Mr. Girish Nalavade vs Bhrugesh Amin And Ors

[Arising out of order dated 06.10.2023 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench Court-IV in IA-2688/2023 in CP.IB.68(MB)2021]

IN THE MATTER OF:

Mr. Girish Nalavade Representative of other Homebuyers of Modella Textile Industries Ltd. Resident of: Krishna, B Wing, Neelkanth Palms, Thane 400610 ...Appellant

Versus

1. Bhrugesh Amin BDO India LLP The Ruby-Level 9 NW Wing Senapati Bapat Marg, Dabar, Mumbai City, Maharashtra.

2. Edelweiss Asset Reconstruction Company Ltd. Edelweiss House, Windsor LN, Kolivery Village East Mumbai, Maharashtra.

3. Consortium of M/s Ashar Ventures, M/s Ashar Realtors, M/s Toscano Infrastructure Pvt. Ltd. & Ashar IT park, 11th Floor B Wing, Wagle Estate Thane (West), Mumbai-400604.

4. Modella Textile Industries Ltd. (Undergoing Corporate Insolvency Resolution Process) CIN : U45201MH1971PLC15082. ...Respondents 2

Present:

Appellant: Ms. Anjali Sharma, Mr. Ganesh Remani, Mr. Deepak Bashts, Mr. Sachin Daga, Advocates. For Respondents: Mr. Krishnendu Datta, Sr. Advocate with Mr. Ayush J. Rajani, Ms. Khushboo Shah, Ms. Varsha Himatsingka, Advocates for R-1. Mr. Amit Sibal and Mr. P Nagesh, Sr. Advocates with Mr. Ajay Bhargava, Ms. Trishala Trivedi, Ms. Phalguni Nigam, Advocates for R-2. Mr. Arvind Varma, Sr. Advocate with Mr. Chirag J. Shah, Mr. Utsav Trivedi, Ms. Shivani Bhushan, Ms. Diksha Tyagi, Ms. Aishwarya Singh, Advocates for R-3/SRA.

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code 2016 ('IBC' in short) by the Appellant arises out of the Order dated

06.10.2023 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Mumbai Bench,

Court-IV) in IA-2688/2023 in CP.IB.68(MB)2021. By the Impugned Order, the

Adjudicating Authority dismissed the I.A. No. 2688/2023 filed by present

Appellant representing 77 Homebuyers as a class of creditor seeking rejection

of the Committee of Creditors ('CoC' in short) approved resolution plan filed

by the Resolution Professional ('RP' in short) pending for approval of the

Adjudicating Authority in IA-2319/2023. Aggrieved by this impugned order,

the present appeal has been preferred by the Appellant.

Company Appeal (AT) (Insolvency) No. 1542 of 2023 3

2. Coming to the factual matrix at hand, the salient points are as outlined

below:

 The Appellant and other Home Buyers had purchased flats in the real

estate project - 'Nirmal Sports City' of the Corporate Debtor- Modella

Textile Industries Ltd. in 2012-13.

 ECL Finance Limited ('ECLF' in short), which was a part of the

Edelweiss group granted a Term Loan to the Corporate Debtor on

24.07.2013.

 The Corporate Debtor/Respondent No. 4 passed a resolution on

10.03.2016 for the issuance of unlisted, unrated, secured, redeemable,

Non-Convertible Debentures ('NCD' in short) by way of private

placement which were offered to the Edelweiss group. The Debenture

Trustee for the issue was IDBI Trusteeship Services Ltd. and a

Debenture Trust Deed ('DTD' in short) was executed between the

Corporate Debtor and IDBI Trusteeship Services Ltd. on 22.03.2016.

 ECLF granted another loan on 28.09.2016 to the Corporate Debtor. The

Corporate Debtor passed another resolution for the issuance of NCD on

02.11.2017 by way of private placement again to the Edelweiss group

companies and another DTD was executed on 17.11.2017 with respect

to this issue of debentures.

 In the year 2017, the Corporate Debtor entered into an Agreement with

Godrej Properties Limited and relaunched the project as "Godrej Alive".

Under the project "Godrej Alive," all the Home Buyers were offered to

either continue in the project as per the terms and conditions earlier

Company Appeal (AT) (Insolvency) No. 1542 of 2023 4

agreed in the allotment letters from the Corporate Debtor or to exit the

project with 9% compound interest. However, this project also failed to

take off.

 The Corporate Insolvency Resolution Process ('CIRP' in short) of the

Corporate Debtor was initiated upon admission of a petition under

Section 7 of IBC on 04.05.2022.

 In the 12th CoC meeting, the resolution plan proposed by a consortium

of Ashar Ventures and Ors/Respondent No. 3 was approved by the CoC

with 88.95% vote share. The proposed resolution plan of Respondent

No.3/SRA was voted against by the Homebuyers who had 11.05% vote

share.

