Directors and

their families while maintaining the earlier direction for the deposit of INR

2,000 crores; and the Directors concerned were directed to remain

present on the next date. The amicus curiae was asked to create a web

portal within a week; and for that matter, learned counsel appearing for

JAL was to provide all the details as required by the amicus and also to

provide him a sum of INR 5 lakhs. The relevant part of order dated

22.11.2017 reads as under: -

“It is submitted by learned Senior Counsel appearing for Jaiprakash Associates Ltd. (JAL) that the company is ready with Rs 275 crores. The homebuyers raised their concern about the realisation of the amount. This Court appreciates the grievance and the concern of the homebuyers.

38 We think it would be appropriate to direct as follows:

(a) A demand draft of Rs 275 crores be deposited by Mr Anupam Lal Das, learned counsel appearing for the company, before the Registry of this Court, today.

(b) A sum of Rs 150 crores be deposited by 13-12-2017.

(c) A further sum of Rs 125 crores be deposited by 31-12-2017.

(d) Neither the independent Directors nor the promoter Directors shall alienate their personal properties or assets in any manner, and if they do so, they will not only be liable for criminal prosecution but contempt of the court.

(e) That apart, we also direct that the properties and assets of their immediate and dependent family members should also not be transferred in any manner, whatsoever.

Needless to say that direction for deposit of Rs 2000 crores shall remain as it is. The only indulgence is to pay the same in instalments.

Mr Pawanshree Agrawal, who had been appointed as Amicus Curiae on an earlier date, shall create a portal within a week and do the needful as he has done in similar matters. Mr Anupam Lal Das, learned counsel shall provide all the details as required by Mr Pawanshree Agrawal. Mr Anupam Lal Das shall provide a sum of Rs 5 lakhs to Mr Pawanshree Agrawal for creation of the portal and to carry on the consequential activities. Matters be listed on 10-1-2018. On that day, all the independent Directors and promoter Directors of Jaiprakash Associates Limited, shall remain present. Copies of the affidavits deposed by all the five promoter Directors, shall be served on the Central Agency, so that the learned Attorney General can be made aware of that. Call on the date fixed.”

20.5. Next to the above, the matter was considered on 15.12.2017,

when the deposited INR 150 crores were ordered to be kept in a short-

term deposit and the time (for further payment) was extended until

25.01.2018. Further to that, on 10.01.2018, this Court took note of the

submissions made on behalf of the homebuyers of JAL as also an

application made by Reserve Bank of India32 seeking leave to move the

NCLT against JAL and issued the directions, inter alia, to the effect that

JAL shall file an affidavit disclosing its housing projects throughout the 32 ‘RBI’ for short.

39 country and the stage of their construction; the amicus shall open an

independent web portal for the homebuyers of JAL; the application of RBI

shall be considered at a later stage; and the Directors concerned need

not remain personally present before the Court unless so directed but

shall not leave the country. The relevant part of this order dated

10.01.2018 reads as under: -

“Having heard the learned counsel for the parties, we are inclined to pass the following directions:

(i) Jaiprakash Associates Ltd. (JAL) shall file an affidavit stating therein as to how many housing projects it has throughout the country and the stage of their construction. The said affidavit shall be filed within a week hence.

(ii) Mr Pawanshree Agarwal, learned Amicus Curiae shall create an independent web portal in respect of the homebuyers of JAL, which shall reflect the details of the homebuyers.

(iii) The web portal created by Mr Pawanshree Agarwal qua Jaypee Infratech Ltd. (JIL) shall be kept alive.

(iv) The application filed by Reserve Bank of India seeking permission to move NCLT shall be considered at a later stage.

(v) The independent Directors of JAL need not remain personally present on every date of hearing unless so directed by this Court.

The independent Directors shall not leave the country without leave of this Court.

(vi) The earlier order of injuncting JAL to create any kind of third- party interest in the assets is reiterated.

(vii) The applications for impleadment/intervention and directions filed before this Court shall be served on Mr Pawanshree Agarwal.”

20.6. Further effective proceedings took place on 21.03.2018 when it

was stated on behalf of JAL that INR 550 crores had already been

deposited and that only about 8% of homebuyers were interested in

seeking refund while others were desirous of seeking possession of their

flats. This Court indicated that at the given stage, only the matter in

relation to the homebuyers seeking refund was being examined and other

grievances shall be examined in the next phase of proceedings. Since the

40 order for deposit of INR 2,000 crores had not been complied with despite

the end of deadline, the Court issued directions for further deposit of INR

200 crores, as agreed to by the Managing Director of JAL present in the

Court, where the first instalment of INR 100 crores was to be deposited by

15.04.2018 and the second instalment in the like amount was to be

deposited by 10.05.2018. The amicus curiae informed the Court, with

reference to his portal and the record of JAL, that a sum of INR 1,300

crores was required to be refunded by way of principal alone to the

homebuyers who were seeking refunds, whereupon the amicus was

requested to submit a project-wise chart, indicating the number of

persons and the stage of completion. Taking note of the grievances of the

homebuyers that the developer was demanding monthly instalments

despite being unable to complete construction, the developer was

restrained from raising demands towards outstanding or future

instalments in respect of those buyers who had expressed a desire to

obtain refunds. Further to that, the IRP was permitted to finalise the

resolution plan, to be implemented only with the leave of the Court. This

Court also took note of the inability expressed by the learned senior

counsel, who was earlier requested to espouse the cause of homebuyers

in CoC and, in his place, Mr. Gaurav Agarwal Advocate was appointed for

the purpose. This order dated 21.03.2018 reads as under: -

“Heard Mr Anupam Lal Das, learned counsel appearing for Respondent 4 Jaiprakash Associates Ltd. (JAL). Though many a contention has been raised by Mr Das, yet, we are not inclined to entertain the same keeping in view our orders dated 11-9-2017

41 and 25-10-2017. We have been told by Mr Das that JAL has deposited a sum of Rs 550 crores before the Registry of this Court. It is submitted by Mr Das that only 8% of the homebuyers/allottees are inclined to take refund whereas others have expressed their inclination to have the flats. We would intend to make it absolutely clear that, for the present, we are only concerned with those homebuyers who intend to have refund. In the next phase, we may consider the grievances, if any, of the homebuyers who intend to have the flats. In that regard, we think it appropriate to hear Mr Parag P. Tripathi, learned Senior Counsel appearing for Interim Resolution Professional (IRP) and Mr Jayant Bhushan and Mr Sanjay Hegde and others, learned Senior Counsel appearing for some Associations of homebuyers who intend to have their flats. As our order for deposit of Rs 2000 crores has not been complied with, we intend to pass the following directions:

(a) JAL shall deposit a further sum of Rs 200 crores in two instalments, as agreed by the Managing Director who is present in Court today. The first instalment of Rs 100 crores shall be deposited by 15-4-2018 and the second instalment of Rs 100 crores shall be deposited by 10-5-2018;

(b) It is submitted by Mr Pawanshree Agrawal, learned Amicus Curiae that as per his portal an amount of Rs 1300 crores, at present, is required to be refunded towards the principal sum for those homebuyers who, as of today, seek refund. The figure of Rs 1300 crores is as per the record of JAL.

In view of the aforesaid, we would require Mr Agrawal to prepare a projectwise chart indicating the number of persons in respect of that project and the stage of completion of the respective projects so that appropriate order can be passed for disbursement of the amount on pro rata basis to the homebuyers;

(c) Mr Agrawal, learned Amicus Curiae shall keep the portal operational. However, the requests of only those persons on the portal who have sought refund, as of today will be considered at this stage;

(d) The submission of the homebuyers who are seeking refund is that the developer is making demands towards monthly instalments. We direct that no demand towards outstanding or future instalments shall be raised by the developer to the flat buyers who have, as of today, expressed the option to obtain refund. The demands raised by the developer in respect of the homebuyers who have already opted for refund till today, shall remain stayed;

(e) The IRP may proceed to finalise the resolution plan but the same shall be implemented after taking leave of this Court.

(f) The National Company Law Tribunal (NCLT) shall decide subject to the directions which we have given hereinabove.

42 Before we fix the next date, we must note that we have been apprised that Mr Shekhar Naphade, learned Senior Counsel who was appointed to espouse the cause of the homebuyers before the Committee of Creditors has expressed his inability to continue as such.

In view of the aforesaid, a need has arisen to appoint someone else in place of Mr Shekhar Naphade and accordingly we appoint Mr Gaurav Agrawal, Advocate. It is further clarified that Mr Gaurav Agrawal shall be guided by our previous orders.

Let the matter be listed on 16-4-2018 so that this Court can take note of whether the developer has complied with the direction of depositing the first instalment and to pass directions with regard to disbursement of the amount deposited on pro rata basis on the basis of the report submitted by Mr Pawanshree Agrawal.” (emphasis in bold supplied)

20.7. On 16.04.2018, apart from dealing with two applications filed by

the Managing Director and the Joint Managing Director of JAL seeking

permission to travel abroad, this Court took note of the deposit of INR 100

crores by JAL and directed that the second instalment of INR 100 crores

be deposited by 10.05.2018. While reiterating liberty to IRP to finalise the

resolution plan in terms of the earlier order, this Court also extended

liberty to JAL to submit a representation to the competent authority

without expressing any opinion on that count and leaving the

representation to be considered in accordance with law.33

20.8. Thereafter, on 16.05.2018, apart from dealing with another

application filed by an independent Director of JAL seeking permission to

travel abroad, this Court took note of the fact that a sum of INR 750

crores was lying in deposit and it was observed that the same ‘has to be

disbursed on pro rata basis amongst the homebuyers’. It was also

33 As discussed a little later, it has appeared in the final judgment passed in the case of Chitra Sharma that the referred representation had been in relation to the prayer of JAL to participate as one of the intending bidders in the resolution plan which was being formulated by the IRP; and such a participation by JAL was impermissible in view of Section 29A introduced to the Code.

43 directed that JAL, the holding company of JIL, shall deposit a further sum

of INR 1,000 crores ‘jointly and severally’ by 15.06.2018 subject to which,

stay was granted over further proceedings, only insofar as concerning the

liquidation. The relevant part of this order dated 16.05.2018 reads as

under: -

“Having heard the learned counsel for the parties at length, it is directed that Jaiprakash Associates Ltd. (JAL), the holding company of Jaypee Infratech Ltd. (JIL) shall deposit a further sum of Rs 1000 crores jointly and severally by 15-6-2018. Subject to the said deposit, there shall be a stay of further proceedings only insofar as the liquidation is concerned. In the meantime, Interim Resolution Professional (IRP) shall remain in management. If the amount is not deposited by 15-6-2018, the statutory proceedings shall continue. As far as Rs 750 crores, which is lying in deposit is concerned, it has to be disbursed on pro rata basis amongst the homebuyers.”

(emphasis in bold supplied)

20.9. Thereafter, on 13.07.2018, this Court took note of certain

proposals made by JAL, which were opposed by the petitioners. While

observing disinclination to entertain such proposals, this Court posted the

matters on 16.07.2018 ‘exclusively for the purpose of considering the

issue of the rights of the homebuyers and the capability of JAL and JIL to

construct the projects’.

21. After the aforesaid proceedings, the petitions were finally heard

and disposed of by this Court by way of the judgement dated 09.08.2018.

Before taking note of the significant features and attributes of the final

judgement in the case of Chitra Sharma, but to keep feasible track of the

chronology of events, we may indicate that parallel to the proceedings in

44 this Court, NCLT continued with CIRP concerning the corporate debtor JIL

and in that process, passed orders on 09.05.2018 and 15.05.2018,

approving the decision of IRP rejecting the claims of two lenders of JAL to

be recognised as financial creditors of the corporate debtor JIL on the

strength of the mortgage created by the corporate debtor JIL as collateral

security of the debts of its holding company JAL. Thereafter, on

16.05.2018, NCLT accepted an application, that was moved by IRP on

06.02.2018, for avoidance of certain transactions whereby the corporate

debtor JIL had mortgaged its properties as collateral securities for the

loans and advances made by the lender banks and financial institutions to

JAL, as being preferential, undervalued and fraudulent. These aspects

were finally dealt with by this Court in the judgement dated 26.02.2020, as

shall be noticed later.

22. We may now revert to the final judgement dated 09.08.2018 in the

case of Chitra Sharma, and take into account the relevant features,

which do have a bearing on the issues raised in the present litigation.

22.1. In final judgement dated 09.08.2018 in the case of Chitra Sharma

(supra), this Court took note of the past proceedings and also the fact that

when resolution plans were considered and examined by the CoC, JAL

too submitted its proposals which were rejected in view of the bar

contained in Section 29A IBC as also for the reason that JAL failed to

convince the CoC of its ability to tie up the funds for construction.

However, even the other plans could not muster the support of the

45 requisite majority in CoC. Accordingly, IRP informed NCLT that no

resolution plan was approved by the CoC even within the extended period

for completing the CIRP, which came to an end on 12.05.2018. This Court

took note of the mandate of Section 33 IBC whereby liquidation follows

upon rejection of a resolution plan but then, noticed unanimity of the

parties during the course of hearing that the liquidation of JIL was not

going to subserve the interests of the homebuyers who had made

valuable investments by contributing their hard-earned money in the hope

of obtaining a roof over their heads. This Court also observed that a home

for the family was considered to be a part of the right to life and took note

of the appeal made by the homebuyers to ensure complete justice rather

than leaving them at the mercy of the liquidation process. While

appreciating the substance of that plea, this Court nevertheless indicated

the need to abide by the discipline of law and thereafter, proceeded to

take a comprehensive view of the scheme of IBC; and also underscored

the fact that though IBC, as originally enacted, did not contain express

provisions in relation to the interests of homebuyers but, their concerns

were sought to be assuaged in the amendment brought about by the

Insolvency and Bankruptcy (Amendment) Ordinance, 2018, which came

into force on 06.06.2018 and whereby, the homebuyers were expressly

brought within the purview of financial creditors under the IBC. This Court

pointed out that now being duly recognised as financial creditors, the

homebuyers were necessarily a part of the CoC, constituted in terms of

46 Section 21 IBC. This Court also took note of the relevant provisions in the

Regulations relating to the voting share of the respective financial

creditors in CoC and selection of an authorised representative34 to

represent financial creditors in a particular class.

22.2. Proceeding further, this Court extensively referred to a variety of

submissions made on behalf of JAL, seeking to explain the perspective of

the developers with reference to the projects already accomplished by

them and the projects being under execution; and their proposal to

deposit post-dated cheques to the tune of INR 600 crores with the registry

of this Court, if they were allowed to dispose of some of the assets. The

Court also took note of the fact that JAL had sought directions to NCLT to

decide an application for sanctioning the scheme of arrangement,

propounded pursuant to a restructuring agreement accepted by 32

creditors. The request of JAL was to continue with the stay of liquidation

proceedings against its deposit of post-dated cheques of INR 600 crores

and also to stay the directions of this Court whereby IRP was allowed to

remain in management of the corporate debtor. The Court recorded the

propositions of JAL as follows: -

“36. …..JAL has sought to assure that it would double the strength of existing workers for the construction of its projects. JAL has also stated that it would deposit postdated cheques of Rs 600 crores with the Registry of this Court. However, this is subject to the condition that the Court should allow it to dispose of “identified cement assets” including its cement plan (sic) at Rewa in Madhya Pradesh. In order to enable it to do so, JAL has sought a direction to the NCLT at Allahabad to decide the application filed before it for sanctioning a scheme of arrangement, propounded pursuant to a 34 ‘AR’ for short.

47 master restructuring agreement signed and accepted by the 32 creditors. JAL seeks to continue the stay of liquidation proceedings against its deposit of postdated cheques of Rs 600 crores. JAL also seeks a stay on the direction of this Court allowing the IRP to remain in management.”

22.2.1. After careful consideration, this Court rejected the proposal

submitted on behalf of JAL while explaining that accepting any such

proposal on behalf of JAL would cause serious prejudice to the discipline

of IBC. In that regard, this Court referred to the provisions contained in

Section 29A of the Code and the background in which certain specified

persons were made ineligible to be the resolution applicants. 35 This Court,

inter alia, observed and explained as under: -

“39. Clauses (c) and (g) of Section 29-A would operate as a bar to the promoters of JAL/JIL participating in the resolution process. Under clause (c), a person who at the time of the submission of the resolution plan has an account which has been classified a non-performing asset under the guidelines of RBI or of a financial regulator is subject to a bar on participation for a stipulated period. Under clause (g), a person who has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the adjudicating authority under the IBC is prohibited from participating. The Court must bear in mind that Section 29-A has been enacted in the larger public interest and to facilitate effective corporate governance. Parliament rectified a loophole in the Act which allowed a backdoor entry to erstwhile managements in the CIRP. Section 30 IBC, as amended, also clarifies that a resolution plan of a person who is ineligible under Section 29-A will not be considered by the CoC:”

35 We may point out that Section 29A was inserted to the Code along with a few other amendments by way of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, promulgated on 23.11.2017. The Ordinance stated in its Preamble, inter alia, that the same was being promulgated because it was considered necessary to provide for prohibition of certain persons from submitting a resolution plan who, on account of their antecedents, may adversely impact the credibility of the process under the Code. This Ordinance later on took the shape of the Insolvency and Bankruptcy Code (Amendment) Act, 2017 (No. 8 of 2018) that came into force with retrospective effect from 23.11.2017.

48 22.3. Apart from the above, this Court also took note of various grounds

urged on behalf of the homebuyers in opposition to the proposal so

submitted and, after examining the matter in its entirety, this Court was

convinced that JAL/JIL were lacking in financial capacity and resources to

complete the unfinished projects; and allowing them to participate in the

process of resolution would render the statutory provisions nugatory.

22.3.1. Having regard to the issues involved herein, we are impelled to

take note of the grounds so urged on behalf of the homebuyers and their

due acceptance by this Court as follows: -

“40. Mr Anand Grover appearing on behalf of the homebuyers has opposed the proposal submitted by JAL/JIL on the following grounds:

40.1. Loans given to JAL have been classified as non-

performing assets which renders JAL ineligible as a resolution applicant/new promoter under Section 29-A(b) IBC; 40.2. In addition to Section 29-A(b), JAL is also disqualified under Section 29-A(g) IBC. Section 29-A(g) provides that a person who is engaged in a fraudulent transaction should not be allowed to bid for another company as such a person may again engage in fraudulent transactions. In May 2018, the NCLT, Allahabad set aside a fraudulent transaction involving a mortgage of around 750 acres of JIL’s land in favour of the lenders of JAL. This mortgage was without any consideration and the land of 750 acres may be worth INR 5000 crores. The matter is now before the NCLAT, which has specifically framed an issue in this regard;

40.3. RBI is already before this Court seeking initiation of insolvency proceedings against JAL. JAL’s proposal, although presented under the garb of protecting the interest of homebuyers, is aimed at the twin benefits of avoiding insolvency of JAL and regaining control of JIL, thereby defeating RBI’s application for insolvency proceedings of JAL as well as Section 29-A IBC; 40.4. The reasons pleaded by JAL/JIL to excuse their failure to complete the housing projects such as the stay order granted by the National Green Tribunal have been rejected by the orders of the National Consumer Disputes Redressal Commission as there was no stay. One such order was passed by NCDRC on 2-5-2016, in Developers Township Property Owners Welfare Society v. Jaiprakash Associates Ltd.;

40.5. The contention of JAL that they faced impediments on account of the purported stay imposed by NGT is patently incorrect 49 as the stay by NGT was only on handing over possession without an occupation certificate, which had no bearing on the construction. Moreover, JAL carried out construction during that period as is evidenced inter alia by the fact that they raised demands for construction linked payments during this period; 40.6. During the pendency of the CIRP from 9-8-2017, construction work was done under the aegis of the IRP under whom JAL was a mere contractor;

40.7. The claim by JAL that flats have been delivered is a fractured claim as flats have been delivered in incomplete stages and are not in accordance with the allotment letters. The flooring is not complete, doors and windows are missing, no-objection certificates have not been obtained from the Fire Department and the offer of possession is being made without the occupation certificate;

40.8. JAL does not have the capacity to deliver the flats and 22,000 homebuyers are suffering due to delays of more than four years in completion of various projects of JAL and JIL; 40.9. Under the contracts, JAL and JIL are jointly and severally liable to deliver the flats. If JAL was serious about delivering the flats, the present situation would not have arisen. Further, JAL would have avoided the insolvency process of JIL and would not have cast the homebuyers to the uncertainties of insolvency;

40.10. There are serious doubts about the credentials of JAL which has diverted funds from JIL towards its other businesses. The applicant associations had appointed ASA Financial Services to conduct an audit of JIL’s financials and the audit report demonstrates that JAL may have diverted more than INR 10,000 crores from JIL;

40.11. JAL is undergoing a serious financial crisis. This is clear from the following facts:

40.11.1. JAL has not yet honoured the order of this Court asking it to deposit Rs 2000 crores for protection of the interest of the homebuyers. JAL has paid only Rs 750 crores out of Rs 2000 crores, after the expiry of almost 10 months from 11-9-2017 which was the date of the initial order of this Court;

40.11.2. JAL has failed to pay even the latest instalment of Rs 1000 crores by 15-6-2018 in accordance with the order of this Court dated 16-5-2018;

40.11.3. JAL is a defaulter of more than 30 banks to the extent of around Rs 30,000 crores. JAL has also defaulted on fixed deposits, foreign currency convertible bonds and payments to Noida Authority;

40.11.4. Even in the latest proposal, the proposal to deposit Rs 600 crores is spread over time indicating that JAL has no resources; and 40.11.5. The proposal of doubling the strength of workers from 4000 to 8000 would only mean doubling the strength from 17

50 workers per tower to 35 workers per tower (228 towers to be built by 8000 workers). This would amount to 2 workers in each floor of 4 flats (21,532 flats in 228 towers by 8000 workers). At this rate, completion of flats may take several years.

41. Similar submissions have been urged on behalf of the homebuyers by other learned counsel.

42. The bar under Section 29-A would preclude JAL/JIL from being allowed to participate in the resolution process. Moreover, the facts which have been drawn to the attention of the Court leave no manner of doubt that JAL/JIL lack the financial capacity and resources to complete the unfinished projects. To allow them to participate in the process of resolution will render the provisions of the Act nugatory. This cannot be permitted by the Court.” (emphasis in bold supplied)

22.4. It was, however, submitted on behalf of JAL/JIL that with expiry of

timelines for CIRP, the only option would be to liquidate the corporate

debtor which may not be in the interest of homebuyers and in that

situation, the only way out would be to provide for an arrangement outside

the provisions of IBC. It was also submitted that unless a group of

independent professionals came to a conclusion that it was not financially

viable for JAL/JIL to complete the remaining work in a time-bound

manner, their role as developers should not be discounted. Hence, it was

submitted that an independent committee of experts be constituted by the

Court to evaluate the financial capability of JAL/JIL to continue executing

the ongoing projects. It was also submitted that only 8% of the

homebuyers had opted for refunds while 92% had chosen not to claim

refunds, thereby implying a confidence in the ability of JIL/JAL to

complete the project. However, on the other hand, the homebuyers

uniformly opposed the submissions so made and it was urged before the

Court that they had no confidence in the ability of either JIL or JAL to

51 complete the outstanding projects. In the third dimension, it was

submitted on behalf of the IRP that Court may revive the CIRP by

extending the time specified in IBC in order to enable fresh consideration

to be made of the prospect for a resolution which would take into account

the interests of homebuyers under the amended IBC; and the second

option would be to appoint a committee under the supervision of the Court

to explore the possibility of a resolution which would obviate the need for

liquidation. Having pondered over the diverse propositions, the

requirement of balancing the discipline of the Code, to do complete justice

and to secure the interests of all the concerned, this Court found it just

and proper to accept the suggestion that CIRP be revived and CoC be

reconstituted as per the amended provisions of IBC with recourse to the

powers under Article 142 of the Constitution of India. This Court observed

and held as under: -

“47. In considering the rival submissions, several important facets of the case need to be underscored.

47.1. First and foremost, the CIRP was initiated on 9-8-2017, following the order of NCLT admitting the proceedings. The period of 180 days for concluding the CIRP came to an end on 6-2-2018 and the extended period ended on 12-5-2018. When the CIRP was initiated and until the period of 270 days concluded, the homebuyers did not have the status of financial creditors under the provisions of IBC. They had no statutory voting rights in the CoC.

Under the interim directions of this Court, a workable arrangement was sought to be put into place by appointing a representative of the homebuyers on the CoC to facilitate their interests being duly borne in mind. But the point to be noted is that in the absence of a statutory recognition of the position of the homebuyers as financial creditors, the law did not allow for real and substantive entitlements to them in the CoC. These statutory entitlements have been brought in by the Ordinance in order to recognise the vital interests of the homebuyers in a real estate project and to allow

52 them a statutory status in the insolvency resolution process. Unfortunately by the time that the Ordinance came into being on 6- 6-2018, the period of 270 days had expired; the resolution plan of Lakshdeep was rejected and the IRP informed NCLT that no resolution plan had been approved within the extended period of 270 days on 12-5-2018.

47.2. Having regard to the material change which has been brought about by the amendment of the IBC by the Ordinance and the fact that this Court has been in seisin of the proceedings to ensure that the homebuyers are protected, we are of the view that it is but appropriate and to do complete justice to secure the interests of all concerned that the CIRP should be revived and CoC reconstituted as per the amended provisions to include the homebuyers. In the facts of the present case, recourse to the power under Article 142 would be warranted to render complete justice. Parliament has undoubtedly provided a period of 180 days and an extended period of 90 days to complete the process. But in the present case a peculiar situation has arisen as a result of which the status of the homebuyers which had not been recognised prior to 6-6-2018 has now been expressly recognised as a result of the amending Ordinance.

47.3. The learned counsel for the IRP submitted that in the CoC which will be reconstituted under the amended IBC, the homebuyers would have a substantial voting power so as to be able to effectively protect their interests. Moreover, this Court should follow the discipline of IBC which has been enacted by Parliament specifically to streamline the resolution of corporate insolvencies. Matters involving corporate insolvencies require expert determination. The legislature has made specific provisions which are conceived in public interest and to facilitate good corporate governance. The Court should not take upon itself the burden of supervising the intricacies of the resolution process. Accepting the suggestion of Mr Nariman (and one of the two options proposed by Mr Tripathi) of the Court appointing a committee to supervise the resolution process outside IBC will involve the Court in an insuperable burden of evaluating intricate matters of financial expertise on which Parliament has legislated to create specific mechanisms.

47.4. We are emphatically of the view that it would not be appropriate for the Court to appoint a committee to oversee the CIRP and assume the task of supervising the work of the Committee. We must particularly be careful not to supplant the mechanisms which have been laid down in the IBC by substituting them with a mechanism under judicial directions. Such a course of action would in our view not be consistent with the need to ensure complete justice under Article 142, under the regime of law. Hence, the power under Article 142 should be

53 utilised at the present stage for the limited purpose of recommencing the resolution process afresh from the stage of appointment of IRP by the order dated 9-8-2017 and resultantly renew the period which has been prescribed for the completion of the resolution process. We have furnished above, the reasons for doing so. Chief amongst them is the fact that in the present case the period of 270 days expired before the Ordinance conferring a statutory status on homebuyers as financial creditors came into existence. In the circumstances, it would be necessary to revive the period prescribed by the statute by another 180 days commencing from the date of this order. During this period, the IRP shall follow the provisions of the IBC afresh in all respects. A new CoC should be constituted in accordance with the amended provisions IBC to enforce the statutory status of the allottees as financial creditors. We also clarify that apart from the three bidders whose bids were found to be eligible by the IRP, it would be open to the IRP to invite fresh bids to facilitate a wider field of choice before the CoC. In that process, the offers made by the intervenors in these proceedings can also be considered by CoC anew. We are not inclined to evaluate the merits of the bids submitted by the bidders who were left in the fray, two of whom have intervened. All bids must follow the discipline IBC. We have, however, not accepted the submission to allow JIL or JAL and the erstwhile promoters to participate in the process. Their participation is expressly prohibited by Section 29-A and we decline to make any exception which would breach a salutary and express provision made in the IBC.” (emphasis in bold supplied)

22.5. Thereafter, this Court also took into consideration the submissions

made on behalf of some of the homebuyers for issuance of directions to

facilitate pro rata disbursement of INR 750 crores lying in deposit

pursuant to the interim directions. This Court observed that even when the

claim of the refund seekers was to be considered with empathy, such

request could not be acceded to and specified four major reasons for

declining this prayer. The consideration of this Court in relation to the said

sum of INR 750 crores, being also directly relevant for the present

purpose, could be usefully extracted as under: -

54

“48. As we have stated earlier, an amount of Rs 750 crores is lying in deposit before this Court pursuant to the interim directions, on which interest has accrued. The homebuyers have earnestly sought the issuance of interim directions to facilitate a pro rata disbursement of this amount to those of the homebuyers who seek a refund. We are keenly conscious of the fact that the claim of the homebuyers who seek a refund of monies deserves to be considered with empathy. Yet, having given our anxious consideration to the plea and on the balance, we are not inclined to accede to it for more than one reason.

48.1. Firstly, during the pendency of the CIRP, it would as a matter of law, be impermissible for the Court to direct a preferential payment being made to a particular class of financial creditors, whether secured or unsecured. For the present, we leave open the question as to whether the homebuyers are unsecured creditors (as was urged by Mr Tripathi) or secured creditors (as was urged by counsel appearing for them). Directing disbursement of the amount of Rs 750 crores to the homebuyers who seek refund would be manifestly improper and cause injustice to the secured creditors since it would amount to a preferential disbursement to a class of creditors. Once we have taken recourse to the discipline IBC, it is necessary that its statutory provisions be followed to facilitate the conclusion of the resolution process.

48.2. Secondly, the figures which have been made available presently, following the opening of the web portal by the Amicus Curiae, indicate that 8% of the homebuyers have sought a refund of their monies while 92% would evidently prefer possession of the homes which they have purchased. We cannot be unmindful of the interests of 92% of the homebuyers many of whom would also have obtained loans to secure a home. They would have a legitimate grievance if the corpus of Rs 750 crores (together with accrued interest) is distributed to the homebuyers who seek a refund. The purpose of the process envisaged by IBC for the evaluation and approval of a resolution plan is to form a composite approach to deal with the financial situation of the corporate debtor. Allowing a refund to one class of financial creditors will not be in the overall interest of a composite plan being formulated under the provisions of the IBC. 48.3. Thirdly during the course of the hearing, the Court has been apprised of the concerns of the secured creditors, chief among them being IDBI Bank Ltd. In its submissions before this Court, IDBI Bank has emphasised that one of the major reasons for the enactment of IBC was to protect the interest of lenders. The debt owing to the banks and financial institutions has been secured by the assets of JIL, to protect their interests. This debt originates in the public deposits of the banks and financial institutions, who are answerable to their stakeholders.

