Jitender Arora Resolution ... vs Tek Chand & Anr

For Appellant:- Mr. Jitender Arora (RP in-person) Mr. Shikhil Suri and Ms. Nikita Thapar, Advocates

For Respondent:- Mr. Javed Khan and Mr. Harish Kumar, Advocates for R-1.

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 1 of 38 Judgment (Date: 18 .11.2021) (Through Virtual Mode)

{Per: Dr. Alok Srivastava, Member (T)}

This Judgment relates to the appeal filed by Jitender Arora,

Resolution Professional (RP) of the Corporate Debtor (CD) M/s

Premia Projects Limited, who is aggrieved by the impugned order

in I.A. No. 4132 of 2020 in CP (IB) No. 104/PB/2018, passed by

the Adjudicating Authority (NCLT, Delhi) on 29.10.2020

(hereinafter called Impugned Order).

2. In brief, the facts of the case are that an application under

section 7 of IBC was filed against the Corporate Debtor to initiate

CIRP which was admitted vide order dated 30.5.2018 and an IRP

was appointed. The Corporate Debtor, in an earlier proceeding

before the Hon‟ble Delhi High Court, had been sent in liquidation

and a provisional liquidator was appointed in the matter. On

finding that there was an order of the Hon‟ble Delhi High Court,

the Adjudicating Authority held in CP (IB) 104 (PB) of 2018 on

30.1.2019 that no proceedings under IBC can continue in view of

proceedings before the Hon‟ble Delhi High Court. This order of the

Adjudicating Authority was recalled vide order dated 11.3.2019

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 2 of 38 and the admission order under section 7 of IBC was restored.

Thereafter, the Hon‟ble Delhi High Court transferred the

proceedings pending before it with respect to the Corporate Debtor

to the Adjudicating Authority vide order dated 30.9.2019 on

transfer applications CA No. 984 of 2018, CA No. 918 of 2018 and

CA No. 826 of 2018 in view of the fact that the proceedings before

the Hon‟ble Delhi High Court had not progressed much. The

Adjudicating Authority thereafter, on application by the Resolution

Professional, excluded the time spent on pursuing the transfer

applications vide its order dated 18.12.2019 and the CIRP period

was extended by 150 days.

3. It is stated by the Appellant that a plot of land was allotted

by Greater Noida Industrial Development Authority(GNIDA in

short) by allotment letter dated 11.3.2009 to the landowning

company M/s Solitaire Infomedia Pvt. Ltd.(Respondent No.2).

Thereafter, a Collaboration Agreement was entered into on

1.10.2012 by the Corporate Debtor Premia Projects Limited with

Respondent No. 2, the landowning company. At this time Mr.

Tarun Sheinh was the Director and major shareholder of the

Corporate Debtor Company. Mr. Tarun Sheinh became a director

in the Respondent No.2 company too, soon after executing the

aforementioned Collaboration Agreement. In the landowning

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 3 of 38 company (Respondent No. 2), Tarun Sheinh and his wife Rekha

Sheinh held a total of 98,000 equity shares of Rs. 10 each and,

which accounted for 49% of the total share capital of Respondent

No.2 company (refer Additional Affidavit of the Appellant filed vide

diary No. 26753 dated 12.4.2021), and the Corporate Debtor

Premia Projects Limited held 1,02,000 number of shares of Rs. 10

each accounting for 51% of the total share capital of Respondent

No.2 landowning company. The transaction audit report dated

28.9.2019 submitted by the Appellant (pg. 279 of the Appeal

Paperbook Vol II) mentions that the Corporate Debtor Premia

Projects Limited purchased all the shares held by Tarun Sheinh

and his wife Rekha Sheinh in R-2 company on 5.10.2015 and only

100 equity shares were retained by the Tarun Sheinh. Thus from

5.10.2015, Corporate Debtor M/s Premia Projects Limited started

to hold 1,99,900 shares in Respondent No.2 company and only

100 shares were held by Tarun Sheinh. Thus, the Corporate

Debtor Premia Projects Limited had almost total control over the

Respondent No. 2 landowning company. Simultaneously, on

31.3.2015, Tarun Sheinh held 47,500 equity shares out of 50,000

shares in the Corporate Debtor Premia Projects Limited. Thus, he

effectively controlled both the corporate debtor as well as

Respondent No. 2 landowning company and he was director in

both the companies.

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 4 of 38 4. The RP filed I.A. No. 4132 of 2020 before the Adjudicating

Authority claiming that Tarun Sheinh, director in both the

companies has, through the Collaboration Agreement dated

1.10.2012 entered into between the CD and the Respondent No. 2

landowning company and Memoranda of Understanding entered

into with home-buyers for booking and sale of flats constructed on

it, defrauded and cheated the home buyers who had booked flats

in the project being developed by the Corporate Debtor. Through

this IA No. 4132 of 2020, the RP sought the following directions

from the Adjudicating Authority: -

(i) Allow RP to take charge of assets of the subsidiary

company M/s. Solitaire Infomedia Private Limited, or

(ii) Allow RP of the Corporate Debtor to initiate joint CIRP

of both the holding company and its subsidiary (i.e.

the Corporate Debtor and its subsidiary Respondent

No.2).

By the impugned order dated 29.10.2020 (attached at page 55 of

the Appeal Paperbook) the Adjudicating Authority denied the

prayed relief holding that there was no provision in the IBC to

grant such relief.