 The Respondent No. 1/RP had filed I.A. No 2319 before the Adjudicating

Authority for approval of the resolution plan of Respondent No.3/SRA

while the present Appellant representing 77 Homebuyers had filed I.A.

No. 2688/2023 in C.P. (IB) No. 68(MB)2021 inter-alia seeking rejection

of the said plan.

 The Adjudicating Authority dismissed the I.A. No. 2688/2023 filed by

the Appellant. Assailing the impugned order, the present appeal has

been preferred.

3. We have heard Ms. Anjali Sharma, Learned Counsel appearing for the

Appellant; Shri Krishnendu Dutta, Learned Sr. Counsel for the Resolution

Professional; Shri P. Nagesh and Shri Amit Sibal Learned Sr. Counsels for the

Respondent No.2/Financial Creditor and Shri Arvind Verma, Learned Sr.

Counsel appearing for the SRA.

Company Appeal (AT) (Insolvency) No. 1542 of 2023 5

4. Making his submissions, the Learned Counsel for the Appellant

submitted that the Appellant is a creditor in a class who represents 77

Homebuyers of the Corporate Debtor. The Homebuyers had purchased flats

in the 'Nirmal Sports City' real estate project of the Corporate Debtor. As this

project did not take off, the project was relaunched as Godrej Alive. Under

this project, the Homebuyers were given the option to either continue in the

project or exit the project with 9% compound interest. It is the contention of

the Appellant that the Homebuyers of which the Appellant was also a part,

chose to continue in the project. When this project did not take off and the

Corporate Debtor was admitted into CIRP on 04.05.2022, the Respondent No.

2/Financial Creditor filed a claim of Rs. 998.96 crores which comprised a

principal amount of Rs. 502.91 crores and an exorbitant interest amount,

basis which the Resolution Professional constituted the CoC with Respondent

No. 2/Financial Creditor having 88.95% voting share and the remaining

11.05% voting share being vested with the Homebuyers. It was therefore

contended that the CoC had a skewed composition and therefore irregularly

constituted.

5. Further submission was made that the Corporate Debtor had received

term loans from ECLF which was a part of Edelweiss Group of Companies.

The Corporate Debtor had issued NCDs which were offered to the Edelweiss

Group of Companies. It was alleged that the term loans were disbursed even

though there was no development of the property and that the first term loan

was repaid even without any investment/development in the Nirmal Sports

City project. It has been contended that the Respondent No. 2/Financial

Company Appeal (AT) (Insolvency) No. 1542 of 2023 6

Creditor had been disbursing money without satisfying itself as to the

condition precedent listed out in the DTD and loans were paid off using the

debentures issued. This was a clear case of evergreening of loans at a time

when there was no investment/development of the housing projects.

6. It has been contended by the Learned Counsel for the Appellant that

the DTDs executed on 22.03.2016 and 17.11.2017 also reveal that the

Corporate Debtor and the Respondent No. 2/Financial Creditor are "related

parties" as defined under Section 5(24)(h) and 5(24)(m). It was pointed out

that the Respondent No. 2/Financial Creditor had controlling powers over the

operations of the Corporate Debtor and hence a related party. The Resolution

Professional was duty bound to verify and ascertain the related party status

which it failed to do thus wrongly allowing the Respondent No. 2/Financial

Creditor to join the CoC and participate in its meetings. Though this related

party contention was raised in an additional affidavit filed by the Appellant

prior to arguments, it has been ignored by the Adjudicating Authority. The

impugned order is therefore assailed on the grounds of having failed to deal

with the related parties issue raised by the Appellant.

7. It is further the case of the Appellant that it was not open to the RP to

constitute the CoC with a related party of the Corporate Debtor and to allow

the Respondent No. 2/Financial Creditor a right of representation,

participation and voting in the meetings of the CoC. By allowing the admission

of the Respondent No. 2/Financial Creditor into the CoC, the CoC stood

illegally constituted and hence the decisions flowing from the CoC are also

illegal. Due to the failure of the RP to conduct proper investigation into the

Company Appeal (AT) (Insolvency) No. 1542 of 2023 7

claims made by the Respondent No. 2/Financial Creditor, this led to skewed

composition of the CoC. Thus, the CoC with Respondent No. 2/Financial

Creditor thereon could not have approved the resolution plan of the Corporate

Debtor by dint of being a related party. Consequently, the constitution of the

CoC with the Respondent No. 2/Financial Creditor being a related party

renders the constitution of CoC as invalid and hence all actions/decisions of

the CoC deserves to be set aside.

8. It was asserted that the repeated disbursement of loan by the

Respondent No. 2/Financial Creditor without any development of the real

estate project taking place on ground coupled with nil revenue generation and

allowing of loan repayments through subsequent disbursal of term loans

showed the questionable conduct of the Respondent No.2/Financial Creditor

and the Corporate Debtor. It has been further contended that inspite of these

peculiar financial transactions, the RP did not take necessary steps to

investigate these transactions. The RP conducted a transaction audit review

which was limited to two years prior to the insolvency commencement date

rather than covering the entire period from 2013-14 onwards when the term

loans were disbursed. This time reduction of the review to two years was

decided by the Resolution Professional on his own without obtaining the

consent of the CoC at a time when the 2nd CoC had approved transaction

audit to be conducted for a period of a five years.

