Mr. Ankur Narang & Ors vs Mr. Nilesh Sharma. Resolution ...

[Arising out of order dated 01.08.2023 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi (Court-III) in I.A. No. 4171/2021 in CP (IB) No.2130/ND/2019]

IN THE MATTER OF:

Mr. Ankur Narang & Ors. ...Appellants

Versus

Mr. Nilesh Sharma Resolution Professional of Today Homes and Infrastructure Pvt. Ltd. & Ors. ...Respondents

Present:

For Appellants: Mr. Pawan Shree Agrawal and Ms. Shubhangi Negi, Advocates.

For Respondents: Mr. Kanishk Khetan, Advocate for R-1.

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code, 2016 ("IBC" in short) by the Appellants arises out of the Order dated

01.08.2023 (hereinafter referred to as "Impugned Order") passed by the

Adjudicating Authority (National Company Law Tribunal, New Delhi Court-III)

in IA No. 4171/2021 in CP (IB) No.2130(ND)2019.

2. For better appreciation of the matter at hand, we begin by setting out

the factual matrix as brought out before us. The present Appellants constitute

Company Appeal (AT) (Ins.) No. 1240 of 2023 1 a clutch of 25 applicants, each being allottees of residential flats in a project,

namely, Canary Greens, Gurugram (hereinafter referred to as "Project"). The

said project was being developed by Today Homes and Infrastructure Pvt. Ltd.

- Corporate Debtor. Since the possession of the flats was not offered by the

Corporate Debtor within the prescribed time, the Appellants raised complaint

before the National Consumer Disputes Redressal Commission ("NCDRC" in

short) following which the NCDRC ordered on 31.01.2017 that the Corporate

Debtor shall refund the entire amount received from each of the complainants

including Service Tax and VAT along with compensation in the form of simple

interest @ 10% p.a. besides Rs.10,000/- as the litigation cost, which

payments were to be made within three months from the date of the order.

With these orders, NCDRC had disposed of all the complaints. The Appellants

filed the execution petition in pursuance of the NCDRC order and received

compensation until 31.10.2019 on which date the Corporate Debtor was

admitted into Corporate Insolvency Resolution Process ("CIRP" in short). The

principal amount however was not received by them from the Corporate

Debtor.

3. Since the Corporate Debtor had been admitted into CIRP, the applicants

filed their claim. The Resolution Professional ("RP" in short) had raised

certain concerns regarding calculation of the claims filed by them and asked

them to revise their claims aggrieved by which the Appellants filed IA No.

4059/2020 and 4914/2020 before the Adjudicating Authority. Since the RP

later admitted their claims in full, both the IAs were rendered infructuous.

The claim submitted to the RP pertained purportedly only to the principal

amount which was yet to be recovered from the Corporate Debtor.

Company Appeal (AT) (Ins.) No. 1240 of 2023 2

4. Taking the process of CIRP forward, the RP had invited resolution plans.

The RP had presented the plans so received from the Resolution Applicants

before the Committee of Creditors ("CoC" in short) and the resolution plan

was approved by the CoC with 96.93% vote share. Notably, the resolution

plan is pending approval of the Adjudicating Authority. In the interim, the

Appellants aggrieved with the resolution plan filed IA No. 4171/2021 before

the Adjudicating Authority challenging the resolution plan as approved by the

CoC. The Adjudicating Authority dismissed the said IA vide impugned order

dated 01.08.2023 against which the present appeal has been preferred.

5. The Learned Counsel for the Appellants submitted that the

Adjudicating Authority wrongly dismissed their IA No.4171/2021 without

considering the resolution plan which plan is not in consonance with Section

30(2) of the IBC and Regulation 38 of the IBBI (Insolvency Resolution Process

for Corporate Persons) Regulations, 2016 ("CIRP Regulations" in short).

