New Okhla Industrial Development ... vs Ayyagari Viswanadha Sarma Resolution ...

(Arising against the impugned order dated 19.07.2023 passed by the National Company Law Tribunal, New Delhi Principal Bench in I.A. No. 3556 of 2022 & I.A. No. 3392 of 2022, in C.P.(IB) No. 875 OF 2020].

IN THE MATTER OF: Assets Care & Reconstruction Enterprise Limited (Through its Authorized Signatory) 2nd Floor, Mohan Dev Building, 13, Tolstoy Marg, New Delhi - 110001. ...Appellant

Versus

1. Mr. Viswanadha Sarma (Resolution Professional of Arena Superstructures Private Limited) Building 03, Flat 301, My Home Vihanga, Gopanpally Village, Serlingampally Mandal, Hyderabad, Telangana - 500046 ...Respondent No.1

2. Purvanchal Projects Private Limited (Through its Authorised Signatory, Dr. Jagat Singh Thakur) 2nd Floor, Purvanchal Plaza, Mayur Vihar, Phase-II, New Delhi - 110091. ...Respondent No.2

3. Financial creditor in Class (Real Estate Allottee - Home Buyers) Through its Authorized Representative, Mr. Bhim Sain Goyal M-215, Greater Kailash-II, New Delhi, Delhi - 110048 ...Respondent No.3

4. Dhankalash Distributors Private Limited Unit No. 710, 7th Floor, Todi Mansion, 1 Lu Shun Sarani, Kolkata, West Bengal- 700073. ...Respondent No.4 Present:

For Appellant: Mr. Arun Kathpalia & Mr. Abhijeet Sinha, Sr. Advocates with Ms. Heena Kochar, Ms. Diksha Joshi, Mr. Udit Mendiratta, Mr. Shivkrit Rai and Ms. Apeksha Singh, Advocates.

For Respondent: Mr. Vaibhav Gaggar, Sr. Advocate with Mr. Palash Singhai, Mr. Harshal Sareen and Ms. Aashima Gautam, Advocates for RP.

Mr. Gaurav Mitra, Mr. Utkarsh Joshi, Ms. Kanishka Sharma and Ms. Lavanya Pathak, Advocates for Homebuyers.

Mr. Krishnendu Dutta, Sr. Advocate with Mr. Prithu Garg, Ms. Alina Merin Mathew, Mr. Ashutosh Arvind Kumar and Mr. Aryan Bhat, Advocates.

WITH Company Appeal (AT) (Ins.) No. 1117 of 2023

(Arising against the impugned order dated 19.07.2023 passed by the National Company Law Tribunal, New Delhi Principal Bench in C.P.(IB) No. 875 OF 2020].

IN THE MATTER OF:

Dhankalash Distributors Private Limited Unit No. 710, 7th Floor, Todi Mansion, 1 Lu Shun Sarani, Kolkata, West Bengal - 700073 ...Appellant

Versus

1. Ayyagiri Viswanadha Sarma, Resolution Professional Deloitte India Insolvency Professionals, LLP, 7th Floor, Building 10, Tower B, DLF Cyber City, Phase -II, Gurgaon, Haryana - 122002 ...Respondent No.1

Page 2 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 2. Purvanchal Projects Private Limited, SRA LSC A-7, 2nd Floor, Purvanchal Plaza Mayur Vihar, Phase-I, New Delhi - 110091. ...Respondent No.2

3. Assets Care & Reconstruction Enterprises Private Limited ("ACRE") Office: 2nd Floor, Mohandev Building, 13 Tolstoy Marg, New Delhi -110001 ...Respondent No.3

4. Creditors in Class, i.e. Homebuyers Through their Authorised Representative, Mr. Bhim Sain Goyal Address M-215, Greater Kailash-II, New Delhi, Delhi, 110048 ...Respondent No.4

5. Anil Kumar Saxena R/ o, B-118, First floor, Shivalik, Malviya Nagar, New Delhi -110017 ...Respondent No.5

6. Ashish Kumar R/o, Bs 25, Shalimar Bagh, New Delhi- 110088 ...Respondent No.6

Present:

For Appellant:

For Respondent: Mr. Vaibhav Gaggar, Sr. Advocate with Mr. Palash Singhai, Mr. Harshal Sareen and Ms. Asshima Gautam, Advocates for RP.