9. Further submission was pressed that the Resolution Professional did

not pro-actively acquire information about the reservation in respect of the

subject parcel of land raised by Thane Municipal Corporation ('TMC' in short).

Company Appeal (AT) (Insolvency) No. 1542 of 2023 8

It was contended that TMC reservation was only at the initial proposal stage

and no notification had been issued inviting objections to any such

acquisition. Even the legal opinion received by the RP indicated that TMC

reservation may not be applicable to the said parcel of land. Since this

apprehension of TMC reservation was not allayed, this led to withdrawal of

large number of potential resolution applicants ('PRA' in short) leaving only

the Respondent No. 3/SRA as the sole bidder which was detrimental to the

interest of the Homebuyers. Even the Authorised Representative ('AR' in

short) of the Homebuyers had raised this issue in the 8th and 9th CoC meetings

that the Homebuyers did not wish to accept the terms as set out by a single

bidder. Despite requests from the Homebuyers, the Resolution Professional

failed to issue fresh Form-G and ignoring the concerns raised by the AR, the

RP proceeded to place the resolution plan of Respondent No. 3/SRA before

the CoC. The resolution plan by providing an exit option with upfront cash

payment without allowing Homebuyers to continue in the project deprived the

Homebuyers of their right to home. Harping on the misconduct of the

Resolution Professional, it was pointed out that there was material irregularity

in the exercise of powers by the Resolution Professional which the

Adjudicating Authority has failed to take notice of and that it erroneously

approved the resolution plan of the Respondent No. 3/SRA.

10. Refuting the contentions raised by the Appellant, counter submissions

were made separately by the Sr. Learned Counsels for Respondent Nos. 1, 2

and 3. Since the grounds arrayed largely overlap, for reasons of convenience,

we propose to summarise their contentions together. Strong reservations were

Company Appeal (AT) (Insolvency) No. 1542 of 2023 9

raised on the locus of the Appellant to file this appeal as creditor in class. It

is also pointed out that the Homebuyers constitute a "creditor in class" and

are represented by an AR. The Appellant has failed to substantiate his status

as AR. It is contended that the cause title of the application shows that it has

been filed by one, Mr. Girish Nalavade, in his individual capacity.

Furthermore, the Appellant failed to disclose the name and detailed

particulars of the 77 Homebuyers whom it claims to represent. Moreover, the

Appellant was only authorised by 77 Homebuyers to file I.A. 2688/2023

before the Adjudicating Authority. The emails issued by the Homebuyers

authorising the Appellant to file I.A. 2688/2023 was prior to the issue of

impugned order. There is nothing on record which refers to any subsequent

authorisation from this group of Homebuyers to the Appellant to file this

appeal on their behalf before this Tribunal.

11. It has also been vehemently contended that the resolution plan has

already been implemented and all the 77 Homebuyers including the present

Appellant have accepted the payment of 100% principal amount in terms of

the approved resolution plan. Moreover, the Home Buyers not having objected

to the said receipt of payments as per the resolution plan cannot now raise

objections. The Homebuyers having received their entire 100% due, the

present appeal has been rendered infructuous. The Appellant after

maintaining a class action with 77 Homebuyers before the Adjudicating

Authority cannot maintain an individual action before this Tribunal. This

would be impermissible in law. The relief claimed by the Appellant to restart

the entire the CIRP process at a time when resolution plan is fully

Company Appeal (AT) (Insolvency) No. 1542 of 2023 10

implemented amounts to derailment of the resolution process. This would

amount to restarting the clock of CIRP which is not the intent of the IBC and

that too when the Appellant is the lone homebuyer out of the entire class of

creditors.

12. It is also the case of the Respondents that the appeal deserves to be

dismissed since it is in the teeth of the decision of the Hon'ble Supreme Court

in Jaypee Kensington Boulevard Apartments Welfare Association and

Ors. vs NBCC (India) and Ors. (2022) 1 SCC 401 ('Jaypee' in short). Once

a decision is taken to accept a plan by a vote of more than 50% of the voting

share of the creditors in a class, the minority is bound by the decision of the

majority.

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

Counsels for both parties and perused the records carefully.

14. The first point before us for consideration is to determine the

sustainability of the argument advanced by the Learned Counsel for the

Appellant that the constitution of the CoC stood vitiated because of the related

party status of the Financial Creditor and Corporate Debtor. The claim of the

Respondents is that this this ground was raised for the first time before the

Adjudicating Authority at the time of filing the written submissions on

12.08.2023 which date was subsequent to reservation of the order by the

Adjudicating Authority on 04.08.2023. In such circumstances, it has been

contended by the Respondents that this issue is an afterthought which the

Appellant has created to build a false pretext to challenge the resolution plan

Company Appeal (AT) (Insolvency) No. 1542 of 2023 11

which has been approved by the CoC with requisite majority. However, the

Appellant has countered this by submitting that the related party contention

was raised by them in an additional affidavit filed by them on 01.08.2023

which pre-dated arguments before the Adjudicating Authority.