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 5 of 38 5. The Collaboration Agreement provided that the Respondent

No. 2 will hand over the possession of land to developer after

receiving a valuable consideration, and the CD will develop the

project and have exclusive right of sales and marketing of 90% of

the constructed area and the owner of the land (Respondent No.2)

will be entitled to ownership and right to sell 10% of the

constructed area apart from receiving Rs. 4.5 Crores as cash both

being part of consideration as contained in the Collaboration

Agreement. The relevant portion regarding Consideration to be

paid to the landowning company Respondent No. 2 by the CD is

reproduced below:-

"CONSIDERATION:

a. In consideration of the Owner granting the said Land with permissible F.S.I., exclusive rights of development to the Developer under this Agreement, the Developer has agreed to pay a sum of Rs. 4.5 crores as consideration to the Owner.

b. The Owner has handed over the possession of the said Land (as and where it is) at the time of execution to the Developer for smooth operations and activities relating to development and construction of the said Land.

c. It is agreed that after completion of construction of the Building/Tower/IT spaces as per the sanctioned plans / License / LOI / approvals from the competent authorities, the Developer shall be entitled to 90% (Ninety percentage) of the fully constructed area on the said Land. And besides required Power of Attorney(ies), the Owner shall execute the required documents/papers in favour of the Developer and/or ultimate buyers, who the said constructed area would be sold by the Developer.

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 6 of 38 d. It is agreed that the Owner shall be entitled to 10% (Ten percentage) of the fully constructed area on the said Land, as consideration under the Agreement. The Owner will be free to do anything with its share of constructed area without any interference of the Developer and the Developer shall examine all required documents/papers, etc., in favour of the Owner/its buyers of the said constructed area of Owner‟s share. However, the Owner can empower the Developer to sell the constructed area of its share and also the Developer shall be bound to sell owner‟s constructed area. It is agreed that the Developer shall sell this area also at the same price or near thereof and on the same terms and conditions as applicable in the Developer‟s own share."

6. The Memoranda of Agreement (MOU) was executed by the

CD with home-buyers and payments were collected by the CD from

the home buyers. A sample MoU dated 23.7.2013, which was

executed between Premia Projects Limited as the „first party‟ and

Alka Arora and nominee Mudit Adityaja as „second party‟ (attached

at pp.174-189 of Appeal Paperbook in Vol I). Clause (iii)(b) there in

mentions the first party‟s rights and title in the said land. The MoU

also mentions that the „second party‟ has agreed, confirmed and

acknowledged that it is satisfied in all respects as to the first

party‟s (a) right, title, and interest in the said land and the

complex; (b) authority to develop and construct the complex; (c)

ability to operate and maintain the complex." Furthermore, the

consideration to be paid by the „second party‟ to the „first party‟ is

included in the MOU as follows (attached at page 178 of the Appeal

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 7 of 38 Paperbook in Vol I):

"2) CONSIDERATION a. The Second party has opted for Down Payment Plan / Flexi Payment Plan / Installment Plan / SIP and has paid and/or shall pay amount(s) towards Unit sale consideration as per Annexure „B" attached hereto. It is already explained and clarified by the First Party to the Second Party and hereby again expressly understood by the Second party, that the amount(s) paid and/or agreed to be paid by the Second Party under the Application Form and this MOU is/are only the basic sale price/consideration for the said Unit and the Second Party hereby assures and undertakes to pay to the First Party all other levy(s), charges, amount(s), taxes etc. as may be applicable for the said Unit including but not restricted to IDC/EDC/FFC/IFMS/EEG/Service Tax etc.

b. The Second Party who has opted for the Flexi payment plan/installment plan hereby assures the First Party that the payment(s) as in Annexure „B‟ shall be made on or before their due date."

7. The consideration as mentioned in the MOU executed

between the CD and the home-buyer is the cost of the flat

proposed to be constructed. The consideration is paid, either as a

one-time lump sum amount or through the flexi-plan arrangement

that is provided in the MOU. The cost of flat in a housing project

of the CD, which is an apartment complex, comprises of two parts

-

(i) Proportionate Cost of land (which relates to each flat).

(ii) Cost of construction of the flat.

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 8 of 38

8. During the consideration of this appeal, M/s. Solitaire

Infomedia Private Limited (Respondent No.2) was served notice for

appearance through speed post, which could not be delivered as

the door of the registered office of Respondent No. 2 was found

locked. Thereafter, service was attempted by the Registry of this

Tribunal through email, but email dated 11.2.2021 was

undelivered as the domain premialtd.com was not found. Finally,

vide order of this Tribunal dated 1.3.2021, public notices were

published in two newspapers, namely Rashtriya Sahara (Hindi)

and The Hindu (English) on 9.3.2021, both having wide circulation

in Delhi region where the registered office of Respondent No.2 is

situated. Despite the publication, Respondent No.2 did not appear

before this Tribunal and hence, no reply or oral arguments could

be received from Respondent No.2.

9. The Appellant filed an application under rule 11 of NCLT

Rules, 2016 seeking permission for substitution and impleading

Mr. Harish Kumar as Respondent No.1 in place of Shri Tek Chand,

who was Respondent No.1 in the appeal and who died during the

pendency of this appeal. This permission is granted.

10. The main issue in this appeal is whether the corporate

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 9 of 38 debtor M/s. Premia Projects Limited and Respondent No.2 M/s.

Solitaire Infomedia Limited should either be considered for joint

CIRP so that the land can be considered as an asset in the joint

CIRP of the Corporate Debtor and Respondent No. 2. This issue is

significant because while the Corporate Debtor received the

booking amounts from the home buyers, it is the allegation of the

RP and home buyers that the ex-director of the CD Tarun Sheinh

siphoned off the amounts so received in other companies

controlled by Tarun Sheinh and hence no significant monies are

available with the CD for its meaningful insolvency resolution. The

issue assumes significance since the land on which the project was

to be developed is an integral constituent of the project through

which the flats were being constructed and this asset of land could

be instrumental in insolvency resolution of CD if a joint CIRP for

the CD and Respondent No. 2 is undertaken.

