Kotak Mahindra Bank & Anr vs Resolution Professional Of Universal ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No.661 of 2021 (Arising out of Order dated 11.06.2021 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench-II in IA 1550/2019 of C.P.(IB) No.456 (ND)/2018)

IN THE MATTER OF: 1. Kotak Mahindra Bank Limited, D-10 Local Shopping Centre, Vasant Vihar, New Delhi 110057.

2. Kotak Mahindra Prime Limited Kotak House, Plot No.7, Second Floor, Sector 125, Noida, Uttar Pradesh. . ... Appellants

Vs

1. Resolution Professional of Universal Buildwell Private Limited 3rd Floor, SCO-61, Above Kotak Mahindra Bank, Old Judicial Complex, Civil Lines, Gurgaon-122001.

2. Universal Aura Welfare Association, Universal Greens Buyer Association and Universal Business Park Association, Resolution Applicant of Universal Buildwell Private Limited GM-35, DLF Phae-2, Gurugram, Haryana-122001. ... Respondents

Present:

For Appellants: Mr. Krishnendu Dutta, Sr. Advocate alongwith Ms. Apoorva Chowdhury and Ms. Versha, Advocates.

For Respondents: Mr. Swapnil Gupta, Ms. Sabhya Jain, Advocates with Mr. Atun Kansal, RP in person for R-1.

Mr. Himanshu Kapoor and Mr. Harshal Kumar, Advocates for R-2.

Company Appeal (AT) (Insolvency) No. 661 of 2021 1 JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against the order dated 11.06.2021 passed

by National Company Law Tribunal, New Delhi Bench-II in IA No.1550 of

2019 and others IAs in CP(IB) 456 (ND)/2018.

2. The Corporate Debtor - Universal Buildwell Pvt. Ltd. was admitted in

insolvency by an order dated 03.07.2018 on an Application filed by Pallavi

Joshi Bakhru under Section 7 of the Insolvency and Bankruptcy Code,

2016 (hereinafter referred to as the "Code"). The Appellant Nos.1 and 2

submitted their claim in Form-C to the Resolution Professional ("RP") on

18.07.2018. The claim of Appellant No.1 was admitted for an amount of

INR 13,82,73,227/- and Appellant No.2 for an amount of INR

37,34,83,401/- Voting share allocated to Appellant No.1 was 1.59% and

4.27% to Appellant No.2 in the Committee of Creditors ("CoC").

3. The RP appointed two Valuers namely - Adroit Technical Services

Private Ltd. and Sapient Services Private Limited in August 2018. The RP

invited Expression of Interest ("EOI") in Form-G. The RP shared the

Valuation Report with Appellant Nos.1 and 2 vide email dated 27.07.2019.

In response to fresh EOI issued by RP, six prospective Resolution

Applicants including Welfare Association Consortium - Respondent No.2

submitted EOI. The 14th CoC Meeting was held on 01.11.2019 and the 15th

Meeting was on 11.11.2019, in which Resolution Plan submitted by Welfare

Association Consortium - Respondent No.2 was approved by 70.44% voting

share. Both the Appellants voted against the Resolution Plan.

Company Appeal (AT) (Insolvency) No. 661 of 2021 2

4. Pursuant to approval of Resolution Plan, an IA No.1550 of 2019 was

filed by RP under Section 30 sub-section (6) of the Code before the

Adjudicating Authority for approval of the Resolution Plan. Both the

Appellants aggrieved by the treatment provided to them by the Resolution

Applicant in the Resolution Plan filed objections. The Adjudicating

Authority vide order dated 11.06.2021 decided the plan approval

Application as well as objections filed by the Appellants. The Adjudicating

Authority vide impugned order remitted the Resolution Plan to the CoC for

modification in terms of the payments as specified in the order. The

objections raised by the Appellants regarding the NIL liquidation value

ascribed to the Appellant with respect to project Universal Business Park

was rejected. Aggrieved by the order impugned, specifically directions

issued in paragraph 49 and 50, this appeal has been filed by the Appellants.