Mr. Prithu Garg, Mr. Ashutosh Arvind Kumar and Mr. Aryan Bhat, Advocates for SRA.

WITH Company Appeal (AT) (Ins.) No. 1231 of 2023

(Arising against the impugned order dated 19.07.2023 passed by the National Company Law Tribunal, New Delhi Principal Bench in I.A. No. 5361 of 2021 & I.A. No. 5979 of 2022 in C.P.(IB) No. 875 OF 2020].

Page 3 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 IN THE MATTER OF:

New Okhla Industrial Development Authority Having its office at: Administrative Building, Sector 6, NOIDA, Guatam Budhha Nagar, ...Appellant Uttar Pradesh- 201301

Versus 1. Ayyagari Viswanadha Sarma, Resolution Professional Registered address: Building 03, Flat 301, My Home Vihanaga, Gopanally Village, Serlingampally Mandal, Telangana- 500107

Correspondence Address: Deloitte Touche Tohmatsu India Lip, 7th Floor, Building 10, Tower B, DLF Cyber City, Phase -II, Gurgaon, ...Respondent No.1 Haryana - 122002

2. Purvanchal Projects Private Limited, Successful Resolution Applicant Having its registered office at: LSC A-7, 2nd Floor, Purvanchal Plaza Mayur Vihar, Phase-II, New Delhi - 110091. ...Respondent No.2

Present:

For Appellant: Mr. Rachit Mittal, Mr. Parish Mishra, Mr. Shubham Sonthalla, Mr. Kanishk Raj, Ms. Srishti Agrawaal, Mr. Abhishek Sinha and Mr. Shivansh Bansal, Advocates.

Page 4 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 For Respondent: Mr. Palash Singhai, Mr. Harshal Sareen and Ms. Aashima Gautam, Advocates for RP.

Mr. Prithu Garg, Mr. Ashutosh Arvind Kumar and Mr. Aryan Bhat, Advocates for SRA.

Mr. Utkarsh Joshi and Ms. Kanishka Sharma, Advocates for Homebuyers.

JUDGMENT

(30th June, 2026)

INDEVAR PANDEY, MEMBER (T)

COMPANY APPEAL (AT) (Ins.) No. 949 OF 2023

This Appeal has been preferred by Assets Care & Reconstruction

Enterprise Limited ("ACRE")/Appellant, acting in its capacity as trustee

of ACRE-122 Trust and as the sole secured financial creditor of Arena

Superstructures Private Limited ("Corporate Debtor"), challenging the

order dated 19.07.2023 passed by the Learned National Company Law

Tribunal, Principal Bench, New Delhi, (Adjudicating Authority) in C.P. (IB)

No. 875 of 2020. By way of the said order, the Learned Adjudicating

Authority approved the Resolution Plan of Purvanchal Projects Private

Limited (Successful Resolution Applicant") /Respondent No.2

submitted by Resolution Professional/ Respondent No.1 vide I.A. No.

3392 of 2022 and simultaneously rejected the objections raised by the

Appellant in I.A. No. 3556 of 2022 against the said Resolution Plan. The

Homebuyers who are Financial Creditor in Class have been arrayed as

Respondent No.3 and Dhankalash Distributors Pvt. Ltd. (Financial

Page 5 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Creditor) has been arrayed as Respondent No.4. For the sake of

convenience, this appeal would be referred to as First Appeal henceforth.