48.4. Fourthly, RBI has moved this Court for permission to initiate an insolvency resolution process. Parliament enacted the Banking

55 Regulation (Amendment) Act 2017 by introducing Section 35-AA and Section 35-AB into the Banking Regulation Act 1949. The amendment empowers the Central Government to authorise RBI to issue directions to any banking company to initiate an insolvency resolution process in respect of a default as understood under the IBC. Such an order was issued by the Central Government on 5-5-2017. The RBI constituted an Internal Advisory Committee (IAC) consisting primarily of its independent Directors. The IAC took up for consideration accounts which were classified either partly or wholly non-performing from amongst the top 500 exposures in the banking system as on 31-3-2017. As a first step, the IAC recommended all such non-performing asset accounts with fund and non-fund based outstandings exceeding Rs 5000 crores. The IAC has initially taken up twelve accounts involving total exposure of Rs 1,79,769 crores. JIL was one of the twelve accounts in respect of which directions have been issued to banks for initiating insolvency resolution. Subsequently, the IAC recommended that in respect of those accounts where 60% or more had been classified as NPAs as on 30-6-2017, banks may be directed to implement a viable resolution plan within six months failing which the accounts may be directed for a reference under the IBC by 31-12-2017. JAL was one such entity. No viable resolution plan could be found as a result of which it is also required to be referred for CIRP. RBI has carried out this exercise as a matter of economic policy in its capacity as the prime banking institution in the country, entrusted with a supervisory role, and the power to issue binding directions……..” (emphasis in bold supplied)

22.6. Having said so, this Court acceded to the request made on behalf

of the RBI to initiate a CIRP against JAL under IBC and thereafter

proceeded to conclude on the matter with the following directions: -

“50. We, accordingly, issue the following directions:

50.1. 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;

50.2. We direct that a CoC shall be constituted afresh in accordance with the provisions of the Insolvency and Bankruptcy (Amendment) Ordinance, 2018, more particularly

56 the amended definition of the expression “financial creditors”;

50.3. We permit the IRP to invite fresh expressions of interest for the submission of resolution plans by applicants, in addition to the three shortlisted bidders whose bids or, as the case may be, revised bids may also be considered; 50.4. JIL/JAL and their promoters shall be ineligible to participate in the CIRP by virtue of the provisions of Section 29-A; 50.5. 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;

50.6. 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 NCLT and continue to remain invested and shall abide by such directions as may be issued by NCLT.” (emphasis in bold supplied)

23. Thus, the ternary, of anxiety on the part of stakeholders to avoid

liquidation of the corporate debtor JIL; of due recognition by the

legislature of the homebuyers as financial creditors; and concern of this

Court to do complete justice in the cause while maintaining the discipline

of law, led to the improvisation in Chitra Sharma, as noticeable in the

preceding paragraphs, with revival of CIRP in relation to the corporate

debtor JIL and re-constitution of CoC with the basic aim to ensure the

resolution of insolvency of the corporate debtor JIL by way of the methods

envisaged by, and permissible under, the Code.

Another round in this Court and further enlargement of time for CIRP in question.

24. However, this resolution process concerning the corporate debtor

JIL again landed in rough weather, now due to passage of time at different

stages while dealing with another grey area i.e., method of counting of

votes in the Committee of Creditors, which led to another round of 57 litigation; and this Court had to again invoke its plenary powers to salvage

the situation in the judgment dated 06.11.2019 in the case of Jaiprakash

Associates Ltd. (supra). For their relevance, the observations made and

directions issued in that case may also be recapitulated.

25. The second round of litigation concerning this CIRP came up to

this Court in the following circumstances:

25.1. Consequent to the aforesaid directions in the case of Chitra

Sharma, the matter proceeded before the NCLT being the Adjudicating

Authority. The IRP issued public notice inviting claims from all the

stakeholders of JIL, including the homebuyers and submitted his report on

formation of the Committee of Creditors before the Adjudicating Authority

on the following basis:

37.3% in case of financial institutions, 62.3% homebuyers, and 0.4% fixed deposit holders.

25.2. However, on 17.09.2018, an application came to be made before

the Adjudicating Authority by one of the associations of homebuyers

seeking clarification as to the manner in which the voting percentage of

the homebuyers would be reckoned. The two members of NCLT

expressed difference of opinion on the issue as a result of which,

reference was made to the President of NCLT to place the matter before

the third member. Eventually, an order was passed by the third member

on 24.05.2019. This order was challenged by one of the associations of

homebuyers before NCLAT. In the meantime, IDBI Bank filed an

58 application before NCLT for excluding the period of pendency of the said

application for clarification regarding the manner of counting the votes of

the concerned financial creditors, from the period of 270 days for

completion of CIRP. However, during the pendency of such an application,

the NCLT, by its order dated 06.05.2019, called upon the authorities, the

representatives of allottees and others to file reply on the necessity to

proceed further with CIRP for considering the resolution plan received

from the concerned bidder. The IDBI Bank assailed this order of NCLT by

way of another appeal before the NCLAT.

25.3. The aforesaid two appeals were decided together by NCLAT by

way of its judgment dated 30.07.2019. The NCLAT took note of the fact

that no regulation had been framed under the Code as to how the voting

share of thousands of allottees (homebuyers) would be counted when all

of them fell within the meaning of ‘financial creditors’ and hence, were the

members of CoC. The NCLAT observed that this had been an

extraordinary situation where the law was silent and there was no

guideline which led to difference of opinion between the two members and

the matter was finally decided by the third member. The NCLAT opined

that in the given situation, certain period could be excluded while counting

the total period of 270 days. In this judgement dated 30.07.2019, NCLAT

provided for exclusion of 90 days for the purpose of counting 270 days of

CIRP from the date of receipt of the copy of its judgement. The NCLAT

also commented that the aforesaid exclusion was being provided to

59 enable calling of fresh resolution plans but reiterated that no liberty was

available to JAL in view of the observations and decision of this Court in

Chitra Sharma (supra).

25.3.1. Those observations and directions of NCLAT in its judgment dated

30.07.2019, as reproduced in the judgement of this Court dated

06.11.2019, could be usefully recounted as follows: -

“22. In view of the aforesaid extraordinary situation, we are of the view that the period from 17-9-2018 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. 4-6-2019 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 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 29-A, 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.”

60

26. The aforesaid judgement of NCLAT was assailed in this Court by

JAL and by the Wish Town Homebuyers’ Welfare Society. These appeals

raised essentially two issues before this Court: one, as to whether NCLT

or NCLAT had the power to exclude any period from the statutory period

in exercise of inherent powers sans any express provision in the Code in

that regard; and second, whether it was open to allow the bidder whose

resolution plan had already been rejected by CoC, to submit revised plan

or to invite fresh resolution plans to be considered by CoC after the

statutory period specified for submission of such plans?

27. After cogitating over the submissions made in support of the

appeals, it was clear that the inevitable fallout of accepting the stand

taken by the appellants would be to set aside the impugned judgment and

relegate the parties to a situation where the only option would be to

proceed with the liquidation process concerning JIL on the premise that

no resolution plan was received before the expiry of the period of CIRP or

being a case of rejection of the resolution plan under Section 31 of the

Code. However, during the arguments, there was complete unanimity

(again) between all the stakeholders, including the appellants before this

Court, that the liquidation of JIL must be eschewed as it would do more

harm to the interests of the stakeholders, in particular the large number of

homebuyers.

28. In the given set of circumstances and considering the position

taken by the stakeholders, this Court found it neither necessary nor

61 appropriate to dilate on the issues as urged and instead, proceeded to

again exercise the plenary powers under Article 142 of the Constitution of

India in order to ensure substantial justice in the cause. In the process,

this Court, of course, rejected the suggestions given by a section of

homebuyers to keep the entire process outside the dispensation under

the Code with reference to the observations already made in the case of

Chitra Sharma (supra), but found it justified to modulate a part of such

directions, to the extent such modulation would not stand in conflict with

the legislative intent and subserve the cause of justice, by providing a

window to find out a viable solution. This Court also took note of various

amendments brought about to the Code and the CIRP Regulations; and

the overall circumstances of the case, where delay in completion of CIRP

relating to JIL was attributable to law’s delay and neither homebuyers nor

other financial creditors were to be blamed for pendency of proceedings

before NCLT and before NCLAT. In the peculiar, rather extraordinary,

situation obtaining in the matter, this Court considered it appropriate to

ensure that an attempt was made for revival of the corporate debtor JIL,

lest it was exposed to liquidation process and for that matter, to permit

IRP to reissue the request for resolution plan to the two bidders who had

earlier submitted the plans and to call upon them to submit revised

resolution plans, which could be placed before CoC. In the process, this

Court also took note of the time limit for completion of insolvency

resolution process as per third proviso to Section 12(3) of the Code,

62 which came into effect from 16.08.2019. The relevant observations of this

Court could be usefully reproduced as under: -

“16. Suffice it to note that an extraordinary situation had arisen because of the constant experimentation which went about at different level due to lack of clarity on matters crucial to the decision-making process of CoC. Besides that, in view of the recent legislative changes, the scope of resolution plan stands expanded which may now include provision for restructuring the corporate debtor including by way of merger, amalgamation and demerger and more so the power bestowed on CoC to consider not only the feasibility and viability of the resolution plan but also the manner of distribution proposed, which may take into account the order of priority amongst the creditors. Additionally, the recently inserted Section 12-A enables the adjudicating authority to allow the withdrawal of an application filed under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of 90% voting share of the CoC. Similarly, sub-clause (7) of Regulation 36-B inserted with effect from 4-7-2018, dealing with the request for resolution plans unambiguously postulates that the resolution professional may, with the approval of the Committee, reissue request for resolution plans, if the resolution plans received in response to earlier request are not satisfactory, subject to the condition that the request is made to all prospective resolution applicants in the final list. In the present case, finally only two bidders had participated and submitted their resolution plan which was placed before CoC and stated to have been rejected. However, applying the principle underlying Regulation 36-B(7), we deem it appropriate to permit IRP to reissue request for resolution plans to the two bidders (Suraksha Realty and NBCC) and/or to call upon them to submit revised resolution plan(s), which can be then placed before CoC for its due consideration.

17. In the present case, as aforementioned, there is unanimity amongst all the parties appearing before this Court including the resolution applicant that liquidation of JIL must be eschewed and instead an attempt be made to salvage the situation by finding out some viable arrangement which would subserve the interests of all concerned.

18. In view of the legislative changes referred to above, we are of the considered opinion that we need to and must exercise our plenary powers to make an attempt to revive the corporate debtor (AIL), lest it is exposed to liquidation process under Chapter III of Part II of the I & B Code. We are inclined to do so because the project has been implemented in part and out of over 20,000 homebuyers, a substantial number of them have been put in possession and the remaining work is in progress and in some cases at an advanced stage of completion. In this backdrop, it

63 would be in the interest of all concerned to accept a viable plan reflecting the recent legislative changes.

19. Indeed, the third proviso to Section 12(3) predicates time-limit for completion of insolvency resolution process, which has come into effect from 16-8-2019. The same reads thus:

“Provided also that where the insolvency resolution process of a corporate debtor is pending and has not been completed within the period referred to in the second proviso, such resolution process shall be completed within a period of ninety days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.” Taking an overall view of the matter, we deem it just, proper and expedient to issue directions under Article 142 of the Constitution of India to all concerned to reckon 90 days’ extended period from the date of this order instead of the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019. That means, in terms of this order, the CIRP concerning JIL shall be completed within a period of 90 days from today.

20. We do not deem it necessary to dilate on the arguments of the respective counsel for the nature of order that we intend to pass, including about the locus standi of JAL which, in our opinion, already stands answered against JAL by virtue of Section 29-A of the Act as expounded in Chitra Sharma.”

29. In the given circumstances, this Court passed the following order

for the purpose of substantial and complete justice and in the interest of

all the stakeholders: -

“21. Accordingly, we pass the following orders to do substantial and complete justice to the parties and in the interest of all the stakeholders of JIL:

21.1. We direct the IRP to complete the CIRP within 90 days from today. In the first 45 days, it will be open to the IRP to invite revised resolution plan only from Suraksha Realty and NBCC respectively, who were the final bidders and had submitted resolution plan on the earlier occasion and place the revised plan(s) before CoC, if so required, after negotiations and submit report to the adjudicating authority NCLT within such time. In the second phase of 45 days commencing from 21-12-2019, margin is provided for removing any difficulty and to pass appropriate orders thereon by the adjudicating authority.

21.2. The pendency of any other application before the NCLT or NCLAT, as the case may be, including any interim direction given therein shall be no impediment for the IRP to receive and process the revised resolution plan from the above named two bidders and take it to its logical end as per the provisions of the I &

64 B Code within the extended timeline prescribed in terms of this order.

21.3. We direct that the IRP shall not entertain any expression of interest (improved) resolution plan individually or jointly or in concert with any other person, much less ineligible in terms of Section 29-A of the I & B Code.

21.4. These directions are issued in exceptional situation in the facts of the present case and shall not be treated as a precedent.

21.5. This order may not be construed as having answered the questions of law raised in both the appeals, including as recognition of the power of NCLT/NCLAT to issue direction or order not consistent with the statutory timelines and stipulations specified in the I & B Code and the Regulations framed thereunder.”

30. The passages above-quoted give insight as to what had been the

concern of all and what had been the intent of the orders passed by this

Court in its plenary powers. It is not far to seek that even where CIRP in

relation to JIL had been facing one hurdle after another, the principal part

of delay was not attributable to any of the stakeholders; and then, all

through, there had been unanimity that liquidation of JIL was to be

avoided and a viable solution ought to be searched. The aforesaid

directions in the judgement dated 06.11.2019 ultimately led the revised

resolution plans by the two applicants being placed before CoC and

voting of CoC in favour of the resolution plan proposed by NBCC which is

the bone of contention in this batch of matters.

31. For completion of the narrative in regard to the second round of

litigation, we may also point out that after the judgment dated 06.11.2019,

even though the process relating to the submission of revised plans and

consideration by CoC took place, but culmination of the proposal in

65 approval of the resolution plan got delayed. Hence, IRP filed one

miscellaneous application in this Court (M.A. No. 540 of 2020), pointing

out various difficulties and unavoidable circumstances which had caused

the delay though the proposal was submitted within the time frame

prescribed. While accepting the reasons stated in the application so filed

by the IRP, this Court, by another order dated 03.02.2020, extended the

time by four weeks for approval of the resolution plan. This is how the

process of approval of resolution plan culminated in the impugned order

dated 03.03.2020 by the Principal Bench of NCLT at New Delhi.36

32. Before dilating on the resolution plan in question, it appears just

and proper to narrate the features relating to yet another litigation directly

impacting the CIRP concerning the corporate debtor JIL. As indicated,

that litigation had been in relation to the application made by IRP for

avoidance of certain transactions as preferential; and in relation to the

claim of some of the lender institutions of JAL to be recognised as

financial creditors of JIL on the strength of the mortgage transactions

whereby the property of JIL was mortgaged to secure the debts of JAL.

Yet another litigation in this Court relating to preferential transactions and lenders of JAL

33. The other litigation concerning this CIRP, leading to the judgment

dated 26.02.2020 in the case of Anuj Jain (supra), came up in the

following circumstances:

36 It may be indicated in the passing that later on, a few miscellaneous applications as also interlocutory applications were filed in relation to the case of Chitra Sharma (supra), most of which were disposed of by this Court on 18.12.2019, in view of the aforesaid order dated 06.11.2019. Having regard to the points requiring determination herein, it is not necessary to dilate on those applications.

66 33.1. As already noticed, even during the pendency of proceedings in

this Court in the case of Chitra Sharma (supra), the IRP had filed an

application on 06.02.2018 seeking avoidance of certain transactions,

whereby the corporate debtor had mortgaged several parcels of its land

as collateral security for the loans and advances made by the lender

banks and financial institutions to the holding company JAL. The IRP

alleged that the transactions in question were preferential, undervalued

and fraudulent, in terms of Sections 43, 45 and 66 of the Code. By its

order dated 16.05.2018, the NCLT accepted the application so made by

IRP in relation to six out of seven transactions that were put in question

and held that those transactions were to be avoided as being fraudulent,

preferential and undervalued. In other words, in relation to such six

transactions, the security interest was ordered to be discharged and the

properties involved therein were vested in the corporate debtor, with

release of encumbrances. In appeal, the NCLAT, however, took an

entirely opposite view of the matter and by its judgement dated

01.08.2019, upturned the order so passed by NCLT, while holding that the

transactions in question do not fall within the mischief of being preferential

or undervalued or fraudulent; and that the lenders in question (the lenders

of JAL) were entitled to exercise their rights under the Code. Aggrieved,

the IRP as also one of the creditors of the corporate debtor JIL and the

associations of homebuyers preferred appeals in this Court.

67 33.2. Apart from the above, during the course of CIRP, two of the lender

banks of JAL sought inclusion in the category of financial creditors of JIL

but IRP did not agree and declined to recognise them as such. Being

aggrieved, the said banks preferred separate applications under Section

60(5) of the Code before NCLT while asserting their claim to be

recognised as financial creditors of the corporate debtor JIL, on account

of the securities provided by JIL for the facilities granted to JAL. The

NCLT rejected the applications so filed by the said banks, by way of its

orders dated 09.05.2018 and 15.05.2018, while concluding that on the

strength of the mortgage created by the corporate debtor JIL, as collateral

security of the debt of its holding company JAL, the lenders of JAL could

not be categorised as financial creditors of JIL. The appeals filed by the

aggrieved lenders of JAL against the said orders dated 09.05.2018 and

15.05.2018 were purportedly allowed as per the result recorded in the

impugned order dated 01.08.2019. Aggrieved, one of the lenders of the

corporate debtor JIL preferred an appeal in this Court, while asserting that

such mortgagees could not be taken as financial creditors of the

corporate debtor JIL.

34. The aforesaid two appeals, relating to avoidance of preferential

transactions and the claim of lender banks of JAL to be recognised as

financial creditors of JIL, were considered together and allowed by this

Court by way of the common judgement dated 26.02.2020 in the case of

Anuj Jain (supra).

68 34.1. As regards the transactions in question, this Court held that they

had been of deemed preference to related party by the corporate debtor

JIL during the look-back period of two years and were covered within the

period envisaged by Section 43(4) of the Code. This Court also held that

clause (a) of sub-section (3) of Section 43 of the Code called for

purposive interpretation so as to ensure that the provision operates in

sync with the intention of legislature; and therefore, the expression “or”,

appearing as disjunctive between the expressions “corporate debtor” and

“transferee”, ought to be read as “and”; so as to be conjunctive of the two

expressions i.e., “corporate debtor” and “transferee”. Having interpreted

the provision so, this Court held that the impugned transactions did not

fall within the ordinary course of business of the corporate debtor JIL and

hence, were not of excepted transfers in terms of Section 43(3) of the

Code. Accordingly, this Court held as under: -

“Summation: The transactions in question are hit by Section 43 IBC

30. For what has been discussed hereinabove, we are clearly of the view that the transactions in question are hit by Section 43 of the Code and the adjudicating authority, having rightly held so, had been justified in issuing necessary directions in terms of Section 44 of the Code in relation to the transactions concerning Properties Nos. 1 to 6. NCLAT, in our view, had not been right in interfering with the well-considered and justified order passed by NCLT in this regard.”

34.2. As regards the second question concerning the status of the

lenders of JAL, this Court observed that when the transactions in question

were found preferential and hit by Section 43 of the Code, they were

denuded of their value and worth; and the security interest created by the

69 corporate debtor JIL over the property involved in those transactions

stood discharged in whole; and, therefore, such lenders of JAL cannot

claim any status as creditors of the corporate debtor JIL much less as

financial creditors. However, the question as regards the status of such

lenders of JAL qua the corporate debtor JIL was examined independent of

the findings that the transactions in question were hit by Section 43 of the

Code, with the following observations: -

“34.4. We may, of course, reiterate that in view of the conclusion that we have reached in relation to the principal issue, the transactions in question are denuded of their value and worth, per the force of the order by NCLT under Section 44 of the Code, which has been approved by us. To be most specific, the security interests created by the corporate debtor JIL over the properties in question stand discharged in whole. Therefore, the respondent lenders cannot claim any status as creditors of the corporate debtor JIL and there could arise no question of their making any claim to be treated as financial creditors as such. However, for its relevance, we deem it appropriate to determine the issue as to whether the lenders of JAL, because of creation of the mortgages in question, could be treated as financial creditors of JIL, independent of the finding that the transactions in question are hit by Section 43 of the Code.”

34.3. Thereafter, this Court dealt with the rival submissions relating to

the status of such lenders of JAL and held that they, on the strength of the

mortgages in question, might fall in the category of secured creditors but,

for the reason that the corporate debtor did not owe them any financial

debt, such lenders of JAL were not falling in the category of financial

creditors of the corporate debtor JIL. This Court summed up the

conclusion on this issue in the following terms: -

“Summation on second issue

57. For what has been discussed hereinabove, on the issue as to whether lenders of JAL could be treated as financial creditors, we

70 hold that such lenders of JAL, on the strength of the mortgages in question, may fall in the category of secured creditors, but such mortgages being neither towards any loan, facility or advance to the corporate debtor nor towards protecting any facility or security of the corporate debtor, it cannot be said that the corporate debtor owes them any “financial debt” within the meaning of Section 5(8) of the Code; and hence, such lenders of JAL do not fall in the category of the “financial creditors” of the corporate debtor JIL.”

35. It would be relevant to notice that the parcels of land forming the

subject of seven questioned transactions were admeasuring about 858

acres; and while leaving 100 acres of land forming the subject of seventh

transaction, which was not declared as preferential, a chunk of 758 acres

of land, which earlier carried encumbrances because of the mortgages in

favour of the lenders of JAL, got released with the judgement delivered by

this Court and stood vested in JIL free from encumbrances. The

judgement was delivered by this Court on 26.02.2020, after voting by CoC

on the resolution plan in question but before the impugned order of NCLT

dated 03.03.2020.

36. The foregoing narrative in relation to the past litigations has

essentially been to flag and accentuate those attributes of the decisions of

this Court which carry their own relevance, bearing and implications on

the issues involved in the present batch of matters.

37. Continuing with the narrative, we may now take up the impugned

resolution plan, propounded by the resolution applicant NBCC and voted

in favour by CoC with an overwhelming majority of 97.36%.

The Resolution Plan

71

38. As noticed, by the order dated 06.11.2019, this Court directed IRP

to complete the CIRP within 90 days from the date of the order; and for

that matter, it was provided that in the first 45 days, it would be open to

the IRP to invite revised resolution plans only from the two applicants

namely Suraksha Realty and NBCC, who were the final bidders and had

submitted resolution plans on the earlier occasion, and to place the

revised plan(s) before the CoC.

38.1. From the facts stated before us, it is borne out that the revised

resolution plans were called from the said applicants and were placed for

consideration in the 16th Meeting of CoC held on 07.12.2019. Having

considered the resolution plans, the members of CoC requested the

resolution applicants to improve their offers and thereupon, both the

resolution applicants agreed to submit addendums to their revised

resolution plans. Accordingly, Suraksha Realty submitted an addendum to

the resolution plan on 07.12.2019 and NBCC submitted its addendum to

the resolution plan on 08.12.2019. Then, with the certificate dated

08.12.2019 from IRP that the resolution plans submitted by Suraksha

Realty and NBCC were fully compliant under Section 30(3) of the Code

read with Regulation 39(2) of the CIRP Regulations, the plans along with

the respective addendums were put to e-voting from 9 a.m. of

10.12.2019, until 11.59 p.m. of 16.12.2019.

38.2. In the voting by CoC, the resolution plan submitted by NBCC

along with addendum was approved by a vote of 97.36% of voting share

72 of the financial creditors in favour. On the other hand, the plan submitted

by Suraksha Realty could muster only a vote of 2.12% of voting share of

the financial creditors. The voting results were circulated by the IRP to the

members of CoC on 17.12.2019; and, on the instructions of CoC, the IRP

issued the Letter of Intent on 17.12.2019, which was duly accepted by

NBCC.

38.3. In compliance of the order dated 06.11.2019 passed by this Court,

the IRP filed the application bearing C.A. No. 5 of 2020 in C.P. (IB) No.

77/ALD/2017 seeking approval of the resolution plan of NBCC under

Section 30(6) read with Section 31 of the Code before the Allahabad

Bench of NCLT on 20.12.2019. Later on, the Principal Bench of NCLT at

New Delhi transferred the proceeding to itself and that is how the

impugned order dated 03.03.2020 came to be passed by the Adjudicating

Authority (NCLT, New Delhi) within the time allowed by this Court.

39. For its very nature and for various requirements of the provisions

contained in the Code as also in the CIRP Regulations, the resolution

plan in question is a vast document carrying business plans, financial

proposals including that of treatment of creditors, equity commitment,

projected steps and expected reliefs and concessions. We shall refer to

the particular stipulation/s in this plan at the relevant stage while dealing

with the specific issue related therewith. However, an overview of the

resolution plan shall be apposite to take note of its concept and salient

features. In this regard, we may usefully reproduce the summary of

73 resolution plan placed before us by the IRP. This summary is subdivided

into different parts namely, (1) claims and their treatment; (2)

implementation of the plan; (3) key reliefs sought for by NBCC; (4) status

of project; and (5) annexure 1, being a part of the implementation

process.

39.1. The summary of claims and their treatment under the resolution

plan is as under: -

S. Type of Admitted No. Creditor Claim Treatment under the NBCC (INR Resolution Plan Crores)

1. Banks/ 9,783  Transfer of ownership of 1526 acres in Financial various land parcels of JIL. NBCC has Institutions estimated value of 1526 acres at INR 5,001 Cr.

 Transfer of 100% ownership of Yamuna Expressway including, the remaining concession rights of Yamuna Expressway. Yamuna Expressway will be hived off into a SPV.

Expressway SPV will raise fresh borrowings of INR 2,200 Crore and pay it to JIL as part of the consideration for transfer of Expressway. This money will be used by NBCC for construction of units.

2. Allottees of 9,588  Allottees to get completed units as per Real Estate (Principal Schedule A, which ranges from 9 amount) months to 42 months from date of transfer to NBCC.

 No delay penalty to be paid for past delays units to be constructed and delivered by NBCC. NBCC will pay Delay Penalty @ INR 5 per sq. ft./per month only if there is delay in delivery of

74 more than 1 year from the delivery dates mentioned in Schedule A subject to Force Majeure event.

 Allottees who have not filed their Claims (Approx. 2,100 in number) shall be treated in a manner similar to other allottees and will be provided units, subject to customary check for compliances and KYC of the customers. 3. Fixed Deposit 29  100% upfront payment of FD Holders’ Holders Note: FD (only such Claims of FD Holders as are holders of forming part of the Admitted Financial approx. 90 Debt) principal dues amounting to INR Crore did 29 Cr within 90 days from the Approval not file Date. Claims.  Liability for other FD holders (approx. INR 90 Crore) who have not filed their respective claims will be relinquished.

4. Refund 64  The entire admitted claim of the Refund Seekers (Principal Seekers shall be settled by payment of (Allottees and amount) an amount not exceeding INR 62.40 Cr, customers) of which 20% shall be paid upfront and the remaining amount shall be paid equally over a period of 4 years i.e. 20% each year in the manner provided under the Resolution Plan.

5. Operational 464  The Total Operational Debt of 464 Crore Creditors is proposed to be settled by payment of INR 20 Cr. This includes Claim of Yamuna Expressway Industrial Development Authority (YEIDA) towards development charges, etc.  Claim of YEIDA for approx. INR 6000 Crore has not been admitted by IRP since these pertain to future obligations for maintenance of toll road (which have not become due) and sub-judice matters relating to additional farmer compensation. 6. Employees/ workmen of No Claim  All dues are paid upto date. the Corporate Debtor 7. Dissenting  Proportionate share in the equity of the

75 Financial 612 Yamuna Expressway SPV and land Creditors parcel of 1526 acres on liquidation (other than value. allottees) 8. Equity  NBCC to become 100% shareholder of Shareholders 1,388 JIL. Rs. 1 crore to existing shareholders towards consideration. Delisting of equity shares of JIL.

9. Jaypee  Jaypee Healthcare Limited (JHL) is Healthcare 100% subsidiary of Corporate Debtor. Limited NA NBCC proposes to divest the entire (Subsidiary shareholding of JHL or transfer to a Company) Trust for the purpose of sale.  The lenders of JHL shall not be entitled to deal with the assets or adversely interfere with the continued business operations of JHL in any manner whatsoever.

39.2. In the summary of the implementation process, by way of a flow

chart, various steps have been indicated which include formation of

different SPVs; raising of fresh debts of about INR 2,000 crores by

securitisation of Yamuna Expressway; transfer of rights of Yamuna

Expressway against equity shares and debt disbursement; transfer of

1,526 acres of land worth INR 5,001 crores, bank loan of INR 5,000

crores and issuance of equity of INR 1 crore; diversification of JHL;

infusion of INR 120 crores equity etc. etc.

39.2.1. The IRP has, in this summary, also indicated other key

implementation provisions, most of which are the matters of contention in

this litigation. That summary reads as under: -

“Other key implementation provisions

76

- Deemed approval of YEIDA for transfer of Land and Toll road to designated SPV’s without incurring any cost such as stamp duty, transfer charges, Etc.

- Liability for additional farmer compensation (presently sub-judice) not payable by JIL. Alternatively, if found payable, YEIDA to collect is directly from end user.

- Transfer of INR 750 crores (plus interest) deposited by JAL, pursuant to the order of the Hon’ble Supreme Court to be transferred to JIL and to be used exclusively for construction of houses.

- JAL to pay amount due to JIL (approx. INR 500) (INR 716 Crores on insolvency commencement date) to JIL.”

39.3. The key reliefs sought for by NBCC in the resolution plan are

summarised as under: -

Sl. Matter Key Reliefs sought No. 1. INR 750 Crore (along with interest) NBCC has retained the right to withdraw deposited by Jaiprakash its Resolution Plan in case INR 750 Cr Associates Ltd. (JAL), holding along with interest accrued thereon is company of JIL with the Hon’ble not made available to JIL. Supreme Court in Writ Petition (Civil) No. 744/2017. 2. Enforcement Directorate has JIL to be discharged from PMLA and initiated investigation under the other investigations. NBCC has retained Prevention of Money Laundering the right to withdraw from its Resolution Act, 2002 (“PMLA”) against JIL. Plan in case the said relief is not granted. 3. 858 acres of JIL’s land was NBCC has sought relief that 858 acres mortgaged with JAL lenders to of mortgaged land shall continue to be secure debt of JAL without any vested in JIL free of any mortgage, consideration or counter guarantee charge and encumbrance subject to the to JIL (Transaction). orders of the Hon’ble Supreme Court. Note: In the meanwhile, out of 858 acres, the Hon’ble Supreme Court vide order dated 26.2.2020 have set aside mortgage of 758 acres as avoidance transaction.

4. Deemed approval of YEIDA for Approval of the Adjudicating Authority business transfer shall be binding on YEIDA and

77 constitute adequate approval by YEIDA for any business transfer to be undertaken between the Corporate Debtor and Expressway SPV.

As per NBCC, no separate approval will be required for ‘carve-out’ and transfer of lands to land bank SPV and toll road to Road SPV as contemplated in the plan.

5. Income Tax Liability On account of transfer of land parcels from YEIDA to JIL in terms of the Concession Agreement, the Income Tax authority has been making an addition to the income of approximately INR 3,000 Cr on an annual basis estimated by the Resolution Applicant to be a tax demand of INR 33,000 Cr. for a period of 30 years, treating the transfer of land parcels as the revenue subsidy. This amount is being treated as operational debt and is being settled in accordance with the Resolution Plan.

6. INR 716 Cr advance to JAL on INR 716 Cr was advanced to JAL Insolvency commencement date towards construction work and (subsequently this amount has maintenance charges/deposit. This reduced to approx. INR 500 crore) amount of INR 716 Cr outstanding from JAL shall also be available to JIL for the purpose of completion of flats to the Home Buyers and other associated purposes.

In case the relief is not granted, the assets currently owned by the JIL and being used by the home buyers of JAL relating to maintenance, shall not be available to the home buyers of JAL with effect from the Approval Date.

7. Additional FAR appeal by YEIDA YEIDA to withdraw the appeal filed in the District Court, Gautam Budh Nagar challenging the award dated 23.1.2017 passed by arbitral tribunal pertaining to additional FAR and JIL to get the right to use additional FAR as per the Resolution Plan.

8. Additional Compensation to Any Claim/claim of YEIDA in future w.r.t.

erstwhile land owner (for both real the land acquired and transferred to JIL

78 estate parcels and land acquired by YEIDA (in terms of the Concession for toll road) Agreement), if any, shall only be recoverable by YEIDA directly from the actual lease holders (i.e. the sub-

lessees) on such date and no Claim/claim shall lie against JIL or NBCC.

9. Extension of Concession Period To ensure feasibility and viability of this Resolution Plan, YEIDA and other concerned authorities shall extend the concession period (currently 36 years) under the Concession Agreement for an additional period of ten years.

10. Liability to repay of capital cost This liability shall stand extinguished, on pertaining to Noida-Greater Noida account of failure of YEIDA to allow JIL Expressway to collect and retain toll/fee from the users of the Noida-Greater Noida Expressway during the term of the Concession Agreement.