Elaborating further it has been submitted that Clause 9.2.2B(iii) of the

resolution plan (hereinafter referred to as "Clause 9") by treating the entire

compensation amount received by the Appellants in terms of the NCDRC

order as refund towards the principal sum was discriminatory and therefore

contrary to Section 30(2)(e) of the IBC. The flats of the Appellants who have

order of refund has been treated as cancelled without payment of refund

amount as against home-buyers who continue to hold allotments. Thus

though the Appellants fall in the same class as other home-buyers but have

been treated differently. Further, the Adjudicating Authority committed an

error in overlooking the fact that as dissenting financial creditors, the

Appellants are required to be paid in priority over the financial creditors who

voted in favour of the resolution plan as contemplated in Regulation 38 of the

Company Appeal (AT) (Ins.) No. 1240 of 2023 3 CIRP Regulations. By providing partial payment and that too after sale of the

respective flats of the Appellants, the resolution plan is contingent in nature

and therefore contrary to the IBC. It has also been contended that the

Appellants being secured Financial Creditors, will rank at the top in terms of

the waterfall mechanism under Section 53 of the IBC along with dues of the

workman after CIRP costs and are entitled for their full claims.

6. Refuting the above submissions, the Learned Counsel for the

Respondent No.1 submitted that the Appellants being a minority group of

Home Buyers have no locus to challenge the resolution plan especially when

the Home Buyers as a class have voted in favour of the resolution plan. It was

also submitted that the Appellants cannot claim that their objections were not

given due cognizance since the RP had given them the liberty to raise their

objections before the Authorized Representative of the Home Buyers and the

Authorized Representative in turn had sent a communication to the

Appellants to get in touch with the Resolution Applicants for redressal of their

objections and make necessary negotiations. Having already availed this

opportunity, it was contended that the Appellants have no legitimate reasons

to feel aggrieved. It was further contended that in Clause 9 of the resolution

plan, the concerns and interests of the Appellants have been duly taken care

of but by making selective and deliberate omissions while referring to Clause

9, they have intentionally distorted the facts. It was emphatically asserted

that the resolution plan having been approved by the CoC in their commercial

wisdom, the scope of interference in the resolution plan in the exercise of

jurisdiction of judicial review by the Adjudicating Authority is extremely

limited. Hence, the Adjudicating Authority had rightly dismissed the IA

4171/2021.

Company Appeal (AT) (Ins.) No. 1240 of 2023 4

7. We have duly considered the arguments advanced by the Learned

Counsel for the parties and perused the records carefully.

8. It is the case of the Appellants that they had raised their objections

before the Authorized Representative with respect to certain clauses

contained in the resolution plan, particularly clause 9. Submission was

pressed that the resolution plan invalidly deducts payment of

compensation/interest from their principal amount which is unjust.

Moreover, they have been treated differently from other homebuyers to whom

possession is being given as they will have a benefit of 65% more than them.

The resolution plan is also conditional as it provides that the payment shall

be made to the Appellants only after the housing units are completed and sold

thereafter. Thus the plan being contingent when it relates to payments to the

Appellants, and thereby these clauses in the resolution plan being prejudicial

and discriminatory to their interests, the CoC in approving such resolution

plan acted contrary to Section 30(2)(e) of the IBC.

9. At this stage it would be helpful to also note the prayers of the present

Appellants as made in IA 4171/2021. It has been prayed that the CoC and

the RP be directed by the Adjudicating Authority to consider their objections

in the said I.A. and to obtain revised/amended resolution plan from the

Resolution Applicant including amendment of Clause 9 so as to secure the

interests of the Appellants in compliance with the NCDRC orders.

10. The Learned Counsel for the Respondent No. 1 asserted that the

Appellants were given adequate chance to raise their objections before the RP

as well as the Authorized Representative of the Home Buyers. There is no

Company Appeal (AT) (Ins.) No. 1240 of 2023 5 merit in the objections raised by the Appellants being a group of individual

homebuyers in minority, particularly so, when the plan has been assented to

by the Home Buyers as a class. In support of their contention reliance was

placed on the judgement of the Hon'ble Apex Court in the Jaypee Kensington

Boulevard Apartments Welfare Association & Ors v NBCC(India) Ltd in

Civil Appeal No. 3395 of 2020 ("Jaypee" in short).