15. Be that as it may, to remove all ambiguities we have decided to go into

the contentious issue of the related party status raised by the Appellant. To

begin with, we may notice Section 5(24)(h) and (m) which have been relied

upon by the Appellant to claim that the Financial Creditor/Respondent No. 2

is a related party and hence could not have found a place in the CoC. The

relevant clauses read as follows:

"5(24) "related party", in relation to a corporate debtor, means--

(h) any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act;

(m) any person who is associated with the corporate debtor on account of--

(i) participation in policy making processes of the corporate debtor; or

(ii) having more than two directors in common between the corporate debtor and such person; or

(iii) interchange of managerial personnel between the corporate debtor and such person; or

(iv) provision of essential technical information to, or from, the corporate debtor;"

16. It has been contended by the Learned Counsel for the Appellant that

the DTDs executed by the Corporate Debtor on 22.03.2016 and 17.11.2017

reveal that the Corporate Debtor and the Financial Creditor/Respondent No.

Company Appeal (AT) (Insolvency) No. 1542 of 2023 12

2 are "related parties" as defined under Section 5(24)(h) and 5(24)(m). It was

pointed out that the Financial Creditor/Respondent No. 2 had controlling

powers over the operations of the Corporate Debtor. The DTDs provided the

control of the Financial Creditor/Respondent No. 2 over the decisions of the

Board of Directors of the Corporate Debtor; control over appointment and

removal of key managerial personal of the Corporate Debtor; the powers of the

Financial Creditor/Respondent No. 2 as Monitoring Agent; control over

business plan of the Corporate Debtor; control over modalities of sale of units

besides control over revenue and other accounts of Corporate Debtor. These

features clearly amplified their related party status. Consequently, the

constitution of the CoC with the Financial Creditor/Respondent No. 2 being

a related party therein renders the constitution of CoC to be invalid and all

actions/decisions of the CoC therefore deserves to be set aside.

17. To fulfil the ingredients of Section 5(24)(h), it is required to be proven

and substantiated that any Director, Partner or Manager of the Corporate

Debtor is accustomed to act on the advice, direction or instruction of the

Financial Creditor/Respondent No. 2. In the present facts of the case, there

is no dispute that the Financial Creditor/Respondent No. 2 had extended term

loans to the Corporate Debtor and DTDs were executed. However, no

categorical material or proof has been placed on record to indicate that the

Financial Creditor/Respondent No. 2, on the strength of the DTDs, gave any

advice, direction or instruction to Director, Promoter or Manager of the

Corporate Debtor and that the latter was accustomed to act accordingly. It is

usual practice for lending institutions to keep a watch and safeguard their

Company Appeal (AT) (Insolvency) No. 1542 of 2023 13

investments. Hence even if the DTDs provided for appointment of a Monitoring

Agent, it does not conclusively establish that the Corporate Debtor was

accustomed to act on the directions or instructions of the Monitoring Agent.

Without any cogent basis or concrete proof, to assume that the Corporate

Debtor was acting on the advice, direction or instruction of the Financial

Creditor, as has been contended by the Appellant, does not appeal to our

reasoning.

18. As regards whether the conditions stipulated in the four sub-clauses of

Section 5(24)(m) have been fulfilled or not, again there has to be tangible and

specific material that the Appellant is required to produce to substantiate

their standpoint on each of the subclauses distinctively and separately. We

however notice that the Appellant merely adverted attention to the fact that

DTDs contain certain clauses by virtue of which it can be inferred that Section

5(24)(m) is attracted, however, no further details have been provided to

provide a foundational basis to their contention. Participation by the Financial

Creditor/Respondent No. 2 in policy making process could have been possible

only through Director of the Corporate Debtor which is not the case in the

present matter. There is no sign of any evidence either before us to establish

that Financial Creditor/Respondent No. 2 by their conduct participated in the

policy making process of the Corporate Debtor. Nothing concrete has been

placed on record which amplifies interference on the part of the Financial

Creditor/Respondent No. 2 in the day to day functioning of the Corporate

Debtor or in the appointment of managerial staff and employees of the

Corporate Debtor. There is no material placed before us to either suggest that

Company Appeal (AT) (Insolvency) No. 1542 of 2023 14

essential technical information was exchanged between the Financial

Creditor/Respondent No. 2 and the Corporate Debtor.

19. At this stage, we would also like to add that it is an undisputed fact that

the Appellant by virtue of being a member of the class of creditors of

Homebuyers was represented on the CoC through the AR of the Homebuyers.