5. The Resolution Plan, which was submitted by the Resolution

Applicant was in two parts. The first part of the Resolution Plan dealt with

the three residential projects, i.e. Universal Aura, Universal Green and

Universal Business Park. Part-2 of the Plan dealt with other projects

including the Pavilion. The Promoters of the projects have obtained

financial facilities from the Appellant, creating a charge/ mortgage with

respect to projects Universal Business Park and the Pavilion. The

Resolution Plan dealt with secured creditors, unsecured creditors and other

stake holders with respect to the projects Universal Aura, Universal Green

and Universal Business Park. With regard to all other projects, including

Pavilion, the Plan permitted the secured creditors to realise their security.

Company Appeal (AT) (Insolvency) No. 661 of 2021 3 In the present Appeal, no issue has been raised with regard to security

interest of the Appellants in Pavilion, which security they have been

permitted to realise. The issues raised in the Appeal relates to only the

liquidation value of security interest of the Appellant in project Universal

Business Park. The Plan has earmarked an amount of Rs.3 crores to the

Appellants with regard to Universal Business Park and liquidation value

ascribed to the Appellant with respect to Universal Business Park is NIL.

6. Before we proceed further, we may notice paragraph 49 and 50 of the

impugned order, which paragraphs have been prayed to be set aside by the

Appellant. The Appellants have also prayed for a direction to the CoC to

consider the Valuation Report submitted by the Registered Valuers while

determining the valuation of assets of the Corporate Debtor and computing

the liquidation value payable to the Appellant Nos.1 and 2. Paragraph 49

and 50 of the impugned order is as follows:

"49. Now, in the light of position of law settled by the Hon'ble Supreme Court (Supra), we consider the contention of Mr. Sumant Batra, Advocate and we notice that the amount proposed to be paid in the Resolution Plan is approved by the CoC. Under Section 30(2)(b) of IBC read with Section 53 of IBC, 2016, it is the duty of the Resolution Professional to examine the Resolution Plan, whether the distribution to the Creditors is made in terms of the provisions of law and Regulations, thereafter the Resolution Professional shall place the same before the Committee of Creditors u/s 30(3) IBC 2016 for its approval. The COC after considering the feasibility and viability, the manner of distribution proposed, may approve the Plan by not less than 66% of voting share

Company Appeal (AT) (Insolvency) No. 661 of 2021 4 u/s 3(4) of the IBC 2016. It is the commercial wisdom of the CoC to determine what amounts are to be paid to different classes and sub classes of creditors in accordance with the provisions of the Code and the Regulations made thereunder. It is seen that while deciding the amounts in the instant case, the CoC has considered the liquidation value placed by the Resolution Professional as well as the Resolution Applicant as mentioned in aforementioned paragraphs. Since the units, that have already been sold, are no longer an asset of the Corporate Debtor and consequently cannot be liquidated, their liquidation value has been provided as NIL. The COC after considering the same, approved the amounts proposed to be paid to Kotak Mahindra Bank Limited, Kotak Mahindra Prime Limited and similarly, to DHFL. Hence, we find, no force in the contention raised by the Ld. Counsel for the Objectors that the amounts which are proposed to be paid to the DHFL, Kotak Mahindra Bank Limited and Kotak Mahindra Prime Limited are contrary to the provision of Section 30(2)(b) of the IBC read with Section 53(1) of the IBC, 2016.

50. However, we notice there is significant differences between the liquidation value submitted by the Two Valuers and valuation assessed by the Resolution Professional and Resolution Applicant, therefore, we think it proper, to leave the matter upon the COC to reexamine this issue and if the properties/ infrastructure in the projects of the corporate debtor is available for sale/ disposal, the COC may consider taking steps for suitable correction of the Liquidation value of all the projects and subsequently, ask the Resolution Applicant to account for the same in the Resolution Plan."