2. The challenge in the present Appeal essentially arises from the

grievance of the Appellant that despite being a dissenting financial creditor

and the sole secured financial creditor of the Corporate Debtor, the

Approved Resolution Plan failed to secure to the Appellant its minimum

entitlement in terms of Section 30(2)(b) read with Section 53 of the

Insolvency and Bankruptcy Code, 2016. The appellant has made the

following prayers:

Reliefs Sought:

a. Set aside the Impugned Order dated July 19,2023 passed by the Ld. NCLT in inter-alia, LA. No. 3556/2022 and LA. No. 3392/2022 in C.P. (IB) No. 875/ 2020;

b. Declare that the Respondent No. 2's Approved Plan is non- compliant with Section 30(2) of the IBC and related regulations and therefore the Ld. NCLT has erred in approving the same under the mandate of the IBC;

c. Direct for the payment of the liquidation value as per Section 30(2)(b) read with Section 53(1) of the IBC, payable to ACRE as a dissenting financial creditor and quantified at Rs. 1,44,91,91,358/-;

d. During the pendency of this Appeal, stay the operation and implementation of the Impugned Order dated July 19,2023 passed by the Ld. NCLT in inter-alia, LA. No. 3556/2022 and LA. No. 3392/2022 in C.P. (IB) No. 875/2020; e. During the pendency of this Appeal, restrain the RespondentNo.2 from taking over the control of the Corporate Debtor and further taking any steps to implement the Approved Plan; and or f. Pass such other orders or directions as this Hon'ble Appellate Tribunal may be deemed fit and necessary in the facts and circumstances of the present case

Page 6 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 COMPANY APPEAL (AT) (INS.) NO. 1117 OF 2023

3. The Second Appeal being Company Appeal (AT) (Ins.) No. 1117 of

2023 has been preferred by the Appellant, Dhankalash Distributors

Private Limited ("DDPL"), under Section 61 of the Insolvency and

Bankruptcy Code, 2016, assailing the same impugned order dated

19.07.2023 whereby the Adjudicating Authority approved the Resolution

Plan submitted by the SRA, while ignoring and overlooking the objections

raised by the Appellant in I.A. No. 3986 of 2022 concerning irregularities in

the Corporate Insolvency Resolution Process and alleged illegalities in

approval of the Resolution Plan. The Appellant, being the original financial

creditor at whose instance CIRP against CD was initiated is aggrieved by

the dismissal of its objections and approval of the Resolution Plan, has

preferred the present Appeal. In this Appeal. RP is the Respondent No.1;

SRA is the Respondent No.2; Assets Care and Reconstruction

Enterprises (ACRE) is the Respondent No.3; and Creditors in Class

(Homebuyers) are Respondent No.4 in this appeal. In addition, two

registered valuers have also been arrayed as Respondents, viz. Mr. Ashish

Kumar/Respondent No.5 and Mr. Anil Saxena/Respondent No.6.

4. The appellant has made the following prayers in the Appeal:

Relief sought:

A. Set aside and quash the Impugned Order dated 19.07.2023 passed by the Hon'ble National Company Law Tribunal, Principal Bench in IA No. 3392 of 2021 in C.P. (IB) 875 of 2020.

B. Direct the Ld. Adjudicating Authority to adjudicate and dispose of the Restoration Application preferred by the Appellant after giving due consideration to the material facts

Page 7 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 placed before the Ld. Adjudicating Authority as well as this Hon'ble Appellate Tribunal by the Appellant.

C. Direct the Resolution Professional to conduct the CIR Process in a fair and transparent manner giving due consideration to the value brought in by the other Resolution Applicants through their Resolution Plans by having a fruitful discussion as to their feasibility and viability, and thereafter re-conduct the voting process.

D. Pass any other order or orders which this Hon'ble Appellate Tribunal deems fit and proper in the facts and circumstances of the case.

COMPANY APPEAL (AT) (INS.) NO. 1231 OF 2023

5. The Third Appeal being Company Appeal (AT) (Ins.) No. 1231 of 2023

has been preferred by the Appellant, New Okhla Industrial Development

Authority ("NOIDA"), under Section 61 of the Insolvency and Bankruptcy

Code, 2016 (hereinafter referred to as 'Code'), assailing the same impugned

order dated 19.07.2023. The Appellant is aggrieved by the dismissal of its

I.A. No. 5361 of 2021 related to wrongful classification of appellant;

wrongful rejection of interest, time extension charges and farmers'

compensation and subsequent I.A. No. 5979 of 2022 relating to its claims

and concessions allowed to SRA in the Resolution Plan.