The AR of the Homebuyers had participated all through the CIRP process

including at the stage of filing I.A. No. 2688/2023. Perusal of the CoC

meetings shows that at no stage was the issue of related party status of the

Respondent No. 2/Financial Creditor and Corporate Debtor voiced before the

CoC. It is also an undisputed fact that the related party status was not raised

in the reliefs sought or prayers made before the Adjudicating Authority while

filing IA No. 2688/2023.

20. Given this position, that on both counts, that is, absence of material

placed on record and lack of substantiation of pleadings made by the

Appellant of related party status of the Financial Creditor/Respondent No. 2

and the Corporate Debtor, we are disinclined to subscribe to the bogey of

related party issue raised by the Appellant. Having failed to adequately

demonstrate the related party status of the Financial Creditor/Respondent

No. 2, and the Corporate Debtor, we do not find any irregularity on the part

of the RP in constituting the CoC with the Financial Creditor/Respondent No.

2 as a member thereof. This answers the first issue raised before us.

21. This brings us to the second contention of the Appellant that the

Financial Creditor/Respondent No. 2 was assigned a higher vote share than

Company Appeal (AT) (Insolvency) No. 1542 of 2023 15

its entitlement. It is contended by the Appellant that the Financial

Creditor/Respondent No. 2 had inflated its claim by adding penal interest to

the outstanding principal amount and that this was wrongly admitted by RP

thus wrongly imparting majority vote share to the Financial

Creditor/Respondent No. 2. This contention has been effectively dealt by the

Adjudicating Authority in the impugned order which is to the effect:

"10. We find that, during the course of argument in IA-3327 /2023, the Resolution Professional was asked to place on record detailed working of claim of R2 with supporting documents substantiating each component of their claim. During the argument, the bone of contention was limited to interest claimed on Penal Interest. The Counsel for R2 submitted that even if that amount is not considered, the vote share of R2 shall remain more than the minimum threshold required for approving the plan, hence, this objection is meaningless. We find merit in this argument and are of conscious that the issue of inflated claim is dealt by us separately in IA3327 /2023, where we had found no infirmity in the admission of claim of R2. Accordingly, we reject this contention."

22. We have no cogent grounds to disagree with the above findings of the

Adjudicating Authority. On going through the minutes of the CoC meetings,

we find that since the 1st CoC meeting onwards, the RP had unceasingly

placed on the agenda for discussion one Item which read as: "Take note of

the list of creditors who have submitted their claims and the status of

verification of such claims". The RP had in each CoC meeting ventured to

apprise the CoC members on the statement of claims received and the

methodology of arriving at voting rights of each financial creditor on the CoC.

That the RP was working out the admitted claims of all the financial creditors

Company Appeal (AT) (Insolvency) No. 1542 of 2023 16

diligently and assigning them corresponding vote share is evident from the

fact that while in the 1st CoC meeting, the vote share of the Financial

Creditor/Respondent No. 2 was 99.52%, the same got reduced to 93.94% in

the 6th CoC meeting and then further reduced to 88.95% in the 12th CoC

meeting as against the vote share of the Homebuyers rising from 0.48% in the

1st CoC meeting to 11.05% in the 12th CoC meeting. In none of these CoC

meetings, the AR had raised any objections either on the claims admitted in

respect of the Financial Creditor/Respondent No. 2 or raised any objections

on their vote share. Thus, to say that there was discriminatory treatment of

the claims made by the Appellant as against what was offered to the Financial

Creditor/Respondent No. 2 is clearly misconceived since the RP was diligently

updating the claims and the corresponding vote share of the financial

creditors. Not having pointed out any irregularity on the part of the RP in

constituting the CoC with the Financial Creditor/Respondent No. 2 having

majority vote share prior to the CoC approving the resolution plan, it cannot

be agitated now at this belated stage when the resolution plan stands

approved. Thus, to answer the second issue, the CoC is found to have been

validly constituted based on the duly verified claims of the financial creditors,

to which no objections were raised by the Appellant, we find no cogent reasons

to hold the decisions taken by the CoC to be either irregular or invalid.

23. This brings us to the third issue as to whether the RP was actively

following up the TMC reservation issue or not. When we examine the minutes

of CoC meetings which have been placed on record in the Appeal Paper Book,

it is clearly evident that all developments pertaining to TMC reservation has

Company Appeal (AT) (Insolvency) No. 1542 of 2023 17

been figuring right from the 6th CoC meeting onwards. On the steps taken by

the RP with regard to the TMC reservation, we notice that the RP kept the CoC

informed in a timely manner of the fact that TMC had passed a resolution

declaring the subject parcel of land as reserved. The CoC was periodically kept

apprised of the follow up steps taken by the RP in dealing with this issue

which included visit to the TMC office and filing of an RTI application to find

out the correct status of the reservation. The Resolution Professional had also

taken up the matter through the architect to enquire about the reservation

status besides seeking legal opinion on the matter and appointing a legal firm

to seek appropriate legal remedy. Thus, the Resolution Professional cannot be

held responsible for having suppressed any material fact pertaining to the

TMC reservation issue from the CoC members including the AR. Keeping in

mind the above-cited multifarious efforts made by the RP, the bonafide of the

RP in this regard cannot be doubted. Hence, we do not find any infirmity or

error in the findings recorded by the Adjudicating Authority in respect of the

conduct of the Resolution Professional which is to the following effect:

"11.......We find from the minutes of 10th CoC meeting held on 10.3.2023 placed in IA 2319 of 2023 that the Resolution Professional had taken steps to find out the correct position relating to TMC reservations and have also filed an application to TMC for clarification on Development Plan vide letter dated 26.09.2022 through its Architect Sakaar Architects and also reminded TMC for withdrawal of said Reservation vide letter dated 26.12.2022. The Resolution Professional had also sought legal opinion from DSK Legal on23.12.2022 and had appointed M/s J Sagar Associates for filing appropriate writ petition."

Company Appeal (AT) (Insolvency) No. 1542 of 2023 18

24. Having found no merit in the contention raised by the Appellant of the

RP having mishandled the TMC reservation issue, we now like to dwell upon

a related issue raised by the Appellant that since the TMC reservation issue

was not handled properly by the RP, it led to a situation where majority PRAs

had withdrawn and only a solitary bidder was left in the fray. It is also the

case of the Appellant that their apprehensions in this regard were expressed

by the AR in the CoC but the RP did not give due weightage to the proposal of

the Homebuyers to go in for fresh round of bidding to create room for better

offers.

25. When we look at the impugned order, we find that the TMC reservation

issue and concerns expressed by the AR of the Homebuyers has been dealt at

length by the Adjudicating Authority in the impugned order before holding

that there is no merit in this argument of the Appellant. The relevant excerpts

of the impugned order are as reproduced below:

"11. The other issue pertains to reservation of Thane Municipal Corporation (TMC) in respect of project land, over which the commercial/residential development was to take place. The applicant alleges that the R1, the Resolution Professional, should have approached appropriate legal forum to deal with the so-called reservation of TMC, and this negligence in seeking appropriate clarification in this respect caused other prospective Resolution Applicant to withdraw from the process, thus, leaving R3 as the only Resolution Applicant. The Applicant has stated that the Home buyers have emphasized on option of continuing the project at old rates agreed with the corporate debtor, and the bids for the fresh Resolution Plan should be invited again so that there would be more competition and better offers as opposed to the current offer in the discussion from 9th meeting of CoC held on 01.02.2023. We note that a joint meeting (at the request of home buyers) was scheduled amongst home buyers, the AR, the Resolution Professional and the Lead Lender to address the concerns

Company Appeal (AT) (Insolvency) No. 1542 of 2023 19

of the home buyers, however, the Home-buyers insisted upon flat against their claim, and not the cash refund.

12. The Prospective Resolution Applicants, Successful Resolution Applicant, withdrew on account of TMC reservation, and no bias can be established merely on account of their act of withdrawal on account of facts pertaining to TMC reservation, as all the Prospective Resolution Applicants were shared all facts pertaining to this aspect without any additional advantage having been accorded to the Successful Resolution Applicant. It was not argued before us that the Successful Resolution Applicant knew what others didn't or the Successful Resolution Applicant was not told about such Reservation what others were told. Every Prospective Resolution Applicant is within its right to make a business decision based on its risk appetite and no collusion can be inferred merely from this fact.

13. We also find that the issue of TMC reservation was argued at length during the other Objector's IA, and it was also found that, no notification inviting objections to the proposed acquisition has so far not been made by the Competent Authority, as the reservation over the Project Land is at the initial proposal stage. However, we find that the Town Planning Authority can take into account future proposals also while according to the approval to the building plan as held in Indian National Trust for Art & Cultural Heritage & Ors. Vs. The State of Maharashtra & Ors., 2006 SCC Online Bom 527. Accordingly, we feel that there exists a doubt as whether the approval of Town Planning Authority will be after considering such proposed changes in the land use, which is still to be legally binding on the land-owners? We note that the R3 has proposed 100% payment of principal amount during the course of argument and has filed an additional affidavit to this effect. Since, a Resolution Plan is required to be certain as well as feasible, we feel that contemplation of flats to the home-buyers, as against proposed cash pay-out, will make the plan uncertain and will also put question mark on its feasibility. Accordingly, we do not find merit in this argument also.

26. To examine the tenability of the findings of the Adjudicating Authority,

we proceed to look at the sequence of events in the CoC meetings and the role

Company Appeal (AT) (Insolvency) No. 1542 of 2023 20

of RP in this context. We find that during the 6th CoC meeting, the AR had

submitted that many Home buyers had requested the RP to communicate to

the PRAs to allow existing Homebuyers to complete purchase of homes

originally allotted to them on payment of balance consideration. In deference

thereto, we find that the RP, based on these inputs received from the AR, had

already uploaded the choice of the Home Buyers in the Virtual Data Room

and communicated to PRAs to provide resolution to the claims of home buyers

with options to get refund of amount paid or settlement of claims by way of

allotment with balance consideration payable by homebuyers.