Company Appeal (AT) (Insolvency) No. 661 of 2021 5

7. The learned Counsel for the Appellants challenging the directions

issued in paragraph 49 and 50 of the impugned order, submitted that the

total average liquidation value for Corporate Debtor as assessed by the

Registered Valuers was INR 299.23 crores and the liquidation value

assessed by the Registered Valuers for Universal Business Park is

Rs.51,32,34,718/-. The Appellant having pari passu charge the liquidation

value of the security interest in the Universal Business Park, comes to INR

23.09 Crores and the RP and Resolution Applicant have wrongly treated

the liquidation value of the Appellants as NIL, which is not in accordance

with law. The valuation given by Registered Valuers as per the Insolvency

and Bankruptcy Board of India (Insolvency Resolution Process for

Corporate persons) Regulations, 2016 (hereinafter referred to as the "CIRP

Regulations") is a statutory valuation, which cannot be tinkered with by

the RP or the Resolution Applicant. Allocation of Rs.3 crores to the

Appellant in the Resolution Plan is not in accordance with the amount,

which the Appellants were entitled as per their liquidation value, which is

INR 23.09 crores. The Resolution Plan, thus, is not in accordance with

Section 30, sub-section (2) and ought not to have been approved. It is

further submitted that the liquidation value, which has been determined

by the two Registered valuers cannot be interfered with by the Resolution

Applicant or the CoC. The CoC under the Code, does not have power to re-

examine the liquidation value of the assets of the Corporate Debtor. The

role has been clearly assigned to the Registered Valuers. The Appellants

have raised the issue of liquidation value attributable to them in the 14th

Company Appeal (AT) (Insolvency) No. 661 of 2021 6 Meeting of CoC, which objection was disregarded. Respondent No.2 relied

upon a misplaced and incorrect premise that the entire area under the

Universal Business Park has been sold and no asset remains with the

Corporate Debtor. The Appellant Nos.1 and 2 collectively hold 46% charge

over the Universal Business Park project. In any event, 89,025 sq. ft. area

available with the Corporate Debtor has not been legally transferred as

execution of Builder Buyer Agreement does not amount to transfer/sale.

The decision of the RP and the CoC that Appellants have no liquidation

value, since there was no transferrable area available with the Corporate

Debtor in the Universal Business Park, is misconceived and untenable.

The Appellants having voted against the Plan, they are entitled to minimum

liquidation value in the allocation as per sub-section (2) of Section 30 of

the Code read with Section 53(1).

8. The learned Counsel for the RP refuting the submission of the

Appellants submits that Appellants are being provided INR 3 crores and

further being provided the project 'The Pavilion' having liquidation value of

INR 27.24 crores. The claim of security interest over Universal Business

Park is based on mortgage executed in September 2010 over land and

unsold super-built-up area. The fact of the matter is that in September

2010 at the time of creation of mortgage, the Promoters and Corporate

Debtor had already sold area in excess of the total super area available in

the project. By September 2010, the area of 1,65,115 sq. ft. had been sold

by Builders Buyer's Agreement ("BBA") and an area of 90,606 sq. ft. have

been sold by way of Conveyance Deed . No unsold inventory is available as

Company Appeal (AT) (Insolvency) No. 661 of 2021 7 a security claimed by the Appellant, hence, the liquidation value of the

Appellants have been treated as NIL. As per the definition of 'liquidation

value' contained in Regulation 2(k) of the CIRP Regulations, no estimated

realizable value of the assets of the corporate debtor could be determined

as on date, since no inventory was available for the same. Thus, liquidation

value has rightly been held to be NIL, which has been accepted by the

Adjudicating Authority in the impugned order. The entire super area of

Universal Business Park was conveyed by Conveyance Deed as well as BBA

in September 2010, rather area sold was in excess of total super area and

there was no super area available, which could be monetized in favour of

the Corporate Debtor. Thus, in the project Universal Business Park, no

liquidation value could have been ascribed to the Appellants, which have

been done so rightly.

9. The learned Counsel for Respondent No.2 also adopted the

submissions made by the learned Counsel for the RP and submits that the

Resolution Applicant has rightly ascribed NIL liquidation value to the

Appellants with regard to Universal Business Park. The entire area of the

Pavilion has been given to the Appellants under the Resolution Plan, since

the Appellants are only creditor with regard to Pavilion, from which it can

realise its dues. As per the Scheme of the Code, the mortgage rights of the

Financial Creditors does not have any relevance for the purpose of

Resolution Plan submitted for the revival of the projects of the Corporate

Debtor. The Appellants also have personnel Guarantee of the Promoters of

the Corporate Debtor. The units mentioned under the Mortgage, which

Company Appeal (AT) (Insolvency) No. 661 of 2021 8 was executed by the Promoters in favour of the Appellants had already been

soled through Conveyance Deed and BBA prior to execution of Mortgage

Deed, hence, the liquidation value has to be treated as NIL.

10. We have considered the submissions of learned Counsel for the

parties and have perused the records.

11. The main thrust of arguments of the Appellants relate to the

liquidation value to which Appellants are entitled in the resolution process.