6. It is the contention of the appellant that without adequately

adjudicating the objections raised by NOIDA regarding treatment of

statutory dues, lease obligations, reliefs and concessions sought under the

Resolution Plan and the effect of the approved plan upon the rights and

interests of the statutory development authority; the resolution plan has

been approved by the Ld. AA. The following prayers have been made in this

appeal:

Page 8 of 91

CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Reliefs Sought

a) That this Hon'ble Appellate Tribunal be pleased to set aside the impugned order dated 19.07.2023 passed by the Hon'ble NCLT, Principal Bench, New Delhi in CP(IB) No.875(PB)/2020.

b) That this Hon'ble Appellate Tribunal be pleased to pass any such reliefs and directions as this Hon'ble Tribunal deems fit in the facts and circumstances of the case.

7. All the three Appeals arise from the common impugned order dated

19.07.2023 passed in CP (IB) No. 875 (PB)/2020 in the CIRP of Arena

Superstructures Private Limited and involve interconnected questions

regarding the approved Resolution Plan. They were heard together and are

being decided by this common judgment.

FACTS OF THE CASE

8. Brief facts of the case relevant to disposal of these three appeals are

as follows:

(i) The Corporate Debtor - Arena Superstructures Private Limited, is

a company engaged in the business of construction, development,

purchase and sale of residential and commercial properties. The

Corporate Debtor was also the promoter of a residential real estate

project known as "Lotus Arena-I", situated at Plot No. SC-01/A2,

Sector-79, Noida, Uttar Pradesh.

(ii) The Corporate Insolvency Resolution Process ("CIRP") against the

Corporate Debtor commenced pursuant to a petition filed under

Section 7 of the Code by Dhankalash Distributors Private Limited, an

Page 9 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 unsecured financial creditor of the Corporate Debtor. The Ld.

Adjudicating Authority, by an order passed on 29.10.2020 in C.P. (IB)

No. 875 of 2020, admitted the said petition and initiated CIRP against

the Corporate Debtor. Mr. Pawan Kumar Singhal was appointed as

the Interim Resolution Professional.

(iii) Subsequently, by an order dated 09.06.2021, the Adjudicating

Authority replaced the Interim Resolution Professional and appointed

Respondent No.1, Mr. Viswanadha Sarma, as the Resolution

Professional of the Corporate Debtor. The new Resolution Professional

decided to restart the entire resolution process and accordingly

published a fresh Form-G on 30.06.2021 inviting fresh Expressions

of Interest from resolution applicants.

(iv) During the 10th meeting of the Committee of Creditors held on

08.09.2021, the Resolution Professional informed the CoC members

that he had interacted with two registered valuers, namely Mr. Ashish

Kumar and Mr. Anil Saxena, appointed by the erstwhile IRP for

determination of the liquidation value of the Corporate Debtor. These

valuers had originally submitted their valuation reports on

05.02.2021 and 24.05.2021 respectively. However, the Resolution

Professional stated that certain "incremental information" had

allegedly not been considered by the valuers while preparing their

original assessments. Consequently, the said additional information

was shared with the valuers, pursuant to which both valuers

Page 10 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 submitted addenda revising the liquidation value of the Corporate

Debtor substantially downward.

(v) As per the original valuation conducted by 1st Valuer Mr. Anil

Saxena, the liquidation value of the land and building assets of the

Corporate Debtor had been assessed at Rs. 428,78,03,749/-.

However, after consideration of the additional information supplied

by the Resolution Professional, the reassessed liquidation value was

drastically reduced to Rs.159,20,79,150/-. Similarly, the 2nd Valuer

Mr. Ashish Kumar, who had originally valued the Corporate Debtor

at Rs.412,94,45,763/-, revised the liquidation valuation downward to

Rs.141,89,58,164/-.

(vi) Following issuance of the fresh Form-G, six prospective resolution

applicants submitted their respective resolution plans. These

applicants included Ace Infracity Developers Private Limited in

consortium with Campbell Advertising Private Limited, Alpha Corp

Development Private Limited, Eldeco Infrastructure and Properties

Limited, Hawelia Builder Private Limited, Satya Developers Private

Limited and Purvanchal Projects Private Limited. The plans were

opened and deliberated upon before the Committee of Creditors

('CoC') during the 10th CoC meeting held on 08.09.2021.

