M/S Esaar (India) Ltd vs Prabhat Technologies (India) Limited & ...

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT)(INS) NO.183 OF 2024 & IA No.2699 of 2024 (Arising out of judgement and order dated 09.01.2024 passed by National Company Law Tribunal, Mumbai in IA No.68/2021 in CP(IB)1874/MB/2019). In the matter of: M/s Essar (India) Ltd, Through: Ms Palak Jain 101, 1st Floor, Western Edge I Off. Western Express Highway, Borivali (East) Mumbai 400066 Appellant

Vs

1. Prabhat Technologies (India) Ltd, Unit No.402, Western Edge I, Kanakia Spaces, Western Espress Highway, Borivali (East) Mumbai 400066 Th: Liquidator

2. State Bank of India, Tulsani Chambers Free Press Journal Marg, Mumbai 400021

3. Mr Rajendra Karanmal Bhuta, Erstwhile IRP Of Prabhat Technologies (India) Ltd 1207, Yogi Paradise, Yogi Nagar, Borivali (West) Mumbai 400092 Respondent

For Appellant: Mr Nakul Dewan, Sr Advocate with Mr. Abhinav Agrawal, Mr Piyush Bhardwaj, Advocates.

For Respondent: Mr. Ayush J Rajani, Ms Khushboo Shah Rajani, Advocates for R1. Mr Abhijeet Sinha, Sr Advocate with Ms Shivani Sinha, Ms Meera Mvrali, Advocates for R2. 2

Ms Parul Shukla, Mr Saday Mondol, Advocates for R3/RP. Mr Rajender K Bhuta, IRP With COMPANY APPEAL (AT)(INS) NO.446 OF 2024 & IA No.1539 of 2024

In the matter of:

1. Mr. Vishwamani Tiwari Residing at 603, 6th floor, C-wing, Mangalam Apartment Co-op Hsg, Soc Ltd, Thakur Complex, S No. 753, Village Poisar, Kandivali (East), Mumbai- 400101.

2. Mrs. Prabha Vishwamani Tiwari Residing at 603, 6th floor, C-wing, Mangalam Apartment Co-op Hsg, Soc Ltd, Thakur Complex. S No. 753, Village Poisar, Kandivali (East), Mumbai- 400101.

3. Mr. Parag Made Residing at B-601/602, Akshardham Complex, Goraswadi Corner, SV Road, Near Milape Cinema, Malad West Mumbai-400064. Appellants

VERSUS

1. Prabhat Technologies (India) Limited Unit No. 402, Western Edge I, Kanakia Spaces, 3

Western Express Highway, Borivali (East), Mumbai- 400066 (through its Liquidator Mr. Shailash Desai)

2. State Bank of India Through Manager, Tulsani Chambers Free Press Journal Marg Mumbai- 400021

3. Mr. Rajendra Karanmal Bhuta. Erstwhile Interim Resolution Professional of Prabhat Technologies (India) Limited 1207, Yogi Paradise, Yogi Nagar, Borivali (West), Mumbai 400092 ... Respondents For Appellant: Mr P.B. Suresh, Sr Advocate with Ms Shubhangi Pandey, Advocate. For Respondent: Mr. Ayush J Rajani, Ms Khushboo Shah Rajani, Advocates for R1. Mr Abhijeet Sinha, Sr Advocate with Ms Shivani Sinha, Ms Meera Mvrali, Advocates for R2. Ms Parul Shukla, Mr Saday Mondol, Advocates for R3/RP. Mr Rajender K Bhuta, IRP

JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

This is an appeal against an impugned order dated 09.01.2024 passed

by Ld.National Company Law Tribunal, Mumbai in IA No.68/2021 in

CP(IB)1874/MB/2019).

2. It is the submission of the learned counsel for the appellant the

Committee of Creditors had approved the subject resolution plan dated

23.10.2020 in the 9th CoC Meeting with an overwhelming majority of 98.15%. 4

on 07.11.2020. However, vide the Impugned Order dated 09.01.2024 passed

by the Ld.National Company Law Tribunal, Mumbai Bench-I ('NCLT'), the

resolution plan submitted by the Appellants was rejected on sole basis of the

Respondent No. 2/State Bank of India claiming to have unilaterally

withdrawn its consent to the plan. It is argued the Ld. NCLT, without there

being an application under Section 33 (2) of the IB Code had directed the

Corporate Debtor to be liquidated. Further the Ld. NCLT did not render any

finding or observation on the purported allegations of fraud made by

Respondent No. 2 against the Appellants in their objection application.