The CIRP Regulations defines the 'liquidation value' under Regulation 2(k),

which is to the following effect:

"2(k) liquidation value" means the estimated realizable value of the assets of the corporate debtor, if the corporate debtor were to be liquidated on the insolvency commencement date."

12. Regulation 27, sub-regulation (1), requires appointment of two

Registered Valuers to determine the 'fair value' and the 'liquidation value'

of the Corporate Debtor. Regulation 27, sub-regulation (1) is as follows:

"27. Appointment of Professionals.-- (1) The resolution professional shall, within seven days of his appointment but not later than forty-seventh day from the insolvency commencement date, appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35."

13. The RP appointed two Registered Valuers, namely - Adroit Technical

Services Private Ltd. ("Adroit") and Sapient Services Private Limited

("Sapient"). The Valuation Report submitted by both the Registered

Company Appeal (AT) (Insolvency) No. 661 of 2021 9 Valuers have been brought on record in the reply filed on behalf of

Respondent No.1. We may notice certain portion of the Report by the Adroit

on the Project of Universal Business Park in Part G of the Report, where

following has been stated:

"G. Location 7 : Universal Business Park, Village Badshahpur, Tehsil & District Gugugram, Haryana Address of Property The subject property is a commercial project in the name of "Universal Business Park" addressed as Universal Business Park, Village Badshahpur, Tehsil & District Gurugram, Haryana, Total land area underneath the Commercial project is 2.1625 Acres.

Ownership As per copy of ownership documents, ownership 2.1625 Acres of land is in favor of M/s Blaze Promoters Private Limited. As per the license No.58 dated 19/03/08 & collaboration agreement dated 28 September 2008 between M/s Blaze Promoters Private limited (referred as owner of land) and M/s Universal Buildwell Private Limited (referred as developers). Companies have entered into an agreement under terms & conditions by which 80% of the total super built-up area of Universal Business Park is the ownership of the M/s Universal Buildwell Pvt. Ltd. and 20% of the total built-up area of Universal Business Park is under the ownership of M/s Blaze Promoters Private Limited.

No demarcation of the 80% of the share of super built-up area and sold/unsold area has been made on each floor therefore we cannot ascertain the exact location of the areas on each floor under the ownership of the company. For the purpose of valuation, we have relied upon the

Company Appeal (AT) (Insolvency) No. 661 of 2021 10 information provided by the team of Resolution Professional via mail dated 2nd April 2019, 12:24 pm. As per the information provided to us, out of the total super built-up area, 83706.03 sq. ft. of area has been sold to the respective companies/ individuals; where the company has sold 18,500 sq. ft on 13,014 sq ft of area on 7th Floor. We believe that there is an error in the sold area statements.

Hence for the purpose of valuation we have valued 89,025.97 sq ft of balance super built-up area left under the ownership of the company.

(For details refer Title Description) It is advised that a legal opinion is taken thereto establish any legal encumbrances on the property. Any legal encumbrance, to the title, to part or whole of the property revealed upon scrutiny, may have detrimental effect on the value ascertained, which may lead to revision of our report."

14. The Report indicates that the Valuers noticed that total super built-

up area of 83,706.03 sq. ft. has been sold and for the purposes of valuation

89,025.97 sq. ft. area was taken. Further, the total super built-up area in

sq. ft. from ground to 14th Floor has been noticed as 2,15,915 sq. ft. For

the purposes of valuation 89,025.97 sq. ft. was taken and after adopting

the Report, rate of INR 7850/- per sq. ft. was taken and the Valuer ascribed

the value of INR 55,90,83,092/-.

15. Similarly, when we look into the Report of Sapient with regard to

Universal Business Park, the Valuer has also taken the total built-up area

as 2,15,915 sq. ft. and has noticed that Conveyance Deed has been

Company Appeal (AT) (Insolvency) No. 661 of 2021 11 executed for the area equivalent to 83,706.03 sq. ft. The observations of

the Valuer is to the following effect:

"Observation:

1. There are total 13 floors in the tower.

2. The tower consist of 3 basement floors for parking.

3. Ground floor is well constructed.

4. Remaining all the floors were in the condition of about to complete.

5. Multiple banks are also present in the ground floor.

6. Staircase leading to 4th floor is well constructed.

7. There was no electricity facility.

8. During our inspection, it was found that 75% work has been done satisfactorily in respect of construction.

9. The total super built-up area is 2,15,915 sq. ft. out of which conveyance deed was found for the area equivalent to 83,706,03 sq. ft. Therefore, to arrive at the value of building, we have considered the remaining area for the purpose of valuation.