39.4. The timelines and methods for implementation have been indicated

in the annexure to this summary which reads as under: -

S. Actions Timelines No.

1. Incorporation of NBCC SPV for acquisition of 100% Within 90 days of shareholding of JIL Approval Date

2. Infusion of Equity Commitment by NBCC SPV into the Upto a maximum of Corporate Debtor towards acquisition of 100% INR 120 Cr within shareholding in the Corporate Debtor 90 days of taking over the Corporate Debtor in the form of Equity/Quasi-

Equity/Debt.

3. De-listing (with exit price of INR 1 Cr to the public Within 90 days of shareholders) and extinguishment of the shares of Approval Date Non-Promoter Shareholders and Existing Promoters

4. Incorporation of Expressway SPV by the Corporate Within 90 days of Debtor Approval Date

79 Transfer of Yamuna Expressway asset from the Within 90 days of Corporate Debtor to the Expressway SPV by way of Approval Date business transfer or any other tax efficient transfer mechanism for a consideration equal to the book value of the Yamuna Expressway in the books of the Corporate Debtor

Transfer/Novation of Institutional Financial Creditor’s dues to an extent of INR [Fresh Debt – (less) 2000 Cr] from the Corporate Debtor to the Expressway SPV.

Issuance of optionally/non-convertible Debentures by Expressway SPV to the Corporate Debtor amounting to INR 2,200 Cr

Issuance of equity shares by Expressway SPV to the Corporate Debtor for the balance consideration (i.e. book value of the Yamuna Expressway in the books of the Corporate Debtor –(less) INR 2,200 Cr – (less) transferred/novated debt)

Expressway SPV to avail indebtedness in consultation with the CoC aggregating to a minimum of INR 2,000 Cr (“Fresh Debt”) from the Expressway Lenders by securitizing future cash flows of the Expressway

5. Payment of unpaid CIRP Costs Within 90 days of Approval Date

6. Payment of the Operational Debt to Operational INR 20 Cr or the Creditors (other than the workmen dues as above) of liquidation value, if the Corporate Debtor any due to the Operational Creditors in terms of Sections 30 and 53 of the Code (other than the workmen dues as above), whichever is higher, shall be paid in full before any payment to the Financial Creditors.

7. Payment of transferred/novated debt of INR [Fresh Debt – (less) 2000 Cr] by Expressway SPV to the Institutional Financial Creditors

80

8. Payment of an amount not exceeding INR 29 Cr Within 90 days of forming part of the Admitted Financial Debt to FD Approval Date Holders subject to conditions as specified in the Resolution Plan

9. Payment of INR 2,000 Cr. by Expressway SPV to the Within 90 days of Corporate Debtor towards part redemption of the Approval Date optionally/non-convertible debentures

10. Conversion of Admitted Financial Debt (due to Within 90 days of Institutional Financial Creditors) into equity shares of the Approval Date the Corporate Debtor and subsequent reduction of share capital to extinguish the shareholding of Institutional Financial Creditors in the Corporate Debtor in entirety

11. Incorporation of Land Bank SPV and issuance of Within 90 days of equity shares by the Land Bank SPV to the tune of INR the Approval Date 1 Cr which shall be subscribed to by the Corporate Debtor Transfer of land worth INR 5,001 Cr* Jaganpur-187 acres, Mirzapur- 170 acres, Tappal-550 acres and Agra-619 acres (the specific land parcels to be transferred to the Land Bank SPV at the aforesaid locations shall be at the discretion of the Resolution Applicant) total admeasuring 1,526 acres from the Corporate Debtor to the Land Bank SPV by way of a business transfer or any other tax efficient transfer mechanism

Transfer/Novation of Admitted Financial Debt (due to the Institutional Financial Creditors) to an extent of INR 5,001 Cr from the Corporate Debtor to Land Bank SPV

Transfer of 100% shareholding of the Land Bank SPV from the Corporate Debtor to the Institutional Financial Creditors

12. Transfer of equity shares from the Corporate Debtor to Within 90 days of Institutional Financial Creditors equivalent to 100% the Approval Date equity share capital of Expressway SPV for a consideration equal to their then outstanding debt to be paid by way of settlement of the outstanding debt to the same extent

13. Delivery of constructed flats to the Home Buyers As per the Delivery towards satisfaction of their Claims Schedule set out in Annexure A.

81

14. Payment of an amount not exceeding INR 62.40 Cr to 20% of INR 62.40 the Refund Seekers towards their admitted claims Cr. within 90 days of the Approval Date, remaining amount to be paid shall be paid equally over a period of 4 years i.e. 20% each year in the manner provided under this Plan

15. Redemption of remaining amount of INR 200 Cr by the Any time prior to Expressway SPV to the Corporate Debtor the monetization of the Expressway Asset by the Institutional Financial Creditors.

40. As noticed, on this resolution plan being presented for approval

before the Adjudicating Authority, various objections were raised by

various stakeholders. All such objections and the prayer for approval of

the resolution plan were considered analogously; and the Adjudicating

Authority has, by its order dated 03.03.2020, proceeded to approve the

plan with a few modifications and with certain directions. This order dated

03.03.2020 is the matter of challenge for one reason or another by the

parties before us. For their relevance, it would be appropriate to take note

of the salient features of this order in necessary details.

Order dated 03.03.2020 by the Adjudicating Authority in approval of the resolution plan with modifications

41. The order dated 03.03.2020, as passed by NCLT in exercise of its

jurisdiction under Section 31 of the Code, could be reasonably divided in

five segments. In the first place, the NCLT recounted the relevant

82 background aspects leading to the CIRP in question and the orders

passed by this Court in the aforementioned three rounds of litigation in the

cases of Chitra Sharma, Jaiprakash Associates Ltd. and Anuj Jain

(supra). Secondly, the NCLT dealt with the issue relating to the said INR

750 crores deposited by JAL in terms of the interim orders passed by this

Court in the case of Chitra Sharma and which was to abide by the

directions of NCLT in terms of the final judgement in Chitra Sharma.

Thirdly, the NCLT examined the resolution plan and summarised its

propositions, projections and stipulations. Thereafter, in the fourth

segment, the NCLT dealt with the objections against the resolution plan

by several persons/entities, including JAL and its stakeholders, ICICI

Bank, YEIDA, some of the aggrieved homebuyers, YES Bank and the

agreement holders. In the fifth segment, the NCLT generally dealt with the

clauses relating to the reliefs and concessions in the resolution plan as

also various other applications filed by different stakeholders. For their

relevance, the material observations and findings of the Adjudicating

Authority (NCLT) in its order dated 03.03.2020 could be relayed

sequentially.

42. In the first part of the order dated 03.03.2020, the NCLT referred

to the very same background aspects which we have already recited

hereinbefore, namely, the award of contract for construction of

Expressway to JAL, incorporation of JIL as special purpose vehicle, the

Concession Agreement extended by YEIDA, taking up of the projects by

83 JIL for laying of Expressway and developing residential flats, JIL having

collected money from homebuyers but having failed to deliver flats to

them and having also defaulted in payment of loan instalments, initiation

of CIRP and litigation in this Court in the case of Chitra Sharma (supra).

The NCLT traversed through all the aforementioned relevant interim

orders and final judgment in Chitra Sharma. The NCLT also took note of

the directions of this Court in the judgment dated 06.11.2019 in the case

of Jaiprakash Associates Ltd. and in the judgment dated 26.02.2020 in

the case of Anuj Jain.

43. In the second part, in relation to the said amount of INR 750

crores and accrued interest thereupon, the NCLT took note of a vast

variety of submissions made by different claimants, which may also be

usefully recounted as follows.

43.1. It was submitted on behalf of JAL, who moved an application

seeking return of the said sum of INR 750 crores, that when the Supreme

Court had declined the request of homebuyers for pro rata distribution of

the said amount and had transferred the same to NCLT, the amount could

not be appropriated for any purpose other than refunding it to JAL. It was

submitted that the said deposit of INR 750 crores had acquired the

character of constructive trust and this amount was required to be

refunded to JAL on the principles enshrined in Sections 77 and 83 of the

Indian Trusts Act. It was further submitted that since the Supreme Court

had nowhere directed either to pay the remaining balance or to utilise this

84 money towards refund of homebuyers’ money, it had to be treated as the

money of JAL and returned accordingly. It was also submitted that as per

CIRP Regulations 36 and 37, only the properties of the corporate debtor

were subject to the resolution process and the amount deposited by JAL,

being not the asset of the corporate debtor, was required to be returned.

Such submissions of JAL were duly supported by ICICI Bank, the leader

of the consortium of banks, who had lent money to JAL and it was further

submitted that in the case of Chitra Sharma (supra), the Supreme Court

directed the promoters of JAL to deposit INR 2,000 crores in order to

ensure that the homebuyers were not left remediless and their money

could be refunded but after amendment to IBC, the Supreme Court

neither ordered such refund nor insisted upon the promoters of JAL to

deposit the remaining balance of INR 1,250 crores, but simply delegated

this work to the NCLT to proceed with CIRP and to approve the resolution

plan in accordance with IBC. It was submitted on behalf of ICICI Bank

that there being no specific direction by the Supreme Court to utilise this

money for the financial creditors of JIL, the same was required to be

returned to JAL. The promoter-directors of the corporate debtor also filed

an affidavit stating that no part of this money was deposited by JIL and

the same was not handed over to JIL for any purpose whatsoever; and

that the Supreme Court had never held that JAL was legally bound to

contribute funds required for completing the projects of JIL. On similar

lines, the appellant Pankaj Sharma and other homebuyers of JAL also

85 prayed for release of the said amount to JAL so that it could be utilised for

the homebuyers of JAL. It was submitted that JAL itself was in financial

distress and if such a huge amount belonging to it was given to another

company, the interests of the stakeholders of JAL would be jeopardised. It

also submitted that the purpose for which the deposit was made had not

been fulfilled and it was not meant for construction of the flats of JIL and

this money, being not an asset of JIL, should be returned to JAL.

43.2. In opposition, it was submitted by the lenders of JIL, led by IDBI

Bank that in the judgement dated 09.08.2018, the Supreme Court was

conscious of the fact that this amount could not be disbursed only to one

class of creditors and hence, it was not allowed to be used for the

purpose of the refund seekers. It was further submitted that the corporate

debtor was generating revenue through collection from Yamuna

Expressway but this money, rather than being utilised for servicing the

loans provided by the institutional lenders, was being utilised towards

construction work and for running the corporate debtor as a going

concern; and in this scenario, the said amount of INR 750 crores with

interest should be distributed on pro rata basis to the lenders of JIL in

accordance with the voting share in the CoC. Along with others, IRP also

made submissions that there were 32,754 allottees to whom flats were

sold as per the records of JIL and as on 05.10.2018, 24,296 of them were

waiting for possession of their flats; and if the money was ordered to be

released for construction and development of the projects of the

86 corporate debtor, it would provide a boost to the construction activity and

serve the larger purpose. It was submitted by IRP that as per the orders

passed by this Court in Chitra Sharma (supra), this money was intended

to protect the interests of homebuyers only. It was also pointed out that as

per the tripartite agreement involving JAL, JIL and homebuyers, JAL was

the developer of the project and was responsible for delivering

possession of flats to the homebuyers. The IRP also referred to various

orders passed by this Court in the course of proceedings in the case of

Chitra Sharma as also a settlement proposal given by JAL on

15.02.2019, stating that the said sum of INR 750 crores was to be utilised

towards revival of the business of JIL irrespective of the outcome of legal

proceedings. In the backdrop of these facts and circumstances, it was

submitted that the said amount being for the cause of homebuyers, it was

not open to JAL or its lenders or promoters or homebuyers to seek

reopening of the issue concluded by the decision of this Court.

43.3. Having noticed the length and breadth of the arguments on the

two sides, where one was supporting for utilisation of the said amount of

INR 750 crores and accrued interest for the benefit of the homebuyers of

JIL and where other side was arguing for return of the money to JAL, the

NCLT proceeded to consider as to how this money was to be dealt with.

43.4. The NCLT referred to the background in which this Court had

passed the order for deposit of the said amount where promoter–directors

of JAL and JIL were one and the same; and JIL/JAL had failed to deliver

87 flats to the homebuyers of JIL within the timelines given by them. The

NCLT observed that in the orders of this Court, JIL/JAL were directed to

deposit a sum of INR 2,000 crores towards refund of the money of

homebuyers; the Court had never treated that money as the property of

JAL; and the only reason for this Court not distributing the deposited

amount to the homebuyers was that only 8% of them were seeking refund

whereas 92% had asked for possession of the flats and, in order to avoid

preferential treatment, this issue was relegated to the NCLT. The NCLT

further observed that though JAL was per se not a debtor to the

homebuyers but, when the money had come on behalf of the debtor in

relation to a debt obligation or for discharge of an obligation, neither the

person depositing it could subsequently say that he was the owner of the

money nor the money could be construed as a trust money. The NCLT

held that this money had to be utilised to the obligation owed to the

creditors of the corporate debtor and any decision for refund of money to

JAL would be overreaching the wisdom of the Supreme Court. The NCLT,

accordingly, disposed of all the applications with respect to the issue of

INR 750 crores and held that this money is to be treated as the asset of

the corporate debtor. The relevant passages of the observations and

findings of NCLT in regard to this issue could be extracted as under: -

“51. On reading the judgments and orders of Hon'ble Supreme Court, it is evident that the Hon'ble Supreme Court is aware of the fact that JAL has deposited the money. It is aware of the fact that JIL money has gone to JAL for construction of the towers to the homebuyers of JIL, it is a fact that promoter-directors of JIL and JAL are one and the same. It is a fact that JIL/JAL failed

88 to deliver flats to the homebuyers of JIL within the timelines given by them. In all the orders of the Hon'ble Supreme Court, it has only been said that JIL/JAL shall deposit Rs. 2000 crore towards the refund of homebuyers money. It has not been treated that money as the money of JAL. On reading all the orders of the Hon'ble Supreme Court, all that could be ascertained is the Hon'ble Supreme Court endeavoured to claw back the homebuyers’ money from JIL and JAL. In that pursuance, JAL deposited Rs. 750 crore. The only criteria for not distributing this Rs. 750 crore to the homebuyers is that only 8% of the homebuyers sought for refund of the money whereas 92% homebuyers have asked for flats, therefore to avoid preferential treatment, this issue has been relegated to the NCLT to deal with in accordance with IBC. One more fact is, though Hon'ble Supreme Court initially stayed the proceedings of CIRP, subsequently vacated the stay and allowed the IRP to proceed with CIRP.

52. In the backdrop of these facts and in the light of submissions made by either side, let us see what the Honourable Supreme Court held in Chitra Sharma “Directing disbursement of the amount of Rs. 750 Crore to the Homebuyers who seek refund would be manifestly improper and cause injustice to the Secured Creditors since it would amount to preferential treatment to a class of creditors” (Para 48.1 of Chitra Sharma case (2018) 18 SCC). This being the observation, now the point before us is how to go about it. It has not been said anywhere in the observation that this money should go back to JAL. Moreover the Hon'ble Supreme Court has not asked JAL/JIL to deposit the money on the condition that it would be returned to JAL in the event it has not been distributed to JIL homebuyers. It has not been said anywhere that it is the money of JAL.

53. It is a fact that if homes are not delivered within the time, the only recourse is either to complete the homes or to refund the money. Once a contract is not performed as stated under an agreement entered between the parties, if the party advanced money is entitled for refund of the money, the jural relation in between the person given the money and the person taken the money will become creditor and debtor relation. When such money has come back from the debtor to the creditor or to a person in between for the cause of the creditor, it can never be called as the money of the debtor, it has to be treated as money returned to the creditor.

54. In this case, JAL has admittedly failed to complete the projects as stated by JIL and JAL. It is not the case that this money was given for charitable purpose. It is not the case that this money was deposited with the Hon'ble Supreme Court on the condition that it would be returned to JAL in the event it has not been distributed to the homebuyers. As long as debtor is liable to pay

89 money to the creditor, once it has been deposited towards that payment, it can't be stated that money belongs to the debtor.

*** *** ***

56. ICICI Bank Counsel has argued that money is fungible, therefore unless money has gone out from JAL for repayment, it can't be said as money deposited by JIL is the money payable to JIL homebuyers.

57. No doubt money is fungible, but obligation to repay is not fungible, therefore when money is deposited or clawed back to repay it to the creditor, the money being fungible and there being an obligation for repayment, it can no more be considered as money owned by the debtor. Though JAL is per se not a debtor to the Homebuyers, when money has come on behalf of the debtor in relation to a debt obligation or for discharge of an obligation, the person deposited it towards that obligation cannot subsequently say that he is the owner of the money, therefore entitled for return of it.

58. If trust concept is examined, we will know that trust is a relationship where property/money held by one party for the benefit of another party. Trustee holds the property/money for the benefit of the trust beneficiaries. Trustee is under fiduciary duty to ensure that the property of the owner is maintained and the benefit thereof is reached to the persons to whom it is intended to. In the case of trust, the owner is under no obligation to pass on the benefit to the beneficiary, therefore, the owner/settler being the owner of the property, he is entitled to take it back in the event it is not utilized for the purpose the owner intended to. But that is not the case when money from the Debtor or on behalf of the Debtor has gone out towards discharge of an obligation. In the case of trust, ownership of that property or money remains with the owner as long as it is not utilized for the purpose intended to. That owner has no obligation to part with his property/money.

59. In case of homebuyers’ issue, once homebuyers entered into an agreement with a developer and when their relations entered into turbulence and not in a position to become normal, the relation in between them will become creditor and debtor and the person under obligation shall refund the money of the homebuyers. In the given case, JAL deposited money on behalf of JIL for utilization of the same to the homebuyers of the Corporate Debtor. Therefore, it is evident that this deposit is made towards an obligation. When any money is received towards an obligation, it can neither be construed as trust money nor construed as governed by constructive trust, therefore we have not found any merit to say that this money is governed by trust concept.

60. In this case, the homebuyers’ money has been lying with the Corporate Debtor and JAL, it is an admitted fact that money come from the Homebuyers has gone to JAL in the name of

90 construction. It is not the case of the JAL that JIL money has not come for construction. Moreover, JAL, by the time it has deposited, was aware that it was depositing that money towards the obligation owned to JIL homebuyers.

61. Here there could not be any assumption or presumption to say that JAL deposited this money before the Honourable Supreme Court with an assumption that it would come back to it in the event this money has not been utilized for the distribution of it to the homebuyers of JIL.

62. As long as the Hon'ble Supreme Court has not stated that this money has to be returned to JAL, it has to be construed that the Hon'ble Supreme Court has consciously retained the money within the custody of it and thereafter transferred this money to NCLT with a direction that the parties shall abide by the directions of NCLT. Had the Hon'ble Supreme Court has felt that it should go back to JAL, the Honourable Supreme Court would have returned it to JAL, but it has not been done. Whenever any payment is made towards any liability, it has to be treated as a payment made towards that liability. It does not matter who paid the money, it matters as to whether it has been paid towards an obligation or not. Since JAL has without any objection or condition paid to the homebuyers of JIL on behalf of JIL, it has to be treated that the payment is towards the obligation of JIL. Though it has not been explicitly explained that JAL paid on behalf of JIL, the matter pending before the Hon'ble Supreme Court being with regard to homebuyers of JIL, when money was asked to be deposited towards refund of JIL homebuyers, and the same being paid by JAL, now it is not open to JAL to say that it is JAL’s money.

63. As to the argument saying that for Rs. 750 Crore has not gone into the books of Corporate Debtor (JIL), therefore it cannot be treated as the asset of JIL, when money has been deposited on the directions of Honourable Supreme Court and that has not been returned by Honourable Supreme Court, we are only limited to understand that the Honourable Supreme Court has not refunded the money because refunding to a few creditors in preference to other creditors would become a preferential treatment, therefore such observation cannot be extrapolated to say that the Hon’ble Supreme Court has refused to refund the money on the assumption that this money has to go back to JAL.

64. If we see the situation in the perspective of the historical facts, it is evident that homebuyers paid money, JIL and JAL failed to deliver homes to the homebuyers, therefore the obligation lies upon JIL to satisfy that obligation either by refunding the money or by delivering homes to the homebuyers, for neither of the things being done, the money having passed from JIL to JAL, and part of it having come back as per the orders of the Hon'ble Supreme Court, now it is not open either to JAL or its creditors to canvass that this money is belonging to JAL.

91 65. In view thereof, we hereby consider that this money has to be utilized to the obligation owed to the creditors of the Corporate Debtor and in case this Bench for any reason passes any order for return of this money to JAL, it would be nothing but overreaching the wisdom of the Hon'ble Supreme Court and its directions. When money has been paid by JAL towards an obligation as per directions of the Hon'ble Supreme Court, it can no more be considered as the assets of JAL. As to whether it has been stated in the information memorandum that this Rs. 750 Crore is an asset of the Corporate Debtor or not, every case has to be seen in the context of its facts. If at all for any reason, this is not shown as the asset of the corporate Debtor in the information memorandum, can it be said that the Hon'ble Supreme Court transferring the deposit to NCLT has no meaning? Any order that has been passed by the Hon'ble Supreme Court, is binding on all Courts and Tribunals, for there being no direction to return this money to JAL or to determine as to whether it has to be paid to JAL or not, it is not open to this Bench to draw any inference other than an inference considering that this money is an asset of the Corporate Debtor. Since JAL is not under further obligation to complete construction of homes, there is no occasion to assume that if this money go back to JAL, it would be utilized for the cause of the creditors of the Corporate Debtor, in view thereof, we hereby dispose of all CAs related to Rs. 750 Crore issue by holding that this money is to be treated as the asset of the Corporate Debtor.”

44. After having dealt with the issue of INR 750 crores, the NCLT took

up the issue with regard to the approval of the resolution plan and for that

matter, in the third segment of the impugned order, summarised the

salient features of the resolution plan, which have already been noticed

hereinbefore and need not be repeated. The objections dealt with by the

NCLT in the fourth segment of its order dated 03.03.2020 could now be

noticed with reference to the objector and the subject matter.

45. It was submitted on behalf of JAL that the resolution plan could not

be approved for the reasons that it was being used as a device for

enrichment of NBCC at the cost of the corporate debtor where NBCC was

attempting to acquire JIL having worth of about INR 8,257 crores for a

92 petty sum of INR 120 crores; that the resolution plan was a contingent

one where NBCC reserved its right to withdraw if the said sum of INR 750

crores was not treated as part of the resolution plan and JIL was not

discharged of PMLA and other investigations; that the approval was

inconsistent with Section 11(4)(g) of RERA; that simultaneous voting on

two resolution plans was not permissible in law; that the resolution

applicant wrongly suggested that there was no haircut in the proposed

settlement of dues of financial creditors because the haircut was as far

high as INR 6,101 crores which was 62.36% of the debt of INR 9,783

crores. These contentions were countered by IRP with the submissions

that the promoters of JAL and JIL had no locus to question the offer

accepted by the CoC and as per the decision of this Court in the case of

Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Ors.

(C.A. No. 4242 of 2019)37, no provision in the Code required the resolution

applicant to match the liquidation value; that no provision in the Code

prevented simultaneous voting over two plans; and that as per the

decision of this Court in the case of Pioneer Urban Land and

Infrastructure Ltd. & Anr. v. Union of India & Ors.: (2019) 8 SCC 416,

RERA and IBC co-exist and have to be interpreted harmoniously and in

the event of a clash, RERA must give way to IBC. It was also submitted

that when the homebuyers who were entitled to raise RERA objections

had themselves voted in favour of the plan, the promoters/directors could

not raise any grievance. There was a question of claim of the corporate 37 Since reported as (2020) 11 SCC 467.

93 debtor against JAL, being the amount given as mobilisation advance on

which, there was a discrepancy in the accounting, but it was admitted on

behalf of JAL that an amount of INR 274 crores was net receivable by JIL

from JAL. To this, the NCLT directed payment of the said amount to JIL

and for reconciliation of the account as regards the remaining dues. The

NCLT had also brushed aside the submissions regarding the contingent

nature of the plan with reference to its finding on the issue related to the

said deposited sum of INR 750 crores and Section 32A inserted to the

Code by way of amendment with effect from 28.12.2019. The relevant

observations of NCLT read as under: -

“69. With regard to these two issues, this Bench has already decided that Rs. 750 Crore lying with NCLT shall be utilized for the cause of the creditors of the Corporate Debtor and with regard to PMLA proceedings, for Section 32A being brought into existence by way of Amendment to the Code 28.12.2019, now there need not be any separate protection from the PMLA proceedings over the assets of the Corporate Debtor, therefore we have not dealt with this issue, therefore the argument saying that plan is conditional has no merit.

*** *** ***

72. Moreover, the calculation of figures given by JAL to say that figures placed by the Resolution Plan are not supported by material, in any event, this being an issue to be taken up by the CoC, this Bench cannot decide the fate of the resolution plan on the figures shown by the promoters of JIL and JAL, unless such plan is vitiated by fraud.

73. Apart from this, it is not the case of promoter/directors that company has positive net worth entitling the promoters of the company to receive the residual proceeds in the event company is liquidated. As long as liabilities are more than the assets of the company, the promoters/directors’ arguments cannot be seen as a point having bearing on the resolution plan approved by the CoC.

74……….This objection over simultaneous voting per se does not look as an act in violation of the Code or Regulations thereto. No provision has envisaged that two plans should not be put to voting. Moreover there is no mandate that if two plans are put to voting,

94 the plan voted in favour to be declared non est in law. Doctrine of severance could be applied by validating the action doable under the law as valid. If any excess has happened, such excess can be taken out. Besides this, both the plans are not approved. In addition to it, unsuccessful Resolution Applicant has no grievance to the plan present before us.

75. With regard to RERA issue, the IRP submits that the Hon'ble Supreme court in para 28 of Pioneer Urban Land & Infrastructure Limited & anr. Vs. Union of India & Ors. (WP (c) no. 43 of 2019) held that RERA and IBC must be held to co-exist and be interpreted harmoniously and in the event of clash, RERA must give way to IBC.

76. When the home-buyers, who are entitled to raise RERA objection themselves have voted in favour of the plan, RERA violation if any, it cannot be the grievance of the promoters/directors.

77. With regard to Rs. 716 Crores claim against JAL by the Corporate Debtor, the IRP submits that after setting off the amount paid to JAL, the amount to be refunded by JAL is a sum of Rs. 594 Crores as on 31.12.2019. It is an admitted fact that mobilisation advance of Rs. 586 Crores is due and payable by JAL and JIL as on 31.12.2019, out of which JAL says, after setting off, the amount due and payable to JIL by JAL is only Rs. 274 Crores. However, JAL counsel has not placed material supporting the figures shown as set off, since JAL Counsel himself has stated that net receivable by JIL from JAL amounts to Rs. 274 crores, JAL shall forthwith pay Rs. 274 crores to JIL, as to remaining money as sought by the Resolution Applicant, JIL and JAL shall draft a reconciliation statement, accordingly payment has to be made to whomever any outstanding is payable.”

46. Another major part of objections, in terms of magnitude and

implication, came up from the dissenting financial creditor ICICI Bank. It

was submitted by this lender bank that being a dissenting financial

creditor, it was entitled to receive payment as per the liquidation value in

terms of Section 30(2)(b) of the Code read with Regulation 38(1)(b) of

CIRP Regulations but in the resolution plan, it was sought to be provided

only the land and equity in the SPVs proposed to be incorporated; and

such a provision in the resolution plan was entirely impermissible. It was

95 also submitted that while the assenting financial creditors were allowed to

receive upfront payment of INR 300 crores on the basis of fresh debts

raised by Expressway but the same benefit was not being extended to the

dissenting financial creditors. The NCLT noted the star argument of the

learned counsel for ICICI Bank that distribution of equity or the land

parcels to the dissenting financial creditors does not satisfy the

requirement of “payment” under Section 30(2) of the Code read with

Regulation 38(1)(b) of the CIRP Regulations; and such payment has to be

a liquidated sum, as stated under Section 53 of the Code. Per contra, it

was contended on behalf of the resolution applicant and the IRP that it

was nowhere envisaged in Section 30(2) of the Code that payment of

liquidation value to dissenting financial creditors has to be in cash; that

even Regulation 38(1)(b) of the CIRP Regulations only provided for the

priority of payment to the dissenting financial creditors before the

assenting financial creditors and the mode of payment to be in cash was

not mentioned; that when the assenting financial creditors were not being

paid in cash and had accepted equity and land parcels, payment to the

dissenting financial creditors in cash would cause prejudice to the rights

of the assenting financial creditors. Meaning of the word “payment” in

Black’s Law Dictionary was also cited and it was argued that the money or

other valuable thing delivered to discharge the obligation is to be

construed as payment under Section 30(2) of the Code.

96 46.1. While dealing with the rival submissions in relation to this claim of

the dissenting financial creditor, the NCLT referred to the binding nature of

agreement between JIL and the said creditor as also the rights of a

dissenting financial creditor in terms of Sections 30(2) and 53 of the Code

and concluded that the only recourse available was payment in cash to

such dissenting financial creditor a sum equivalent to the liquidated sum

he would be entitled to receive under Section 53 of the Code. The NCLT

said,-

“91. If you come to the resolution under IBC, there are two outcomes in it. One is some creditors agreeing for a resolution to the existing situation. Another is, some creditors may not agree for the resolution. The persons agree for the resolution, they are no doubt bound by the arrangement they agreed upon. But as to the dissenting creditors, who have not agreed for the resolution, they are governed by sections 30(2) & 53 of the Code. In the case of dissenting creditor, the Corporate Debtor or the Resolution Applicant stepping into the shoes of the Corporate Debtor is bound by the earlier contract entered between the Corporate Debtor and the dissenting financial creditor and then by the pro rata distribution entitled u/s 53 of the Code. The only recourse available is, the dissenting creditor shall be paid in cash equivalent to the liquidated sum he is entitled to receive u/s 53 of the Code. It is a deeming fiction to calculate the liquidated sum payable to the dissenting financial creditor and pay the same to the dissenting creditor as if the company is liquidated. To make such payment, the company need not be factually liquidated.” 46.2. The word “payment”, as defined in Black’s Law Dictionary was

also analysed by NCLT and it was stated that the obligation has to be

seen and in the instant case, the obligation was repayment of money lent

along with interest. It was observed, that the dissenting financial creditors

were to be paid in cash not just by virtue of Section 53 of the Code but

97 also by virtue of the terms and conditions of the agreement between JIL

and the dissenting financial creditor, in the following words: -

“92….Therefore this argument will not be ticking to say that payment in kind to the promise is discharge of obligation. If the promisee has agreed to give up the payment obligation, he is free to do so. In this case, for the dissenting financial creditor has not agreed to the approval of the resolution plan, they shall be paid in cash, not only by virtue of the mandate under Section 53 of the Code but also by virtue of terms and conditions of the agreement between the Corporate Debtor and the dissenting financial creditor.”

46.3. The NCLT further observed that upon approval of the plan by the

CoC, it was not open to the parties to say that, since the assenting

creditors were not getting better treatment than the dissenting creditor, the

dissenting creditor shall remain bound to the plan; and when a particular

issue was governed by law, something not present in the law could not be

thrust upon any party under the cover of equity. The NCLT, thereafter,

proceeded to analyse the requirements of Section 30(2) of the Code with

Section 53 and Regulation 38 of the CIRP Regulations; and also

examined its powers to deal with those aspects of the resolution plan

which were not compliant with Section 30(2) of the Code. Having

examined and analysed thus, the NCLT held that when the resolution plan

is found non-compliant with Section 30(2), the IRP or the resolution

applicant cannot say that the approval being within the ambit of

commercial wisdom of CoC, all what was decided by CoC was binding on

the dissenting financial creditor; and it was within its (NCLT’s) jurisdiction

to modify the plan so as to make it compliant with the requirements of law

98 without altering its basic structure. The NCLT observed and held as

under: -

“98. If section 30(2) (b) (ii) is carefully examined, and read in the context of the said clause, it is clear that payment will be the amount to be paid to the financial creditors under Section 53 of the code, because it is for payment of the debts of the financial creditors, thereafter it has been further stated it shall be not less than the amount to be paid to them in accordance with Section 53 of the code.

