Lotus City Plot Buyers Welfare ... vs Three C Homes Pvt. Ltd. & Ors

IN THE MATTER OF: Lotus City Plot Buyers Welfare Association ...Appellant

Vs.

Three C Homes Pvt. Ltd & Ors. ...Respondents

Present: For Appellant: Mr. Piyush Singh, Ms. Aditi Sinha Advocate

For Respondent: Mr. Sumesh Dhawan, Ms. Vatsala Kak, Mr. Rishabh Jain, Ms. Ankita Bajpai, Advocates for R-1 Mr. Gaurav Katiyar (R1 RP) Mr. Abir Roy, Mr. Ishaan Chakrabarti, Advocates for R2 Mr. Arun Kathpalia, Sr. Advocate with Mr. Vivek Pandey, Ms. Disha Gupta, Mr. Kauser Husain, Mr. Aditya Dhupar, Advocates for R2. Mr. Shobhit Srivastava, Mr. Sahil Sethi (Caveator, R3-23) Mr. Abhay Gupta, Advocate R-15 Mr. Satish Rai, Advocate for R22 Mr. Vijay Saxena, Advocate for R-24

With Company Appeal (AT) (Insolvency) No. 193-194 of 2021 IN THE MATTER OF: Gaurav Katiyar ...Appellant Vs. Sandeep Goyal&Ors. ...Respondents Present: For Appellant: Mr. Sumesh Dhawan, Ms. VatasalaKak, Mr. Rishabh Jain Advocates.

Ms. Ankita Bajpai, Advocate Mr. Gaurav Katiyar (in person)

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

1 For Respondent: Mr. Kunal Godhwani, Mr. Abhishek Anand, Mr. Veren Sharma, Advocate for R1-8 and 10- 21 Mr. Sandeep Goel, R1 in person Mr. Arun Kathpalia, Sr. Advocate with Mr. Abir Roy, Mr. Ishaan Chakrabarti, Mr. Vivek Pandey, Ms. Diksha Gupta, Mr. Kauser Husain, Mr. Aditya Dhupar, Advocates, R23 Mr. Rahul Adlakha, Advocates for R-1 to R-8 and R-10 -21) With Company Appeal (AT) (Insolvency) No. 205 of 2021 In the matter of: Ace Infracity Developers Pvt. Ltd. ...Appellant Vs. Three C Homes Pvt. Ltd. & Ors. ...Respondents Present For Appellant : Mr. Abir Roy, Mr. Ishaan Chakrabarti, Mr. Vivek Pandey Advocates. Mr. Arun Katpalia, Sr. Advocate with Ms. Diksha Gupta, Mr. Kauser Husain, Mr. Aditya Dhupar, Advocates For Respondent: Mr. Sumesh Dhawan, Mr. Rishabh Jain, Ms. Vatsala kak, Adocates for R1 Mr. Gaurav Katiyar (R1) Mr. Vijay Kishore Saxena, Advocate forR2 Mr. Abhishek Anand, Advocate for R3-10, and R12 -23 Ms.Ankita Bajpai, Advocate Mr. Kunal Godhwani, Mr. Rahul Adlakha, Mr. Viren Sharma, Advocates for (R3-10 and R12-R23) Mr. Sandeep Geol, Advocate for R23.

JUDGMENT

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

2

1. These appeals are filed under Section 61 of the 'Insolvency and

Bankruptcy Code, 2016' (in short 'Code') against the impugned order

dated 08.02.2021 passed by the 'Adjudicating Authority' (National

Company Law Tribunal, Division Bench New Delhi Bench -III), in

C.A.No. 3840 of 2020 and I.A No.3385 (ND) of 2020 in company

petition I.B No. 432/ND/2019.

2. Since all these appeals have been filed against the common order

dated 08.02.2021 passed by the 'Adjudicating Authority' and

accordingly, all the appeals have been clubbed for disposal. It is also

observed that the three appeals as enumerated above is seeking the

common reliefs of setting aside the impugned order dated 08.02.202

passed by the 'Adjudicating Authority' and connected consequential

reliefs.

3. The 'Adjudicating Authority' has rejected the 'Resolution Plan' and

has directed the 'Resolution Professional' (RP) to file appropriate

application for seeking liquidation order of the Corporate Debtor

namely- M/s. Three C Homes Pvt. Ltd. The Adjudicating Authority

logic for rejection of 'Resolution Plan' is based on the following

factors apart from other reasons explained in the impugned order:

i. 'Liquidation value 'of Corporate Debtor is Rs.480.70 Crore

while Resolution Plan involves infusion of only Rs.95 crore by

the Resolution Applicant and that too over a period of two

years.

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

3 ii. 'Resolution Plan' provided by Resolution Applicant assumes

that the farmers will forgo their claim of Rs.71.66 Crores in

exchange of the Resolution Applicant promised to spend a

sum of Rs. 15 Crore towards the development of village

Salarpur is an amateurish.

iii. 'Resolution Plan' approved by the 'Committee of Creditors'

(CoC) is not in compliance of the provisions of the Code and

the 'CIRP Regulations 4th Amendment 2020' which came into

force on 07.08.2020.

4. The Adjudicating Authority has also seen the implication of Hon'ble

Supreme Court Judgment rendered in the case of Maharashtra

Seamless limited. Vs. Padambhan Venkatesh as stated below:

"i. the Creditors in Maharashtra Seamless Ltd's case supra was

normal Financial Creditor i.e. Indian Bank and no Home Buyers

were involved whereas the Financial Creditors is present

petition are home Buyers, a category in class.

ii. in the said case, basic issue arose before Hon'ble Supreme

Court stemmed out of the fact that in the said matter, the

Successful Resolution Applicant was asked to pay an

additional amount of Rs.120.54 Crores over and above upfront

payment of Rs.477 Crores to financial creditors therein as

against Liquidation Value of Rs.597.54 crores. In other words,

the upfront amount in comparison to Liquidation Value and

shorter by around 20 per cent only."