11. This makes it necessary for us to see at this stage whether the

Adjudicating Authority had taken note of Clause 9 of the resolution plan while

passing the impugned order which is the main pillar of objection raised by the

Appellants. Perusal of the impugned order clearly shows that the Adjudicating

Authority had duly considered the objections raised by the Appellants with

respect to Clause 9 of the resolution plan and held as follows: -

"10. ...... The said clause was part of the plan, and the plan was duly approved by members of CoC with a whopping majority of 96.93%. A resolution plan providing a lesser amount than admitted does not make it illegal. Hence, there is no reason for this Tribunal to direct the Resolution Applicant to amend clause 9.2.2 (B) (iii) of the Resolution Plan.

11. We agree with the submissions made by the Learned Counsel for the Resolution Professional and we are of the considered view that the commercial wisdom of the CoC as has been held by the Hon'ble Supreme Court in various judgments cannot be called in question. Moreover, the Resolution Plan makes adequate provisions for consideration of the claims of the Applicants. Therefore, we are not inclined to entertain the present application."

(Emphasis supplied)

12. In the present facts of the case, we find that the Appellants were given

a chance to raise their objections before the RP as well as the Authorized

Representative of the Home Buyers. The RP did not falter in accepting their

claims in spite of expressing some reservations initially. The RP had also

Company Appeal (AT) (Ins.) No. 1240 of 2023 6 facilitated the Appellants in routing their objections to the Authorized

Representative and the latter had provided them the window of opportunity

of taking up their issues with the resolution applicants. We are of the

considered opinion that the RP and the Authorized Representative did not fail

in the discharge of their responsibilities and no cause of action survives on

this count.

13. We also notice that it is an undisputed fact that the Appellants

constitute a total of 25 home buyers with admitted claims of about Rs.14 crore

as against a total of approximately 1500 home buyers in the said project with

a claim totalling to Rs. 1110.20 crores. The resolution plan has been

admittedly approved by the CoC with 96.93% vote share. In the instant case

where the resolution plan has been admittedly approved by the CoC with

96.93% vote share, the issue before us is whether objections raised by a wafer-

thin, miniscule minority amongst the homebuyers against the collective

business decision taken by the Home Buyers can survive and be amenable to

judicial intervention.

14. The Learned Counsel of the Appellant pointed out that in the recent

judgment of the Hon'ble Supreme Court in Vishal Chelani & Ors v.

Debashish Nanda in Civil Appeal No. 3806 of 2023 it has been held that

resolution plan which treats homebuyers having decrees from RERA

differently from others forming part of the same class is bad in law. We have

no quarrel with the proposition of law laid down in the above judgment.

However, we find the facts in that case to be distinguishable from the present

matter. During the insolvency proceedings in that case, a resolution plan was

presented, making a distinction between home buyers who had sought relief

Company Appeal (AT) (Ins.) No. 1240 of 2023 7 under RERA and those who had not. Those homebuyers who enjoyed RERA

relief were made to file their claims in Form-C while other homebuyers were

allowed to file claim in Form-CA thus putting the latter set of homebuyers to

some advantage. However, no such distinction is made in the present case

between home buyers who invoked NCDRC remedies and those who did not.

All home buyers, irrespective of their foray into the realms of NCDRC or not

have been treated as financial creditors and allowed to file their claims in

Form-CA and to participate as creditors in a class in the CoC in the present

insolvency proceedings. Hence the facts of the two cases being different, the

ratio is not applicable.

15. It is the case of the Respondent No. 1 that in the given statutory

framework of IBC there is only limited judicial review which can be exercised

by the Adjudicating Authority and that the supremacy of the commercial

wisdom of CoC has been reaffirmed repeatedly and consistently by the Hon'ble

Supreme Court. It was also submitted that dissenting minority amongst

Creditors in class have to be treated at par with other Home Buyers in terms

of the Jaypee judgment.