10. For the calculation of land, value is calculated proportionately after considering the conveyance deed.

11. We have given the combined value of Land and building as its work completion stage is more than 50% and some offices are also present there during our physical verification.

12. To arrive at the liquidation value, we have considered a distress factor of 30% on Fair Value."

16. The Sapient has thus fixed the valuation accordingly.

Company Appeal (AT) (Insolvency) No. 661 of 2021 12

17. Before we proceed further, we may notice the caveat, which was put

by both the Valuers regarding the valuation. The Adroit under the heading

'Introduction' in para-F 'Assumptions and limiting conditions' has made

following observations:

"• For the purpose of this valuation exercise, we have assumed that the subject property has a clear and marketable title and is free from any legal and physical encumbrances, disputes, claims and other statutory liabilities. Further we have assumed that the area of the subject property is as per the revised drawings and suggest for a legal opinion on its requisite approvals and clearances from appropriate local authorities and complies with local development control regulations. • Any matters related to legal title and ownership are outside the purview and scope of this valuation exercise. Further, no legal advice regarding the title and ownership of the subject property has been obtained while conducting this valuation exercise. The client/ bank is hereby advised to take an appropriate legal opinion on the matter while taking any decision based on this report."

18. Similarly, Sapient in paragraph 2.10 'Legal Title' has stated as

follows:

"2.10 Legal Title We have assumed that the ownership of the subject fixed belongs to the client and is free from all encumbrances. We cannot accept any responsibility for its legal validity."

Company Appeal (AT) (Insolvency) No. 661 of 2021 13

19. The Valuation Report of both the Valuers, thus, indicate that they

have valued the super area available in the project Universal Business Park

excluding the area which was covered by Conveyance Deed. The Valuers

proceeded on the assumption that areas, which have been conveyed no title

is left with the Corporate Debtor and rest of the area can be included in the

valuation. The RP in its reply in the Appeal as well as in the reply before

the Adjudicating Authority has brought the facts on the record, indicating

that apart from conveying of the super area, the Corporate Debtor has also

entered into Builder Buyer's Agreement with the allottees and the BBA with

the allottees with regard to super area in Universal Business Park was

1,65,115 sq. ft. In the reply filed by RP in the Appeal in paragraph 8,

detailed facts have been reported, which is to the following effect:

"8. As per the records of the Corporate Debtor, Builder Buyer's Agreements ("BBA") have been executed in respect of 165,115.53 sq. ft. in the said Project prior to September 2010 i.e., date of creation of mortgage in favour of Kotak Prime (i.e.

20.01.2011). In addition to this, an area of 90,606 sq. ft. has been conveyed by the Corporate Debtor by way of conveyance deeds. Therefore, the area covered under the Agreements to Sell taken together with Conveyance Deed exceeds the total saleable area and therefore, no realizable value can be attached to the Corporate Debtor from the Universal Business Park project. A table capturing details of the total available Super Built Up Area in Universal Business Park and area sold under conveyance Deeds and BBAs is annexed herewith as ANNEXURE R-1."

Company Appeal (AT) (Insolvency) No. 661 of 2021 14

20. In the rejoinder affidavit filed by the Appellants, paragraph 8 of the

reply has not been specifically answered and in paragraph 42 of rejoinder

affidavit, reply of paragraph 2 to 22 has been given in following words:

"42. That the contents of Para 2 to 22 are misplaced, misconceived and vehemently denied. The Appellant No.1 and Appellant No.2 relies on the submissions made in preliminary submissions and is not repeating herein for the sake of brevity."

21. In the rejoinder, however, the Appellants have given certain details

in paragraph 12 to 14, which are as follows:

"12. From a bare perusal of the working provided by the Respondent No.1, the following emerges:

Universal Buildwell Private Limited-

Universal Business Park Project Total Saleable Area assumed 2,15,915 Sq. Ft. by the Resolution Professional based on the mortgage deed provided by the Objector Blaze Promoters Private 43,183 Sq. Ft Limited share of 20% in the total area not to be included Balance Area 1,72,732 Sq. Ft. Total area averred to be sold 89,706 Sq. Ft. through conveyance deed Net remaining area 89,025 Sq. Ft.