11. The Learned Counsels for both parties presented their

respective arguments before us. The Learned Counsel for the

Appellant has submitted that the Corporate Debtor had entered

into the Collaboration Agreement with Respondent No. 2 Company

and MoU with the home buyers. It was done to collect booking

amounts by the Corporate Debtor which otherwise would have no

assets. In the event of failure to construct the flats, the Corporate

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 10 of 38 Debtor would not have any asset to extinguish the liabilities of the

home buyers. His submission is that the Corporate Debtor-

Developer got the right to market the flats so that it could collect

money from the home buyers. The money so collected was

siphoned off by Tarun Sheinh and the Corporate Debtor was not

left with any assets. Hence the financial creditors and other

creditors would be left high and dry. Since the home buyers as

creditors seek insolvency resolution of the CD, the present case is

a fit one for lifting the corporate veil of the Corporate Debtor and

that of its wholly-owned subsidiary (Respondent No. 2 company)so

that their inter-twined nature of their businesses and assets

becomes clear. He has contended that once the inter-twined

nature of the businesses of the two companies becomes clear

insofar as the housing development project in question is

concerned, a joint CIRP of the CD and Respondent No. 2 company

would result in effective resolution of the Corporate Debtor and

taking care of the interests of the creditors of CD. In such a

situation, the Ld. Counsel for the Appellant has requested for a

joint CIRP order in respect of the CD and Respondent No. 2

company.

12. The Learned Counsel for the Appellant has cited the

following cases in support of his contention: -

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 11 of 38

(i) State Bank of India and Anr. vs Videocon

Industries Limited and Ors [2019 SCC Online NCLT

745].

(ii) Mrs. Mamatha vs AMB Infrabuild Private Limited

and Others [Company Appeal (AT) (Ins) No. 155 of

2018].

(iii) Arcelormittal India Private Limited vs Satish

Kumar Gupta and Others [(2019) 2 SCC 1].

13. The Learned Counsel for Appellant has also cited a report of

the Working Committee on Group Insolvency dated 23.9.2019

to provide the rationale for dealing with the insolvency of

companies of a group. The Learned Counsel for Appellant has

made a case for lifting the corporate veil of the Corporate Debtor

and its wholly-owned subsidiary company M/s. Solitaire Infomedia

Private Limited so that the malfeasance and actions of their

common director Taurn Sheinh for defrauding the creditors of the

Corporate Debtor become evident, and thereafter through a joint

insolvency resolution process, the creditors are able to get their

dues.

14. In his arguments, the Learned Counsel for the Respondent

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 12 of 38 No. 1 has stated that as per the MoU dated 11.10.2013 entered

between Respondent No.1 and M/s. Premia Projects Limited, it is

clearly mentioned that M/s. Premia Projects Limited is the „first

party‟ therefore, the corporate debtor also includes its subsidiaries,

in particular M/s. Solitaire Infomedia Limited. The Learned

Counsel for Respondent No.1 has further claimed that Tarun

Sheinh is the common Director of both the Corporate Debtor and

M/s. Solitaire Infomedia Private Limited, who was instrumental in

executing the Collaboration Agreement and MoUs with the

nefarious objective of siphoning off money collected from home

buyers and defrauding and cheating them. Therefore, he has

agreed,that this is a fit case where the corporate veil of both the

companies be lifted for the truth to come out, in order to

understand the role of the two companies and their director Tarun

Sheinh who collaborated for developing the land in question,

constructing flats thereon, collecting money from home buyers and

siphoning off collected monies, thereby defrauding the home

buyers. He has cited the judgment of NCLAT in Mrs. Mamtha

versus AMB Infrabuild Pvt. Ltd.(supra) to emphatically state that

both the companies should be treated to be from same group of

companies for the purpose of a joint Corporate Insolvency

Resolution Process (CIRP).

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 13 of 38

15. The Appellant filed an affidavit vide Diary No. 26753 dated

12.4.2021 whereby it has submitted certain documents relevant to

show the intricate connection between the Corporate Debtor and

Respondent No. 2. With this affidavit, the Appellant has filed the

following documents: -

(i) Annual return of M/s Solitaire Infomedia Pvt. Limited

(Respondent No. 2) in form MGT-7 for the year 2014-

15

(ii) List of shareholders of Premia Projects Limited

(Corporate Debtor) and Solitaire Infomedia Private

Limited (Respondent No.2) as on 31.3.2015

(iii) Independent Auditors‟ report for FY 2015-16

(iv) Balance Sheet of the Corporate Debtor for FY 2015-16.

16. The main ground on which the Appellant has claimed

initiation of joint CIRP of the Corporate Debtor Respondent No.2 is

that the Corporate Debtor is the main company and the

landholding company M/s. Solitaire Infomedia Private Limited

(Respondent No.2) is its subsidiary company. He has alluded to

the common director Tarun Sheinh of both the companies and

their major shareholding in both the companies in support of his

claim that both the companies are held and controlled primarily by

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 14 of 38 the same person Tarun Sheinh. The Appellant has shown that the

„Collaboration Agreement‟ between the Corporate Debtor and

Respondent No.2 entered into on 1.10.2012 for development of

project at KP- (V), Greater Noida West, Uttar Pradesh was entered

into after the appointment of Tarun Sheinh as Director in Solitaire

Infomedia Limited (Respondent No.2) so he was the common

director in both the companies. Later the CD (which was controlled

by Taurn Sheinh) acquired equity shareholding in Solitaire

Infomedia Pvt. Ltd. (Respondent No.2) and the intertwining of

business of both companies was practically complete insofar as the

housing project was concerned. The dates showing these events, as

provided by the Appellant, are as follows:

(i) Tarun Sheinh becomes Director of Respondent No.2

company before 1.10.2012

(ii) Date of execution of Collaboration Agreement:

1.10.2012

(iii) Corporate Debtor (Premia Projects Limited) acquires

controlling equity shares in Respondent No. 2

company-between1.4.2015 and 31. 3. 2016.