Importantly the Ld. NCLT did not even issue notice to the Appellants giving

them an opportunity to explain the frivolous one-sided allegations made by

Respondent No. 2, to justify its unilateral withdrawal of consent made upon

allegations of fraud and on an application by the Respondent No. 3 (the

Insolvency Resolution Professional) filed under section 30(6) of the Insolvency

and Bankruptcy Code, 2016 ('Code') seeking approval of Resolution Plan had

rather directed 'Liquidation' of the Corporate Debtor.

3. The solitary basis of allegation of the purported fraud made by the

Respondent No. 2/SBI is the Appellants did not have a clear title to one of the

properties, i.e., Flat No. 2402, Siddesh Apartment, Khattar Gully, CTS No. 2267

to 2270, Girgaon, Mumbai-400 004 ('Girgaon Property'), which was given as a

source of fund for the resolution plan.

4. In terms of the subject resolution plan, the resolution value was Rs.

77,98,24,619/-. For demonstrating their capacity to raise the funds for the

resolution plan, the Appellants had provided certain Source of Funds. Under 5

the Source of Funds, the Appellants had provided five immovable properties

owned by the Appellants as a source for Rs. 20 crores. Out of these 5

properties, the Girgaon property, owned by Appellant No. 3/Parag Malde, was

only one property, having a distress valuation of only Rs. 90 lacs, viz. 1.5%

of the resolution value.

5. Admittedly, Appellant No. 3/Parag Malde had purchased the Girgaon

property by way of a Registered Sale Deed dated 10.07.2014 (registered on

15.07.2014) from one, Shyamsundar Vyas and Madhu Shyamsundar Vyas

('vendors'), for a sale consideration of Rs. 69,40,000/-. Now since between

2019 to 2023, when Mr. Malde was suffering from life-threatening ailments of

cancer, his vendor(s) fraudulently executed an Agreement to Sell dated

21.10.2020 of the same flat which they had already sold to appellant No.3.

After being notified of such illegality, the appellant No.3 Mr. Malde had

instituted a suit, viz. Suit No. 139/2024 against his erstwhile owners of the

flat and such suit is pending adjudication before the City Civil Court, Mumbai.

Furthermore, appellant No.3 had instituted criminal complaint against his

vendors for this fraudulent act.

6. It is to be noted on 25.07.2014 the Appellant vide a Mortgage Deed

dated 25.07.2014 had mortgaged the subject Girgaon property with a

consortium of banks comprising of Respondent No. 2/State Bank of India,

Union Bank of India and Bank of India, for a loan facility. The loan facility

was extended by the consortium after due diligence and after thorough title

verification of the subject property. Admittedly, since 2014, the subject

Girgaon property has remained mortgaged with such consortium of banks 6

and regular title searches were being carried out by them. Even at the time

of the approval of the subject Resolution Plan, the subject Girgaon property

remained to be mortgaged with Respondent No. 2 Bank.

7. The CoC had approved the Appellants' Resolution Plan with an

overwhelming majority of 98.15% voting which ended on 07.11.2020..

Accordingly, the CoC directed Respondent No. 3 (RP) to file an application

under Section 30(6) of the IB Code for approval of such plan before the Ld.

NCLT. On 07.11.2020 the Respondent No. 3/RP filed an application, viz. IA

No. 68/2021 before the Ld. NCLT, Mumbai under Section 30(6) of the IB Code

for approval of the Appellants' plan.

8. On 18.10.2023, 13th CoC Meeting dated 18.10.2023 was conveyed by

the Respondent No. 3/RP at the instance of the Respondent No. 2/SBI to

discuss the issue relating to the Girgaon property. In this meeting the

Appellants had clarified they were not aware about the title dispute of Girgaon

property and were taken by surprise themselves. Furthermore, to provide a

compromise and resolve the situation the Appellants even offered to replace

the Girgaon property as a source of fund and in the alternative offered a fixed

deposit of Rs. 1,00,00,000/- to secure the value of the property, which was in

fact valued at Rs. 90 lacs.

9. On 25.10.2023 upon finding out about the fraud, the Appellants had

immediately filed a criminal complaint against the vendors, i.e., Mr Shyam

Sundar Vyas and alleged proposed Vendee, i.e., Gajraj Rathod. Further as

above on 12.12.2023, appellant No. 3 also filed a suit, viz. Suit No. 139/2024

against his vendors challenging the alleged fraudulent sale deed dated 7

21.10.2020. Respondent No. 2/SBI is also a party to this suit and is fully

aware of the bonafides of the Appellants.

10. On 18.12.2023 despite the assurances provided by the Appellants to

demonstrate their bonafide, the Respondent No. 2/SBI, for reasons best

known to them, filed the subject objection application, proposing to

unilaterally withdraw its consent to the Resolution Plan and sought directions

to Respondent No. 3/RP to take appropriate steps for liquidation of the

Corporate Debtor. Respondent No. 2/SBI appeared before Ld. NCLT on

23.11.2023 and made a statement that Union Bank of India and Bank of India

is also supporting its withdrawal of consent. On 19.12.2023, the above

statement was again repeated.