27. Further, the 7th CoC meeting held on 26.12.2022 in its minutes clearly

records that RP had received only one resolution Plan from the

SRA/Respondent No.3 and that CoC members requested RP to circulate the

financial proposal of the plan after conducting compliance check which task

was also complied to by the RP. The subsequent 8th CoC meeting held on

20.01.2023 notes that 21 PRAs had withdrawn from submitting plan proposal

and that the comments of the CoC members including the Homebuyers as

received on the plan of the SRA had been shared by the RP with SRA. It is

also an undisputed fact that the RP requested the AR of Homebuyers in this

8th meeting of CoC to have a meeting with Homebuyers to discuss broad

contours of the resolution plan of the SRA/Respondent No.3. Further both

the 8th CoC meeting and the 9th CoC meeting held on 01.02.2023 noted that

the AR of the Home Buyers had conveyed to the RP that the Home Buyers

wanted an option in the resolution plan of continuing in the real estate project

at the same rate that was agreed upon at the time of the allotment. It was

Company Appeal (AT) (Insolvency) No. 1542 of 2023 21

therefore decided that a joint meeting be held with the AR, RP, Financial

Creditor/Respondent No. 2 as Lead Lender and the Home buyers. At all the

stages outlined above, the RP had taken due note of the suggestions made by

the AR of the Homebuyers and acted on these suggestions and there were no

complaints made by the Appellant in this regard. Neither was any action taken

by the RP which can be treated as patently collusive with the Financial

Creditor/Respondent No. 2 or the SRA/Respondent No.3.

28. Meantime, since the 330 days of CIRP was ending on 30.03.2023, the

RP placed the resolution for extension of CIRP by 60 days beyond 330 days

so as to consider the resolution plan of the sole resolution applicant and this

was approved by CoC members with 100% vote in the 10th CoC meeting held

on 20.03.2023. This action of the RP was in order as it was in conformity with

the timelines set by the IBC. It was reiterated by the AR of Homebuyers in this

meeting that the Homebuyers wanted the SRA to accede to their option of

continuing in the project at the same rate as agreed at the time of allotment

failing which fresh bidding process be started. Accordingly, a meeting was

facilitated by the RP between the Homebuyers and the SRA while also

clarifying the position that it is the commercial call of the SRA while

submitting their resolution plan.

29. During the 12th CoC meeting held on 18.05.2023, the AR requested the

RP to discuss the possibility of further time extension of CIRP since the

Homebuyers wanted the CoC with the help of RP to resolve the issue with

respect the TMC reservation and initiate fresh bid process. However, the

Financial Creditor/Respondent No. 2 had taken the view that since the

Company Appeal (AT) (Insolvency) No. 1542 of 2023 22

resolution plan of the SRA is legally compliant and the CIRP process has

already been extended beyond the 330 days period, the plan submitted by

them should be put to vote. The RP had accordingly put the resolution plan

to vote which resolution plan was approved by 88.95% vote share in the 12th

CoC meeting.

30. Given this factual position, as borne out from the CoC meeting

proceedings, we do not find any reason to entertain any doubts in our minds

about the impartial and professional conduct of the RP. The RP had provided

adequate opportunity for the financial feasibility and viability of the plan

proposal to be evaluated both by the Financial Creditor/Respondent No. 2

and the AR of Homebuyers. The RP cannot be blamed to have acted in a

partisan manner or in such a manner so as to jeopardise the fate of the

Homebuyers. Neither can it be held against the RP that he acted in collusion

with the SRA or the Financial Creditor/Respondent No. 2. Merely because the

Appellant was dissatisfied with the resolution plan, it does not entitle the

Appellant to level such grave allegations of collusion on the part of the RP and

the Respondents No. 2 and 3. The RP at all stages had facilitated the

Homebuyers in raising their concerns and objections to the resolution plan

through the AR and in fact also provided them the window of opportunity of

taking up their issues with the SRA. Under such circumstances, but for bald

assertions, there is nothing to show that there has been negligence or

dereliction of duties and responsibilities cast on the RP which can be said to

have caused any serious miscarriage of justice to the Appellant. We are of the

considered opinion that no cause of action survives on this count.

Company Appeal (AT) (Insolvency) No. 1542 of 2023 23

31. This brings us to the last question before us as to whether the approval

of the resolution plan by the Adjudicating Authority deserves to be set aside

or the CoC approved resolution plan be sent back for the SRA/Respondent

No. 3 to make necessary changes to the plan in the order to cater to the needs

and demands of the Homebuyers as has been urged by the Appellant. To put

the matter in perspective we may first notice the prayers of the Appellant

which is as extracted below:

"A. That, the CoC approved resolution plan be rejected by this Hon'ble Tribunal and the application for the approval of CoC Approved Resolution Plan filed by the Resolution Professional shall be dismissed.