99. When all these provisions and IBBI specifications made clear payment to the dissenting financial creditors means payment of amount, the resolution professional or the resolution applicant cannot argue that the payment can, not only be in cash but also in kind.

100. The persons agreeing for something, they may agree for anything, it does not mean that the persons disagreeing shall also be treated as the assenting financial creditors are treated. When any financial creditor disagreed for a resolution, he knows that he has to be compromised with the situation befall upon him under Section 53 of the code. It does not matter as to whether his entitlement under Section 53 is more or less than the treatment assenting financial creditors getting. Their rights are already compromised under section 53 slating them to their entitlement on pro rata basis. They cannot be put to further sufferance at the wish of the Resolution Applicant or the CoC. As Section 30 (2) has referred to section 53 entitlement, and this Bench being made custodian to verify as to whether section 30(2) compliance has been accomplished or not, the RP or the resolution plan applicant cannot say that plan approval is within the ambit of commercial wisdom of the CoC therefore what all that is decided by the CoC is binding upon the dissenting financial creditors. Whenever such compliance is not present in the plan, this Bench is authorised to examine the same and interfere with the plan despite the plan has been approved as contemplated under Section 30(4) of the code.

101. Looking at the resolution plan treatment to the dissenting financial creditor in the light of the aforesaid legal proposition, since it has not been said in the Code that plan should be approved as submitted by the resolution professional under Section 30(6) of the code, we are of the view that this Bench has jurisdiction to approve the plan by modifying the plan to the extent that does not alter the basic structure of the plan.” (underlining is in original)

46.4. Having thus held on the requirements of modification of the plan in

relation to the treatment of the dissenting financial creditor while retaining

99 its basic structure, the NCLT observed that the two aspects which were

made the basic conditions by the resolution applicant namely, getting the

said sum of INR 750 crores and extinguishing of PMLA proceedings were

duly taken care of, respectively by the decision in relation to the said

corpus of INR 750 crores and by the amendment of law. The NCLT further

observed that for the sake of viability and feasibility, the plan could be

modified to make it compliant with Section 30(2) of the Code. Having said

so, NCLT proceeded to modify the terms of resolution plan in the manner

that the resolution applicant shall pay to the dissenting financial creditor

the amount receivable in terms of Section 53 of the Code in twelve

monthly instalments along with interest starting from six months from the

date of order with default conditions of interest. The NCLT ordered as

under: -

“103. In view of the same, for the sake of viability and feasibility of the plan, we hereby modify this plan to make it in compliance with the section 30(2) (b) (ii) of the code by holding that the Resolution Applicant shall pay to ICICI an amount that it is entitled to receive u/s 53 of the code within 18 months from the date of approval of this plan, that is in 12 equal monthly instalments along with interest over the admitted claim starting from six months hereof. In the event, the Resolution Applicant has failed to repay as stated above, ICICI is entitled to claim commercial interest over the admitted claim from the date of default, that is from the first month of 12 monthly instalments.”

47. Another major contentious issue before the Adjudicating Authority

related to the objections of YEIDA. As noticed, YEIDA had been the land

providing agency and had entered into Concession Agreement for leasing

the land for construction of Expressway and also for the purpose of

development of the surrounding parcels of land.

100 47.1. The NCLT noticed that as per the said CA, the concessionaire

(JIL) was to bear the acquisition cost for the project land given to it and in

consideration, the concessionaire would obtain the right to develop land

for commercial exploitation and the right to operate the Expressway and

collect toll for a period of 36 years; and after the expiry of 36 years from

the grant of concession, the Expressway shall revert to YEIDA. As to the

land for development, it was given on lease for 90 years. It was

essentially submitted on behalf of YEIDA that the question, of additional

compensation of the land acquired, cropped up with the directions of the

Allahabad High Court; and that the liability in regard to the additional

compensation in relation to the land acquired and leased to JIL was that

of the corporate debtor JIL. It was also pointed out that the question of

such additional compensation by JIL was subjected to arbitration

proceedings where an award was made to the effect that the corporate

debtor need not pay this amount of additional compensation but the

award has been questioned by YEIDA in the proceedings under Section

34 of the Arbitration and Conciliation Act, 199638-39. YEIDA stated its

objection to the stipulation in the resolution plan that in case of the award

being overruled, YEIDA would collect the amount of additional

compensation from the end-users of the project land. It was submitted in

this regard that in the CA, two payment components were present - one

being of acquisition cost payable by the concessionaire and another being

38 Hereinafter also referred as to ‘the Arbitration Act’. 39 It appears from the corrigendum dated 17.03.2020 and the submissions of the parties that the issue is pending before the Court of District Judge, Gautam Budh Nagar.

101 of lease rent, which could be paid by the sub-lessee/end-user as the case

may be. It was submitted that given such components, the IRP or the

resolution applicant could not insist that YEIDA has to collect the

acquisition cost directly from the end-users. It was also submitted that

even if the land utilised for Expressway was to revert to YEIDA after 36

years, the CA nevertheless provided as key components that the

concessionaire would collect toll for this period and has to bear all the

cost including the cost of acquisition; and there was no exemption as

regards the land of Expressway. It was also submitted that the resolution

applicant cannot split the transferred land into two and say that the

payment of additional compensation would be applicable to the land used

for development alone. It was further submitted that in view of Clause

18.1 of CA, in case of the necessity to transfer the concessionaire's rights

and obligations to an SPV, there has to be necessary documentation

involving YEIDA, the concessionaire and the SPV incorporated, so that

YEIDA could keep exercising its rights over the SPV concerned; and the

resolution applicant or CoC could not have unilaterally transferred the

rights and obligations of the corporate debtor to an SPV without the

consent of YEIDA. A decision of this Court in the case of Embassy

Property Development Pvt. Ltd. v. State of Karnataka and Ors.: 2019

SCC OnLine SC 1542 was also referred to submit that IBC will not have

overriding effect on every enactment which is applicable to the

transactions related to the corporate debtor. It was further submitted that

102 the requirement of withdrawal of arbitration case could not be thrust upon

YEIDA under the cover of the plan; and for the resolution plan having set

out so many provisions curtailing the rights held by YEIDA, the same was

required to be rejected. However, the Adjudicating Authority also noticed

that despite such objections, the counsel appearing on behalf of YEIDA

submitted that since the project was for public cause, it would have no

objection for approval of the resolution plan provided necessary changes

were made in it ‘by removing the fall outs from the concession

agreement’.

47.2. In regard to this issue relating to the objections and submissions

on behalf of YEIDA, the NCLT was of the view that CoC should not have

approved the resolution plan stating that the additional compensation

would be collected from the end-users; and proceeded to modulate the

terms of the resolution plan to read that YEIDA shall have the right to

collect the acquisition cost through the SPVs concerned. As regards the

issue as to whether additional compensation need not be paid with regard

to the Expressway for the same would revert to YEIDA after 36 years, the

NCLT found it appropriate to read down the resolution plan as leaving it

open to the parties to have proper recourse over this issue in the

competent forum when occasion so arise. The NCLT also observed that

the Concession Agreement was based on the statute created by the State

Government and, therefore, any violation of terms and conditions of the

same would be the violation of law in force. The NCLT, however, again

103 recorded the submissions on behalf of YEIDA that their endeavour was

only for compliance of the terms and conditions of CA in order to ensure

proper monitoring on realisation of dues and supervision over the work of

corporate debtors or SPVs but not for rejection of the resolution plan. The

relevant observations, findings and directions of YEIDA in regard to this

issue read as under: -

“118. On hearing the submissions of either side, with regard to payment of additional compensation, in the event any direction has been given in the arbitration proceedings to the Corporate Debtor to pay additional compensation, as per concession agreement, additional cost shall be paid by the concessionaire. We don't go into the point as to whether additional compensation is part of the acquisition cost because i.e. a point already Adjudicated by the Arbitral Authority and the issue is pending before the Hon'ble High Court of Delhi, now the limited point to be dealt with is, as to whether such compensation, if directed to be paid, is to be paid by the concessionaire or by the end users.

119. As said above, there are two payment components come from the concessionaire one is acquisition cost, two is the lease rentals. In the concession agreement, it is obvious that acquisition cost (actual cost) shall be paid by the concessionaire, as to lease rentals are concerned, it has been dealt with in detail that lease rentals could be collected either from sub-lessee or from the end users, wherever the interest is transferred either to the sub-lessee or the end users. Therefore, CoC should not have approved the resolution plan stating that the compensation, if awarded, shall be collected from the end users.

120. To iron out all these creases and to make this resolution plan viable, we hereby direct that the resolution plan shall be read as YEIDA has right to collect acquisition cost through the SPVs concerned.

121. With regard to other objections that additional compensation need not be paid with regard to Expressway land on the premise that since Expressway will revert to YEIDA after 36 years, YEIDA counsel submits that this land has been given on consideration of collection of toll for about 36 years.

122. In the backdrop of this factual scenario, we are of view that both are governed by concession agreement, therefore the Resolution Plan is to be read that it is left open to both the parties to have proper recourse over this issue before Competent Forum of law when time comes for payment of additional compensation.

104 123. On transfer of concessionaire's rights and obligations to SPVs, as per the concession agreement, it is clear that this Corporate Debtor is a concessionaire, for the first time concessionaire having proposed to transfer its rights and obligations to the aforesaid two SPVs, we are of the view that documents shall be executed between the concessionaire, YEIDA and each of the SPVs. At last we must say that the concession Agreement is based on the statute created by the State Government, therefore any violation of the terms and conditions of the concession agreement is violation of the law in force as contemplated under section 30(2) of the Code, it has been decided as above.

124. Despite YEIDA counsel representing the State Government Authorities with regard to its rights, the counsel has categorically mentioned that YEIDA’s endeavour is only for compliance of the terms and conditions of concession agreement so that the State Agencies will have proper monitoring on realization of its dues and will have proper supervision over the works of the Corporate Debtor or its SPVs, but not to ensure that this resolution plan is rejected by this Bench on the grounds aforementioned.”

48. After having dealt with the aforesaid major issues relating to INR

750 crores, objections of JAL and its stakeholders, ICICI Bank and

YEIDA, the NCLT proceeded to deal with the other issues relating to the

fixed deposit holders, some of the aggrieved homebuyers, YES Bank and

the agreement holders.

48.1. As regards fixed deposit holders, the NCLT provided that the

resolution applicant shall make a provision to clear their dues as and

when the unclaimed fixed deposit holder claims it, and this right will

remain in force as long as they were entitled to claim under the

Companies Act, 2013. These directions of NCLT in the impugned order

read as under: -

“125. Regarding FD holders payments who have not made claims which have been reflected in the records of the Corporate Debtor, the Plan Applicant shall make a provision to clear their dues as and

105 when the unclaimed FD holder claims it, and this right will remain in force as long as they are entitled to claim under Companies Act 2013.”

48.2. The NCLT also took note of the submissions of some of the

homebuyers who were not agreeing with the resolution plan in question.

Those dissatisfied homebuyers submitted that the timelines given in the

resolution plan for completion of flats were not workable; there was no

clause for refund of money in the event flats not being completed within

the timelines envisaged, except to the extent of nominal interest; and that

the voting share of homebuyers being only 57.66%, it cannot be said that

cent percent consent had been given for approval of the resolution plan

by CoC. The NCLT declined to recognise such objectors as dissenting

financial creditors because authorised representative of this class of

creditors had voted in favour of the resolution plan. The NCLT observed

and held as under: -

“126. One Rashmi Singhal and another applicant calling themselves as dissenting home-buyers, filed IA 871/2020, stating that the time lines given in the Resolution Plan for completion of flats are not workable and for there being no clause for refund of money in the event flats are not completed within the time lines envisaged, except to the extent of nominal interest mentioned in the plan, these two submit that they have dissented for the approval of the Resolution Plan. They have further relied upon voting share saying homebuyers voting share is only 57.66% therefore, it cannot be called that cent percent consent has been given for approval of the Resolution Plan by CoC. For there being a rule under IBC, whenever more than 50% voting has come from a class of creditors represented by an authorized representative, the approval given to the authorized representative for more than 50% will become 100% approval, therefore it cannot be said that dissenting homebuyers before authorised representative to be considered as dissenting financial creditors against the total voting of CoC. If the authorized representative dissented in the CoC, then the respective class of creditors would be considered as dissenting financial creditors. Moreover, if at all any dissenting financial

106 creditor is there, his only look out is as to whether he has been paid as per Section 30(2) of the Code or not but not to see whether the Resolution Plan is workable or not.” 48.3. As regards the objections raised by YES Bank, which had given

loan to Jaiprakash Healthcare Ltd., a wholly-owned subsidiary of JIL,

against dealing with the shares of its borrower (JHL) in the resolution

plan, the NCLT observed that the resolution applicant and the said Bank

having agreed for constitution of a Committee to deal with the shares and

assets of JHL, that issue was not required to be discussed. The NCLT

said, -

“127. YES Bank, which has given loan to Jaiprakash Health Care subsidiary of JIL, has also raised an objection against dealing with the shares of the Health Care belonging to the Corporate Debtor. However, since the Resolution Applicant and YES Bank having agreed for constitution of a Committee to deal with the shares and assets of the subsidiary company, we are under no obligation to discuss this issue any further.”

48.4. As regards the right reserved by the resolution applicant to cancel

the transactions where certain parcels of land were transferred by the

corporate debtor without proper agreement/sub-lease deed, NCLT noticed

the submission made by such agreement holders that the agreements

were executed by the corporate debtor in the normal course of its

business prior to the commencement of CIRP and monies were also

advanced; and therefore, such agreements could not be terminated

unilaterally. The NCLT also noticed the counter submissions by IRP and

NBCC that the agreements allegedly executed between the corporate

debtor and the agreement holders had not been determined, but the

107 resolution applicant has reserved its right to cancel such instruments

wherever the corporate debtor had entered into deals without proper

agreements and without support of consideration. In this regard, the NCLT

observed that if an agreement was not valid in law and suffered from want

of consideration, it was not even required to be said that such agreement

could be cancelled by the party concerned. However, the NCLT further

observed that even when such a clause had been mentioned, the

agreement holders had not lost their right to seek remedy in the

competent forum; and determined this part of the matter in the following

words: -

“132. It is a trite law when an agreement is not valid in the eyes of law and consideration has not been paid, then it need not be separately said that such agreement could be cancelled by the effected party.

133. Though such clause has been mentioned, it does not mean that the agreement holders have lost their rights to seek remedy for its grievances before Competent Forum, in view thereof, this clause need not be considered as clause effecting the rights of the alleged agreement holders.”

48.5. The NCLT also made observations as regards the objections

raised by JAL and other objectors against inclusion of 858 acres 40 as part

of the resolution plan and pointed out that such an objection lost its

relevance after the decision of this Court dated 26.02.2020 in the case of

Anuj Jain (supra).

49. Having thus dealt with the relevant objections, the NCLT entered

into the fifth segment of its order and generally dealt with the provisions

40 This figure was corrected on 17.03.2020 by NCLT as ‘758 acres’ in terms of the order of this Court dated 26.02.2020.

108 relating to the reliefs and concessions with the observations/directions as

under: -

“134. The clauses already covered in the aforesaid discussion will not be discussed again, but as to the clauses not covered above are hereby dealt with as follow: -

Clauses 1 to 5 have already been covered in the above discussion.

Clause No. 6:- With regard to the past liabilities of income tax authority, they shall stand extinguished.

Clause No. 7:- Since reduction of the share capital of the corporate debtor is not part of this resolution, this Adjudicating Authority cannot waive the procedure for reduction of share capital in relation to the companies not yet incorporated. Clause No. 8 & 10:- Payment of stamp duty mentioned in clause 8 is waived to the extent permissible under law.

Clause No. 9:- Any non-compliance arising out of past claims prior to CIRP initiation shall not have any bearing on this corporate debtor from hereof.

Clause No. 11:- The lenders to the corporate debtor shall regularise all the accounts and ensure that such classification of the loan account is standard in their books with effect from the transfer dates.

Clause No. 12:- All claims which have been placed before the RP and any criminal proceedings appurtenant to those claims are hereby extinguished.

Clause No. 13:- As to the contracts relating to the development of land by JAL, the Resolution applicant can reserve its right to terminate the same, as to the claims, if any, the resolution applicant has right to take appropriate action against JAL. Clause No. 14:- With regard to liability arising out of concession agreement in relation to YEIDA, since those issues are governed by concession agreement, this Bench cannot nullify the rights of YEIDA against the corporate debtor emanating from the concession agreement.

Clause No. 15:- The agreements for subleases executed between the corporate debtor and the third parties, which are not in accordance with law and not supported by material proof, the Resolution applicant will have a right to terminate in accordance with law.

Clause No. 16 to 18:- The resolution applicant is granted 12 months’ time from the approval date to ensure compliances in

109 relation to the non-compliance of applicable laws by the corporate debtor or of its subsidiary pertaining to any period up to the approval date and licenses if any, to be obtained. Clause No. 19:- In respect to the lands shown as transferred to JAL for real estate development, where the title and ownership is still lying with the corporate debtor, the resolution applicant is at liberty to proceed in accordance with law.

Clause No. 20:- It goes without saying that the IRP will not be held responsible with regard to discharge of his duties during CIR Process. The IRP and the Resolution Applicant will not be liable for any transactions carried out by the ex-management of the corporate debtor.

Clause No. 21:- This point has already been dealt with in the above discussion.

Clause No. 22:- For the purpose of consolidation of the books of the CD with the resolution applicant, the effective date shall be treated as the first day of the quarter immediately succeeding quarter in which the resolution applicant completes the takeover of the CD.

Clause No. 23:- This point is not clear as to whether it is referring to the land of the Corporate Debtor mortgaged to the lenders of JAL, if that is so, since it has been decided by the Honourable Supreme Court, it need not be reiterated.

Clause No. 24:- This generalization of cancellation of all agreements cannot be granted unless each transaction is specifically dealt with.

Clause No. 25:- The resolution applicant cannot modify the resolution plan once it is approved by the CoC.

Clause No. 26:- As to the claims placed before the IRP and other liabilities of the CD which are shown in the records of the company and where notice has been given to such creditors, they can be construed as withdrawn after the approval date. Clause No. 27:- With regard to extension of concession period by YEIDA, it is YEIDA to decide as to whether such extension should be given or not.

Clause No. 28:- This Adjudicating Authority can only direct the Central Government and Reserve Bank of India to accord permissions to the extent permissible under law.”

50. As regards other applications/objections, the NCLT disposed them

of with comments wherever required. We need not elaborate on all such

110 observations but could usefully point out the rejection of two such

applications.

50.1. One such application was filed by a financer of one of the

homebuyers seeking its induction in the CoC. This application was

dismissed as misconceived in the following words: -

“CA-74/2019 filed by PNB Housing Finance Ltd. for directions to the IRP to induct this applicant in the CoC and if any amount is refunded to the home-buyers, the amount due to the applicant ought to be paid to this applicant because it is the lender to the home-buyers. This application is dismissed as misconceived, as the lender to the home-buyers will not have any right to be financial creditors of the CD.” 50.2. Another application was filed by three homebuyers seeking the

relief of quashing the minutes of CoC dated 01.03.2019; for direction to

conduct a forensic land audit of the corporate debtor; and for various

directions to IRP, like those for taking legal opinion on Concession

Agreement, analysis of Expressway cost escalation, providing information

and answers to the queries of homebuyers etc. etc. The NCLT noted the

propositions of these applicants and dismissed the application with the

observations that they were three persons out of thousands of

homebuyers and if such issues were to be examined and decided, the

resolution process could never be completed; and at the stage of

approval of the resolution plan, if objections of this kind were allowed,

there would be no end to it. The NCLT said, -

“It is an application filed by Mr. Hemant Kumar & two others, who do not have direct voting in the CoC, because there are thousands of home-buyers, out of them these three are minuscule in number, if at all these issues are to be examined and decided, and remain waiting for the remedies, this resolution process will not complete

111 even after two years from hereof. Moreover, at the time of approval of this resolution plan, if objections of this kind are allowed there cannot be any end to it, therefore, this application is hereby dismissed.”

51. With the aforesaid, the Adjudicating Authority (NCLT) concluded

on the matter while disposing of all the applications and while holding that

all the stakeholders shall remain bound by the order so passed. However,

various stakeholders have various submissions to make and various

objections to take against the order so passed by the Adjudicating

Authority.

52. Having taken note of the relevant contents of the order dated

03.03.2020, as passed by the Adjudicating Authority (NCLT) in exercise of

its jurisdiction under Section 31 of the Code, it would be worthwhile to

summarise the significant attributes of, and takeaways from, this order

because a substantial part of the forthcoming discussion shall be

revolving around the findings recorded and directions given therein. The

relevant aspects could be summarised as follows:

(a) As regards the said sum of INR 750 crores, the Adjudicating

Authority, with reference to the orders passed by this Court in the case of

Chitra Sharma (supra), held that the deposit made by JAL became an

asset of the corporate debtor JIL; and the said money was to be utilised

towards securing the interests of homebuyers. As regards the question of

the amount payable by JAL to JIL, it was directed that JAL shall make

payment of the admitted amount of INR 274 crores; and after

112 reconciliation of accounts, further payment shall be made to whomsoever

outstanding was found payable.

(b) As regards the objections by the dissenting financial creditor ICICI

Bank, the Adjudicating Authority held that payment to such dissenting

financial creditor shall be made in cash, as per the amount it would be

entitled to under Section 53 of the Code, in the form of twelve monthly

instalments with interest to be accrued six months post the order. It was

also observed by the Adjudicating Authority that it had the necessary

jurisdiction to modify the resolution plan to make sure it complied with

Section 30(2) of the Code, so long as its basic structure was not altered.

(c) As regards the objections by YEIDA, the Adjudicating Authority

held that YEIDA shall have the right to collect the acquisition cost through

the SPVs proposed to be incorporated so as to make the resolution plan

compliant with the terms of the Concession Agreement; however, the

Adjudicating Authority refrained from adjudicating on the issue of

additional compensation in relation to the land under Expressway and left

it for the parties to take appropriate action at the appropriate stage. The

Adjudicating Authority also held that for transfer of rights and obligations

to the two SPVs, necessary documents shall be executed involving the

concessionaire (JIL), YEIDA and the SPV concerned. These alterations

were ordered by the Adjudicating Authority ‘to iron out all these creases

and to make this resolution plan viable’.

113 (d) As regards the issue relating to the fixed deposit holders, the

Adjudicating Authority provided that the resolution applicant shall make a

provision to clear the dues even of those fixed deposit holders who had

not made the claims. In other words, the Adjudicating Authority directed

for another modification of the resolution plan, for satisfying the dues of

unclaimed fixed deposit holders.

(e) The Adjudicating Authority brushed aside the objections sought to

be taken by some of the aggrieved homebuyers, while holding that they

could not be categorised or treated as dissenting financial creditors.

(f) As regards the objections by YES Bank, the Adjudicating Authority

pointed out that no intervention was required since YES Bank agreed to

settle its objections with NBCC by forming a Committee.

(g) As regards the agreement holders, the Adjudicating Authority

observed that if an agreement was not valid in law and suffered from want

of consideration, it was not even required to be said that such agreement

could be cancelled by the party concerned. However, the Adjudicating

Authority also observed that even when such a clause had been

mentioned in the resolution plan, the agreement holders had not lost their

right to seek remedy in the competent forum.

(h) The Adjudicating Authority generally dealt with the clauses relating

to the ‘reliefs and concessions’ in Schedule 3 of the resolution plan as

also various other applications filed by different stakeholders. Some of the

reliefs and concessions sought for by the resolution applicant were not

114 granted or were declined, for the reasons specified against the relevant

clauses. The other applications/objections were disposed of with a few

comments.

Order dated 22.04.2020 by NCLAT making interim arrangement

53. As noticed at the outset, the aforesaid order dated 03.03.2020 was

challenged in various appeals before the Appellate Authority (NCLAT),

which have since been withdrawn to this Court after we took note of all

the factors concerning this litigation and accepted the requests made by

the parties concerned. Such requests were made when the matters first

appeared before us in challenge to an interim order dated 22.04.2020

passed by NCLAT, whereby the NCLAT made an interim arrangement of

constitution of an Interim Monitoring Committee for implementation of the

plan in question. The said order dated 22.04.2020, being also a subject of

challenge in this batch, could be usefully noticed to complete the

narrative.

54. The resolution applicant NBCC preferred an appeal against the

aforesaid order dated 03.03.2020 insofar as it felt aggrieved of the

modifications in the resolution plan. In that appeal, the NCLAT, while

issuing notice to the unrepresented parties, directed that the approved

resolution plan may be implemented subject to the outcome of appeal but

at the same time, it was also provided that IRP may constitute an Interim

Monitoring Committee comprising of the successful resolution applicant

(NBCC) and three major institutional financial creditors, who were the

115 members of CoC. This impugned interim order dated 22.04.2020 reads as

under: -

“22.04.2020 The Appellant – NBCC (India) Ltd., which has emerged as the Successful Resolution Applicant in ‘Corporate Insolvency Resolution Process’ initiated against Jaypee Infratech Ltd. (JIL) is aggrieved of modifications made by the learned Adjudicating Authority in the ‘Resolution Plan’ submitted by it and as approved by the ‘Committee of Creditors’ to the extent it allows objections of ICICI Bank Ltd. and Yamuna Expressway Industrial Development Authority and directs payment to unclaimed Fixed Deposit Holders. It is submitted that the learned Adjudicating Authority could not intercede the business decision of the ‘Committee of Creditors’ taken by the prescribed voting shares and the learned Adjudicating Authority exceeded its jurisdiction in making such modifications.

Issue notice to the Respondents through Speed Post in the main appeal as well as in the Interim Application.

On behalf of ICICI Bank Ltd., Ms. Misha, learned Counsel accepts notice. On behalf of Respondent No.4 – Interim Resolution Professional, Mr. Sumant Batra, learned Counsel accepts notice. On behalf of Respondent No.5 – IDBI Bank, Mr. Bidhwajit Dubey, learned Counsel accepts Notice. No further notice be served upon these Respondents. The above Respondents may file their reply affidavits within two weeks. Rejoinders, if any be filed within one week thereof.

Let notice be served upon Respondent Nos.2 and 3. Requisites along with process fee be filed within three days. If the Appellant provides email addresses of the Respondents, let service be effected through email also.

Mr. Sumant Batra, learned Counsel representing the ‘Resolution Professional’ intends to file an Appeal in regard to some observations made in paragraph 103 of the impugned order. We are told that the implementation of the ‘Successful Resolution Plan’ would involve participation of the ‘Successful Resolution Applicant’, i.e. NBCC (India) Ltd. as also the three major Institutional Financial Creditors, who are Members of the ‘Committee of Creditors’ i.e., IDBI Bank Ltd., IIFCL and LIC. Meanwhile, till further orders, the approved ‘Resolution Plan’ may be implemented subject to outcome of this Appeal. The Interim Resolution Professional may constitute ‘Interim Monitoring Committee’ comprising of the ‘Successful Resolution Applicant’, i.e., the Appellant and the three major Institutional Financial Creditors, who were Members of the ‘Committee of Creditors’ as named above.

116 Mr. Sumant Batra, learned Counsel submits that as of now he is continuing and managing the affairs of the ‘Corporate Debtor’. The Resolution Professional, who would be constituent of the ‘Interim Monitoring Committee’ shall continue to be paid as may be deemed reasonable by the ‘Interim Monitoring Committee’ from the date of this order. If any fee is outstanding for the past services rendered by the Resolution Professional during the ‘Corporate Insolvency Resolution Process’, the same shall be paid as per the decision of the ‘Committee of Creditors’. These directions will last till the disposal of this Appeal.

List the matter for ‘admission after notice’ on 15th May, 2020.”

The relevant statutory provisions

55. Having taken note of the parties and their respective interests; the

principal points for determination; the relevant factual and background

aspects, particularly with reference to the three decisions of this Court

dated 09.08.2018, 06.11.2019 and 26.02.2020; the salient features of the

resolution plan; and key aspect of the orders impugned, we may now go

through the provisions that would be relevant for determination of the

points arising in this batch of matters.

56. While the expressions generally used in the Code are defined in

Section 3 but then, the expressions employed for the purpose of Part II of

the Code, dealing with insolvency resolution and liquidation of corporate

persons, are defined in Section 5 thereof.

56.1. The relevant definitions as occurring in Section 3 are as under: -

“Section 3(8): “corporate debtor” means a corporate person who owes a debt to any person;

Section 3(10): “creditor” means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder;

117 Section 3(11): “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;

Section 3(12): “default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be;

Section 3(30): “secured creditor” means a creditor in favour of whom security interest is created;

Section 3(31): “security interest” means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person:

Provided that security interest shall not include a performance guarantee;”

56.2. The relevant definitions occurring in Section 5 for the purpose of

Part II of the Code are as under: -

“Section 5(1): “Adjudicating Authority”, for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013); Section 5(7): “financial creditor” means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to;

Section 5(8): “financial debt” means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes-

(a) money borrowed against the payment of interest;

(b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease

118 under the Indian Accounting Standards or such other accounting standards as may be prescribed;

(e) receivables sold or discounted other than any receivables sold on non-recourse basis;

(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;

41 [Explanation.- For the purposes of this sub-clause,-

(i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and

(ii) the expressions, “allottee” and “real estate project” shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);]

(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;

(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;

(i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;

Section 5(20): “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;

Section 5(21): “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;

Section 5(25): “resolution applicant” means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of section 25;

Section 5(26): “resolution plan” means a plan proposed by resolution applicant for insolvency resolution of the corporate debtor as a going concern in accordance with Part II

41 This Explanation was inserted by Act 26 of 2018 w.r.e.f. 06.06.2018.

119 42

[Explanation.- For removal of doubts, it is hereby clarified that a resolution plan may include provisions for the restructuring of the corporate debtor, including by way of merger, amalgamation and demerger;] Section 5(27): “resolution professional”, for the purposes of this Part, means an insolvency professional appointed to conduct the corporate insolvency resolution process and includes an interim resolution professional; and Section 5(28): “voting share” means the share of the voting rights of a single financial creditor in the committee of creditors which is based on the proportion of the financial debt owed to such financial creditor in relation to the financial debt owed by the corporate debtor.”

57. As already indicated, and which is not far to seek, the Explanation

inserted to sub-clause (f) of clause (8) of Section 5 with effect from

06.06.2018 made it clear that any amount raised from an allottee under a

real estate project is deemed to be having the commercial effect of a

borrowing and thereby, it answers to the description of a “financial debt”.

The pertinent consequence of this clarificatory amendment is that such an

allottee under a real estate project stands in the capacity of a financial

creditor of the corporate debtor. Prior to this amendment, such an allottee

was sought to be regarded only as an ‘other creditor’ and that had been

the principal cause behind the litigation in this Court in Chitra Sharma

(supra). For a complete and meaningful understanding of this Explanation

inserted to Section 5(8)(f) of the Code, it would be in concordance to take

note of the meanings assigned to the expressions “allottee” and “real

estate project” in RERA. The referred clauses (d) and (zn) of Section 2 of

RERA read as under: -

42 Inserted by Act 26 of 2019, sec. 2 (w.e.f. 16.08.2019).

120 “Section 2(d): “allottee” in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent; Section 2(zn): “real estate project” means the development of a building or a building consisting or apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto;”

58. We may now take note of the relevant provisions contained in the

Code, as amended from time to time and as applicable to the case at

hand, particularly Section 18 relating to the duties of interim resolution

professional; Section 21 specifying the composition of the Committee of

Creditors and matters related with it; Section 24 laying down the norms for

meeting of the Committee of Creditors; Section 25 relating to the duties of

the resolution professional; Section 25A, as inserted with effect from

06.06.2018 and as amended with effect from 16.08.2019, in regard to the

rights and duties of the authorised representative of the financial creditors;

Section 30 on the essentials of a resolution plan and its submission to the

Committee of Creditors by the resolution professional; Section 31 relating

to the approval of resolution plan by the Adjudicating Authority; Sections

32 and 61 relating to the appeal against an order approving the resolution

plan and grounds for such an appeal; Section 53 relating to distribution of

assets in case of liquidation; and Section 238 on the overriding effect of

the Code. These provisions read as under: -

121

“Section 18. Duties of interim resolution professional.- The interim resolution professional shall perform the following duties, namely:-

(a) collect all information relating to the assets, finances and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to-

(i) business operations for the previous two years;

(ii) financial and operational payments for the previous two years;

(iii) list of assets and liabilities as on the initiation date; and

(iv) such other matters as may be specified;

(b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15;

(c) constitute a committee of creditors;

(d) monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors;

(e) file information collected with the information utility, if necessary; and

(f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including-

(i) assets over which the corporate debtor has ownership rights which may be located in a foreign country;

(ii) assets that may or may not be in possession of the corporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies;

(vi) assets subject to the determination of ownership by a court or authority:

(g) to perform such other duties as may be specified by the Board.