13. The Respondent No.1 has although averred that the conveyance deed in favour of the allottees aggregated to 89,706 Sq. Ft., however, no documentary evidence has been presented by the Respondent No.1 with the CoC members to end the controversy, in absence of any documentary evidence, the liquidation value payable to the Appellant No.1

Company Appeal (AT) (Insolvency) No. 661 of 2021 15 and the Appellant No.2 cannot be treated as 'NIL' as claimed by the Respondent No.1 and Respondent No.2.

14. Further the Appellant No.1 and the Appellant No.2 holds 46% percent charge over the Universal Business Park Project, therefore, any alleged conveyance deed that has been issued by the Corporate Debtor shall not include the 46% percent of the charged assets belonging to the Appellant No.1 and the Appellant No.2. Furthermore, without in any manner admitting the averments made by the Respondent No.1 in respect of liquidation value of the Appellant No.1 and the Appellant No.2, if the working sheet provided by the Respondent No.1 is taken into consideration, in any event 89,025 Sq. Ft. area available with the Corporate Debtor has not been legally transferred as execution of Builder Agreement does not amount to transfer/sale under the provisions of the Transfer of Property Act, 1882 read with the provisions of the Registration Act, 1908. Therefore, averment of Respondent No.1 and Respondent No.2 that the security interest of the Appellant No.1 and the Appellant No.2 does not have any liquidation value on account of alleged sale of all area, is on the fact of it is misconceived and untenable."

22. From the materials brought on record, it is clear that area which is

covered by Conveyance Deed was 89,706 sq. ft., whereas total saleable area

of the Universal Business Park was 2,15,915 sq. ft. Pleadings of RP was

categorical that by BBA, area of 165,115.53 sq. ft. was allocated, which

facts have not been disputed by the Appellants. The Appellants case rather

is that execution of BBA does not amount to transfer/ sale under the

provisions of the Transfer of Property Act, which plea has been specifically

Company Appeal (AT) (Insolvency) No. 661 of 2021 16 taken in paragraph 14 as extracted above. There can be no doubt about

legal position that title is conveyed when Conveyance Deed is executed, but

certain rights accrue to homebuyers under the BBA, which rights have

been recognized by law Courts including the Hon'ble Supreme Court.

Promoter, who has entered into a BBA with allottee and allotted a particular

flat and received the payment has no right to transfer the same. Hence, the

said unit is not available for the Corporate Debtor to again transfer and

realise its value. From the pleadings on record, we thus, are of the view

that allocation area of 165,115.53 sq. ft. is a matter of record and has to

be accepted, since no other facts or material come on record.

23. We have noticed that in the Valuation Report, both the Valuers have

proceeded to value the super area, which was left after deducting the area

conveyed. The Valuers proceeded on the premise that the Corporate Debtor

has no ownership with respect to the area, which has been conveyed and

rest of the area can be valued for the purpose of valuation of the Corporate

Debtor. On the record, the RP has given details of name of allottees, which

were given BBA with the date of BBA. Annexure R-1 to the reply contains

the details of BBA of Ground Floor and other Floors with the name of

allottees and the date of BBA. All the BBA, which have been captured in

Annexure R-1 are prior to September 2010. The details of areas sold

through Conveyance Deed has also been given, which areas have already

taken note by the Valuers. The stand taken by the RP and Resolution

Applicant is that liquidation value of the Appellant has been treated as NIL,

since on the date, the valuation was done, there was no super area left,

Company Appeal (AT) (Insolvency) No. 661 of 2021 17 which could be monetized for the Corporate Debtor. The Corporate Debtor

has sold excess area both by Conveyance Deed and BBA. We are satisfied

that by the BBA, executed prior to September 2010, when the charge and

mortgage was created by Promoters in the project Universal Business Park,

all areas were sold. The Valuers, technically were right in taking a view

that those areas, which has been conveyed by Promoters, they do not have

ownership, however, the Valuers proceeded to take into consideration the

areas with regard to which no Conveyance Deed was executed to be the

assets of the Corporate Debtor.

24. When we look into reality, which is apparent from the materials on

record, it is clear that with regard to Universal Business Park, entire area

was sold by Conveyance Deed and by BBA to the allottees and the

Promoters have received the money through the Conveyance Deed and BBA

and after execution of the BBA, the allottees acquired the right to receive

possession of the units for which payments have been made.