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

4

5. The Adjudicating Authority based on above analysis has come to the

conclusion that 'Resolution Plan' does not have any potential to fulfil

the dreams of homebuyers which is at just 19.77 % of the liquidation

value of Corporate Debtor.

6. The Appellant has submitted that the Adjudicating Authority has not

considered the impact of following calculations while considering

Rs.95 Crores being released by 'Resolution Applicant':

i. Did not include Rs.211 Crores i.e. the quantum of debt due to

allottees as after giving the possession of plots to allottees, the

debt due to allottees would stand satisfied;

ii. Did not include the quantum of Rs.50.70 Crore which shall be

paid by Resolution Applicant to Ex-management. Since, the

settlement was done after filing of approved resolution plan.

Hence, the aforesaid table also did not include the payment of

debt due to ex-management;

iii. Did not include discounts of Rs.8.18 Crores, as it will reduce

the inflow of Rs.95 Crores;

iv. Did not include quantum of Rs.1.75 Crores as amount shall

be payable to five allottees whose plots are not on maps and

layout;

v. Did not include quantum of Rs.38.75 Crores waived off in

satisfaction of interest due to the allottees (i.e. interest on

delay payment);

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

5 vi. Did not include quantum of Rs.5.47 lakhs i.e. payment

proposed to the operational creditors.

7. The Appellant has also submitted that the notification purportedly

dated 07.08.2020 came into existence only on 08.08.2020 at 10:42

PM whereas CoC meeting e-voting commenced on 08.08.2020 at

3:00PM. As far as the issue of farmers are concerned, these are not

contractual obligations.

8. The Appellant has also stated that the Resolution Plan had been

approved with 62.9% voting share which would be considered as

100% as per Section 25A (3A) of the Code in favour of the

'Resolution Plan'. They have also raised the issue that the decision

of the CoC in respect of commercial issues cannot be challenged by

the Adjudicating Authority.

9. While hearing the appeal on 11.06.2021 certain Respondents

have withdrawn their objections raised in these appeals as per

the instructions of their clients and the same is stated

hereunder: "11.06.2021- Learned Counsel appearing in

CA(AT)(Ins.) No. 151 of 2021and CA(AT)(Ins.) No. 205 of 2021

for Respondent Nos. 3 to 10, 12,13,15 to 23 and in

CA(AT)(Ins.) No. 193-194 of 2021for Respondent Nos. 1-8, 10,

11, 13 to 21 submit that as per the instructions of their client

they have withdrawn the objections raised in these Appeals ."

10. While limited Respondents in these three appeals have stated that

there are no infirmity in the impugned order passed by the

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

6 Adjudicating Authority. It was also stated that the RP has not

submitted the 'compliance certificate' as required under the Code.

The RP in the 3rd CoC meeting has requested for the formation of

sub-committee to appraise and validate the Resolution Plan which

is contrary to the provisions of the Code. Section 25(2)(i) mandates

that the RP shall represent all the plans at the meeting of the CoC.

They have also stated certain infirmity in not providing priority to

'Operational Creditor' over 'Financial Creditor' as required under the

Regulations 38 of IBBI (Insolvency Resolution Process for Corporate

Person) Regulation 2016. It was also stated by them that the Form-

H submitted by the RP is not incompliance of the provisions of the

Code and related Regulations. They have also alleged that the

Resolution Applicant is acquiring the Corporate Debtor is less than

1/5th of the Liquidation value of the Corporate Debtor.

11. We have carefully gone through the submissions made by the

Appellants and concerned Respondents. There is a difference of CoC

where they are 'Banks' and 'Institutional lenders 'as members, while

the CoC in the Homebuyers are not so expert in finance and related

valuations. Hence, CoC in case of the commercial organisations will

have a different perspective and expertise while in case of Real Estate

projects where the CoC are totally comprising of homebuyers may

not have the same expertise and perspective. Although, in case of

Homebuyers provisions exists for Authorised Representatives but

even he cannot be equated with the expertise with the banking

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

7 professional will have. We are not passing any comments on specific

Authorised Representatives.

12. While the Resolution Plan will generally provide a higher value than

the liquidation value but in case of Real Estate Project may not be

always feasible and homebuyers are in dire need of getting their

homes at the earliest. However, in this case certain reconciliation are

required that what is the actual realisable value which the

homebuyers are getting whether it is below liquidation value or

above liquidation value.

13. There is also a need to look at the CIRP Regulations (4 th Amendment)

2020 notified on 07.08.2020 and 5th CoC meeting circulated on

04.08.2020 and held on 08.08.2020.

14. There is a need for impleading Yamuna Expressway Industrial

Development Authority (YEIDA) to ascertain status of dispute with

farmers and its consequential impact, if any, on this projects.

15. Liquidation is the last resort and this programme of homebuyers

needs some calibration and proper evaluation.

16. In view of the aforesaid observations, we are remanding back the

matter to the Adjudicating Authority and setting aside their

liquidation order with a direction to review the programme in full

alongwith the relevant provisions of the code and Regulations and

then the Adjudicating Authority is free to pass appropriate order as

they think fit and proper in accordance with law. Pending IAs, if any,

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

8 stands disposed of. Any interim order(s) passed by this Appellant

Tribunal stands vacated. No orders as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

(Dr. Ashok Kumar Mishra) Member(Technical)

8th July, 2021 New Delhi

Raushan. K

Company Appeal (AT) (Ins) No. 151of 2021 Company Appeal (AT) (Ins) No. 193-194 of 2021 Company Appeal (AT) (Ins) No. 205 of 2021

9