Explanation.–For the purposes of this [section] 43, the term “assets” shall not include the following, namely:-

43 Substituted by Act 26 of 2018, sec. 14, for “sub-section” (w.r.e.f. 06.06.2018).

122 (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment;

(b) assets of any Indian or foreign subsidiary of the corporate debtor; and

(c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator.

Section 21. Committee of creditors.-(1) The interim resolution 44

professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. (2) The committee of creditors shall comprise all financial creditors of the corporate debtor:

Provided that a financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor, shall not have any right of representation, participation or voting in a meeting of the committee of creditors.

Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares, prior to the insolvency commencement date.

(3) Subject to sub-sections (6) and (6A), where the corporate debtor owes financial debts to two or more financial creditors as part of a consortium or agreement, each such financial creditor shall be part of the committee of creditors and their voting share shall be determined on the basis of the financial debts owed to them.

(4) Where any person is a financial creditor as well as an operational creditor,-

44 This Section 21 has undergone various changes in its amendment by Act 26 of 2018 w.r.e.f. 06.06.2018 which include substitution/omission of certain expressions as also insertion of certain provisions. While leaving aside all the minute details, we may, of course, indicate that by this very amendment, sub-sections (6A) and (6B) were also inserted and sub-sections (7) and (8) were substituted. Before their substitution, sub-sections (7) and (8) stood as under:

“(7) The Board may specify the manner of determining the voting share in respect of financial debts issued as securities under sub-section (6).

(8) All decisions of the committee of creditors shall be taken by a vote of not less than seventy-five per cent of voting share of the financial creditors:

Provided that where a corporate debtor does not have any financial creditors, the committee of creditors shall be constituted and comprise of such persons to exercise such functions in such manner as may be specified by the Board.”

123

(a) such person shall be a financial creditor to the extent of the financial debt owed by the corporate debtor, and shall be included in the committee of creditors, with voting share proportionate to the extent of financial debts owed to such creditor;

(b) such person shall be considered to be an operational creditor to the extent of the operational debt owed by the corporate debtor to such creditor.

(5) Where an operational creditor has assigned or legally transferred any operational debt to a financial creditor, the assignee or transferee shall be considered as an operational creditor to the extent of such assignment or legal transfer.

(6) Where the terms of the financial debt extended as part of a consortium arrangement or syndicated facility provide for a single trustee or agent to act for all financial creditors, each financial creditor may-

(a) authorise the trustee or agent to act on his behalf in the committee of creditors to the extent of his voting share;

(b) represent himself in the committee of creditors to the extent of his voting share;

(c) appoint an insolvency professional (other than the resolution professional) at his own cost to represent himself in the committee of creditors to the extent of his voting share; or

(d) exercise his right to vote to the extent of his voting share with one or more financial creditors jointly or severally. (6A) Where a financial debt—

(a) is in the form of securities or deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as authorised representative for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors;

(b) is owed to a class of creditors exceeding the number as may be specified, other than the creditors covered under clause (a) or sub-section (6), the interim resolution professional shall make an application to the Adjudicating Authority along with the list of all financial creditors, containing the name of an insolvency professional, other than the interim resolution professional, to act as their authorised representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the committee of creditors;

(c) is represented by a guardian, executor or administrator, such person shall act as authorised representative on behalf of such financial creditors, and such authorised representative under clause (a) or clause (b) or clause (c) shall attend the meetings of the committee of

124 creditors, and vote on behalf of each financial creditor to the extent of his voting share.

(6B) The remuneration payable to the authorised representative-

(i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the financial debt or the relevant documentation; and

(ii) under clause (b) of sub-section (6A) shall be as specified which shall form part of the insolvency resolution process costs.

(7) The Board may specify the manner of voting and the determining of the voting share in respect of financial debts covered under sub-sections (6) and (6A).

(8) Save as otherwise provided in this Code, all decisions of the committee of creditors shall be taken by a vote of not less than fifty-

one per cent. of voting share of the financial creditors:

Provided that where a corporate debtor does not have any financial creditors, the committee of creditors shall be constituted and shall comprise of such persons to exercise such functions in such manner as may be specified.

(9) The committee of creditors shall have the right to require the resolution professional to furnish any financial information in relation to the corporate debtor at any time during the corporate insolvency resolution process.

(10) The resolution professional shall make available any financial information so required by the committee of creditors under sub-section (9) within a period of seven days of such requisition.

Section 24. Meeting of committee of creditors.-(1) The 45

members of the committee of creditors may meet in person or by such electronic means as may be specified.

(2) All meetings of the committee of creditors shall be conducted by the resolution professional.

(3) The resolution professional shall give notice of each meeting of the committee of creditors to-

(a) members of committee of creditors, including the authorised representatives referred to in sub-sections (6) and (6A) of section 21 and sub-section (5);

(b) members of the suspended Board of Directors or the partners of the corporate persons, as the case may be;

45 This Section 24 has also undergone a few changes in its amendment by Act 26 of 2018 w.r.e.f. 06.06.2018 which are essentially of sequel to the amendment of Section 21.

125

(c) operational creditors or their representatives if the amount of their aggregate dues is not less than ten per cent of the debt. (4) The directors, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of committee of creditors, but shall not have any right to vote in such meetings:

Provided that the absence of any such director, partner or representative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting.

(5) Subject to sub-sections (6), (6A) and (6B) of section 21, any creditor who is a member of the committee of creditors may appoint an insolvency professional other than the resolution professional to represent such creditor in a meeting of the committee of creditors:

Provided that the fees payable to such insolvency professional representing any individual creditor will be borne by such creditor. (6) Each creditor shall vote in accordance with the voting share assigned to him based on the financial debts owed to such creditor. (7) The resolution professional shall determine the voting share to be assigned to each creditor in the manner specified by the Board.

(8) The meetings of the committee of creditors shall be conducted in such manner as may be specified.

Section 25. Duties of resolution professional.-(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor.

(2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:-

(a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor;

(b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings;

(c) raise interim finances subject to the approval of the committee of creditors under section 28;

(d) appoint accountants, legal or other professionals in the manner as specified by Board;

(e) maintain an updated list of claims;

(f) convene and attend all meetings of the committee of creditors;

126 (g) prepare the information memorandum in accordance with section 29;

[(h) invite prospective resolution applicants, who fulfil such 46

criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans.]

(i) present all resolution plans at the meetings of the committee of creditors;

(j) file application for avoidance of transactions in accordance with Chapter III, if any; and

(k) such other actions as may be specified by the Board. 47 Section 25A. Rights and duties of authorised representative of financial creditors.-(1) The authorised representative under sub-section (6) or sub-section (6A) of section 21 or sub-section (5) of section 24 shall have the right to participate and vote in meetings of the committee of creditors on behalf of the financial creditor he represents in accordance with the prior voting instructions of such creditors obtained through physical or electronic means. (2) It shall be the duty of the authorised representative to circulate the agenda and minutes of the meeting of the committee of creditors to the financial creditor he represents. (3) The authorised representative shall not act against the interest of the financial creditor he represents and shall always act in accordance with their prior instructions:

Provided that if the authorised representative represents several financial creditors, then he shall cast his vote in respect of each financial creditor in accordance with instructions received from each financial creditor, to the extent of his voting share:

Provided further that if any financial creditor does not give prior instructions through physical or electronic means, the authorised representative shall abstain from voting on behalf of such creditor. (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

46 This clause (h) was substituted by Act 8 of 2018, sec. 4, w.r.e.f. 23.11.2017. Clause (h), before substitution, stood as under:

“(h) invite prospective lenders, investors, and any other persons to put forward resolution plans;”.

47 This Section 25A was inserted by Act 26 of 2018 (w.r.e.f. 06.06.2018). Herein, sub-section (3A) was inserted by Act No. 26 of 2019 (w.e.f. 16.08.2019).

127 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 representative shall cast his vote in accordance with the provisions of sub-section (3). (4) The authorised representative shall file with the committee of creditors any instructions received by way of physical or electronic means, from the financial creditor he represents, for voting in accordance therewith, to ensure that the appropriate voting instructions of the financial creditor he represents is correctly recorded by the interim resolution professional or resolution professional, as the case may be.

Explanation.-For the purposes of this section, the “electronic means” shall be such as may be specified.

48 Section 30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan 49[along with an affidavit stating that he is eligible under section 29 A] to the resolution professional prepared on the basis of the information memorandum.

(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan-

(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the 50 [payment] of other debts of the corporate debtor;

[(b) provides for the payment of debts of operational creditors 51

in such manner as may be specified by the Board which shall not be less than-

(i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or

48 This Section 30 has undergone various changes in its amendments by Acts 8 of 2018, 26 of 2018 and 26 of 2019. Several aspects relating to the requirements of Section 30 have formed the matters of contention herein. For their relevance, all the concerned amendments are being indicated.

49 Inserted by Act 26 of 2018, sec. 23(i) (w.r.e.f. 06.06.2018). 50 Substituted by Act 26 of 2018, sec. 23 (ii)(A), for “repayment” (w.r.e.f. 06.06.2018). 51 Substituted by Act 26 of 2019, sec. 6(a), for clause (b) (w.e.f. 16.08.2019). Earlier clause (b) was amended by Act 26 of 2018, sec. 23(ii)(A) (w.r.e.f. 06.06.2018). Clause (b), before substitution, stood as under:

“(b) provides for the payment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53;”

128

(ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.

Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors.

Explanation 2.—For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor-

(i) where a resolution plan has not been approved or rejected by the Adjudicating Authority;

(ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or

(iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;]

(c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan;

(d) the implementation and supervision of the resolution plan;

(e) does not contravene any of the provisions of the law for the time being in force;

(f) conforms to such other requirements as may be specified by the Board.

52

[Explanation.—For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.] (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2).

52 Inserted by Act 26 of 2018, sec. 23(ii)(B) (w.r.e.f. 06.06.2018).

129 53

[(4) The committee of creditors may approve a resolution plan by a vote of not less than 54[sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, 55 [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor] and such other requirements as may be specified by the Board:

Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it:

Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of section 29A:

Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section.] 56 [Provided also that the eligibility criteria in section 29A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (Ord. 6 of 2018).] (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered:

Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor.

53 Substituted by Act 8 of 2018, sec. 6, for sub-section (4) (w.r.e.f. 23.11.2017). Sub-section (4), before substitution, stood as under:

“(4) The committee of creditors may approve a resolution plan by a vote of not less than seventy five per cent of voting share of the financial creditors.”.

54 Substituted by Act 26 of 2018, sec. 23(iii)(a) for “seventy-five” (w.r.e.f. 06.06.2018). 55 Inserted by Act 26 of 2019, sec. 6(b) (w.e.f. 16.08.2019).

56 Inserted by Act 26 of 2018, sec. 23(iii)(b) (w.r.e.f. 06.06.2018).

130 (6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority.

57 Section 31. Approval of resolution plan.-(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, 58 [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan:

[Provided that the Adjudicating Authority shall, before passing 59

an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.

(3) After the order of approval under sub-section (1),-

(a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and

(b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.

[(4) The resolution applicant shall, pursuant to the resolution 60

plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later:

Provided that where the resolution plan contains a provision for combination as referred to in section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.]

57 This Section 31 has also undergone various changes in its amendments by Act 26 of 2018 and 26 of 2019. For their relevance, all the concerned amendments of this Section 31 are also indicated.

58 Inserted by Act 26 of 2019, sec. 7 (w.e.f. 16.08.2019). 59 Inserted by Act 26 of 2018, sec. 24(a) (w.r.e.f. 06.06.2018). 60 Inserted by Act 26 of 2018, sec. 24(b) (w.r.e.f. 06.06.2018).

131 Section 32. Appeal.-Any appeal from an order approving the resolution plan shall be in the manner and on the grounds laid down in sub-section (3) of section 61.

Section 61. Appeals and Appellate Authority.-(1) Notwithstanding anything to the contrary contained under the Companies Act, 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal. (2) Every appeal under sub-section (1) shall be filed within thirty days before the National Company Law Appellate Tribunal:

Provided that the National Company Law Appellate Tribunal may allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days. (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:–

(i) the approved resolution plan is in contravention of the provisions of any law for the time being in force;

(ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period;

(iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board;

(iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or

(v) the resolution plan does not comply with any other criteria specified by the Board.

(4) An appeal against a liquidation order passed under section 33 may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order.

Section 53. Distribution of assets.–(1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely:-

(a) the insolvency resolution process costs and the liquidation costs paid in full;

(b) the following debts which shall rank equally between and among the following:-

132 (i) workmen’s dues for the period of twenty-four months preceding the liquidation commencement date; and

(ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52;

(c) wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date;

(d) financial debts owed to unsecured creditors;

(e) the following dues shall rank equally between and among the following:-

(i) any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date;

(ii) debts owed to a secured creditor for any amount unpaid following the enforcement of security interest;

(f) any remaining debts and dues;

(g) preference shareholders, if any; and

(h) equity shareholders or partners, as the case may be. (2) Any contractual arrangements between recipients under sub-

section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator. (3) The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be distributed after such deduction. Explanation.–For the purpose of this section-

(i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and

(ii) the term “workmen’s dues” shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013 (18 of 2013).

Section 238. Provisions of this Code to override other laws.- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the

133 time being in force or any instrument having effect by virtue of any such law.

59. We may also take note of Regulations 16A, 37, 38, 39 and 39B in

CIRP Regulations, as applicable at the relevant time as follows: -

“6116A. Authorised representative.-(1) The interim resolution professional shall select the insolvency professional, who is the choice of the highest number of financial creditors in the class in Form CA received under sub-regulation (1) of regulation 12, to act as the authorised representative of the creditors of the respective class:

Provided that the choice for an insolvency professional to act as authorised representative in Form CA received under sub- regulation (2) of regulation 12 shall not be considered. (2) The interim resolution professional shall apply to the Adjudicating Authority for appointment of the authorised representatives selected under sub-regulation (1) within two days of the verification of claims received under sub-regulation (1) of regulation 12.

(3) Any delay in appointment of the authorised representative for any class of creditors shall not affect the validity of any decision taken by the committee.

(4) The interim resolution professional shall provide the list of creditors in each class to the respective authorised representative appointed by the Adjudicating Authority.

(5) The interim resolution professional or the resolution professional, as the case may be, shall provide an updated list of creditors in each class to the respective authorised representative as and when the list is updated.

Clarification: The authorised representative shall have no role in receipt or verification of claims of creditors of the class he represents.

(6) The interim resolution professional or the resolution professional, as the case may be, shall provide electronic means of communication between the authorised representative and the creditors in the class.

(7) The voting share of a creditor in a class shall be in proportion to the financial debt which includes an interest at the rate of eight per cent per annum unless a different rate has been agreed to between the parties.

61 This Regulation 16A was inserted w.e.f. 04.07.2018.

134 (8) The authorised representative of creditors in a class shall be entitled to receive fee for every meeting of the committee attended by him in the following manner, namely:-

Number of creditors in the class Fee per meeting of the committee (Rs.) 10-100 15,000 101-1000 20,000 More than 1000 25,000

(9) The authorised representative shall circulate the agenda to creditors in a class and announce the voting window at least twenty-four hours before the window opens for voting instructions and keep the voting window open for at least twelve hours.

37. Resolution Plan.-A resolution plan shall provide for the 62

measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets, including but not limited to the following:-

(a) transfer of all or part of the assets of the corporate debtor to one or more persons;

(b) sale of all or part of the assets whether subject to any security interest or not;

(ba) restructuring of the corporate debtor, by way of merger, amalgamation and demerger;

(c) the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons;

(ca) cancellation or delisting of any shares of the corporate debtor if applicable:

(d) satisfaction or modification of any security interest;

(e) curing or waiving of any breach of the terms of any debt due from the corporate debtor;

(f) reduction in the amount payable to the creditors;

(g) extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor;

(h) amendment of the constitutional documents of the corporate debtor;

(i) issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose;

62 This Regulation 37 was substituted for the earlier one w.e.f. 06.02.2018. Clause (ba) was inserted to this Regulation w.e.f. 28.11.2019; and clause (ca) was inserted w.e.f. 04.07.2018.

135

(j) change in portfolio of goods or services produced or rendered by the corporate debtor;

(k) change in technology used by the corporate debtor; and

(l) obtaining necessary approvals from the Central and State Governments and other authorities.

38. Mandatory contents of the resolution plan.- 64[(1) The 63

amount payable under a resolution plan-

(a) to the operational creditors shall be paid in priority over financial creditors; and

(b) to the financial creditors, who have a right to vote under sub- section (2) of Section 21 and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the plan.] (1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor. (1B) A resolution plan shall include a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past.

(2) A resolution plan shall provide:

(a) the term of the plan and its implementation schedule;

(b) the management and control of the business of the corporate debtor during its term; and

(c) adequate means for supervising its implementation.

65 [(3) A resolution plan shall demonstrate that-

(a) it addresses the cause of default;

(b) it is feasible and viable;

63 This Regulation 38 has also undergone several changes. The relevant amendments to sub- regulation (1) and (3) are separately indicated hereinbelow. That apart, sub-regulation (1A) was inserted w.e.f. 05.10.2017 and sub-regulation (1B) was inserted w.e.f. 24.01.2019 64 Sub-regulation (1) was amended w.e.f. 04.07.2018; then was substituted w.e.f. 05.10.2018; and then was again substituted w.e.f. 28.11.2019. Before the last substitution, this sub- regulation (1), stood as under:-

“(1) The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors.”

65 Sub-regulation (3) was inserted w.e.f. 07.11.2017 and then was substituted w.e.f. 04.07.2018. Before substitution, this sub-regulation (3), stood as under:-

“(3) A resolution plan shall contain details of the resolution applicant and other connected persons to enable the committee to assess the credibility of such applicant and other connected persons to take a prudent decision while considering the resolution plan for its approval.”.

136 (c) it has provisions for its effective implementation;

(d) it has provisions for approvals required and the timeline for the same; and

(e) the resolution applicant has the capability to implement the resolution plan.] 66

39. Approval of resolution plan.- 67[(1) A prospective resolution applicant in the final list may submit resolution plan or plans prepared in accordance with the Code and these regulations to the resolution professional electronically within the time given in the request for resolution plans under regulation 36B along with-

(a) an affidavit stating that it is eligible under section 29A to submit resolution plans;

[***] 68

(c) an undertaking by the prospective resolution applicant that every information and records provided in connection with or in the resolution plan is true and correct and discovery of false information and record at any time will render the applicant ineligible to continue in the corporate insolvency resolution process, forfeit any refundable deposit, and attract penal action under the Code. (1A) A resolution plan which does not comply with the provisions of sub-regulation (1) shall be rejected.] [(2) The resolution professional shall submit to the committee 69

all resolution plans which comply with the requirements of the Code and regulations made thereunder along with the details of following transactions, if any, observed, found or determined by him-

(a) preferential transactions under section 43;

(b) undervalued transactions under section 45;

66 This Regulation 39 has also undergone wide ranging amendments, the relevant of which are indicated hereinbelow.

67 Sub-regulation (1) was substituted w.e.f. 01.01.2018 and that was replaced by sub- regulation (1) and (1A) w.e.f. 04.07.2018. Before 04.07.2018, sub-regulation (1) stood as under: –

“(1) A resolution applicant shall submit resolution plan(s) prepared in accordance with the Code and these regulations to the resolution professional within the time given in the invitation made under clause (h) of sub-section (2) of section 25.” 68 Clause (b) was omitted w.e.f. 05.10.2018. Before omission, it stood as under:

“(b) an undertaking that it will provide for additional funds to the extent required for the purposes under sub-regulation (1) of regulation 38; and”.

69 Sub-regulation (2) was substituted w.e.f. 07.11.2017. Prior to this substitution, this sub- regulation (2) stood as under:

“(2) The resolution professional shall present all resolution plans that meet the requirements of the Code and these Regulations to the committee for its consideration.”

137

(c) extortionate credit transactions under section 50; and

(d) fraudulent transactions under section 66, and the orders, if any, of the adjudicating authority in respect of such transactions.]

70 71

- [(3) The committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit:

Provided that the committee shall record its deliberations on the feasibility and viability of the resolution plans.] [(4) The resolution professional shall endeavour to submit the 72

resolution plan approved by the committee to the Adjudicating 70 This sub-regulation (3) was substituted w.e.f. 04.07.2018; before its substitution it stood as under:

“(3) The committee may approve any resolution plan with such modifications as it deems fit” Its proviso was substituted w.e.f. 25.07.2019; before its substitution it stood as under:

“Provided that the committee shall record the reasons for approving or rejecting a resolution plan.” There had also been an insertion of sub-regulation (3A) w.e.f. 06.02.2018 but the same was omitted w.e.f. 05.10.2018.

71 We may further indicate that w.e.f. 07.08.2020, entire of this sub-regulation (3) has been substituted and sub-regulations (3A) and (3B) have been inserted, essentially dealing with the eventuality of consideration of more than one resolution plans by the CoC.

Though the amendment w.e.f. 07.08.2020, would not directly apply to the present case but, for reference, we may reproduce the newly substituted sub-regulation (3),(3A) and (3B) as under:

“(3) The committee shall-

(a) evaluate the resolution plans received under sub-regulation (2) as per evaluation matrix;

(b) record its deliberations on the feasibility and viability of each resolution plan; and

(c) vote on all such resolution plans simultaneously.

(3A) Where only one resolution plan is put to vote, it shall be considered approved if it receives requisite votes.

(3B) Where two or more resolution plans are put to vote simultaneously, the resolution plan, which receives the highest votes, but not less than requisite votes, shall be considered as approved:

Provided that where two or more resolution plans receive equal votes, but not less than requisite votes, the committee shall approve any one of them, as per the tie-breaker formula announced before voting:

Provided further that where none of the resolution plans receives requisite votes, the committee shall again vote on the resolution plan that received the highest votes, subject to the timelines under the Code.”

72 This sub-regulation was substituted for the earlier one w.e.f. 04.07.2018 and was also amended w.e.f. 24.01.2019.

138 Authority at least fifteen days before the maximum period for completion of corporate insolvency resolution process under section 12, along with a compliance certificate in Form H of the Schedule and the evidence of receipt of performance security required under sub-regulation (4A) of regulation 36B.] (5) The resolution professional shall forthwith send a copy of the order of the Adjudicating Authority approving or rejecting a resolution plan to the participants and the resolution applicant. (6) A provision in a resolution plan which would otherwise require the consent of the members or partners of the corporate debtor, as the case may be, under the terms of the constitutional documents of the corporate debtor, shareholders’ agreement, joint venture agreement or other document of a similar nature, shall take effect notwithstanding that such consent has not been obtained. (7) No proceedings shall be initiated against the interim resolution professional or the resolution professional, as the case may be, for any actions of the corporate debtor, prior to the insolvency commencement date.

(8) A person in charge of the management or control of the business and operations of the corporate debtor after a resolution plan is approved by the Adjudicating Authority, may make an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in implementing the terms of a resolution plan.

[(9) A creditor, who is aggrieved by non-implementation of a 73

resolution plan approved under sub-section (1) of section 31, may apply to the Adjudicating Authority for directions.]” 74 39B. Meeting liquidation cost.-(1) While approving a resolution plan under sub-section (4) of section 30 or deciding to liquidate the corporate debtor under sub-section (2) of section 33, the committee may make a best estimate of the amount required to meet liquidation costs, in consultation with the resolution professional, in the event an order for liquidation is passed under section 33. (2) The committee shall make a best estimate of the value of the liquid assets available to meet the liquidation costs, as estimated in sub-regulation (1).

(3) Where the estimated value of the liquid assets under sub- regulation (2) is less than the estimated liquidation costs under sub- regulation (1), the committee shall approve a plan providing for contribution for meeting the difference between the two. (4) The resolution professional shall submit the plan approved under sub-regulation (3) to the Adjudicating Authority while filing the approval or decision of the committee under section 30 or 33, as the case may be.

73 This sub-regulation was inserted w.e.f. 24.01.2019. 74 This sub-regulation was inserted w.e.f. 25.07.2018.

139 Explanation.-For the purposes of this regulation, ‘liquidation costs’ shall have the same meaning as assigned to it in clause (ea) of sub- regulation (1) of regulation (2) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

60. We would hasten to reiterate that in the foregoing extractions of

the provisions, we have indicated the

amendments/substitutions/insertions in the related footnotes to the extent

relevant for the present purpose; and not necessarily all the changes as

brought about from time to time.

JIL’s CIRP: Chronicle of complications

61. The factual and background aspects relating to this batch of

matters make it evident that the insolvency resolution of the corporate

debtor JIL carries with it vexed and strikingly intricate issues where twice

over this Court had exercised its plenary powers under Article 142 of the

Constitution of India to ensure complete justice in the cause and yet, for a

variety of reasons, the insolvency resolution is eluding the corporate

debtor JIL; and even when the resolution plan is said to have been

approved by a vast majority of 97.36% of the voting share of Committee

of Creditors, several issues are still hovering over with an assortment of

grievances of different stakeholders and role players. Even the very

process taken up by the Committee of Creditors has been questioned

apart from several questions over one or the other stipulation in the

resolution plan. Further, several questions have spurt up on the order

passed by the Adjudicating Authority, wherein some of the objections

have been accepted and the plan has been modified while a few other 140 objections have been rejected. Modification of the resolution plan by the

Adjudicating Authority has given the resolution applicant and even IRP

several causes to be discontented with and at the same time, rejection of

some of the objections has also been challenged by the objectors. This

apart, some of the stakeholders, who did not raise objections before the

Adjudicating Authority, have also raised their grievances against the plan.

Put in a nutshell, this process of resolution is yet to pass through a maze

of hurdles.

61.1. Having regard to the peculiar circumstances of this case, we had

withdrawn all the appeals pending before NCLAT to this Court and have

heard the entire matter at sufficient length, while extending opportunity of

making oral and written submissions to practically all the parties who

wished to put their say on record.

61.2. We have examined the submissions so made as also the material

placed on record with reference to the law applicable and have given

anxious consideration to the relevant submissions, which are reflected in

the points for determination formulated hereinbefore.

62. Before proceeding further, we may also recapitulate that while

entertaining these matters and transferring the cases pending before

NCLAT to this Court by order dated 06.08.2020, we had directed that the

IRP shall continue to manage the affairs of the subject company i.e., JIL.

We may point out that the IRP has filed an affidavit dated 05.09.2020,

stating the status of the corporate debtor and the major part of activities

141 relating to construction of flats and issuing Offers of Possession which,

according to the IRP, has resulted in reduction of liability to the real estate

allottees. The relevant paragraphs of this affidavit read as under: -

“I state that as part of management of the affairs of the Corporate Debtor, the Deponent inter alia is continuing the construction of residential and commercial dwelling units forming part of the real estate projects of the Corporate Debtor. I further state during the corporate insolvency resolution process (hereinafter, “CIR Process”), the IRP continued construction of residential and commercial dwelling units and has issued Offer of Possessions (OOPs) for 7996 units based on occupancy certificates received from the NOIDA Authority, from time to time. That out of these OOPs issued, sub-lease registration of 6,429 has been completed. The process of issuance of OOPs as started by the Deponent after the receipt of such occupancy certificates continues.

I further state that for approximately 2,688 allottees to whom OOPs providing for delay rebate was issued prior to 17.12.2019, either the Sub-Lease Deed is still to be executed or the Sub-Lease Deed is pending for registration before the Registrar of Assurances of Noida.

I state that the delivery of units and their transfer by way of sub- lease registration has resulted in a reduction of Financial Creditors’ (Real-Estate Allottees) liability by more than Rs. 2,250 Crores since commencement of the CIR Process in the Corporate Debtor.”

The objectives and scheme of IBC

63. For dealing with the questions involved, worthwhile it would be to

begin the discussion broadly on the scheme of the Code and

assignments of some of the relevant role players in the corporate

insolvency resolution process.

63.1. As noticed from the Preamble, the Code came to be enacted to

consolidate and amend the laws relating to reorganisation and insolvency

resolution of corporate persons, partnership firms and individuals in a

time bound manner; the objectives, inter alia, being for maximisation of

142 the value of assets of such persons and balance of interests of all the

stakeholders. The Preamble reads as under: -

“An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.”

63.2. In the judgment delivered on 25.01.2019 in the case of Swiss

Ribbons Private Limited and Anr. v. Union of India and Ors.: (2019) 4

SCC 1775, this Court traversed through the historical background and

scheme of the Code in the wake of challenge to the constitutional validity of

various provisions therein. One part of such challenge had been founded on

the ground that the classification between ‘financial creditor’ and ‘operational

creditor’ was discriminatory and violative of Article 14 of the Constitution of

India. This ground as also several other grounds pertaining to various

provisions of the Code were rejected by this Court after elaborate dilation on

the vast variety of rival contentions. In the course, this Court took note, inter

alia, of the pre-existing state of law as also the objects and reasons for

enactment of the Code. While observing that focus of the Code was to

ensure revival and continuation of the corporate debtor, where liquidation

would be the last resort, this Court pointed out that on its scheme and

framework, the Code was a beneficial legislation to put the corporate debtor

75 Hereinafter also referred to as the case of ‘Swiss Ribbons’.

143 on its feet, and not a mere recovery legislation for the creditors. This Court

said, -

“27. As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme—workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal76 at para 83, fn 3)

28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution

76 ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta & Ors : (2019) 2 SCC 1.

144 process is not adversarial to the corporate debtor but, in fact, protective of its interests…..” (emphasis in bold supplied)

64. Keeping in view the objectives of the Code and observations of

this Court, we may now take an overview of the scheme and structure of

the relevant parts of the Code. Part I thereof contains the provisions

regarding title, extent, commencement and application of the Code as

also the definition and meaning of various expressions used in the Code.

Different provisions have come into force on different dates, as

permissible under proviso to sub-section (3) of Section 1. Part II of the

Code deals with insolvency resolution and liquidation for corporate

persons. Chapter I of Part II makes provision for its applicability and also

defines various expressions used in this Part (Sections 4 and 5). Chapter

II of Part II contains the provisions for corporate insolvency resolution

process in Sections 6 to 32 whereas Chapter III of this Part II contains the

provisions for liquidation process in Sections 33 to 5477.

64.1. A glance at Chapter II of Part II would inform that it contains the

blueprint for the process of insolvency resolution in relation to the

corporate debtors to whom this Part applies, while specifying the persons

who could initiate the process; the manner and impact of such initiation;

the roles and rights as also duties of key persons and entities to be

involved in the resolution process like the resolution professional, the

Committee of Creditors, the authorised representative of financial

77 Sections 4 to 32 came into force on 01.12.2016 whereas Section 33 to 54 came into force on 15.12.2016.

145 creditors and the resolution applicant; the matters essential for

preparation of the resolution plan; the submission and approval of the

resolution plan; and the appeal against approval of the resolution plan.

Approval of resolution plan: Crucial steps and role players

65. As noticed, as per the requirements of the Code read with the

orders passed by this Court in the cases of Chitra Sharma and

Jaiprakash Associates Ltd. (supra), the insolvency resolution process

in relation to the corporate debtor JIL has already passed through the

stages of initiation, appointment of interim resolution professional,

constitution and reconstitution of the Committee of Creditors, submission

and resubmission of resolution plans, approval of the resolution plan of

NBCC by the Committee of Creditors, submission of the said resolution

plan to the Adjudicating Authority, and its approval by the Adjudicating

Authority, albeit with some modifications.