25. In this context, we may notice the judgment of the Hon'ble Supreme

Court, where the Hon'ble Supreme Court had occasion to consider the

nature of right, which accrue through a BBA to allottee and the protection,

which homebuyers are required from the Courts of Law. We may refer to

the judgment of the Hon'ble Supreme Court in Bikram Chatterji v. Union

of India (2019) 19 SCC 161, where the Hon'ble Supreme Court had

occasion to consider housing and real estate allotment, Sale Deed, transfer

of flats by builders/ developers to homebuyers. The Hon'ble Supreme

Court was considering the real estate Project namely - Amrapali Group.

Company Appeal (AT) (Insolvency) No. 661 of 2021 18 Writ petitions under Article 32 were filed by homebuyers praying for

various reliefs from the Hon'ble Supreme Court. In the above context

Hon'ble Supreme Court while considering the BBA made following

observation in paragraph 133 and 134 of the judgment:

"133. The agreement initially executed in favour of homebuyers to purchase flats may not create any right in the property in praesenti, it will be only on the execution of the registered document that title is going to be perfected, but investment in project is only of homebuyers. In this case, as they have paid money invested in projects, it is for the courts to do complete justice between the parties and to protect the investment so made and interests of homebuyers and to ensure that they get the perfect title and the fruits of their hard earned money and lifetime savings invested in the projects.

134. On behalf of Bank of Baroda, learned Senior Counsel submitted that the agreement of promoter/ builder with homebuyers is unregistered as such, no right has been created in the immovable property in view of the provisions contained in Section 49 of the Registration Act. The submission ignores and overlooks the provisions of RERA which intends to prevent such frauds on homebuyers and ensure completion of projects and that of the agreement between promoters and buyers. There are various rights under the agreement as well as under RERA. The agreement entered into at the time of allotment is the basis of the investment in the projects made by homebuyers, it cannot be said to be a scrap of paper. It is their valuable investment which is required to be protected and cannot be permitted to be

Company Appeal (AT) (Insolvency) No. 661 of 2021 19 taken away by builder or secured creditors in an illegal manner. The provisions of Section 17 of the Registration Act no doubt provide that a document of title requires compulsory registration, no doubt registered document has to be executed that also has to be taken care of by the Court so as to protect the interest of homebuyers."

26. In the above case before the Hon'ble Supreme Court, the Banks, who

had security interest contended that they have agreements with the

Promoters. In reference to the claim of the Banks regarding mortgage,

Hon'ble Supreme Court had observed that in the facts and circumstances

of the case, rights or interest of the allottees are not affected by the

mortgage created by the Bankers. In paragraph 136 of the judgment,

following has been held:

"136. The learned Senior Counsel on behalf of Bank of Baroda submitted that the provisions of Section 11(4)(h) of RERA provides that the promoter, after he executes an agreement for sale for any apartment, plot or building, cannot mortgage or create a charge on such an apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be. The provision has a non obstante clause. As the provision has given an overriding effect by non obstante clause, the provision is of no help to the banks as the agreement had been by promoters with homebuyers entered into earlier in point of time to the creation of the mortgage. There could not have been any mortgage created subsequently and even if validly

Company Appeal (AT) (Insolvency) No. 661 of 2021 20 created, it would not affect the right and interest of the allottee as intended by RERA. Thus, the right and interest of the allottee are safeguarded by virtue of the provisions contained in Section 11(4)(h). As the project was pending, the provision intends to confer a right on the allottee and save the allottees and also their interests from such liability. Even if the provision is held not applicable on the ground that RERA came into force later, since there was no valid mortgage as held by us, it was incapable of affecting the right or interest of the allottee. Had it been ensured that the money due to Noida and Greater Noida Authorities was paid by the promoters to the authorities, the fraud of siphoning of money would not have taken place to the extent it has been done. Moreover, the money borrowed from banks has not been invested in the projects. In fact, projects required no funding. It would be iniquitous to charge the allottees with the bankers' money. Thus, in the peculiar facts and circumstances of the case, we hold that rights or interests of the allottees are not at all affected by the mortgage created by the bankers or by the dues of the Noida or Greater Noida Authorities."