16. It will be useful to extract the relevant portions of the Jaypee judgment

supra as hereinunder:

"163. Taking up other aspects of the rival submissions and having examined the scheme of the Code in relation to a plan of insolvency resolution, we are clearly of the view that the propositions of some of the associations and individual homebuyers to claim themselves as 'dissenting homebuyers' and thereby, 'dissenting financial creditors' do not stand in conformity with the scheme of the Code and the manner of voting on a plan of resolution by the Committee of Creditors.

*** *** *** ***

Company Appeal (AT) (Ins.) No. 1240 of 2023 8 164.3. In the face of clear language of sub-section (3A) of Section 25A of the Code, read with the law declared by this Court in Pioneer Urban(supra), the suggestion on behalf of the dissatisfied homebuyers that the said provision was only intended to iron out the logistical issues and technical difficulties is required to be rejected altogether. The said provision, as held by this Court, is to iron out the creases that might have been felt in the proper working of Section 25A; and it is made explicit that the allottees, even if not a homogeneous group, they could vote only either to approve the resolution plan or to disapprove the same. Divergence of the views within their own class may exist but, when coming to the vote in the Committee of Creditors, their vote would be that of a class.

164.4. Having regard to the scheme of IBC and the law declared by this Court, it is more than clear that once a decision is taken, either to reject or to approve a particular plan, by a vote of more than 50% of the voting share of the financial creditors within a class, the minority of those who vote, as also all others within that class, are bound by that decision. There is absolutely no scope for any particular person standing within that class to suggest any dissention as regards the vote over the resolution plan. It is obvious that if this finality and binding force is not provided to the vote cast by the authorised representative over the resolution plan in accordance with the majority decision of the class he is authorised to represent, a plan of resolution involving large number of parties (like an excessively large number of homebuyers herein) may never fructify and the only result would be liquidation, which is not the prime target of the Code. In the larger benefit and for common good, the democratic principles of the determinative role of the opinion of majority have been duly incorporated in the scheme of the Code, particularly in the provisions relating to voting on the resolution plan and binding nature of the vote of authorised representative on the entire class of the financial creditor/s he represents.

*** *** *** ***

165. In the present case, on one hand, it has consistently been submitted by the stakeholders, particularly the homebuyers, that liquidation of JIL should be eschewed, but on the other hand, some of the associations and homebuyers have attempted to find faults with the resolution plan to which their majority, who voted, took the decision for approval. There is

Company Appeal (AT) (Ins.) No. 1240 of 2023 9 no scope for any homebuyer suggesting himself to be a dissenting financial creditor merely because he was not with majority within the class. His dissatisfaction does not partake the legal character of a dissenting financial creditor.

166. For what has been discussed hereinabove, the suggestions that there was no cent percent approval of the resolution plan, or that there was no consensus amongst homebuyers, or that the plan of Suraksha Realty was considered better, are required to be rejected. It is not the case that the AR of homebuyers has not voted in accordance with the decision taken by a vote of more than 50% of the voting share of homebuyers who did cast their vote. In the given set of facts, we have no hesitation in thoroughly disapproving the unnecessary imputations made by one set of homebuyers against the AR that he made any incorrect statement before the CoC. That being the position, and the authorised representative having voted in accordance with the instructions given to him from the class of financial creditors i.e., homebuyers, every individual falling in this class remains bound by his vote and any association or homebuyer of JIL cannot be acceded the locus to stand differently and to project its/his own viewpoint or grievance by way of objections or by way of appeal. All such objections and appeals are required to be rejected on this ground alone.

*** *** *** ***

170. To sum up this part of discussion, in our view, after approval of the resolution plan of NBCC by CoC, where homebuyers as a class assented to the plan, any individual homebuyer or association cannot maintain any challenge to the resolution plan nor could be treated as carrying any legal grievance.

171. Once we have held that these dissatisfied homebuyers and associations are not entitled to put up any challenge to the resolution plan contrary to the decision of the requisite majority of their class, all their objections are required to be rejected outright......