65.1. The issues now raised before us basically relate to the contents

of the resolution plan in question; its approval by the Committee of

Creditors; and the order passed by the Adjudicating Authority in its

approval with modifications. Thus, on the issues raised and points arising

for determination, the focus in the present case is on the dispensation

governing the process of approval of the resolution plan by CoC who,

under Section 30(4) of the Code, considers and votes at the resolution

plan after it has been verified by the resolution professional as being

compliant with the statutory requirements specified in Section 30(2) of

146 the Code; and on the approval of resolution plan by the Adjudicating

Authority in terms of Section 31 of the Code. Having regard to the issues

involved, we may usefully take note of the relevant principles enunciated

by this Court in relation to these crucial steps of CIRP.

66. The relevant aspects relating to the steps in CIRP for approval of

the resolution plan have come up for interpretation before this Court in at

least three major decisions, in the cases of K. Sashidhar v. Indian

Overseas Bank and Ors.: (2019) 12 SCC 150 (decided on 05.02.2019),

Committee of Creditors of Essar Steel India Limited v. Satish Kumar

Gupta and Ors.: (2020) 8 SCC 531 (decided on 15.11.2019), and

Maharashtra Seamless Limited v. Padmanabhan Venkatesh and

Ors.: (2020) 11 SCC 467 (decided on 22.01.2020). The contesting

parties have also relied upon these decisions in support of their

respective contentions. We shall be referring to these cases in a little

detail in the later part of this judgment while determining Point A

concerning the scope of the jurisdiction of the Adjudicating Authority in

dealing with the resolution plan approved by the Committee of Creditors.

At this juncture, we may only indicate the importance of a few essential

role players in the process, as discernible from the relevant provisions of

the Code and as exposited by this Court.

66.1. In the scheme of IBC, the script of corporate insolvency resolution

process, to a large extent, revolves around the resolution professional.

When CIRP gets initiated with admission of the application by the

147 Adjudicating Authority as per Sections 7, 9 or 10, as the case may be, an

interim resolution professional is appointed by the Adjudicating Authority

in terms of Section 13(1)(c) and in the manner laid down in Section 16.

Collating and admitting the claims of all creditors; appointing and

convening the meetings of the Committee of Creditors; and running the

business of the corporate debtor as a going concern during the

intermediate period are the key tasks assigned to the interim resolution

professional, as distinctly appears from Sections 15, 17, 18 and 20 of the

Code. Further, in the scheme of IBC, the Committee of Creditors, in its

first meeting to be held within seven days of its constitution, has to

resolve to appoint the interim resolution professional as a resolution

professional or to replace him by another resolution professional (vide

Section 22 IBC). In terms of Section 23, the resolution professional is to

conduct the entire CIRP and manage the operations of the corporate

debtor during the period of CIRP. His duties and responsibilities extend to

the conduct of all the meetings of the Committee of Creditors, giving

notice of such meetings to the members of CoC, to the members of the

suspended Board of Directors and to the operational creditors, if amount

of their aggregate dues is not less than 10% of the debt. Akin to the

duties of the interim resolution professional under Section 18 of the

Code, the resolution professional is also required to preserve and protect

the assets of the corporate debtor while continuing with the business

operations and while undertaking the actions contemplated by Section

148 25(2) of the Code. Significantly, the resolution professional is also

required to prepare the information memorandum in terms of Section 29

of the Code; invite prospective resolution applicants; and present the

resolution plans at the meeting of the Committee of Creditors, while duly

examining them as required by Section 30 of the Code. These

compliances are duly regulated by Regulations 35, 36, 36A and 36B of

the CIRP Regulations.

66.1.1. Taking note of the relevant provisions, this Court in the case of

Essar Steel (supra) summed up the key role of the resolution

professional in the following terms: -

“48. The detailed provisions that have been stated hereinabove make it clear that the resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application under Sections 7, 9 or 10 of the Code till a resolution plan is approved by the Adjudicating Authority, but is also a key person who is to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans that are submitted in accordance with the detailed information given to resolution applicants by the resolution professional. Another very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors.”

66.2. Further, the role of prospective resolution applicant has also been

explained in Essar Steel with reference, inter alia, to UNCITRAL

Legislative Guide as also Regulations 37 and 38 of the CIRP Regulations

on the contents of a resolution plan, while pointing out the rights of a

prospective resolution applicant to receive necessary information as also

149 its duty to prepare the resolution plan providing for necessary measures

for insolvency resolution of the corporate debtor with maximisation of the

value of its assets.

Committee of Creditors: the protagonist of CIRP

67. While in their representative roles, the resolution professional and

the resolution applicant are duty bound to ensure that the resolution plan

is prepared in conformity with the requirements of the Code and the

CIRP Regulations and is properly presented for consideration, the central

role in taking the decision as to whether a resolution plan be adopted or

not, in the same form as presented to it or in a modified form; and as to

whether the attempt for revival of corporate debtor be made or not,

ultimately rests with the pivotal body, comprising of the financial creditors

of the corporate debtor and termed as “Committee of Creditors”. As

noticed from the provisions above-quoted, the final decision on a

resolution plan is taken by the Committee of Creditors; and, for approval,

a resolution plan is required to be voted in favour by not less than 66% of

the voting share of the financial creditors, as per Section 30(4) of the

Code. It is also relevant to point out that though the resolution

professional is to run the business of the corporate debtor as a going

concern during the corporate insolvency resolution process but, as per

Section 28(3) of the Code, he cannot take certain decisions relating to

150 the management of the corporate debtor without prior approval of the

Committee of Creditors by a vote of at least 66% of the voting shares78.

67.1. It is, therefore, evident that corporate insolvency resolution, with

approval of the plan of resolution, is ultimately in the exclusive domain of

the Committee of Creditors. Even during the resolution process, major

decisions as regards management and finances of the corporate debtor

are in the control of the Committee of Creditors. As per the composition

delineated in Section 21 of the Code, the Committee of Creditors is

comprised of all financial creditors of the corporate debtor; and the frame

of Section 21 puts it beyond doubt that the voting share of each financial

creditor is determined on the basis of financial debt owed to it. It is also

clear from Section 30(4) as also Section 28(3) that the major decisions of

approval are to be taken by the Committee of Creditors by a vote of at

least 66% of the voting share of the financial creditors and not by a

simple majority. The reasons and purpose for assigning such a unique

and decisive role in corporate insolvency resolution to the Committee of

Creditors and for that matter, to a substantial block of not less than 2/3 rd

of voting share of the financial creditors, were extensively delineated in

the report of the Bankruptcy Law Reforms Committee of November, 2015

while remarking on the essential theme that the ‘appropriate disposition

of a defaulting firm is a business decision, and only the creditors should

make it’.

78 This percentage of minimum votes of CoC, for approval of resolution plan as also for prior approval of certain actions, was ‘seventy-five’ in the Code as originally enacted and was altered to ‘sixty-six’ by way of an amendment with effect from 06.06.2018.

151 67.2. In the case of K. Sashidhar (supra), while setting out the relevant

extracts from the said Report, this Court exposited on the primacy of the

commercial wisdom of the Committee of Creditors in the corporate

insolvency resolution process in the following terms: -

“52. As aforesaid, upon receipt of a “rejected” resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable.

53. In the report of the Bankruptcy Law Reforms Committee of November 2015, primacy has been given to CoC to evaluate the various possibilities and make a decision. It has been observed thus:

“The key economic question in the bankruptcy process

152 When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned.

The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the Government (legislature, executive or judiciary) into this question. This has been strictly avoided by the Committee. The appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it.” (emphasis in bold supplied; emphasis in italics is in original)

67.3. In Essar Steel (supra), a 3-Judge Bench of this Court surveyed

almost all the relevant provisions concerning corporate insolvency

resolution process; and, as noticed above, explained the assignments of

different role players in this process. In that context, this Court again

explained the primacy endowed on the commercial wisdom of the

Committee of Creditors and reasons therefor, with a further detailed

reference to the aforesaid report of the Bankruptcy Law Reforms

Committee of November, 2015. Apart from the passage from the said

report that was noticed in K. Sashidhar (reproduced hereinabove), the

Court noticed various other passages from this report in Essar Steel;

and one part thereof, which further underscores the rationale for only

financial creditors handling the process of resolution, could be usefully

reproduced as under (part of paragraph 56 at p. 578 of SCC): - 153

“5.3.1. Steps at the start of the IRP ***

4. Creation of the creditors committee The creditors committee will have the power to decide the final solution by majority vote in the negotiations. The majority vote requires more than or equal to 75 per cent of the creditors committee by weight of the total financial liabilities. The majority vote will also involve a cram down option on any dissenting creditors once the majority vote is obtained. … The Committee deliberated on who should be on the creditors committee, given the power of the creditors committee to ultimately keep the entity as a going concern or liquidate it. The Committee reasoned that members of the creditors committee have to be creditors both with the capability to assess viability, as well as to be willing to modify terms of existing liabilities in negotiations. Typically, operational creditors are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that, for the process to be rapid and efficient, the Code will provide that the creditors committee should be restricted to only the financial creditors.” (emphasis in italics is in original)

67.4. In Essar Steel, the Court referred to the above-quoted and other

passages from the judgement in K. Sashidhar (supra) and explained the

decisive role of the commercial wisdom of the Committee of Creditors,

inter alia, in the following passages: -

“54. Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion.…… *** *** ***

59. Even though it is the resolution professional who is to run the business of the corporate debtor as a going concern during the intermediate period, yet, such resolution professional cannot take certain decisions relating to management of the corporate debtor without the prior approval of at least 66% of the votes of the Committee of Creditors…….

154 60. Thus, it is clear that since corporate resolution is ultimately in the hands of the majority vote of the Committee of Creditors, nothing can be done qua the management of the corporate debtor by the resolution professional which impacts major decisions to be made in the interregnum between the taking over of management of the corporate debtor and corporate resolution by the acceptance of a resolution plan by the requisite majority of the Committee of Creditors. Most importantly, under Section 30(4), the Committee of Creditors may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability, and various other requirements as may be prescribed by the Regulations.

*** *** ***

64. Thus, what is left to the majority decision of the Committee of Creditors is the “feasibility and viability” of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.” (emphasis in bold supplied)

67.5. In the case of Maharashtra Seamless Ltd. (supra), again, a 3-

Judge Bench of this Court referred extensively to the enunciations in

Essar Steel (supra) and reiterated the primacy assigned to the

commercial wisdom of the Committee of Creditors in the matter of

corporate insolvency resolution.

155

68. For what has been noticed hereinabove, it would not be an

exaggeration in terms that, in corporate insolvency resolution process,

the role of Committee of Creditors is akin to that of a protagonist, giving

finality to the process (subject, of course, to approval by the Adjudicating

Authority), who takes the key decisions in its commercial wisdom and

also takes the consequences thereof. As noticed, the process is aimed at

bringing the corporate debtor back on its feet and it is acknowledged that

appropriate disposition of a defaulting corporate debtor and the choice of

solution, to keep the corporate debtor as a going concern or to liquidate

it, is to be made by the financial creditors, who could assess the viability

and may take decisions in modification of the terms of the existing

liabilities. In other words, the decision as to whether the corporate debtor

be resurrected or not, by acceptance of a particular resolution plan, is

essentially a business decision and hence, is left to the committee

consisting of the financial creditors, that is, the Committee of Creditors

but, with the requirement that the resolution plan, for its approval, ought

to muster not less than 66% votes of the voting share of the financial

creditors.

69. The significance of primacy of the Committee of Creditors in the

process of corporate insolvency resolution unfolds itself when we

examine the contours of the jurisdiction of Adjudicating Authority dealing

with a resolution plan after the same has been voted at by the Committee

of Creditors. We have formulated the questions relating to such contours

156 as the first point for determination in view of the fact that most of the

other questions involved in this batch of matters revolve around the order

dated 03.03.2020 as passed by the Adjudicating Authority in approval of

the resolution plan of NBCC with certain modifications. The decision on

legality and validity of the order passed by the Adjudicating Authority on

any particular objection or issue would largely depend on the question as

to whether the Adjudicating Authority has acted within its jurisdiction or

has overstepped its jurisdiction or has acted illegally or with material

irregularity in exercise of its jurisdiction. In fact, contours of the

jurisdiction of the Adjudicating Authority are also delineated by this Court

in the aforesaid decisions, as shall be noticed infra.

70. With the foregoing observations and while keeping the

aforementioned enunciations in view, we may now take up the points

arising for determination in this case.

Point A

Contours of the jurisdiction of Adjudicating Authority in dealing with a resolution plan

71. As noticed, the resolution plan in relation to the corporate debtor

JIL, as propounded by NBCC, has been approved by the Committee of

Creditors with the votes of 97.36% of the voting share of financial

creditors. However, the Adjudicating Authority (NCLT), while passing the

impugned order dated 03.03.2020, has modified some of the terms of the

resolution plan while also declining modification in relation to some other

terms of the resolution plan. In relation to either of the events, whether of

157 modifying the terms of the plan or declining the prayer for modification,

invariably the question pertaining to the jurisdiction of the Adjudicating

Authority would arise for consideration.

72. The contours of the powers and jurisdiction of Adjudicating

Authority dealing with a resolution plan approved by the Committee of

Creditors have been clearly defined, delineated and described by this

Court in the aforesaid decisions in K. Sashidhar, Essar Steel and

Maharashtra Seamless Ltd. Appropriate it would be to take note of the

principles emanating from these decisions with a brief reference to the

relevant factual aspects of each of these cases.

73. The first in this series of judgments relating to the process of

approval of resolution plan in CIRP proceedings had been the case of K.

Sashidhar (supra) where the matters in issue related to two different

corporate debtors, Kamineni Steel & Power (India) (P) Ltd. (‘KSPIPL’)

and Innovative Industries Ltd. (‘IIL’).

73.1. Shorn of unnecessary details, the relevant factual aspects of the

case of KSPIPL had been that the said company had filed a petition

under Section 10 of the Code seeking initiation of CIRP that was

admitted on 10.02.2017 by NCLT, Hyderabad and IRP was appointed

with directions to constitute CoC. Accordingly, CoC was constituted and

there had been a few rounds of consideration of the matter by CoC,

where different propositions were mooted for insolvency resolution.

Ultimately, on 30.10.2017, the voting share of consenting banks

158 expressly approving the proposed resolution plan was 66.67% and the

voting share of dissenting lender banks was 26.97%. Bank of

Maharashtra, having 6.36% voting share, neither approved nor rejected

the plan nor abstained from voting but conveyed that they remained

‘open to consider the resolution plan’. Be it noted that at the relevant

time, the requirement for approval of the resolution plan, as per Section

30(4) of the Code, was that it ought to be approved by a vote of not less

than 75% of voting share of the financial creditors.

73.1.1. The position as obtainable after the aforesaid voting was that the

resolution plan fell short of receiving minimum 75% votes of the voting

share of the financial creditors. IRP filed an affidavit of the outcome

before the Adjudicating Authority (NCLT, Hyderabad) on 03.11.2017.

However, the Managing Director of the corporate debtor submitted before

the Adjudicating Authority that the majority ought to be counted without

taking into account the voting share of the financial creditor who chose

not to participate in the voting. It was the submission that with such

exclusion, the percentage of voting share in approval of the plan would

be 78.63% and, therefore, the plan could be taken as approved by the

CoC. The NCLT, by its order dated 20.11.2017, allowed the petition so

filed and approved the resolution plan with certain directions. The three

dissenting financial creditors, including the said Bank of Maharashtra,

filed an appeal before NCLAT against the order of NCLT in approving the

resolution plan despite the same having not received the approval of

159 minimum 75% votes of the voting share of financial creditors. The

Managing Director of the corporate debtor also filed an appeal

challenging the observation made by NCLT regarding the corporate

guarantee to be proceeded with.

73.2. The factual aspects relating to the other corporate debtor IIL had

been that its lender bank filed insolvency application that was admitted

by NCLT, Mumbai on 17.01.2017. In the CoC meeting relating to this

corporate debtor, the financial creditors holding 66.57% voting share

voted in favour of approving the proposed resolution plan, whereas

dissenting financial creditors, having 33.43% voting share, voted against.

Resultantly, the proposed plan was not approved for want of support of

the requisite percentage of voting share. The resolution applicant filed an

application seeking permission to submit a revised resolution plan and to

invite fresh votes. The impending liquidation proceedings were objected

to by the workers’ union too. The NCLT, however, rejected the

applications and directed initiation of liquidation proceedings by its order

dated 23.11.2017. An appeal was filed challenging the order so passed

by the NCLT.

73.3. The Appellate Authority (NCLAT) took up both the appeals relating

to KSPIPL and IIL together and the same were disposed of by a common

judgment dated 06.09.2018, wherein it was held that the statutory

requirement of approval of resolution plan by vote of not less than 75% of

the voting share of financial creditors, as laid down under Section 30(4) 160 of the Code, was mandatory and the plans in question were not approved

by the requisite majority. Therefore, the appeals were dismissed.

73.4. The common judgment so passed by NCLAT was in challenge

before this Court. During the pendency of appeals in this Court, the

aforesaid amendment to Section 30(4) was made and the requisite voting

share for approval of resolution plan was reduced to 66% with effect from

06.06.2018.

73.5. After examining the long length of rival submissions, this Court

proceeded to determine the questions as to whether the percentage of

voting share of the financial creditors specified in Section 30(4) of IBC

was mandatory; as to whether the votes of the financial creditors who had

abstained from voting were required to be ignored for the purpose of

computing the required percentage of voting share; as to whether the

amendments brought into force during the pendency of appeals were

applicable to those cases; and as to whether it was open to the

Adjudicating Authority/Appellate Authority to reckon any factor other than

those specified in Sections 30(2) or 61(3) of IBC, as the case may be, for

rejection of the resolution plan?

73.6. This Court analysed the entire scheme of the Code, particularly

concerning the resolution plan and its approval by the Committee of

Creditors and then by the Adjudicating Authority; and held that the

percentage of voting share was not directory and in the light of the

provisions contained in the Code and the CIRP Regulations, the

161 approving votes must fulfil the requisite percentage of voting share. The

Court also held that the amendment to Section 30(4), prescribing new

qualifying standard for approval of resolution plan was neither

retrospective in operation nor was having retroactive effect. The Court

also rejected the suggestion for different percentage of voting share in the

case of KSPIPL. These aspects are not much relevant for the present

purpose. The aspects relevant are the enunciations in relation to the

respective roles of the Committee of Creditors and the Adjudicating

Authority. As already noticed, this Court explained in detail the primacy

given to the commercial wisdom of the Committee of Creditors and such

commercial wisdom being made non-justiciable. Having said so, this

Court also proceeded to define the strict limits of the jurisdiction of

NCLT/NCLAT while dealing with the matter relating to approval of

resolution plan in the following passages: -

“55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers

162 and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality.

The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code.

56. For the same reason, even the jurisdiction of NCLAT being in continuation of the proceedings would be circumscribed in that regard and more particularly on account of Section 32 of the I&B Code, which envisages that any appeal from an order approving the resolution plan shall be in the manner and on the grounds specified in Section 61(3) of the I&B Code…….

57. On a bare reading of the provisions of the I&B Code, it would appear that the remedy of appeal under Section 61(1) is against an “order passed by the adjudicating authority (NCLT)”, which we will assume may also pertain to recording of the fact that the proposed resolution plan has been rejected or not approved by a vote of not less than 75% of voting share of the financial creditors. Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions investing jurisdiction and authority in NCLT or NCLAT as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order “approving a resolution plan” under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers “by the resolution professional” during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds—be it under Section 30(2) or under Section 61(3) of the I&B Code—are regarding testing the validity of the “approved”

163 resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by CoC in exercise of its business decision.

58. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers.” (emphasis in bold supplied)

74. A few months after the decision in the case of K. Sashidhar, the

aforesaid provisions relating to the approval of resolution plan came up

for further exposition before a 3-Judge Bench of this Court in the case of

Essar Steel (supra).

74.1. On the background aspects, while omitting details, suffice it to

notice for the present purpose that in the case of Essar Steel, the NCLT,

Ahmedabad admitted the petition filed by a lender bank and after a few

rounds of proceedings, the negotiated resolution plan of ArcelorMittal

(India) (P) Ltd. was approved by CoC by a majority of 92.24%. After

several further proceedings, the Adjudicating Authority, by its order dated

08.03.2019, disposed of the application to approve the resolution plan.

However, in the appeal, the NCLAT modified the terms of the resolution

plan and proceeded to redistribute the proceeds while, inter alia, holding

that financial creditors and operational creditors deserve equal treatment

under a resolution plan and while further holding that CoC was not

164 empowered to decide the manner in which distribution was to be made

between one or other creditors, as there would be a conflict of interest

between financial and operational creditors. The order so passed by the

NCLAT was in challenge before this Court.

74.2. In the given backdrop, the roles of resolution professional,

resolution applicant and Committee of Creditors as also the jurisdiction of

Adjudicating Authority and Appellate Authority came up for further and

fuller exposition by this Court in Essar Steel (supra). We have already

noticed the passages from this decision in regard to the scheme of IBC

and the pivotal role of Committee of Creditors in the process of insolvency

resolution of a corporate debtor. As regards the jurisdiction of Adjudicating

Authority and Appellate Authority in this process of insolvency resolution,

in Essar Steel, this Court extensively referred to the principles laid down

and explained in K. Sashidhar and thereafter held as under: -

“Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar.” (emphasis in bold supplied)

74.3. In Essar Steel, it was however argued that sub-section (5) of

Section 60 was not considered in K. Sashidhar and in that context, this

Court examined the rights of operational creditors and the reasons set

forth in the Insolvency Committee Report, 2018 and then, reiterated the

165 primacy of Committee of Creditors while declaring the law in no uncertain

terms that the Adjudicating Authority cannot interfere on merits with the

commercial decision taken by the Committee of Creditors; the limited

judicial review available to it was to see that the Committee of Creditors

had taken into account the requirement of keeping the corporate debtor

as a going concern with maximisation of the value of assets and the

interests of all stakeholders including operational creditors were taken

care of. Significantly, in Essar Steel, this Court laid down that if the

Adjudicating Authority would find that the requisite parameters had not

been kept in view, it may send the resolution plan back to the Committee

of Creditors to resubmit the same after satisfying the parameters. This

Court laid down as under: -

“73. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back

166 to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.” (emphasis in bold supplied)

74.4. Thereafter, this Court dealt with the matter on merits in relation to

certain claims and objections which need not be elaborated; suffice it

would be to notice that this Court did not approve the impugned order of

NCLAT and directed that CIRP of the corporate debtor shall take place in

accordance with the amended resolution plan, as accepted by the

Committee of Creditors.

75. Maharashtra Seamless Ltd. (supra) has been yet another

decision in which interference with the decision of Committee of Creditors

by NCLAT met with total disapproval of this Court.

75.1. In Maharashtra Seamless Ltd., the matter related to CIRP

concerning the corporate debtor United Seamless Tubular Private Ltd.

where resolution plans of four different applicants were considered and

CoC approved the resolution plan filed by the appellant Maharashtra

Seamless Ltd. by a majority of 87.10% of the voting share of financial

creditors. Certain differences arose with respect to the liquidation value of

the assets of corporate debtor and the CoC took an average of the

closest estimate. However, NCLAT ordered re-determination of liquidation

value and accordingly, the revised value was arrived at. Thereafter, the

CoC again approved the resolution plan of the appellant considering the

167 revised liquidation value. Then, NCLT approved the resolution plan

submitted by the appellant which included an upfront payment of INR 477

crores for infusion in the capital of the corporate debtor. A promoter of the

corporate debtor and a financial creditor filed appeals before NCLAT

contending that the resolution plan gave unfair advantage to the

resolution applicant whereupon, the Appellate Authority proceeded to give

a direction to the resolution applicant to enhance its fund inflow upfront.

75.2. In the aforesaid backdrop, the matter was considered in appeal

filed by the resolution applicant. After having examined the relevant

provisions of the Code and the CIRP Regulations as also the

enunciations in Essar Steel (supra), this Court observed that there was

no provision in the Code or Regulations under which the bid of any

resolution applicant has to match the liquidation value; that the object

behind such valuation process was to assist the CoC to take a proper

decision on the resolution plan; and once the plan was approved by CoC,

the Adjudicating Authority was only to ascertain if the resolution plan was

meeting the requirements of sub-sections (2) and (4) of Section 30. The

Court observed that in the given case, the Appellate Authority had

proceeded on equitable perceptions rather than commercial wisdom.

Even while observing that release of assets at the value 20% below the

liquidation value arrived by valuers appeared inequitable, this Court

observed that the adjudicatory process ought to cede ground to the

commercial wisdom of the creditors rather than assess the resolution plan

168 on the basis of quantitative analysis. While disapproving interference by

the Appellate Authority, this Court observed and held as under: -

“27. Now the question arises as to whether, while approving a resolution plan, the adjudicating authority could reassess a resolution plan approved by the Committee of Creditors, even if the same otherwise complies with the requirement of Section 31 of the Code. The learned counsel appearing for Indian Bank and the said erstwhile promoter of the corporate debtor have emphasised that there could be no reason to release property valued at Rs 597.54 crores to MSL for Rs 477 crores. The learned counsel appearing for these two respondents have sought to strengthen their submission on this point referring to the other resolution applicant whose bid was for Rs 490 crores which is more than that of the appellant MSL.

28. No provision in the Code or Regulations has been brought to our notice under which the bid of any resolution applicant has to match liquidation value arrived at in the manner provided in Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in Essar Steel. We have quoted above the relevant passages from this judgment.

29. It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the adjudicating authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said provisions in the order of the adjudicating authority in approving the resolution plan.

30. The appellate authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable.

Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the adjudicating authority has to be satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an adjudicating authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the adjudicating authority in limited judicial review has been laid down in Essar Steel, the relevant passage (para 54) of which we have reproduced in earlier part of

169 this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the appellate authority ought to have interfered with the order of the adjudicating authority in directing the successful resolution applicant to enhance their fund inflow upfront.” (emphasis in bold supplied)

76. The expositions aforesaid make it clear that the decision as to

whether corporate debtor should continue as a going concern or should

be liquidated is essentially a business decision; and in the scheme of IBC,

this decision has been left to the Committee of Creditors, comprising of

the financial creditors. Differently put, in regard to the insolvency

resolution, the decision as to whether a particular resolution plan is to be

accepted or not is ultimately in the hands of the Committee of Creditors;

and even in such a decision making process, a resolution plan cannot be

taken as approved if the same is not approved by votes of at least 66% of

the voting share of financial creditors. Thus, broadly put, a resolution plan

is approved only when the collective commercial wisdom of the financial

creditors, having at least 2/3rd majority of voting share in the Committee of

Creditors, stands in its favour.

77. In the scheme of IBC, where approval of resolution plan is

exclusively in the domain of the commercial wisdom of CoC, the scope of

judicial review is correspondingly circumscribed by the provisions

contained in Section 31 as regards approval of the Adjudicating Authority

and in Section 32 read with Section 61 as regards the scope of appeal

against the order of approval.

170 77.1. Such limitations on judicial review have been duly underscored by

this Court in the decisions above-referred, where it has been laid down in

explicit terms that the powers of the Adjudicating Authority dealing with

the resolution plan do not extend to examine the correctness or otherwise

of the commercial wisdom exercised by the CoC. The limited judicial

review available to Adjudicating Authority lies within the four corners of

Section 30(2) of the Code, which would essentially be to examine that the

resolution plan does not contravene any of the provisions of law for the

time being in force, it conforms to such other requirements as may be

specified by the Board, and it provides for: (a) payment of insolvency

resolution process costs in priority; (b) payment of debts of operational

creditors; (c) payment of debts of dissenting financial creditors; (d) for

management of affairs of corporate debtor after approval of the resolution

plan; and (e) implementation and supervision of the resolution plan.

77.2. The limitations on the scope of judicial review are reinforced by the

limited ground provided for an appeal against an order approving a

resolution plan, namely, if the plan is in contravention of the provisions of

any law for the time being in force; or there has been material irregularity

in exercise of the powers by the resolution professional during the

corporate insolvency resolution period; or the debts owed to the

operational creditors have not been provided for; or the insolvency

resolution process costs have not been provided for repayment in priority;

171 or the resolution plan does not comply with any other criteria specified by

the Board.

77.3. The material propositions laid down in Essar Steel (supra) on the

extent of judicial review are that the Adjudicating Authority would see if

CoC

has taken into account the fact that the corporate debtor needs to keep

going as a going concern during the insolvency resolution process; that it

needs to maximise the value of its assets; and that the interests of all

stakeholders including operational creditors have been taken care of.

And,

if the Adjudicating Authority would find on a given set of facts that the

requisite parameters have not been kept in view, it may send the

resolution plan back to the Committee of Creditors for re-submission after

satisfying the parameters. Then, as observed in Maharashtra Seamless

Ltd. (supra), there is no scope for the Adjudicating Authority or the

Appellate Authority to proceed on any equitable perception or to assess

the resolution plan on the basis of quantitative analysis. Thus, the

treatment of any debt or asset is essentially required to be left to the

collective commercial wisdom of the financial creditors.

77.4. During the course of submissions, one of the parties (YEIDA),

seeking to support modification of the resolution plan concerning some of

the terms and stipulations, has referred to a decision by a learned Single

Judge of the Allahabad High Court in the case of Pradumna Kumar Jain

172 v. U.P. Secondary Education Service Commission, Allahabad and

Ors.: (1997) 30 ALR 339 to submit that the power to approve or

disapprove includes the power to modify; and it has been strongly argued

that the power to modify is inherent in the power of approval in terms of

Section 31 of the Code. It is noticed that the questions involved in the

cited decision related to the powers under Regulation 8 of the U.P.

Secondary Education Services Commission (Procedure for Approval of

Punishment) Regulations, 1985, which provided that ‘the Commission

shall after due consideration approve or disapprove the punishment

proposed or may issue any other directions deemed fit in the case’. While

interpreting the said provision, where the Commission was to act as a

superior authority and the provision itself postulated that the said authority

could ‘issue any other directions deemed fit’, the Court held that the

expressions indicated the existence of the power to modify. We are afraid,

the principles stated in the said decision or in other decisions of like

nature cannot be imported to read the power to modify the resolution plan

into Section 31 of the Code.

77.5. In fact, the power of approval conferred on the Adjudicating

Authority in Section 31 of the Code is required to be visualised with

reference to the overall scheme of the Code and the purposes for which

such powers have been conferred. The power of judicial review in Section

31 is not akin to the power of a superior authority to deal with the merits of

the decision of any inferior or subordinate authority. As succinctly stated in

173 Essar Steel (supra), the limited judicial review available is to see that the

Committee of Creditors has adhered to the specified parameters, of

keeping the corporate debtor going as a going concern during the

resolution process; maximisation of the value of its assets; and taking

care of the interests of all stakeholders. This Court has, in no uncertain

terms, held that if the specified parameters have not been kept in view,

the Adjudicating Authority may send a resolution plan back to the

Committee of Creditors to re-submit such plan after satisfying the

parameters. The reasons given by the Committee of Creditors are, thus,

looked at by the Adjudicating Authority only from this point of view. It is not

a jurisdiction to decide as to what ought to be the terms of the resolution

plan. That jurisdiction, in the scheme of IBC, is conferred on the

Committee of Creditors alone, who has to take such a decision in its

commercial wisdom, while keeping in view the applicable provisions and

the specified parameters; of course, its decision of approval has to be by

the requisite majority of minimum 66% of the voting share.

77.6. In yet another set of submissions, on behalf of the erstwhile

director of JIL and JAL, it has been repeatedly asserted that the

Committee of Creditors had failed in its statutory duty to ensure

maximisation of JIL’s assets and protecting the interests of all

stakeholders; and it is submitted that the Committee of Creditors failed to

visualise that there was no justification for NBCC seeking to acquire JIL

174 on a meagre amount of INR 120 crores despite the net worth of JIL being

much higher.