17. It is useful to peruse the Collaboration Agreement and its

various clauses to understand the extent and nature of

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 15 of 38 collaboration and intertwining of business the main company, the

Corporate Debtor and its subsidiary landing holding company

(Respondent No. 2). In the recital of the Collaboration Agreement

(attached at pp 165 - 173 of Appeal Paperbook), the intent of the

landowner and the developer in executing the said Collaboration

Agreement is stated as follows:

"Whereas, the Owner is desirous of developing "the said Land" and to construct IT Spaces, ITes Spaces, commercial spaces and other constructions as allowed by the relevant authorities under the law (hereinafter called "DEVELOPMENT OF LAND"), and for this purpose, is willing to transfer the entire development rights of the said Land;

AND WHEREAS, the Developer on the request of the Owner and also on basis of representations and assurances of the Owner has agreed to develop the "said Land" and accept from the Owner the exclusive rights of development of the said Land on the terms and conditions as mutually agreed between the parties."

18. The Covenants of the land owner and the Developer

(attached at pp 168 -171 of Appeal Paperbook in Vol I.) of special

note are sub-clauses (e) and (g) of the Owners Covenants which are

reproduced below:

"e. The Owner shall not interfere with or obstruct in any manner with the execution and completion of work of development and construction of any building on the said Land. However, the Owner shall have a right to supervise and monitor the project either by himself or through its representative, particularly to satisfy himself about the progress and quality of construction as per specifications annexed and agreed by the parties.

g. The Owner and / or its nominee / transferees / assigns

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 16 of 38 shall be bound to comply with all the terms and conditions of the said Lease Deed or Building Bye Laws / License or any other rules / terms and conditions of the NOIDA Authority / department/ government pertaining to the said land."

19. Clause 6, sub clause (a) of the Developer‟s Covenants in the

Collaboration Agreement gives the Developer the right to develop

modern IT space, ITES space, commercial spaces and other IT

enabled services with air-conditioned and power back-up on the

said land entirely at its own cost, expenses and resources after

procuring requisite permission, sanctions and approvals from all

competent authorities. Sub clauses (c) and (d) of clause 6 of

Developer‟s Covenants are as follows: -

"c. The Developer shall have the exclusive right of sales and marketing of the constructed area / building / tower and has exclusive right to appoint sales and marketing agents / teams. The project would be sold in the name of the Developer under its Brand Name and the Developer would be at liberty to use its Brand Name and Logo on the said project."

d. All the expenses relating to marketing brokerage, advertisement, payment of all contractors, labours, marketing agents, staff etc. during the course of development, promotion and marketing of the said Project and all other incidental expenses shall borne by the Developer."

20. The above discussion also points strongly to the fact that in

considering the CIRP of the Corporate Debtor - Developer, it is

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 17 of 38 necessary that all the assets form part of the housing project are

considered.

21. From the above, it is abundantly clear that Tarun Sheinh,

who controlled and was Director in the Corporate Debtor Premia

Projects Limited became a Director in the Respondent No.2

company Solitaire Infomedia Limited, and thereafter, once he

started to control both the companies viz. Corporate Debtor Premia

Projects Limited and Respondent No.2 Solitaire Infomedia Limited,

entered into a Collaboration Agreement on 1.10.2012 regarding

development of the land owned by Respondent No.2 company by

the Corporate Debtor. The Collaboration Agreement gave the

Corporate Debtor, development rights at a valuable consideration

of Rs. 4.5 crores as well as 10% of the fully constructed area on

the said land. The developer, after completion of construction in

the project, was to be entitled to 90% of the fully constructed area

on the said land. Hence, it is clear that there was a valuable

consideration given to the landowning company (Respondent No.2)

by the developer company (Corporate Debtor). In turn, the

Corporate Debtor was given the possession of land and the rights

to develop the said land within a period of four years after

obtaining necessary approvals and the rights to sell 90% of the

constructed area on the said land. The MOU, a sample of which is

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 18 of 38 attached at pp 174 - 189 of the Appeal Paper book in Vol I, shows

that the Corporate Debtor as „first party‟ is entitled to develop the

said land and the complex and receive monies from the home

buyers/allottees as consideration.

22. It is therefore clear that Tarun Sheinh, who effectively

controlled the landholding Respondent No.2 company ( Solitaire

Infomedia Limited) and the developer company - Corporate Debtor

(Premia Projects Limited), made the dual instruments of

Collaboration Agreement and MoU as a clever stratagem to give by

one hand land to the developer and receive monies as the price of

allotted flats in the other hand, all along claiming the right hand

does not know what the left hand is doing as these acts were being

done by two outwardly different companies. As has come out in the

transaction audit report submitted by the RP through an affidavit

(Diary No. 23898 of the Appeal Paperbook), huge amount of money

has been siphoned off by Tarun Sheinh from the Corporate Debtor

company. It is thus clear that Tarun Sheinh defrauded the

homebuyers by collecting money from them through the Corporate

Debtor, but not constructing and completing the projects promised

under the Memoranda of Understanding entered into with various

homebuyers. This circle of cheating was completed because the

asset of land on which the project was to be developed and land

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 19 of 38 constructed was owned by another company. In this manner, he

made a similar attempt to save his property from being auctioned

even when he would not provide constructed flats to the

homebuyers.

23. Therefore, if the home buyers who are financial creditors of

Developer Company, are to receive their rightful dues and the

insolvency resolution of the corporate debtor has to be carried out

in an effective manner, piercing of corporate veil is necessary.