*** *** *** ***

Company Appeal (AT) (Ins.) No. 1240 of 2023 10

175. For what has been discussed above, we hold that the homebuyers as a class having assented to the resolution plan of NBCC, any individual homebuyer or any association of homebuyers cannot maintain a challenge to the resolution plan and cannot be treated as a dissenting financial creditor or an aggrieved person; the question of violation of the provisions of the Real Estate (Regulation and Development) Act, 2016 does not arise; the resolution plan in question is not violative of the mandatory requirements of the CIRP Regulations; and when the resolution plan comprehensively deals with all the assets and liabilities of the corporate debtor, no housing project could be segregated merely for the reason that the same has been completed or is nearing completion."

(Emphasis supplied)

17. The Hon'ble Supreme Court in the Jaypee matter has emphasized that

the democratic principles of a determinative role of majority opinion have been

enshrined in the statutory construct of the IBC and hence the minority

homebuyers have to necessarily sail with the majority within the class. In the

present facts of the case, when the majority has approved the resolution plan,

the objections raised by the Appellants are inconsequential in so far as they

represent the homebuyers in minority. It has been clearly held in the Jaypee

matter that when the Home Buyers as a class have voted in favour of a

resolution plan, a particular constituent of that class and that too in a

minority cannot be heard in opposition to the resolution plan by way of

objection as there is no concept of dissenting homebuyers within Creditors in

class. Once the CoC has approved the resolution plan by requisite majority

and the same is in consonance with applicable provisions of law the same

cannot be a subject matter of judicial review and modification. We are

therefore not impressed with the plea raised by the Appellants that the

Company Appeal (AT) (Ins.) No. 1240 of 2023 11 Adjudicating Authority had committed an error in rejecting their IA without

having considered the main petition seeking approval of the resolution plan.

18. On the contention raised by the Appellants that their interests have

been prejudiced since the resolution plan is contingent and conditional, it has

been countered by the Respondent No. 1 that it is a misconceived argument.

It was contended that clause 9 deals with the compensation amounts received

by the Appellants as ordered by NCDRC including legal costs incurred by

them. The Resolution Plan has made adequate provisions for consideration of

the claims of the Appellants. It was submitted that the resolution plan clearly

provides for treatment that would be provided to the Appellants in case the

units are not resold. We find that the Adjudicating Authority has taken due

note of these provisions in clause 9 of the resolution plan which take care of

the concerns of the Appellants and find place in Para 10 of the impugned

order as extracted hereunder: -

"To compensate such allottees towards additional cost including legal cost incurred by them, Resolution applicant propose to pay 35% of the additional amount realized by the resolution applicant on sale of units booked by such allottee. The additional amount realized will be the difference between the value received by the RA on sale of such units and the value of the unit as per BBA Agreement.

**** **** **** To further compensate allottee in this category, in case of allotment of units, the total amount already refunded to such allottee on effective date will be received back in 6 equal monthly installments without any interest. The allottee need to pay due installments if pending and further dues installments based on completion stage within 15 days of demand notice."

Merely because there is a reduction in the claim of any creditor does not make

the resolution plan fall foul of law. We quite agree with the Adjudicating

Company Appeal (AT) (Ins.) No. 1240 of 2023 12 Authority that "resolution plan providing a lesser amount than admitted does

not make it illegal". Any clause in the resolution plan which requires creditors

to take a hair-cut cannot be construed as being violative of Section 30(2)(e) of

the IBC.

19. Under such circumstances there is nothing to show that there has been

transgression of the bounds of rules and regulations which have caused any

serious miscarriage of justice to the Appellants. We are of the considered

opinion that the Adjudicating Authority did not commit any error in

dismissing IA 4171/2021.

20. We do not find any good grounds to entertain this appeal. Appeal is

dismissed. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical) Place: New Delhi Date: 20.10.203

PKM

Company Appeal (AT) (Ins.) No. 1240 of 2023 13