77.6.1. The assessment about maximisation of the value of assets, in the

scheme of the Code, would always be subjective in nature and the

question, as to whether a particular resolution plan and its propositions

are leading to maximisation of value of assets or not, would be the matter

of enquiry and assessment of the Committee of Creditors alone. When

the Committee of Creditors takes the decision in its commercial wisdom

and by the requisite majority; and there is no valid reason in law to

question the decision so taken by the Committee of Creditors, the

adjudicatory process, whether by the Adjudicating Authority or the

Appellate Authority, cannot enter into any quantitative analysis to adjudge

as to whether the prescription of the resolution plan results in

maximisation of the value of assets or not. The generalised submissions

and objections made in relation to this aspect of value maximisation do

not, by themselves, make out a case of interference in the decision taken

by the Committee of Creditors in its commercial wisdom.

78. To put in a nutshell, the Adjudicating Authority has limited

jurisdiction in the matter of approval of a resolution plan, which is well-

defined and circumscribed by Sections 30(2) and 31 of the Code read

with the parameters delineated by this Court in the decisions above-

referred. The jurisdiction of the Appellate Authority is also circumscribed

by the limited grounds of appeal provided in Section 61 of the Code. In

175 the adjudicatory process concerning a resolution plan under IBC, there is

no scope for interference with the commercial aspects of the decision of

the CoC; and there is no scope for substituting any commercial term of

the resolution plan approved by the CoC. Within its limited jurisdiction, if

the Adjudicating Authority or the Appellate Authority, as the case may be,

would find any shortcoming in the resolution plan vis-à-vis the specified

parameters, it would only send the resolution plan back to the Committee

of Creditors, for re-submission after satisfying the parameters delineated

by Code and exposited by this Court.

79. The other points arising in this batch of matters, particularly with

reference to the findings and directions by the Adjudicating Authority in

the impugned order dated 03.03.2020 and with reference to the other

related aspects, may now be examined within the framework of the

parameters aforesaid and the principles laid down by this Court.

Point B

Simultaneous voting over two resolution plans by CoC

80. While dealing with a plethora of disputes and objections

concerning the resolution plan of NBCC and the process of its approval,

we deem it appropriate to deal, first of all, with a part of objections that

approval of the resolution plan of NBCC by CoC is vitiated because of the

fact that two resolution plans, of Suraksha Realty and NBCC, were put to

simultaneous voting whereas such simultaneous voting on the resolution

176 plans was not permissible. If this part of objections is accepted, perhaps,

nothing more would require consideration.

81. It has been argued on behalf of the objectors that at the time of

voting by CoC in the present matter, there was no provision in the Code

permitting the voting by CoC at more than one resolution plan at a time

and in the very scheme of the Code and the requirements of due

consideration, it was necessary that one plan was considered at one point

of time. The process of simultaneous voting in the present case has

vitiated the decision of CoC. It has also been argued that Regulation

39(3B), permitting the CoC to put more than one resolution plan to vote,

was inserted to CIRP Regulations only with effect from 07.08.2020 and

being prospective in operation, would not apply to the present process.

Per contra, it is contended by the parties standing with the approval of the

plan in question that there had not been any prohibition or restriction in

the Code for putting more than one resolution plan to vote at the same

time. On behalf of IRP, it has also been contended that in terms of sub-

section (3) of Section 30, he was required to present the CoC such

resolution plans, which were conforming to the conditions referred in sub-

section (2); and as per sub-section (4) of Section 30, the CoC ‘may

approve a resolution plan’. It is, therefore, submitted that in the present

process, both the plans were rightly placed before the CoC; and the CoC

rightly voted on such plans and approved one of them. It is submitted that

the amendment brought about with effect from 07.08.2020 is clarificatory

177 in nature and only gives out the methodology for putting more than one

resolution plan to vote.

82. Having examined the objection against simultaneous voting with

reference to the material on record and the law applicable, we are unable

to find any substance whatsoever in this objection.

83. It is noteworthy that there has not been any prohibition in the

scheme of IBC and CIRP Regulations that CoC could not simultaneously

consider and vote upon more than one resolution plan at the same time

for electing one of the available options. It has rightly been contended on

behalf of IRP that in terms of sub-section (3) of Section 30 of the Code,

he was obliged to place both the plans before CoC when they were found

conforming to the conditions referred to in sub-section (2) of Section 30;

and thereafter, it was for the CoC to consider the plans and to vote upon

the same. Of course, the CoC could have approved only one resolution

plan; and that has precisely been done in the present case. There does

not appear any flaw or fault in the process adopted in the present case as

regards voting over the resolution plans by the CoC.

83.1. Moreover, as noticed, the legislature itself has made the position

clear by way of a later amendment with effect from 07.08.2020, by

specifically making stipulations for simultaneous voting over more than

one resolution plan by the CoC, particularly with amendment of sub-

regulation (3) of Regulation 39 of CIRP Regulations and insertion of sub-

regulations (3A) and (3B) thereto.79 Such an amendment could only be 79 vide second footnote to sub-regulation (3) of Regulation 39 of CIRP Regulations, ibid.

178 visualised as clarificatory in nature; and, in any case, even before

amendment, there had not been any prohibition in putting two or more

conforming resolution plans to vote simultaneously.

84. It is also noticeable that when the matter was considered in the

second round of litigation and this Court issued various necessary

directions in the order dated 06.11.2019 in exercise of its plenary powers

under Article 142 of the Constitution of India, it was specifically provided

that the two applicants viz., Suraksha Realty and NBCC would be invited

to submit revised plans for consideration. The minutes of CoC meeting

have also been placed before us by IRP and it appears that this very

aspect was duly deliberated in the meeting where IDBI Bank proposed for

simultaneous voting over the two plans and this suggestion was accepted

by almost all CoC members except ICICI Bank Ltd. and Axis Bank Ltd.,

who were having together the voting share of only about 2.3%. Due

deliberations in this regard, in the meeting of Committee of Creditors

dated 07.12.2019, read as under: -

“The IRP enquired from CoC about the Resolution Plan that need to be put for voting by CoC. IDBI Bank on behalf of lenders proposed that given the unique nature of this case both plans should be put to vote as this will provide equal opportunity for individual members of COC to select their preferred Resolution Plan. The main reason for proposing joint vote on both plans was

-

-Specific directions of Hon’ble Supreme Court under its special powers (Article 142) where COC/IRP was required to consider Resolution Plans from only NBCC and Suraksha in accordance with law and regulation.

-Ideally it would like to propose the H1 Resolution Plan to vote, but since the total overall evaluation scores were very close and there is no consensus amongst members of COC on the evaluation methodology used.

179 -Giving equal opportunity to all members of COC (including Home buyers and FD holders) to approve the plan most preferred by them.

-Given the unique and complex nature of this Resolution process.

All CoC members except ICICI Bank Limited, Axis Bank Limited (together having vote share of approx. 2.3%) agreed with the suggestion made by IDBI Bank and decided to put both the Resolution Plans simultaneously to vote. Accordingly, it was decided that both the Resolution Plans will be put to vote simultaneously and in the event both secure the minimum threshold of 66% votes, the plan securing overall higher vote will be considered as the preferred resolution plan. The IRP agreed to follow the COC’s instructions and organise the voting. It was pointed out by CAM in the CoC meeting that since both the Resolution Plans are being put to vote, we might end up in a situation where both the Resolution Plans will receive more than 66% votes, thus creating doubts as to whether both resolution applicants are equally entitled to have their plans submitted to the adjudicating authority for approval. Therefore, to avoid such a situation, the CoC members should be allowed to vote on either of the two Resolution Plans only. The Authorised Representative of the Home Buyers informed that almost all home buyer does not want liquidation of the corporate debtor. In case there is a spilt of vote between Home Buyers and other members of COC, there are more chances of no resolution plan getting approved and situation of liquidation may arise. Majority of home buyers who have written to AR of Home Buyers have indicated NBCC as its preferred choice. Home Buyers are also fully aware that without support of other members of COC, none of the resolution plan will get approved by COC. Para 21(i) of Hon’ble Supreme Court judgment dated 06.11.2019 also directed to “place the revised plan(s) before the CoC, if so required, after negotiations and submit report to the adjudicating authority NCLT within such time.” To avoid scenario of liquidation or non-compliance of Hon’ble Supreme Court direction, AR of Home Buyers insisted that both the Resolution Plans should be put to vote and the CoC members should be allowed to vote on both the Resolution Plans and in the event that both the Resolution Plans receive more than 66% votes, then the successful Resolution Applicant will be decided basis (sic) the Resolution Plan that has received higher number of votes.”

85. In view of the above, we are unable to find any fault in

simultaneous consideration and voting over two resolution plans by CoC

for electing one of them; and we would have no hesitation in giving our

180 imprimatur to such a process. The baseless objection in this regard has

rightly been rejected by the Adjudicating Authority.

Point C

Matters related with the land providing agency YEIDA

86. We may now enter into the first major point for determination in

this batch of matters; and that relates to the stipulations in the resolution

plan concerning the land providing agency YEIDA. The frontal aspect of

this issue is about the provision made in the resolution plan for meeting

with the contingent liability of additional compensation for land acquisition.

The other aspect pertains to the directions by the Adjudicating Authority

for execution of tripartite agreement amongst YEIDA, the corporate

debtor JIL and the SPVs proposed to be set up in terms of the resolution

plan. An ancillary aspect relates to certain reliefs and concessions sought

for by the resolution applicant.

87. As noticed, the rights under the land in question were provided to

the original concessionaire under the Concession Agreement dated

07.02.2003 and later on, JIL was recognised as the concessionaire. In the

broad framework, one chunk of land was provided to the concessionaire

for constructing the Expressway and its allied facilities, for which the CA

provided, inter alia, as under: -

“4.1 Land for construction of Expressway shall be provided by TEA to the Concessionaire, generally in a width of 100 meters along the alignment of the Expressway with additional land width, where required, for developing other facilities like Toll Plazas etc., on following terms & conditions.

*** *** ***

181 b. The land shall be leased for a period starting from the date of transfer till the end of the Concession Period through such lease deed as may be mutually agreed between the Parties.

*** *** *** d. The sole premium of the transferred land shall be equivalent to the acquisition cost plus a lease rent of Rs. 100.00 (Rupees one hundred) only per hectare per year. The acquisition cost shall be the actual compensation paid to the land owners without any additional charge and shall be payable by the Concessionaire as per applicable rules. The lease rent shall be payable annually.”

Another chunk of land was provided to the concessionaire for

commercial exploitation, for which the CA provided, inter alia, as under: -

“4.3 Land for development shall be transferred by TEA to the Concessionaire free from all Encumbrances on following terms & conditions:

a. It shall be on lease for a period of 90 (ninety) years from the date of transfer through such lease deeds as may be mutually agreed between the Parties.

*** *** *** c. The sole premium of the transferred land shall be equivalent to the acquisition cost plus a lease rent of Rs. 100.00 (Rupees one hundred) only per hectare per year. The acquisition cost shall be the actual compensation paid to the land owners without any additional charge and shall be payable by the Concessionaire as per applicable rules. The rent shall be payable annually for 90 (Ninety) years from the date of transfer of land.

d. The Concessionaire shall be entitled to further sub-lease developed / undeveloped land to sub-lessees / end-users in its sole discretion without any further consent or approval or payment of any charges / fee etc. to TEA or any other relevant authority.

e. After sub-lease of part of the land by the Concessionaire, the same can be transferred / assigned without requiring any consent or approval of or payment of any additional charges, transfer fee, premiums etc. to TEA or to any other relevant authority and/or there can be subsequent multiple sub-leases of the land in smaller parts. The lease rent of the respective sub-leased portion of land shall be paid by the sub-lessees / transferees to TEA directly on pro-rata basis @ Rs. 100.00 (Rupees one hundred) per hectare per year. The Concessionaire shall be required to pay lease rent to TEA for

182 the portion of land remaining in its possession after sub-

lease, on pro-rata basis at the aforesaid prescribed rate. Total lease rent paid by the Concessionaire and various sub- lessees / transferees shall be Rs. 100.00 (Rupees one hundred) per hectare per year.

*** *** *** g. The Concessionaire may make a request to TEA to execute the lease deed directly in favour of Concessionaire’s subsidiaries, assigns, transferees etc. in respect of any portion of the land on the same terms and conditions as mentioned above, and on receipt of such request TEA shall execute the lease deed in respect of such portion of land directly in favour of such subsidiaries, assigns and transferees.

h. In case TEA and the Concessionaire consider it appropriate, tripartite agreement for sub-lease deed may be executed between the TEA, Concessionaire and the Sub- Lessee.

4.4 The Concessionaire shall be free to decide the purpose for which transferred land will be used i.e. for commercial, amusement, industrial, institutional, residential etc. and also for the area of land to be allocated for different uses. The Concessionaire shall also be free to decide whether the sub-leased land shall be in the form of plots or constructed properties. No permission of TEA shall be required either for the land use or for transfer of leasehold / sub-leasing / multiple sub-leasing of land. The land use shall however be as per applicable Master Plan and other regulations.”

Another stipulation, in Clause 18.1 of the CA, which has its own

relevance to the present case, may also be taken note of as under: -

“TRANSFER OF CONCESSIONAIRE’S RIGHTS AND OBLIGATIONS TO SPV

18.1 In case the Concessionaire and the TEA consider it necessary to transfer Concessionaire’s rights and obligations under this Agreement to a SPV, the Concessionaire shall, in a reasonable time, transfer all its rights and obligations under this Agreement to a SPV for which documents as may be required shall be executed between the Concessionaire, the TEA and the SPV without additional cost to the Concessionaire or the SPV.”

87.1. It is not in dispute that under the said Concession Agreement, JIL

got the rights: (a) to construct and operate the Expressway and collect toll

183 for a period of 36 years; and (b) to use the land along the Expressway for

commercial exploitation for a period of 90 years.

88. The issue pertaining to additional amount of land acquisition

compensation cropped up in the wake of a decision of the Full Bench of

Allahabad High Court dated 21.10.2011 in the case of Gajraj and Ors. v.

State of U.P. and Ors.: 2011 SCC OnLine All 1711, wherein the High

Court ruled in favour of payment of additional compensation to the land

owners involved therein. The said decision in Gajraj was upheld by this

Court in the case of Savitri Devi v. State of U.P. & Ors.: (2015) 7 SCC

21. In sequel, a spate of litigation in Allahabad High Court concerning

other parcels of land came up and several other land owners, including

whose land stood acquired for the project in question, demanded

additional compensation. It is stated by YEIDA that looking to such

litigations and agitations, the Government of U.P. proceeded to set up a

committee called the ‘Chaudhary Committee’; and the said committee

recommended for grant of additional compensation (to the extent of

64.7%) to the land owners whose land had been acquired. While

accepting these recommendations, the Government of U.P. proceeded to

issue G.O. dated 29.08.2014, directing YEIDA to ensure payment of

additional compensation to all the land owners. In this turn of events,

YEIDA demanded the amount of additional compensation from JIL to the

tune of INR 2591.78 crores by its communication dated 20.01.2015 and

184 yet another amount of approximately INR 247 crores by its

communication dated 31.05.2017.

88.1. The aforesaid communications of YEIDA and the said G.O. dated

29.08.2014 were challenged by JIL by way of a writ petition before the

High Court of Allahabad but, later on, JIL sought permission to withdraw

with a view to seek recourse to the alternative remedy of arbitration, as

provided in the CA. The High Court of Allahabad, by its order dated

03.11.2016, permitted JIL to withdraw and to pursue the alternative

remedy of arbitration80. Thereafter, the concessionaire JIL took up the

matter in arbitration which led to the arbitral award dated 02.11.2019 in its

favour, holding that the demand made by YEIDA was not sustainable.

This award has been challenged by YEIDA under Section 34 of the

Arbitration and Conciliation Act, 1996 and those proceedings, being

Arbitration Case No. 3 of 2020, are pending in the Court of District Judge,

Gautam Budh Nagar. It has also been pointed out that the said G.O. was

struck down by the Allahabad High Court in other petitions; and the order

so passed by the High Court has been challenged in SLP (Civil) No.

10015-10034 of 2020, pending in this Court.

89. At the stage of drawing up the resolution plan in question, the said

arbitral award had been made with the result that the liability towards the

amount of additional compensation was not standing against JIL.

However, for the reason that the matter was sub judice, the resolution

80 As per the facts stated, the said order of High Court was challenged by YEIDA in this Court in D. No. 15058 of 2017, which was dismissed on 01.09.2017.

185 applicant considered it appropriate to make a provision for meeting with

the contingency, in case this liability would ultimately get fastened on JIL;

and proposed in the resolution plan as under: -

“1.2 Treatment of creditors As part of the Resolution Plan, it is proposed that:

(i) As mentioned in this Plan, this Resolution Plan assumes that no amount is payable by the Corporate Debtor in relation to the Landowner Compensation Debt in view of the Award. However, if the said position changes on account of the Award being overruled then in relation to the Landowner Compensation Debt, the amounts payable to the landowners shall be collected directly by YEIDA in the following manner for the following parcels of lands (in relation to which such debt accrues), from the ultimate end-users:

(i) Land under development (real estate projects) – the compensation in this regard shall be collected by YEIDA from the Home Buyers;

(ii) Land already subleased to other entities by the Corporate Debtor – the compensation shall be collected from the respective sub-lessees to whom the lands have been subleased by the Corporate Debtor either directly or indirectly;

(iii) Unutilized land parcels – the compensation shall be collected from the end users in whose favour such land shall be transferred/subleased by the Corporate Debtor; and

(iv) Yamuna Expressway – Yamuna Expressway is a project of public utility and the ultimate owner of the project land is YEIDA, who will get the ultimate ownership of the Yamuna Expressway after the expiry of the concession period under the Concession Agreement and accordingly the compensation in this regard shall be payable by YEIDA.”

90. Apart from the above, the resolution applicant also proposed to set

up two separate SPVs, one being Expressway SPV and another being

Land Bank SPV. It was proposed that the assets and liabilities pertaining

to Expressway shall be transferred to the Expressway SPV by way of

transfer of 100% shareholding and the concession rights under the CA;

186 and that out of the unutilised parcels of land available with the corporate

debtor, 1,526 acres shall be transferred to Land Bank SPV; and that Land

Bank SPV will also take over the admitted financial debt to the tune of

INR 5,100 crores. In the resolution plan, the applicant also stated about

the approvals required and its assumptions in that regard in the following

terms: -

“BUSINESS PLAN / FINANCIAL PROJECTIONS *** *** ***

(d) Provisions for the Approvals required and the timeline for the same *** *** ***

(ii) The Resolution Applicant is of the view that the approval of this Resolution Plan by the Adjudicating Authority shall be deemed to have waived all the requirements in relation to transfer of Yamuna Expressway and land bank asset by way of business transfer and no approval/consent shall be necessary from any other person (including Yamuna Expressway Industrial Development Authority (“YEIDA”) or any other Governmental Authority), in this regard.”

91. Moreover, in Clauses 4, 14 and 27 of Schedule 3 of the resolution

plan, while seeking ‘reliefs and concessions’, the resolution applicant

mooted a few more propositions concerning YEIDA and the Concession

Agreement, which have also contributed to the intricacies of the matter.

91.1. In Clause 4 of Schedule 3 of the resolution plan, NBCC expected

that YEIDA shall withdraw its challenge to another award dated

23.01.2017, pertaining to the issue of additional FAR, in the following

terms: -

“4. YEIDA to withdraw the appeal filed in the District Court, Gautam Budh Nagar being Arbitration Case No. 69 of 2017 challenging the award dated January 23, 2017 passed by arbitral tribunal pertaining to additional FAR and the Corporate Debtor to

187 get the right to use additional FAR as per details contained in Annexure-P at all five land parcels immediately (on withdrawal of such appeal) without any additional payment for the same. However, the Resolution Applicant shall make a payment of INR 1 Cr in consideration of full and final settlement of YEIDA’s claim if any arising out of such appeal, considering YEIDA’s claim as Operational Debt in terms of IBC and to ensure equitable treatment to all the Operational Creditors.”

91.2. Further, in Clause 14 of Schedule 3 of the plan, the resolution

applicant sought extinguishment of liability towards capital cost pertaining

to Noida-Greater Noida Expressway in the following terms: -

“14. The liability arising out of the Concession Agreement, to repay the capital cost pertaining to Noida-Greater Noida Expressway (treated as interest free loan from YEIDA to the Corporate Debtor) shall stand extinguished, on account of failure of YEIDA to allow the Corporate Debtor to collect and retain toll/fee from the users of the Noida-Greater Noida Expressway during the term of the Concession Agreement, as agreed under Clause 3.7 of the Concession Agreement.”

91.3. Yet further, in Clause 27 of Schedule 3, the resolution applicant

expected an extension of the period under the CA by 10 years. This

Clause reads as under: -

“27. To ensure feasibility and viability of this Resolution Plan, YEIDA and other concerned authorities shall extend the concession period (currently 36 years) under the Concession Agreement for an additional period of ten years.”

92. YEIDA took exception to several parts of the stipulations aforesaid

before the Adjudicating Authority and essentially submitted that the liability

towards the amount of additional compensation, in relation to the land

acquired and leased to JIL, was that of JIL, although such a question was

sub judice in challenge to the arbitral award under Section 34 of the

Arbitration Act. It was submitted on behalf of YEIDA that in case the

188 liability is ultimately mulcted on JIL, YEIDA cannot be driven to collect the

amount of additional compensation from the end-users as proposed in the

plan. It was asserted that the terms of CA provided for two payment

components: one being of acquisition cost payable by the concessionaire

and other being of leased rent to be paid by the sub-lessee/end-user; and

given such components, it could not have been provided that YEIDA

would collect the acquisition cost directly from the end-users.

92.1. It was also submitted that the resolution applicant was not entitled

to split the transferred land into two, and to say that the payment of

additional compensation would be applicable only towards the land used

for development and not for the land used for Expressway.

92.2. As regards the expected exemption to pay the acquisition cost

pertaining to the land utilised for Expressway, it was submitted that even if

Expressway was to revert to YEIDA after 36 years, JIL was allowed to

collect toll for this period and there could be no exemption as regards cost

of acquisition for the land of Expressway.

93. Another part of objection was that if the concessionaire’s rights

and obligations were proposed to be transferred to SPVs, proper

documentation was required, so that YEIDA could exercise its rights over

the SPVs concerned. It was yet further submitted that withdrawal of the

arbitration case could not be thrust upon YEIDA.

94. As noticed, the Adjudicating Authority observed in regard to these

issues concerning YEIDA that looking to the terms of CA, the Committee

189 of Creditors should not have approved the resolution plan stating that the

compensation, if awarded, shall be collected from the end-users.

However, the Adjudicating Authority proceeded to modulate such terms ‘to

make the plan viable’ and provided that the resolution plan be read to

mean that YEIDA shall have a right to collect acquisition cost through the

SPVs concerned. With regard to the issue of additional compensation

concerning the land of Expressway, the Adjudicating Authority considered

it appropriate to read the resolution plan in the way that it is left open to

both the parties to have proper recourse over this issue before a

competent forum when the time would come for payment of additional

compensation. As regards transfer of concessionaire’s rights and

obligations to SPVs, the Adjudicating Authority was of the view that, when

JIL as concessionaire was, for the first time, proposing to transfer its

rights and obligations to SPVs, the documents involving the

concessionaire JIL, YEIDA and the SPV concerned were required to be

executed. The NCLT also observed that the CA was based on the statute

created by the State Government and, therefore, violation of its terms and

conditions would be a violation of the law in force and would not be

permissible in terms of Section 30(2) of the Code.

94.1. Interestingly, the other reliefs and concessions in regard to YEIDA,

as sought for in the aforementioned Clauses 14 and 27, were specifically

declined by the Adjudicating Authority (vide the comments on these

clauses in paragraph 134 of the order dated 03.03.2020). However, as

190 regards Clause 4 of the ‘reliefs and concessions’ that YEIDA shall

withdraw the arbitration case filed under Section 34 of the Arbitration Act,

though the Adjudicating Authority noticed this aspect in the arguments of

the parties but, did not make any specific order in that regard and in

paragraph 134 of the impugned order dated 03.03.2020, merely observed

that Clauses 1 to 5 were covered by the previous discussion.

95. On behalf of the resolution applicant (NBCC), while questioning

the directions and observations of the Adjudicating Authority in relation to

the dealings with YEIDA and particularly in relation to the contingent

liability of additional compensation, a detailed reference has been made

to all the background aspects and extensive arguments have been made

in support of the stipulations in the resolution plan.

95.1. It is submitted on behalf of the resolution applicant that as on date,

there is no claim of YEIDA against JIL in relation to the additional amount

of compensation but, keeping the larger interests in view, the resolution

plan has provided for this eventuality in the manner that YEIDA would be

able to collect the amounts from the end-users. While taking exception to

the observations in the order impugned, it is submitted that the

Adjudicating Authority has seriously erred in seeking to construe the CA

because that was an issue pending in the arbitration case. It is further

submitted that in terms of Regulation 37 of CIRP Regulations, the

resolution plan can propose modifications/alterations of contracts of the

corporate debtors and in fact, all the contracts are being modified under

191 the plan, of course, subject to the approval by the CoC with requisite

majority. As regards legal status of the Concession Agreement , it is

submitted that the Adjudicating Authority has erred in assuming as if it

were a statutory contract. In this regard, with reference to Section 6-A of

the U.P. Act of 197681, it is contended that YEIDA may by an agreement

authorise any person to provide or maintain, or continue to provide or

maintain, any infrastructure or amenities and therefore, once an

agreement was reached between JIL and YEIDA, their relationship would

be governed by that contract (Concession Agreement). It is submitted that

while enacting Section 6-A of the U.P. Act of 1976, the intent of the

legislature has been to carve out a contractual relationship distinct from

the statute and this goes against the whole construct of ‘statutory contract’

which YEIDA is trying to project. The decisions of this Court in the cases

of India Thermal Power Ltd. v. State of M.P. and Ors.: (2000) 3 SCC

379 and Kerala State Electricity Board and Anr. v. Kurien E. Kalathil

and Ors.: (2000) 6 SCC 293 have been referred to submit that merely for

YEIDA being a statutory body, the contract in question does not partake

the character of a statutory contract. This issue relating to contingent

liability of additional compensation, according to NBCC, is required to be

81 Section 6-A of U.P. Act of 1976 reads as under: -

“6-A Notwithstanding anything to the contrary contained in any other provisions of this Act and subject to such terms and conditions as may be specified in the regulations, the Authority may, by Agreement, authorize any person to provide or maintain or continue to provide or maintain any infrastructure or amenities under this Act and to collect taxes or fees, as the case may be, levied therefore.”

192 settled for proper implementation of the resolution plan or else, it may

lead to serious impediment in future.

95.2. As regards those observations of the Adjudicating Authority where

the issue of additional compensation qua the Expressway land has been

left open for decision in the competent forum, it is submitted that the

observations are not in accord with the decision in Essar Steel (supra),

that there ought to be finality of claims against the corporate debtor.

According to YEIDA, if this issue is left to be decided in any other

proceedings, the same would lead to ‘hydra head’ popping up in the

future.

95.3. It is further submitted that Expressway land would admittedly

revert to YEIDA after the end of concession period and, therefore, YEIDA

is the end-user of the Expressway. It is submitted that since the plan

proposed the payment by end-users and this principle was approved by

CoC, YEIDA has to be the entity liable towards additional compensation in

relation to the land of Expressway, for it being the end-user with the land

reverting to it. It has also been submitted that YEIDA has otherwise stated

no objection to the pass-through proposition as regards liability towards

additional compensation to the end-users and hence, its objection

towards this liability qua Expressway land remains unjustified. It is also

submitted that in the resolution plan, a debt of INR 2,000 crores is

proposed to be raised on the Expressway for the purpose of construction

of flats; and in the event this liability of additional compensation on the

193 Expressway land is not passed on to the end-user, raising of the loan may

become difficult.

95.4. NBCC has further stated its objection to the proposed tripartite

agreement with reference to Clauses 4.3(d), 4.3(e) and 4.4 of CA and it is

submitted that the right of transfer being available to the concessionaire,

foisting of tripartite agreement with YEIDA is not justified. It is submitted

that so far as the execution of tripartite agreement in relation to the

Expressway SPV is concerned, this part of the order is not being

challenged but as regards Land Bank SPV, there is no requirement of

entering into a tripartite agreement because JIL has unfettered rights

under CA to transfer the land to any person.

95.5. As regards decision of this Court in the case of Municipal

Corporation of Greater Mumbai (MCGM) v. Abhilash Lal and Ors.:

(2019) SCC OnLine SC 1479, which is relied upon by YEIDA, it is

submitted that the said decision is not applicable to the facts of the

present case because therein, MCGM had not entered into a binding

lease agreement containing the terms similar to the CA applicable to the

parties herein. Moreover, in the said decision, the statute, i.e., Municipal

Corporation of Greater Mumbai Act, 1888, itself provided that the only

way MCGM’s properties could be dealt with was through lease or by way

of creation of any other interest with the prior permission of MCGM, but

there is no similar provision in the U.P. Act of 1976.

194 96. On behalf of the IRP, it has been submitted that granting or

refusing the reliefs sought for under Schedule 3 of the resolution plan is a

matter within the discretion of the Adjudicating Authority and even if the

same have not been granted, they do not form a part of the commercial

terms of the plan; and the referred clauses of ‘reliefs and concessions’ are

not hit by Section 30(2)(e) of the Code.

97. The associations of homebuyers as also the individual

homebuyers standing in support of the plan have contended that the

alleged terms of the Concession Agreement and any alleged breach

thereof does not amount to a breach under Section 30(2)(e) of the Code

and therefore, the Adjudicating Authority has acted wholly without

jurisdiction in dealing with such terms because they do not come within

the scope of Section 31 of the Code.

97.1. However, one of the homebuyers, who has moved an application

for intervention, I.A. No. 84309 of 2020, has made several submissions

questioning the dealings of JIL and YEIDA and has submitted that the

Concession Agreement having not been provided to the homebuyers, the

CIRP proceedings are rendered void.

98. In response to the aforesaid submissions in favour of the

resolution plan, several counter arguments have been made by different

parties. To avoid prolixity and repetition, we take into account the

submissions of the parties directly related with these issues namely,

YEIDA. Added to that, we may also refer to the submissions made on

195 behalf of the erstwhile director of the corporate debtor JIL as also its

holding company JAL.

99. It has been stated and reiterated, as had been the submissions

before the NCLT, that YEIDA does not stand to oppose the resolution plan

only for the sake of opposition; rather it would like the plan to succeed

but, it has a public duty to ensure that the framework under CA is

preserved; and the issues being raised by it are solely intended to

preserve the CA and to enforce the terms therein. Again, a detailed

reference has been made to the background aspects concerning the land

in question and the Concession Agreement as also to the findings of

NCLT and thereafter, the contentions urged on behalf of the resolution

applicant have been refuted.

99.1. In the first place, YEIDA has submitted that the resolution

applicant is not correct in suggesting that the Adjudicating Authority has

dealt with the interpretation of CA to hold that compensation was to be

paid by the concessionaire and by the proposed SPVs. Paragraph 118 of

the impugned order dated 03.03.2020 has been referred wherein, the

Adjudicating Authority stated that the question, as to whether additional

compensation was a part of the acquisition cost, was not being examined

because it had already been adjudicated in arbitration and is pending in

the Court.

99.2. While supporting the other part of impugned order dated

03.03.2020, it is submitted that there being no privity of contract between

196 YEIDA and the end-users, the amount towards additional compensation

could only be collected from the SPVs and not directly from the end-

users. According to YEIDA, the Adjudicating Authority has rightly modified

the mechanism in the resolution plan for collection of additional

compensation in the manner that instead of collecting the amount directly

from the end-users, YEIDA would now be collecting it through the SPVs

concerned. This has, according to YEIDA, no impact on the commercial

aspects of the resolution plan.

99.3. It is also submitted that the contract in question, that is, the

Concession Agreement, is a statutory contract entered into by YEIDA for

public purpose and it cannot be altered or modified through a resolution

plan as an ordinary commercial contract. It is submitted that the CA grants

and governs the rights of corporate debtor JIL over the land of YEIDA;

that such rights are limited and distinct from ownership rights; and that the

resolution applicant cannot unilaterally alter the CA and improve upon the

rights granted thereunder to enhance the assets of the corporate debtor.