Once the corporate veil of the two companies is taken off, the

intricate business relationship between landowning company and

the Corporate Debtor - Developer Company would become crystal

clear. The role of the common director in both companies, Tarun

Sheinh would become absolutely evident and clear in the clever

execution of the back-to-back Collaboration Agreement and MoUs

to get possession of the land, and collect monies from the home

buyers through one company, siphoning them off for his personal

benefit and leaving the corporate debtor bereft of any assets of

meaningful value for effective and successful insolvency resolution

of the Corporate Debtor. It stands to logic and reason that if the

Corporate Debtor does not own any economically valuable assets,

no resolution applicant will come forward for successful resolution

of the Corporate Debtor. Later, if the Corporate Debtor were to go

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 20 of 38 into liquidation, there would be hardly any tangible assets

available for liquidation, and hence the creditors would be left

completely high and dry. What happens to the home-buyers who

have sunk their hard-earned incomes, often their lifetime savings,

in the booking and payment of instalments for the to-be-built flats

is a question that has difficult answer. Hence for successful

resolution of the Corporate Debtor „piercing of the corporate veil‟ of

the two companies - Corporate Debtor (Developer) and Landowning

subsidiary company (Respondent No. 2) becomes absolutely

necessary and imperative.

24. The relevant definitions from IBC are reproduced below for

ready reference:-

"Section 3(27) - "property" includes money, goods, actionable claims, land and every description of property situated in India or outside India and every description of interest including present or future or vested or contingent interest arising out of, or incidental to, property.

Section 3(33) -"transaction" includes a agreement or arrangement in writing for the transfer of assets, or funds, goods or services, from or to the corporate debtor.

Section 3(34) - "transfer" includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.

Section 29. Preparation of information memorandum -

(1) The resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 21 of 38 resolution plan.

(2) The resolution professional shall provide to the resolution applicant access to all relevant information in physical and electronic form, provided such resolution applicant undertakes -

(a) to comply with provisions of law for the time being in force relating to confidentiality and insider trading;

(b) to protect any intellectual property of the corporate debtor it may have access to; and

(c) not to share relevant information with third parties unless clauses (a) and (b) of this sub-section are complied with.

Explanation - For the purposes of this section, "relevant information"

means the information required by the resolution applicant to make the resolution plan for the corporate debtor, which shall include the financial position of the corporate debtor, all information related to disputes by or against the corporate debtor and any other matter pertaining to the corporate debtor as may be specified."

Regulation 36 of the Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons) Regulations,

2016 is reproduced below:-

"36. Information memorandum. (1) Subject to sub-regulation (4), the resolution professional shall submit the information memorandum in electronic form to each member of the committee within two weeks of his appointment, but not later than fifty-fourth day from the insolvency commencement date, whichever is earlier.

(2) The information memorandum shall contain the following details of the corporate debtor -

(a) assets and liabilities with such description, as on the insolvency commencement date, as are generally necessary for ascertaining their value.

Explanation. - Description, includes the detail such as date of acquisition, cost of acquisition, remaining useful life, identification number, depreciation charged, book value, and any other relevant details;

(b) the latest annual financial statements;

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 22 of 38 Xxxxxxxxxx

(4) The resolution professional shall share the information memorandum after receiving an undertaking from a member of the committee to the effect that such member or resolution applicant shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub- section (2) of section 29."

On above reading of sections, Section 3(27) of the code defines

property as one which includes present or future or vested or

contingent interest arising out of, or incidental to, property.

Section 3(33) of IBC covers transaction, which includes a

agreement or arrangement in writing for the transfer of assets, or

funds, goods or services, from or to the Corporate Debtor. Section

3(34) of the IBC includes transfer of right, title and possession or

lien of property. Section 29 of IBC and Regulation 36 of the

Insolvency and Bankruptcy Board of India (Insolvency Resolution

Process for Corporate Persons) Regulations, 2016 provides for the

forming of a Information Memorandum, which contains the details

of assets and liabilities with their description of the Corporate

Debtor.

25. When we read the definitions of „property‟, „transaction‟,

„transfer‟ along with the provisions of section 29 (regarding

provision of Information Memorandum) in a constructive manner

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 23 of 38 and consider meaning along with the spirit and letter of the IBC as

contained in the preamble of IBC, it becomes clear that such

assets, which are transferred to or from the Corporate Debtor, and

which are germane to the insolvency resolution of the Corporate

Debtor and are part of the assets of the Corporate Debtor, even if

held by another company, such assets should be included in the

Information Memorandum das well as insolvency resolution. It is

only with such consideration and meaning of assets/property that

the creditors of the Corporate Debtor can get their rightful dues as

is required and provided under the IBC. Moreover, the

Collaboration Agreement between the Corporate Debtor and its

partly or statutory, the land owing company Respondent No. 2

transfers assets of land to the Corporate Debtor, whereby the

Corporate Debtor on the strength of this asset is able to enter into

MoUs with home buyers. Therefore, the Collaboration Agreement

is very organic to the entire process of insolvency resolution of the

Corporate Debtor, and the asset of land which is transferred and

given in possession by the land owner company Respondent No. 2

also becomes an „asset‟ of the Corporate Debtor.

26. The Learned Counsel for Appellant has referred to the report

of the Working Group on Group Insolvency constituted by the

Insolvency and Bankruptcy Board of India (supra). In particular

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 24 of 38 the said report at page 65 states as follows:-

"The WG notes from the UNCITRAL Guide recommends that typically the separate legal identity of group companies should be respected, except

„(a) Where the court is satisfied that the assets or liabilities of the enterprise group members are intermingled to such an extent that the ownership of assets and responsibility for liabilities cannot be identified without disproportionate expense or delay; or

(b) Where the court is satisfied that the enterprise group members are engaged in a fraudulent scheme or activity with no legitimate business purpose and that substantive consolidation is essential to rectify that scheme or activity.‟ "

27. Regarding the applicability of the proposed framework for

substantive consolidation the report mentions as follows:-

" 3.3.1. Applicability Consistent with international practice, stakeholders consulted by the WG suggested that substantive consolidation should be applicable in limited circumstances.