B. That, the fresh bidding in the instant matter be ordered by the Hon'ble Tribunal.

C. That, in alternative this Hon'ble Tribunal be pleased to send back the CoC approved resolution plan, and direct the Respondent No. 3 to make necessary changes to the plan in the order to cater to the needs and demands of the home buyers. Copy of the Minutes of Meeting of Home Buyers with Respondent No. 3 held on 25th March, 2023 is attached herewith as Annexure A10.

D. That, the evaluation matrix should be suitably amended to provide for special attention to the needs of home buyers. E. That, the home buyers be required to contribute towards only those expenses which are approved and ratified by the homebuyers and not be bound to incur those expense which re approved by Respondent No. 2 on behalf of entire CoC. F. Any other suitable relief or direction which this Hon'ble Tribunal may consider appropriate in the facts and circumstances of the case. For this act of kindness, the Applicant herein shall every prayer.

G. The Applicant states that this Application is filed with the limited information that has come to the notice or information of the Applicant. The Applicant craves liberty to add, amend, and modify the statements, averments and grounds

Company Appeal (AT) (Insolvency) No. 1542 of 2023 24

mentioned herein. The Applicant craves leave to produce additional documents and details."

32. It is an undisputed fact that the resolution plan of the SRA has been

approved by the CoC with requisite vote share. This resolution plan duly

approved by the CoC with 89.05% vote share was placed before the

Adjudicating Authority which has already approved the resolution plan. In the

instant case, we find that when the resolution plan came up for consideration

and approval before the Adjudicating Authority, the SRA improvised and

upwardly revised its offer by way of an affidavit agreeing to pay 100% of the

principal amount of the Homebuyers as against refund of approximately 40%

of the claim amount admitted by the RP which was initially contained in the

CoC approved resolution plan. This amount was acceptable to the

Homebuyers and has not been objected to by any of the 77 Homebuyers. The

orders of the Adjudicating Authority in I.A. 2319/2023 approving the

resolution plan has not been challenged as can be seen from the prayers

contained in the immediately preceding paragraph.

33. The moot question before us therefore is whether in the given

circumstances, the Appellant as a disgruntled solitary homebuyer or at best

representing 77 Homebuyers can raise objections against the collective

business decision taken by the CoC approving the resolution plan of the SRA.

In the present matter at hand, neither any contravention of law nor material

irregularity has been brought on record. It is settled law that once the CoC

has approved the resolution plan by requisite majority and the same is in

consonance with applicable provisions of law and nothing has come to light

Company Appeal (AT) (Insolvency) No. 1542 of 2023 25

to show that the RP had committed any material irregularities in the conduct

of the CIRP proceedings, the same cannot be a subject matter of judicial

review and modification. In any case, quite apart from the fact that the

resolution plan is already under implementation it has also not been

controverted by the Appellant that all the 77 Homebuyers including the

Appellant have accepted the offer of 100% of their principal amount from the

SRA. That being the case, the Appellant being a dissatisfied Homebuyer in a

hopelessly minority position, he has no option but to 'sail along' or 'drag along'

with the overwhelming majority which has accepted the resolution plan in

terms of the legal precepts articulated in the Jaypee judgement supra which

is to the effect:

"212.... That is the purport and effect of 'drag along' or 'sail along' provisions in the scheme of the Code. .....

214. The homebuyers as a class shall be deemed to have voted in favour of approval of the resolution plan of NBCC; and once having voted so, any particular constituent of that class cannot be heard in opposition to the plan by way of objection or appeal. The statute, that is IBC, has itself provided for estoppel against any such attempted opposition to the plan by a constituent of the class that had voted in favour of approval. The misplaced assumptions on the part of dissatisfied homebuyers have gone to the extent that they have attempted to put themselves at par with the dissenting financial creditors like ICICI Bank, who carry an entirely different legal status in CIRP, for being not within the class of homebuyers and being of a different class of financial creditors. The said financial creditor has rightly opposed these submissions and has rightly pointed out that its rights in terms of Section 30(2)(b) of the Code stand at an entirely different footing."

Company Appeal (AT) (Insolvency) No. 1542 of 2023 26

34. The intent, objective and purpose of IBC being time bound resolution of

insolvency of the Corporate Debtor, it clearly does not provide any leeway or

scope to dissatisfied individual Homebuyers in a minority like the present

Appellant to override the commercial wisdom of the majority in the CoC. We

not find any merit in the contention of the Appellant to reject the CoC

approved resolution plan which has since been approved by the Adjudicating

Authority. Any indulgence shown would tantamount to derailing the

resolution process and setting the clock back which we cannot countenance.

35. For the foregoing reasons, we are of the considered view that there are

no sufficient and plausible grounds made which warrant any interference with

the impugned order. There is no merit in the appeal. The appeal is dismissed.

No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 19.03.2024 Ram N.

Company Appeal (AT) (Insolvency) No. 1542 of 2023