27. When we revert to the facts of the present case, it is clear that the

entire super area of Universal Business Pak was conveyed by Sale Deeds

and by BBA, rather, the facts indicate that total area conveyed/ allotted

was more than total area of Ground Floor and all the Floors. When area

has been allotted to homebuyers, who have also paid the amount as per

the agreement, homebuyers get an interest to receive the possession of the

unit.

Company Appeal (AT) (Insolvency) No. 661 of 2021 21

28. The Adjudicating Authority after considering the facts in the

impugned order has considered all aspects of the matter and has noted the

facts and circumstances, which were brought by the parties on record. The

Adjudicating Authority has also noticed and extracted the summary of the

Resolution Plan in its order. In paragraph 41 of the impugned order,

following has been observed:

"41. So far as the Kotak Mahindra Bank Limited and Kotak Mahindra Prime Limited are concerned, they are proposed to be paid Rs.3 crores on the ground that the entire area under the Universal Business Park project has been sold and there are no assets belonging to the Corporate Debtor left under this project. Accordingly, the liquidation value of the assets belonging to the Corporate Debtor under this project is shown as Nil in the Part-I of the Resolution Plan. It is also mentioned that they have mortgage right over the land, on which the project namely, "the Pavillion" is situated in Sector 70A, Mauza Palra, Tehsil & Distt. Gurugram, Haryana. As shown in the Part-II of the Resolution Plan, the project is yet to be started and they will get realization of the amount in the manner as stated in Part-II of the Plan."

29. We have also noticed the caveats given by the Valuers in their Report.

The valuation of the different projects including project Universal Business

Park was with the caveats as noted above. The Valuers did not enter into

issue of encumbrance over the assets. The finding has been recorded by

the Adjudicating Authority in paragraph 49 that since the units have

already been sold, are no longer the asset of the Corporate Debtor, hence,

Company Appeal (AT) (Insolvency) No. 661 of 2021 22 the liquidation value of the Universal Business Park project is NIL. The

Adjudicating Authority has rightly come to the above conclusion after

considering the facts and circumstances of the present case. We fully

concur with the observations made by the Adjudicating Authority in

paragraph 49.

30. Now, we come to the submission of the learned Counsel for the

Appellants that the Adjudicating Authority committed error in directing the

CoC to re-examine the issue of significant differences between the

liquidation value submitted by the two Valuers . As per statutory scheme

under the CIRP Regulations and the IBC Code, the liquidation value arrived

by the valuers serves an important factor in the entire resolution process.

The liquidation value fixed by the Valuers cannot be ignored in the

resolution process. It is true that CoC on any valid reason can take a call

to ask for any fresh valuation due to any relevant circumstances, but the

valuation done by the Registered Valuers and average of liquidation value

taken up by the Valuers serves the specific purpose and cannot be allowed

to be disregarded by the CoC. In event, it is accepted that the CoC can

change the liquidation value on its own, that may lead to unsatisfactory

results. We, thus, are of the view that liquidation value found by the

Registered Valuers cannot be allowed to be changed by the CoC. We, thus,

are satisfied that direction by Adjudicating Authority to CoC to re-examine

the issue of significant differences between liquidation value submitted by

two Valuers was uncalled for. We may however, hasten to add that in the

present case, liquidation value, which was to be ascribed to the Appellant

Company Appeal (AT) (Insolvency) No. 661 of 2021 23 was an issue, which cannot be said to have determined by the Valuers in

their Valuation Report. Valuers in their Valuation Report has added a

caveat, which we have already noticed, which clearly left the issue to be

determined while allocating the amounts to be paid to the dissenting

Financial Creditors. Thus, in the facts of present case, we having

concurred with the finding of the Adjudicating Authority that liquidation

value of the Appellant was NIL, we see no reason to maintain the direction

issued in paragraph 50.

31. In view of the foregoing discussions, we are of the view that

observations and directions in paragraph 49 needs to be affirmed, whereas

directions issued in paragraph 50, deserves to be deleted. We are further

of the view that relief (b) and other reliefs claimed in the Appeal by the

Appellants cannot be granted.

32. In result of the foregoing discussions, we dismiss the Appeal subject

to deletion of paragraph 50 of the impugned order dated 11.06.2021.

Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

11th April, 2023

Ashwani

Company Appeal (AT) (Insolvency) No. 661 of 2021 24