11. Accordingly, the Ld. NCLT vide Order dated 19.12.2023 had directed a

"formal application" to be filed to bring on record the withdrawal of consent

by all the three banks, i.e., Respondent No. 2/SBI, Union Bank of India and

Bank of India. However, no such application was filed by Union Bank of India

and Bank of India. Furthermore, no notice was issued to the Appellants (who

were never parties before the Ld. NCLT) to explain one-sided allegations of

fraud made by the Respondent No. 2/SBI. On 9.01.2024 merely on a

statement made by Respondent No. 2/SBI, the Ld. NCLT had passed the

Impugned Order dated 9.01.2024, not only rejecting the Appellants'

resolution plan, but also directed liquidation of the Corporate Debtor.

12. Heard.

13. Apparently, the decision of Respondent No. 2 defies commercial wisdom

and probably for this reason no other financial creditor had supported its 8

position qua the withdrawal of consent. Admittedly the resolution plan offered

a resolution value of Rs. 77.98 Cr whereas the Liquidation Value of the

Corporate Debtor was Rs. 23.45 Cr as per the valuation report. Further the

subject Girgaon property is valued at only Rs. 90 lacs, which was only 1.5%

of the resolution value and the appellants had already offered to replace the

said property and to file a fixed deposit receipt of Rs. 1 crore to justify its

capacity to honour the resolution value. Therefore, it makes commercial

sense to proceed with the resolution plan, rather than to liquidate the

Corporate Debtor.

14. Moreso there appeared to be no justification for rejection of the

Resolution Plan by the Ld. NCLT as the solitary basis of objecting to the plan

by the Respondent No. 2/SBI was an alleged title dispute with respect to one

of the five properties given by the Appellants as a source of fund. The facts,

prima facie, does not suggest any intention to defraud the respondents as

admittedly the Appellant had a registered sale deed to substantiate his title

over the subject property. Can there be an allegation of malafide intent,

especially when the subject property has been mortgaged with Respondent

No. 2/SBI since 2014 itself and regular title search was taking place. Even

the SBI was not aware of the alleged title dispute which has been fraudulently

created by the erstwhile vendor(s) of the flat apparently purchased legally by

Appellant No. 3.

15. We find the Impugned Order is a non-speaking order and even against

principles of natural justice, as the aggrieved party, viz the Resolution

Applicants, whose plan was rejected on account of an alleged fraud, was never 9

given an opportunity to explain its position. Further the impugned order does

not give any reason for rejecting the Appellants' resolution plan, once duly

approved by the Committee of Creditors with an overwhelming majority of

98.15%.

16. The Ld. NCLT rather had merely accepted a statement of Respondent

No. 2/SBI to permit withdrawal of consent. It ignored its earlier Order dated

19.12.2023, whereby it had directed Respondent No. 2 to file a "formal

application" to bring on record the fact the Bank of India and Union Bank of

India, had also withdrawn their consent.

17. The impugned order shows the ld. NCLT did not adjudicate upon

allegations of fraud made by the Respondent No. 2/SBI against the Appellants

and gave no notice to the appellants and further no reasons are given by the

ld. NCLT to send the Corporate Debtor to liquidation. Further certain issues

viz. (a) Whether liquidation could have been ordered by Ld. Adjudicating

Authority at the instance of Financial Creditor, without any formal application

by the Resolution Professional and/or without an approval by the Committee

of Creditors; and (b) Whether the Financial Creditor can withdraw its consent

given to Resolution Plan, pending its approval by the Ld. Adjudicating

Authority; The Law discussed in EBIX Singapore Pvt Ltd Vs. Committee of

Creditors of Educomp Solutions and others 2022(2) SCC 401; Express

Resorts and Hotels Ltd Vs Amit Jain and others 2023 SCC Online NCLAT 97;

Deccan Value Investors LP and Another Vs Dinkar Venkatasubranian and

Another 2024 SCC OnLine SC 4075 was never discussed or adjudicated upon

by Ld. Adjudicating Authority.

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18. Considering above, we set aside the impugned order and remand the

matter to the Ld. Adjudicating Authority to look into the issues above and to

decide the matter afresh through a reasoned order. The Ld. NCLT to take an

independent view, uninfluenced by our comments.The petition be decided

expeditiously, preferably within 8 weeks of the appearances before the Ld.

NCLT. Both the appeals i.e. Company Appeal (AT)(Ins) No.183 of 2024 and

Company Appeal (AT)(Ins) No.446 of 2024 are disposed of accordingly. All

pending applications, if any, are disposed of. No order as to cost.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Ajai Das Mehrotra) Member (Technical) Dated :06-5-2025 BM