Some stakeholders consulted were of the view that the framework should be applicable only in those cases where there is evidence of fraud or sham, or it would be just and equitable to order substantive consolidation. Other stakeholders consulted were of the view that substantive consolidation may be provided for where there is no real separation between group members, and it would not be economically feasible to separate the assets of different group members. This may be ascertained using factors such as the profitability of consolidation at a single physical location, the co-mingling of assets and business functions leading to inter-dependency amongst the group companies, the unity of interests and ownership between the various corporate entities, the degree of difficulty in segregating and ascertaining individual assets and liability, the existence of parent and inter-corporate guarantees on loans, complex security structures, and the transfer of assets without formal observance of corporate

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 25 of 38 formalities."

28. The Insolvency and Bankruptcy Code, 2016 provides for the

resolution of insolvent companies for the revival of those

companies and for the benefit of financial and operational

creditors. The preamble of the IBC states that the reorganization

and insolvency resolution of corporate persons, partnership firms

and individuals in a time bound manner for maximization of value

of assets of such persons is the prime objective of this legislation.

Taking a cue from such an objective and the detailed framework

provided under IBC, there is no gainsaying the fact that the

interests of creditors which doing an effective resolution of an

insolvent company are the primary objectives of the IBC. Therefore,

if a Corporate Debtor has intricate financial relationship with

another company which is controlled in an overwhelming manner

by the same set of directors, as the corporate debtor and their

businesses are inter-related, intertwined and interwoven, it stands

to reason that such companies should be looked at jointly, for

matters related to insolvency resolution, as the financial revival of

one company will be closely linked to the financial health of the

other company.

29. There is no provision in the IBC for a joint CIRP. In State

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 26 of 38 Bank of India and Anr. versus Videocon Industries Limited and

Others (supra), a consolidated CIRP has been ordered in view of

the fact that there are admission orders for insolvency resolution

against 15 companies that has already been given, and prayer was

made for undertaking consolidated CIRP since the assets of all the

15 companies were inter-linked and interwoven. The Adjudicating

Authority has given a 14 point test in para 80 of this judgment for

deciding whether consolidation of individual CIRPs should be done

to yield maximum benefits to stakeholders. Para 80 of State Bank

of India and Anr. versus Videocon Industries Limited and Ors

(supra)gives the essential ingredients of the 14 point test whichis

reproduced hereunder:-

80. Henceforward Summumbonum, is that the UK / USA courts have dealt with the process of consolidation along with the jurisdiction of the Authority by pronouncing that equity and fairness ought to be a yardstick by lifting the corporate veil. Consolidation is to be utilized as a mechanism to maximise the value of financially stressed group of companies. Economic benefit ought to be the sole BEFORE THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH MA 1306/2018, MA 1416/2018, MA 393/2019, MA 115/2019, MA 1574/2019, MA 774 /2019, MA 778/2019, MA 1583/2018 Page 45 of 52 purpose and for that a preliminary searching enquiry is suggested which would yield benefit to stakeholders by off-setting any harm, if inflicted, if not consolidated. On due reading of all these judgements, one proposition of law emerges that the motion of „consolidation‟ depends upon the facts and circumstances of each debtor/debtors. It is appropriate and suitable to give a ruling at this occasion that there is no single yardstick or measurement on the basis of which a motion of consolidation can or cannot be approved. With humility, this Bench herein below sets-out a list of examples, based upon reading the

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 27 of 38 history of „group insolvency‟, so that the presence of them can lead to a decisive conclusion of triggering of „consolidation‟ of Insolvency process. Undisputedly, and also laid down by the courts, before ordering consolidation, a preliminary searching inquiry be ensured that whether consolidation yields benefits to stakeholders by offsetting the harm if not consolidated.

Areas of inquisition and our finding on the facts of this case are:-

i) Common Control : These companies are promoted by Dhoot Family.

ii) Common directors : The family members of V.N. Dhoot are directors in all the Videocon group companies.

iii) Common assets : There are many instances of interdependency between the group companies and the assets are common to such an extent that, for instance, one company has leased its land to another group company to carry on manufacturing.

iv) Common liabilities : The clauses of the VTL and RTL Agreements have demonstrated that "all guarantees thereof executed by one or more of the other Corporate Debtors are deemed to be one obligations of all the Corporate Debtors.

"The company along with 12 other affiliates/entities (collectively referred to as "Obligors" and individually referred to as "Borrower") executed facility agreement with consortium of existing domestic rupee term lenders, in the obligor/co- obligor structure, wherein all the Rupee Term Loans of the obligors are pooled together...." .

v) Inter-dependence :Some corporate debtors are engaged in manufacturing, assembling and distribution of comprehensive range of consumer electronic and home appliances. Also manufacturing set top boxes, Colour Televisions, DVD Players Etc. by some Units/subsidiaries in Aurangabad. This is stated to be India‟s Largest Electronics Retail chain. The uniqueness stated to be that all are marketed under single license of "Videocon Trademark".

vi) Inter-lacing of finance :Pursuant to the RTL Agreement, a consortium of banks and financial institutions including SBI had agreed to grant „Rupee Terms Loans‟ to the RTL obligors under an obligor/co-obligor structure. The Rupee Term Loans under the RTL Agreement were to be utilised for the purposes of refinancing of existing rupee debt of the RTL obligors, funding the capital expenditure in relation to the „Ravva Field‟ and the capital expenditure in relation to the consumer electronics and home appliances BEFORE THE NATIONAL