99.4. As regards the land falling under Expressway, YEIDA has

questioned the contentions urged on behalf of NBCC and it is submitted

that such a ground was not taken in the appeal filed against the impugned

order and was raised for the first time in written submissions.

Nevertheless, according to YEIDA, the argument is patently incorrect, for

it ignores the fact that the corporate debtor JIL and its successor SPVs

would derive the benefits of both, the toll collected from Expressway for

197 36 years as also from the other land for development. It has also been

submitted that the additional compensation for Expressway, when to be

passed on to the end-users, could only be passed on to the commuters in

the form of appropriate adjustment in the toll, but not otherwise.

99.5. Moving on to the questions related with creation of SPVs, transfer

of land to them and the aforesaid stipulations in the resolution plan, it is

submitted that the project in question is an integrated and indivisible one,

as held by this Court in the case of Nand Kishore Gupta & Ors. v. State

of U.P. & Ors.: (2010) 10 SCC 282 and hence, its bifurcation is

impermissible.

99.6. It is also submitted that the assumption in the resolution plan, that

the approval of NCLT would waive the requirement of YEIDA’s approval,

is misconceived. Regulation 37 of CIRP Regulations has been referred to

submit that the plan has to provide for necessary measures for insolvency

resolution including approvals from the Central and State Governments

and other authorities. Therefore, according to YEIDA, such pre-emptory

waiver as envisaged in the plan is contrary to the CIRP Regulations. A

further reference has been made to Clause 18.1 of the CA and it is

contended that in terms thereof, in case any SPV is to be set up,

necessary documents involving the concessionaire JIL, YEIDA and SPV

have to be executed. It is reiterated that despite such objections, YEIDA is

taking a practical view of the matter so as to ensure the success of the

resolution plan and, therefore, the Adjudicating Authority (NCLT) has also

198 rightly provided for such documentation without disturbing the commercial

effect of the plan while ensuring that all the future dealings shall be in

terms of the CA and thereby, fulfilling the requirements of Section 30(2) of

the Code.

99.7. As regards the contentions on the part of the resolution applicant

that Land Bank SPV is not governed by the CA or that there is no

restriction on the corporate debtor’s ability to sub-lease, it is submitted

that the rights for development of the land along the proposed

Expressway were to be provided at five or more locations with one

location in Noida or Greater Noida in terms of Clause 3.3 of the CA.

Therefore, the suggestion that this land may not be governed by CA is not

correct. As regards the right to sub-lease, it is submitted on behalf of

YEIDA that as per the terms of plan, it is not a mere sub-lease in favour of

Land Bank SPV but the chunk of land for development is sought to be

transferred to the Land Bank SPV by way of business transfer; and in any

case, in terms of the referred clauses of CA, execution of tripartite

agreement is a condition indispensable.

99.8. It has also been submitted that YEIDA has consistently taken the

stand that it would be ready to do everything within its power to ensure

that the plan is a success but even after long length of time, the resolution

applicant has not even approached YEIDA for execution of necessary

documents. While relying on the aforesaid decision in MCGM, it has been

argued that the provisions of the Code cannot override a public body’s

199 right and duty to control and regulate as to how its properties are to be

dealt with.

99.9. As regards the powers of the Adjudicating Authority to modify the

plan, reliance is placed on the decision in ArcelorMittal (supra), where

this Court has held that the Adjudicating Authority is to apply judicial mind

to a resolution plan to satisfy itself that the plan meets the requirements

under Section 30 of the Code. It is further submitted that even in Essar

Steel (supra), this Court has recognised the Adjudicating Authority’s

power of judicial review. Further, with reference to the decision of

Allahabad High Court in the case of Pradumna Kumar Jain (supra), it is

submitted that the power to approve or reject a plan must necessarily

include the power to modify a plan. According to YEIDA, such power of

the Adjudicating Authority is implicit in Section 31; and if the Adjudicating

Authority finds that a resolution plan does not conform to the Code but

would do so by modifications, such modifications deserve to be upheld,

lest the corporate debtor is pushed to liquidation. It is re-emphasised that

the modifications provided in the impugned order dated 03.03.2020 have

no commercial implications and they relate only to the mechanism

prescribed by the resolution plan, which are required to be modified to

uphold the CA, a statutory contract.

99.10. Apart from the above, it has also been submitted on behalf of

YEIDA, that the resolution plan carries such other terms and stipulations

which cannot be approved; and objections of YEIDA to such terms were

200 upheld but, NBCC has not appealed against that part of the order of the

Adjudicating Authority. Therefore, those stipulations deserve not to be

approved. In this regard, it has been pointed out that YEIDA has taken

objection to Clause 4 of Schedule 3 requiring it to give up the litigation

under the Arbitration Act; and this objection was noted by the Adjudicating

Authority and NBCC has not challenged those observations. Such a relief,

according to YEIDA, cannot be claimed in a resolution plan and ought to

be declined. It has further been pointed out that the stipulations in the said

Clauses 14 and 27 of Schedule 3 of the resolution plan, respectively for

extinguishment of the liability arising under the CA and for extension of

term of CA, have not been granted by the Adjudicating Authority; and

these aspects having not been appealed against, the clauses in question

deserve to be deleted from the resolution plan.

100. The submissions so made on behalf of YEIDA have been

supported by the erstwhile director of JIL with reference to the decision in

Embassy Property (supra) and with the submissions that YEIDA being a

statutory body created under the U.P. Act of 1976, the agreement entered

into between YEIDA and the corporate debtor is statutory in nature and

this relationship is not just contractual but is statutorily governed. The

requirement that YEIDA must collect compensation from the homebuyers

or end-users in case it succeeds in the arbitration case, according to the

erstwhile director, is in contravention of the law for the time being in force,

for it violates the U.P. Act of 1976. It is further submitted that the

201 Adjudicating Authority has rightly ordered execution of tripartite

agreement involving the proposed SPVs. In essence, the submission has

been that the treatment of YEIDA in the resolution plan is not in conformity

with the law and the order passed by the Adjudicating Authority calls for

no interference.

101. While dealing with the rival submissions, we may indicate at the

outset that some of the objections like questioning the dealings of JIL and

YEIDA and want of availability of CA with the homebuyers have

unnecessarily been raised and carry no meaning to the real questions in

controversy. They require no discussion and are left at that.

102. Coming to the real questions in controversy, in the first place, we

deem it appropriate to observe that the suggestion on behalf of YEIDA

and erstwhile director of the corporate debtor, that the Concession

Agreement in question is a statutory contract, is not correct and cannot be

accepted. It has rightly been pointed out on behalf of the resolution

applicant NBCC that the said CA is not a statutory contract; it has only

been executed by YEIDA in exercise of its enabling powers conferred by

the statute, that is, U.P. Act of 1976 but the same is neither an agreement

provided by the statute nor executed under a statute. This Court has

clarified the law in this respect in the case of India Thermal Power Ltd.

(supra) in the following terms: -

“11. It was contended by Mr Cooper, learned Senior Counsel appearing for appellant GBL and also by some counsel appearing for other appellants that the appellant/IPPs had entered into PPAs under Sections 43 and 43-A of the Electricity Supply Act and as

202 such they are statutory contracts and, therefore, MPEB had no power or authority to alter their terms and conditions. This contention has been upheld by the High Court. In our opinion the said contention is not correct and the High Court was wrong in accepting the same. Section 43 empowers the Electricity Board to enter into an arrangement for purchase of electricity on such terms as may be agreed. Section 43-A(1) provides that a generating company may enter into a contract for the sale of electricity generated by it with the Electricity Board. As regards the determination of tariff for the sale of electricity by a generating company to the Board, Section 43(1)(2) provides that the tariff shall be determined in accordance with the norms regarding operation and plant-load factor as may be laid down by the authority and in accordance with the rates of depreciation and reasonable return and such other factors as may be determined from time to time by the Central Government by a notification in the Official Gazette. These provisions clearly indicate that the agreement can be on such terms as may be agreed by the parties except that the tariff is to be determined in accordance with the provision contained in Section 43-A(2) and notifications issued thereunder. Merely because a contract is entered into in exercise of an enabling power conferred by a statute that by itself cannot render the contract a statutory contract. If entering into a contract containing the prescribed terms and conditions is a must under the statute then that contract becomes a statutory contract. If a contract incorporates certain terms and conditions in it which are statutory then the said contract to that extent is statutory. A contract may contain certain other terms and conditions which may not be of a statutory character and which have been incorporated therein as a result of mutual agreement between the parties. Therefore, the PPAs can be regarded as statutory only to the extent that they contain provisions regarding determination of tariff and other statutory requirements of Section 43-A(2). Opening and maintaining of an escrow account or an escrow agreement are not the statutory requirements and, therefore, merely because PPAs contemplate maintaining escrow accounts that obligation cannot be regarded as statutory.” (emphasis in bold supplied)

102.1. Applying the principles aforesaid to the facts of the present case,

we are clearly of the view that the agreement in question does not acquire

the status of a statutory contract merely for having been executed in

terms of the powers with YEIDA under Section 6-A of the U.P. Act of 1976.

203 102.2. Apart from above, another part of the submissions on behalf of

YEIDA with reference to the case of Nand Kishore Gupta (supra) against

incorporation of two SPVs cannot be accepted. The observations of this

Court in the case of Nand Kishore Gupta (supra) came in the wake of

challenge to the very acquisition process concerning the land parcels for

the project in question, that is Yamuna Expressway Project. One of the

arguments therein was that about 25 million square kilometres of land

was being acquired for 5 parcels of land to be given for commercial

exploitation. This Court found the High Court right in commenting that

such creation of 5 zones for industry, residence, amusement etc. was

going to be complementary to the creation of highway. However, the

observations in Nand Kishore Gupta (supra), holding all the parcels of

land to be part of integrated and indivisible project, cannot be read to

mean that creation of two SPVs by the concessionaire, one for the

Expressway and another for the remaining land for commercial

development, can never be provided.

102.3. However, even if the submissions of YEIDA are not correct in

regard to the aforesaid two aspects, all other submissions made on its

behalf cannot be discarded and rather, on substance, they deserve

acceptance to a large extent.

103. The contract in question, the CA, even though not a statutory one,

is nevertheless a contract entered into between the concessionaire and

statutory authority, that is, YEIDA. It is needless to observe that even if in

204 the scheme of IBC, a resolution plan could modify the terms of a contract,

any tinkering with the contract in question, that is, the Concession

Agreement, could not have been carried out without the approval and

consent of the authority concerned, that is, YEIDA. Any doubt in that

regard stands quelled with reference to Regulation 37 of CIRP

Regulations that requires a resolution plan to provide for various

measures including ‘necessary approvals from the Central and State

Governments and other authorities’. The authority concerned in the

present case, YEIDA, is the one established by the State Government

under the U.P. Act of 1976 and its approval remains sine qua non for

validity of the resolution plan in question, particularly qua the terms

related with YEIDA. The stipulations/assumptions in the resolution plan,

that approval by the Adjudicating Authority shall dispense with all the

requirements of seeking consent from YEIDA for any business transfer

are too far beyond the entitlement of the resolution applicant. Neither any

so-called deemed approval could be foisted upon the governmental

authority like YEIDA nor such an assumption stands in conformity with

Regulation 37 of the CIRP Regulations.

104. Furthermore, the suggestion that Clause 18.1 of the CA had been

a one-time measure and that stands exhausted with creation of JIL as

SPV and transfer of original concessionaire’s rights to JIL, has its own

shortcomings. The concept and purport of Clause 18.1, of course, at the

relevant time had been of the obligation on the original concessionaire to

205 execute the documents for creation of SPV and this clause came in

operation when JIL was created as an SPV. However, it would be wholly

unrealistic to say that once JIL was created as an SPV, the said Clause

18.1 stood exhausted and there remained no obligation on the part of JIL

(as the substituted concessionaire) to execute the necessary documents

if it would propose to transfer its rights and obligations under the CA to

another SPV; and it could do so without the consent of YEIDA. This

suggestion carries an inherent fallacy because if Clause 18.1 is removed

from the CA, a serious question would arise as to how the rights and

obligations of the substituted concessionaire JIL could at all be transferred

to another SPV? Looking to the pith and substance of the CA, the said

Clause 18.1 has to be applied for creation of any SPV by or on behalf of

JIL.

104.1. The other clauses in CA permitting creation of sub-lease could

hardly be applied for en bloc transfer of land to the SPVs, as proposed in

the resolution plan. The referred Clauses 4.3(d) and 4.3(e) were

essentially meant for creation of sub-leases when the land given to the

concessionaire for development, or part thereof, was to be sub-leased to

the end-user/s. Even in that regard, the provisions were made for the

concessionaire to make a request to the land providing agency to execute

the lease-deed directly in favour of its subsidiaries, assigns or

transferees; and in case the agency and the concessionaire would

consider it appropriate, tripartite agreement for sub-lease may be

206 executed. Taking all the relevant clauses together with the substance and

purport of CA, it is difficult to countenance that the proposed transfer to

SPVs could be treated as an ordinary sub-lease for which, no

documentation involving YEIDA would be required.

104.2. Although, as urged, the proposal to create two separate SPVs

may not be impermissible looking to the framework of the CA, where

different stipulations were made in relation to the land for constructing

Expressway with its allied facilities and the land for commercial

exploitation, respectively in Clauses 4.1 and 4.3 of the CA, but the

question is as to the method of transfer of concessionaire’s rights and

obligations to such SPVs. That could only be in accordance with the

approval of YEIDA and with the execution of necessary tripartite

documents as envisaged by CA.

104.3. As observed hereinbefore, looking to the terms and purport of the

CA, creation of two SPVs, one for Expressway and another for the

remaining land for commercial development, is not altogether prohibited

but then, it cannot be suggested by NBCC that such creation of SPVs

could be even without necessary documentation involving YEIDA. In this

regard, YEIDA seems to be right in its contentions that such

documentation is even otherwise required for avoiding any ambiguity

about the rights and obligations and also for itself (YEIDA) to properly

monitor the functioning of SPVs, each of which would stand in the

207 capacity of concessionaire and would be carrying the rights and

obligations under the CA.

104.4. For what has been discussed above, we need not delve into the

decision of this Court in MCGM (supra), where the statutory provision

itself required prior approval of the local body before dealing with its

properties through lease or by creation of any other interest. Though in

the present case, there is no such statutory embargo but for that matter,

all the terms of the Concession Agreement cannot be forsaken. Any

alteration in the essentials of the Concession Agreement would require

the consent of YEIDA.

104.5. The Adjudicating Authority (NCLT), while disapproving the

stipulations in the resolution plan whereby documentation for such

transfer was sought to be avoided, proceeded to order execution of such

documents. According to YEIDA, this modification has no commercial

effect and therefore, has rightly been ordered by NCLT. Although this

modification, prima facie, does not appear to be having any commercial

effect, for it being only a matter of proper documentation but, interlaced

with this process of documentation are the other stipulations, which do

impact the commercial terms of the resolution plan, particularly those

relating to the amount of additional compensation, if payable.

105. With the observations foregoing, we may now take up another

important aspect of the objections, which relates to the provisions in the

208 resolution plan towards the amount of additional compensation, if

payable.

105.1. Concisely put, as per the resolution plan, the contingent liability

concerning additional amount of land acquisition compensation is

proposed to be dealt with in the manner that in the event any such

amount of additional compensation is to be paid, YEIDA would collect the

same from the end-users; and as regards the land of Expressway, such

additional compensation shall be payable by YEIDA because YEIDA will

be the end-user on getting ownership of the land of Expressway after

expiry of the concession period. NBCC has justified these propositions on

various grounds as noticed hereinabove. YEIDA takes serious exception

to them and particularly to the stipulation that additional compensation in

regard to the land of Yamuna Expressway would be payable by it. The

Adjudicating Authority has made two-fold modifications in this regard. In

paragraph 120 of the impugned order dated 03.03.2020, the Adjudicating

Authority has said that to iron out creases and to make the resolution plan

viable, it would direct that the plan shall be read to mean that YEIDA has

a right to collect acquisition cost through the SPVs concerned. On the

other hand, concerning the Expressway land, the Adjudicating Authority

has provided in paragraph 122 of the impugned order that the resolution

plan would be read to mean that it is left open to both the parties to have

proper recourse before competent forum when the time comes for

payment of additional compensation. In the submissions of YEIDA, such

209 modifications were necessary to make the plan compliant with the rights

and obligations under the CA.

105.2. We find the prescriptions in the resolution plan in regard to the

contingent liability of additional compensation to be questionable on more

than one count.

106. The question is yet to be finally determined as to whether such a

liability towards additional amount of compensation rests with the

corporate debtor JIL or with YEIDA, because the arbitral award made in

favour of JIL is the subject matter of challenge in the Court. However, the

contingency was required to be provided in the plan in case liability would

be ultimately fastened on the corporate debtor JIL. It has not been

suggested that any such bifurcation of liability, qua the land under

Expressway on one hand and other parcels on the other, is a subject

matter of the arbitration proceedings. However, going by the terms of the

CA, prima facie, we are unable to find any indication therein that the

liability for compensation with reference to the land under Expressway is

not of the concessionaire. In any case, while making a provision for

meeting with this contingent liability of additional amount of

compensation, the resolution applicant could not have decided of its own

that there will not be any liability of the concessionaire or its assigns

towards the land under Expressway.

106.1. It appears that while proposing to create two different SPVs, the

resolution applicant stumbled on an idea that the liability for additional

210 compensation as regards Expressway land could be simply deflected to

YEIDA with reference to the fact that YEIDA will get this land back after 36

years; and reflected this idea by way of the questioned proposition in the

resolution plan. The Adjudicating Authority has chosen to leave this issue

open, for being litigated at the appropriate time and before the competent

forum. In our view, such a prescription as regards Expressway land

amounts to alterations of the material terms of CA and cannot be made

without the consent of YEIDA. This aspect could have only been

disapproved.

106.2. Similarly, the resolution applicant, of its own, could not have

decided that end-user would mean sub-lessee and thereby deflect even

collection of the amount towards this liability on YEIDA and that too when

YEIDA was not going to be a party in creation of any sub-lease. The

structuring of these propositions regarding contingent liability turns out to

be wholly illogical, apart from being at loggerheads with the terms of the

Concession Agreement.

106.3. It needs no great deal of discussion to find that the said aspect

concerning the provision for additional compensation, if not approved on

material terms, is of significant commercial impact. Even the other

modification by the Adjudicating Authority, that YEIDA shall have a right to

collect acquisition cost through SPVs concerned, carry their own

commercial implications. These are not the terms which could be taken up

for modification without disturbing the financial proposal of the resolution

211 plan. While these prescriptions could not have been approved, in our

view, the Adjudicating Authority could not have entered into any process

of modification. The only course open for the Adjudicating Authority

(NCLT) was to send the plan back to the Committee of Creditors for

reconsideration.

107. Apart from the aforesaid, the reliefs and concessions as sought for

by the resolution applicant in relation to YEIDA in Clauses 4, 14 and 27 of

Schedule 3 are also required to be disapproved. We are unable to

countenance the proposition that by way of a resolution plan, it could be

enjoined upon an agency of the government like YEIDA to give up or

withdraw from a pending litigation. Similarly, extinguishment of existing

liability qua YEIDA is not a relief that could be given to the resolution

applicant for askance. For the same reason, the resolution applicant

cannot seek extension of time period of the Concession Agreement by

way of a clause of ‘relief’ in the resolution plan without the consent of a

governmental body like YEIDA.

108. Before concluding on this point for determination where we have

accepted the major parts of the objections of YEIDA, we may, in fairness

to all the parties concerned, reiterate that despite stating its objections,

YEIDA has consistently maintained before the NCLT as also before this

Court82 that it does not stand to oppose the resolution plan only for the

sake of opposition; rather it would like the plan to succeed but, it has a

public duty to ensure that the framework under CA is preserved and else, 82 vide paragraphs 47.2, 99 and 99.8 (supra)

212 it would be ready to do everything within its power to ensure that the plan

is a success. Thus, it would not be out of place to add a sanguine hope

that being the owner of the land in question and public authority, YEIDA,

who had envisaged and promoted the entire project, would, in future

dealing with the matter, act with caution and circumspection, while

earnestly reflecting upon the practical impact of its propositions/decisions

on various stakeholders, including the homebuyers.

109. For what has been discussed hereinabove, we are constrained to

hold that the stipulations in the resolution plan, as regards dealings with

YEIDA and with the terms of Concession Agreement, have rightly not

been approved and the stipulations in question, when not being

consented to by YEIDA, are required to be disapproved. Further, in the

cumulative effect of the stipulations which have not been approved, the

only correct course for the Adjudicating Authority was to send the plan

back to the Committee of Creditors for reconsideration.

Point D

Treatment of the debt of dissenting financial creditor ICICI Bank Limited

110. Now, we need to enter into another area of major dispute, which

relates to the objections of a dissenting financial creditor, ICICI Bank

Limited.

111. For dealing with the issue concerning dissenting financial creditor,

we need to look closely at the relevant prescriptions in the resolution plan

of NBCC. As noticed, in Schedule 2 of the resolution plan, detailed steps

213 are mentioned for acquisition of control of the corporate debtor and

implementation of the resolution plan. Steps 6A and 6B relate to the

institutional financial creditors. The preceding steps, in their chronology,

are (1) incorporation of NBCC SPV and acquisition of the corporate

debtor by the resolution applicant through that SPV; (2) incorporation of

Expressway SPV by the corporate debtor and transfer of Yamuna

Expressway to that SPV and securitisation of toll cash flow; (3) payment

of unpaid CIRP costs; (4) payment of total operational debt; and (5)

incorporation of Land Bank SPV. The sixth step is divided in two parts,

being Step 6A concerning upfront payment to the institutional financial

creditors and 6B concerning treatment of institutional financial creditors

for the remaining amount. In the second part of Step 6B, specific

stipulations are contained as regards the dissenting financial creditors.

For comprehension of the gamut of such prescriptions, we may reproduce

Steps 6A and 6B in the resolution plan as under: -

“STEP 6A: UPFRONT PAYMENT TO THE INSTITUTIONAL FINANCIAL CREDITOR

1. Part of the Admitted Financial Debts of the Institutional Financial Creditors shall be settled to an extent of INR [Fresh Debt- 2,000] Cr by making upfront Payment of ~ INR [Fresh Debt - (less) 2,000] Cr by the Expressway SPV, to be incorporated by the Corporate Debtor under Step 2 above. No prepayment penalty shall be payable to the Institutional Financial Creditors, in the event of any upfront payment of debt of as provided above.

2. In this regard, it is clarified that upon payment of upfront amount aggregating to INR [Fresh Debt - (less) 2,000] Cr to the Institutional Financial Creditors, their charge over the Yamuna Expressway and toll cash flow shall be automatically released, without any further deed or act by the parties.

“STEP 6B: TREATMENT OF INSTITUTIONAL FINANCIAL CREDITORS FOR THE REMAINING AMOUNT

214 After upfront payment is made to the Institutional Financial Creditors as contemplated under Step-6A above, the remaining Admitted Financial Debt due to the Institutional Financial Creditors shall be settled in its entirety in the following manner. Conversion of part of Admitted Financial Debt (due to Institutional Financial Creditors) into equity shares of the Corporate Debtor and subsequent reduction of share capital to extinguish the shareholding of Institutional Financial Creditors in the Corporate Debtor in entirety;

Transfer of 100% shareholding of Land Bank SPV from the Corporate Debtor to the Institutional Financial Creditors; Transfer of 100% shareholding of Expressway SPV from the Corporate Debtor to the Institutional Financial Creditors for a consideration equal to their then outstanding debt to be paid by way of settlement of the outstanding debt to the same extent; and

It is also proposed that the Resolution Applicant shall enter into:

(i) a management agreement with the Land Bank SPV (to be owned by the Institutional Financial Creditors) for the purpose of monetizing the land held by the Land Bank SPV for an initial tenure of 5 years subject to a fixed/success-based fee to be mutually agreed between the Institutional Financial Creditors and the Resolution Applicant. Detailed terms and conditions of such management agreement, including any escrow mechanism may be mutually agreed between the Institutional Financial Creditors and the Resolution Applicant. Additionally, the Resolution Applicant reserves its first right to buy back the land held by the Land Bank SPV, at the then prevailing market rate.

(ii) an operations & maintenance agreement with the Expressway SPV (to be owned by the Institutional Financial Creditors) to operate and maintain the Expressway for a tenure of 5 years subject to a fee to be mutually agreed between the Institutional Financial Creditors and the Resolution Applicant. Detailed terms and conditions of such O&M agreement, including any escrow mechanism may be mutually agreed between the Institutional Financial Creditors and the Resolution Applicant.

We have structured the transaction in a tax efficient manner to the best of our knowledge. However, in the event any income tax liability or goods and services tax (GST) liability, arises in future on account of transfer of land parcels, same shall be borne by the Institutional Financial Creditors in a pro rata manner without any recourse, express or implied, to the Resolution Applicant. As per IBC, Dissenting Financial Creditors are required to be paid a minimum of amounts in the nature of liquidation value due to

215 them in terms of Sections 30(2) and 53 of the IBC. However, as per the amendment to the CIRP Regulations on 31 December 2017, the requirement for disclosing the Liquidation Value of a corporate debtor undergoing resolution to the resolution applicants has been dispensed with and accordingly, the Liquidation Value for the Corporate Debtor is currently not available with us. However, as per our estimate, the liquidation value owed to the Dissenting Financial Creditors, in terms of Sections 30 and 53 of the IBC read with Regulation 38 of the CIRP Regulations is expected to be nil.;

However, in the event the Dissenting Financial Creditors are entitled to some amount in the nature of liquidation value in terms of Sections 30 and Section 53 of the IBC read with Regulation 38 of the CIRP Regulations, then the Dissenting Financial Creditors would be provided the liquidation value owed to them in terms of Section 30(2) and Section 53 of the IBC read with Regulation 38 of the CIRP Regulations in the form of proportionate share in the equity of the Expressway SPV and transfer of certain land parcels belonging to the Corporate Debtor. For avoidance of doubt it is clarified that on account of the transfer of equity and transfer of land parcels in favour of Dissenting Financial Creditors as stipulated above there will be a corresponding decrease in the equity and area of land parcels being transferred to the Institutional Financial Creditors (through the Land SPV) who vote in favour of the Plan. Further the Resolution Applicant shall have the sole discretion to determine the location of the land parcels to be transferred to the Dissenting Financial Creditors and the value of such land parcels being transferred shall be same as that proposed under this Resolution Plan for the Institutional Financial Creditors who vote in favour of the Plan.

Provided further that the Dissenting Financial Creditors shall bear the stamp duty, registration costs, and other applicable taxes including goods and services tax (GST) involved in the transfer of land parcels in their favour as stipulated hereinabove. Notwithstanding anything contained in this Resolution Plan, the Dissenting Financial Creditors shall neither be entitled to nor shall they receive any other amounts other than the amounts due to them in the nature of liquidation value as stipulated hereinabove.” 111.1. Thus, the proposal in the resolution plan is to the effect that, if the

dissenting financial creditors would be entitled to some amount in the

nature of liquidation value in terms of Sections 30 and Section 53 of the

IBC read with Regulation 38 of the CIRP Regulations, they would be

provided such liquidation value ‘in the form of proportionate share in the

216 equity of the Expressway SPV and transfer of certain land parcels

belonging to the Corporate Debtor’.

112. The dissenting financial creditor of JIL, namely, ICICI Bank

Limited, took exception to the stipulations aforesaid and submitted before

the Adjudicating Authority that being a dissenting financial creditor, it was

entitled to receive cash payment as per the liquidation value in terms of

Section 30(2)(b) of the Code read with Regulation 38(1)(b) of the CIRP

Regulations; and providing for land and equity in the proposed SPVs in

lieu of the requisite payment was entirely impermissible. These objections

were countered by IRP and NBCC with the submissions that it was

nowhere provided in the scheme of the Code and CIRP Regulations that

payment of liquidation value to the dissenting financial creditor has to be

in cash. It was also submitted that when mode of discharge of obligation

towards dissenting financial creditor was not envisaged only by way of

cash payment, money or other valuable thing delivered to discharge the

obligation would be construed as “payment”, fulfilling the requirement of

Section 30(2) of the Code. It was also submitted that when the assenting

financial creditors were not being paid in cash, any such payment to the

dissenting financial creditors would cause prejudice to the rights of the

assenting financial creditors. As noticed, the Adjudicating Authority

rejected the stand so taken by IRP and NBCC and observed that all the

provisions and specifications of the Board made it clear that payment to

dissenting financial creditors means payment of the amount; and it cannot

217 be argued that the payment could also be in a manner other than cash.

The Adjudicating Authority also rejected the contention made with

reference to the treatment assigned to the assenting financial creditors

while observing that a person agreeing might agree for anything but the

same may not be acceptable to the person disagreeing. Accordingly, the

Adjudicating Authority (NCLT) did not approve the proposal in the

resolution plan as regards treatment of the dissenting financial creditors.

112.1. However, after disapproving, the Adjudicating Authority proceeded

on the lines that this objectionable part of the resolution plan could be

modified without altering the basic structure of the plan. Having said so,

the Adjudicating Authority proceeded to modify the resolution plan in the

manner that the resolution applicant shall pay to the dissenting financial

creditors the amount, that was receivable in terms of Section 53 of the

Code, in twelve monthly instalments together with interest with other

stipulations, as contained in paragraph 103 of its order, which we have

reproduced in paragraph 46.4 hereinbefore. This part of the order of the

Adjudicating Authority has been challenged by NBCC as also by IRP in

their respective appeals. The assenting financial creditors, including IDBI

Bank and the assenting homebuyers have also supported this challenge.

Their submissions have been countered by the dissenting financial

creditor ICICI Bank as also by the erstwhile director of the corporate

debtor.

218

113. We may now summarise the essential contents of extensive

submissions made by the parties in challenge to this part of the order of

the Adjudicating Authority, while avoiding repetition of the same contention

by different parties.

113.1. It has been strenuously contended on behalf of the IRP that the

Adjudicating Authority has acted wholly without jurisdiction in modifying

the terms of the resolution plan that was approved by 97.36% of the

voting share of the Committee of Creditors. It is submitted that the

resolution plan in question is duly compliant with the requirements of

Section 30 of the Code and if the Adjudicating Authority was at all of the

view that the plan did not meet with any particular requirement, it could

have only sent it back to CoC to consider the proposed modifications, so

as to afford an opportunity to the resolution applicant to modify the plan

and to the CoC to reconsider and vote upon the same. It is submitted that

the Adjudicating Authority, by itself, could not have made any modification

in the resolution plan, particularly on any commercial aspect of the plan

which remains exclusively within the domain of the CoC.

113.1.1. It has also been submitted on behalf of IRP that in the meeting

of CoC dated 28.11.2019, ICICI Bank did not raise any objection to the

mode of payment and only objected to the amount provided by the

resolution applicant and that being the position, it could not have raised

any objection at a later stage.

219 113.1.2. It is further submitted that the requirements in Section 30(2)(b)

of the Code stress upon the ‘value’ a dissenting financial creditor is

entitled to receive but, it has nowhere been provided that the manner of

payment has to be in cash; rather the manner of payment has been left to

be specified by the Board and the Board has also not specified that such

payment has to be in cash only.

113.1.3. Further, according to IRP, if the word “payment” is given a

prescriptive meaning, it would result in clause (b) of sub-section (2) of

Section 30 prescribing the manner of distribution and that would amount

to amending the word “creditor” in sub-section (4) of Section 30. It is

submitted that in the scheme of the Code, dissenting financial creditors

are bound to accept the manner of distribution in the resolution plan as

approved by the majority of 66% or more of the voting share in the CoC

and if they are not held so bound, the provisions permitting the CoC to

take decisions with requisite majority would be rendered nugatory.

113.2. The resolution applicant NBCC has also made long ranging

submissions in challenge to the directions in paragraph 103 of the order

of the Adjudicating Authority while defending the terms and stipulations in

the resolution plan. It is submitted that Step 6B in the resolution plan has

been formulated in due compliance of the requirements of Section 30(2)

of the Code and Regulation 38(1) of the CIRP Regulations. It is stated in