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 28 of 38 COMPANY LAW TRIBUNAL, MUMBAI BENCH MA 1306/2018, MA 1416/2018, MA 393/2019, MA 115/2019, MA 1574/2019, MA 774 /2019, MA 778/2019, MA 1583/2018 Page 46 of 52 business of the RTL obligors and such other end users as permitted by the facility agent under the RTL Agreement. Recital C of the RTL Agreement states that: " The Rupee Term loan has been sanctioned by the lenders for the purposes of refinancing of existing Rupee debt of the obligors, funding the capital expenditure in relation to the consumer electronics and home appliances business of the obligors and such other end uses permitted by the Facility Agent". (Emphasis Supplied).

vii) Pooling of resources: Facts and evidences have demonstrated that there was common pooling of human resources, liaising and funding. Undisputedly, the directors are common using their contacts and relationship to run all the subsidiaries for which common office staff, accountants, and other human resources are mobilised to manage the affairs collectively. Further, common arrangement of capital/funds is an accepted position in Videocon group.

viii) Co-existence for survival : An interlinked chain of business operations is also evident in this group case. Electronic gadgets/home appliances are manufactured by a unit. However, distribution and market chain is controlled by another entity. Interdependence upon each other is a unique feature visible in Videocon group.

ix) Intricate link of subsidiaries : Consolidated accounts, pooling of resources, commingling of assets and business functions are the examples of intricate link among subsidiaries.

x) Inter-twined accounts : The consolidated accounts of 15 months is one of the evidence to demonstrate that on demand by the lenders, all the subsidiaries have prepared a common position of their assets and liabilities, thereafter, prepared consolidated accounts, stated to be duly approved by an auditor.

xi) Inter-looping of debts : On perusal of the agreements, it is evidenced that the clauses have made a provision of securing the debts owed by subsidiaries of Videocon group. For example, Clause 2.4 of the RTL Agreement states about the Utilisation of the proceeds i.e.: "(i) the obligors hereby agree that the proceeds of the Rupee Term Loan shall be utilized for the following purposes:

(a) Capital expenditure in relation to the Ravva Field and the capital expenditure in relation to the consumer electronics and

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 29 of 38 home appliances business of the obligors, for an amount not exceeding Rs.684 Crores incurred or to be incurred by the Obligors between the current year 2012 and till 2014;

(b) Refinancing of existing Rupee Loans listed in part A of schedule 9 for an amount not exceeding Rs.19,511 Crores; and

(c) Such other end use as may be permitted by the lenders in writing. " BEFORE THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH MA 1306/2018, MA 1416/2018, MA 393/2019, MA 115/2019, MA 1574/2019, MA 774 /2019, MA 778/2019, MA 1583/2018 Page 47 of 52

xii) Singleness of economics of units : The group is known by its brand name "Videocon". Therefore, the entire economics of the group revolve around this brand name either for the purposes of procuring raw material or finally selling the appliances manufactured. The group as a whole is therefore, has a common economic feature to sustain and promote the business operations.

xiii) Common Financial Creditors : As per two Agreements viz. RTL & VTL the lenders are members of „consortium of banks‟ which is common for all. Because the impugned Insolvency Petitions were filed by SBI for itself and also on behalf of the said Joint Lenders Forum, already listed above, the names of all the banks forming consortium thus substantiate the fact that the financial creditors are common for the 15 debtor entities.

xiv) Common group of Corporate Debtors: As per the said two agreements the Debtors are combined together for the purpose of availing various loan facility. Therefore, this is a case where all the Debtors are independently as well as jointly liable for the repayment of loans facilities availed.

We find that in the instant appeal, the two companies - Corporate

Debtor Premia Projects Ltd. and the Respondent No. 2 landowning

company M/s Solitaire Infomedia Private Limited broadly satisfy

the points enumerated in the 14-point test.

30. In the matter of Mrs. Mamatha versus AMB Infrabuild

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 30 of 38 Private Limited and Ors. (supra), the NCLAT has held that the

developer and the land owner should be treated jointly for the

purpose of initiation of CIRP against them. Hence, the Appellant

remitted to the Adjudicating Authority for admission of the case

after notice to the parties. The important point to note in this

matter is that an application for initiation of CIRP jointly against

„developer‟ and the „landowners‟ was filed, which was rejected by

the Adjudicating Authority. In the instant appeal the initiation of

CIRP has been ordered only against the Corporate Debtor

(developer) but at this stage there is neither any application for

initiation of CIRP against the landowner/ landholder nor there is

any order regarding initiation of the CIRP against the landowning

company M/s Solitaire Infomedia Pvt. Ltd.

31. In the situation as obtains in the matter related to the

present appeal, a joint CIRP would be possible only if there is an

application for admission of CIRP under the IBC against the

landowning entity and there is a strong case for undertaking joint

CIRP. We have found, upon piercing of corporate veil, that both

the Corporate Debtor and Respondent No.2 have common Director

Tarun Sheinh and their assets are intricately interwoven in their

business operations. In addition, we have also seen that the

corporate debtor. M/s. Premia Projects Limited has controlling

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 31 of 38 shares in the landowning company (Respondent no.2). Thus, it is

quite clear that their assets have been taken together for the

development of the housing project. Therefore, there appears to be

a strong case for considering the assets of both the companies

jointly.

32. The Hon‟ble Supreme Court, in the matter of Jaypee

Kensington Boulevard Apartments Welfare Association and

Ors. versus NBCC (India) Limited and Ors (2021 SCC Online SC

253) has among other issues looked at the assets of a 100%

subsidiary Jaypee Healthcare Limited (JHL) of the corporate debtor

Jaypee Infratech Limited (JIL) for a proper resolution and taking

care of resolution of the Corporate Debtor in order to take care of

the interests of the creditors of the Corporate Debtor, who are

among others homebuyers allotted flats by the Corporate Debtor.

The relevant portion of this judgment is reproduced below -

"137. Indisputably, the corporate debtor JIL owns 100% equity shareholding in JHL which is having three operational hospitals in the State of Uttar Pradesh.........

Xxxxxxxx

142. In view of the above, we do not consider it necessary to render any other finding in this point for determination except the observation that the resolution plan essentially deals with the assets of the corporate debtor JIL and not that of its subsidiary JHL. Differently put, what the resolution plan deals with are the shares in JHL, which are regarded as assets of the corporate debtor JIL. As

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 32 of 38 observed, no further comments are required and we leave this aspect of the matter at that only."

Viewed from the angle clarified in the above mentioned paragraph,

the shareholding of the Corporate debtor in the Respondent No. 2

Company, is over 97% in the asset of the Corporate Debtor and

should therefore be part of Information Memorandum. Thus there

exists a cogent case of undertaking joint CIRP.

33. As is evident from the above referred portions of the Jaypee

Kensington (supra) judgment the asset of the Corporate Debtor JIL

were considered in the resolution plan. Inter- alia the 100% shares

held by the corporate debtor JIL in JHL were also considered,

wherein a lender of JHL Yes Bank raised objection about its

interests being harmed in case the shareholding of the Corporate

Debtor JIL is considered as an asset in the overall corporate

insolvency resolution of JIL. The Hon‟ble Supreme Court has taken

note of the objection and held that the shares of JIL and JHL,

which are regarded as assets of the Corporate Debtor JIL would be

considered in the resolution plan, of course after giving due

consideration to the lenders of JHL, to whom the share of JIL have

been pledged. In the instant case, the shares of the Corporate

Debtor in the Respondent No. 2 company are not shown as

pledged or secured with any creditor. But the basic point is that

the shares of the Corporate Debtor in Respondent No.2 company

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 33 of 38 should be considered as part of total assets of Corporate Debtor in

the Resolution Plan.

34. The basis for considering land as a necessary asset in the

insolvency resolution of the corporate debtor is evident from the

manner of costing of a flat in an apartment complex. Since IBC

does not provide any indication about costing of flats in a housing

project, we turn our attention to the Real Estate (Regulations and

Development) Act, 2016 which relates to real estate projects and

connected matters. As the project is located in Uttar Pradesh we

consider the Uttar Pradesh Real Estate Regulatory Authority

(General) Regulations, 2019 (hereinafter called „Regulations‟). The

costing of the flat is covered in the Section 4(l)(D) of the Real Estate

(Regulation and Development) Act, 2016, whereby the developer is

required to submit in Form 3 provided in the Regulations through

a Chartered Account. Clause 3 in the Regulations is as follows:

"Formats of Certificates of Architect, Engineer and Chartered Accountant

3. The certificates, issued by the project architect, project engineer, chartered accountant and submitted to the banks for getting release of money from the designated separate accountof the project hall be in Forms REG-1, 2 and 3 respectively. The certificated issued by the project architect on completion of each of the building/wing of the real estate project shall be in Form REG-4."

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 34 of 38 Company Appeal (AT) (Ins) No. 1069 of 2020 Page 35 of 38

35. As is evident from the Form 3 extracted above, the cost of

the project includes cost of land and cost of development. This

total cost of the project forms the basis of the cost of each flat.

Each home buyer pays for the proportionate share of land

alongwith the cost of development and construction. Therefore, in

considering their rightful interest in the resolution of the corporate

debtor company, it is reasonable and logical to factor in the

connected land parcel in the total assets base.

36. In view of the aforementioned discussion, we consider it just,

fair and proper that the land held by Respondent No.2 M/s.

Solitaire Infomedia Pvt. Ltd., is an integral part of the housing

development project, and should be considered as a part of the

total asset base for the insolvency resolution of the Corporate

Debtor M/s. Premia Projects Limited. The inter-woven nature of

the assets of the two companies is amply clear from the provisions

of the „Collaboration Agreement‟ and the „MOU‟ respectively. The

Corporate Debtor has provided valuable consideration to

Respondent No.2 and also taken possession of the land in question

for developing the housing project through the Corporate Debtor.

Hence, the asset of land is effectively transferred to the Corporate

Debtor, on whose strength it has entered into Memoranda of

Understanding with various homebuyers. On the basis of these

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 36 of 38 MOUs the CD has collected monies from the home buyers.

Moreover, in the costing of flats offered to homebuyers, the cost of

land that proportionately is attached with each flat is a part of the

total cost of each flat. In such a situation, it would not be fair and

just to the creditors of the Corporate Debtor, which include the

homebuyers, if the land in question is considered as part of the

overall CIRP process and included in the information

memorandum. In such a situation, a meaningful resolution plan

could be proposed by an applicant.

37. In the instant matter the CIRP of the corporate debtor M/s

Premia Projects Ltd. is under consideration. The landowning

company M/s Solitaire Infomedia Pvt. Ltd. is not under CIRP,

hence it would not be possible to include in the CIRP of the

Corporate Debtor the asset of land on which the Corporate Debtor

is developing the housing project but which is owned by the

Respondent No. 2 company without following the due procedure as

enumerated in law. We, therefore, direct that the matter be

remanded to the Adjudicating Authority with further direction that

an admission application for the landowning company M/s.

Solitaire Infomedia Pvt. Ltd. be considered by the Adjudicating

Authority, and a consolidation of CIRP be thereafter considered so

that the combined assets of land and flats may be considered

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 37 of 38 together to provide fair, just and proper relief to the creditors of the

Corporate Debtor Premia Projects Limited.

38. With these directions, the matter is remanded to the

Adjudicating Authority to complete the process as directed above

at an early date, preferably within two months, and pass

appropriate orders. No order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical)

New Delhi 18th November, 2021

/aks/

Company Appeal (AT) (Ins) No. 1069 of 2020 Page 38 of 38