(vii) Punjab National Bank Housing Finance Limited (PNBHFL), which

was a member of the Committee of Creditors, filed I.A. No. 4546 of

2021 seeking revision of admitted and verified claims of the

homebuyers constituting the financial creditors in class. Later on,

Page 11 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 PNBHFL by an Assignment Agreement dated 25.04.2022, assigned its

debt in favour of the ACRE. Consequently, the Appellant stepped into

the shoes of the assignor financial creditor and acquired membership

in the Committee of Creditors with a voting share of 28.60%. ACRE

also became the sole secured financial creditor of the Corporate

Debtor with an admitted debt amounting to Rs.200,27,42,110/-.

(viii) In the 16th meeting of the Committee of Creditors held on

18.05.2022, the Resolution Professional discussed the process for

submission of revised resolution plans and proposed 16.06.2022 as

the last date for receipt of such revised plans. The said proposal was

approved by the Committee of Creditors.

(ix) In the 17th meeting of the Committee of Creditors convened on

17.06.2022, the resolution applicants were invited to present their

plans before the Committee of Creditors. During these deliberations,

ACRE raised concerns regarding the evaluation matrix, treatment of

dissenting financial creditors and the necessity of determining

compliance with Section 30(2)(b) of the Code before tabling the plans

for voting. The Resolution Professional acknowledged that further

discussions on timelines and compliance issues would take place in

subsequent meetings.

(x) During the 18th meeting of the CoC held on 23.06.2022, the

Resolution Professional informed the members that the resolution

plans would be put to vote on either 30.06.2022 or 01.07.2022.

Thereafter, on 28.06.2022, the Resolution Professional circulated

Page 12 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 compliance reports and a comparative analysis chart in relation to all

resolution plans received for the Corporate Debtor. ACRE addressed

a detailed email dated 29.06.2022 to the Resolution Professional

raising concerns regarding non-compliance of the resolution plans

with Section 30(2)(b) read with Section 53 of the IBC, absence of

implementation mechanisms under Regulation 38(2)(a) of the CIRP

Regulations, and uncertainty regarding release of the Appellant's

security interest. The Appellant requested the Resolution Professional

to seek clarifications from the respective resolution applicants and

specifically highlighted that unless such concerns were addressed,

the plans could not be treated as compliant with the Code. On

30.06.2022, the Resolution Professional replied to the ACRE's email.

The Resolution Professional asserted that, in his opinion, the plans

submitted by Eldeco, Hawelia, Ace and Purvanchal Projects were

compliant with Section 30(2)(b) of the IBC.

(xi) Thereafter, the 19th meeting of the Committee of Creditors was

held on 01.07.2022 for placing the resolution plans before the CoC

for voting. During the meeting, the ACRE once again expressed

objections concerning non-compliance of certain plans with Section

30(2)(b) read with Section 53 of the IBC and raised apprehensions

regarding the treatment proposed for dissenting financial creditors.

The Appellant also sought clarifications from Hawelia Builder Private

Limited and Purvanchal Projects Private Limited, both of whom

subsequently furnished written responses. The Resolution

Page 13 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Professional thereafter proceeded to put the plans to vote from

03.07.2022 till 09.07.2022.

(xii) Upon completion of voting, the Resolution Plan submitted by

Purvanchal Projects Private Limited was approved on 10.07.2022

with 71.11% voting share. Appellant/ACRE had voted in favour of

another competing resolution plan submitted by Hawelia Builder

Private Limited. Another financial creditor Dhankalash with 0.288%

voting rights voted in favour of the Resolution Plan submitted by ACE

Infracity.

(xiii) Thereafter, the Resolution Professional filed I.A. No. 3392 of 2022

before the Learned Adjudicating Authority under Sections 30(6) and

31 of the IBC seeking approval of the Resolution Plan submitted by

Purvanchal Projects Private Limited (SRA). Simultaneously, ACRE

filed I.A. No. 3556 of 2022 objecting to approval of the plan on the

ground that the same failed to provide the Appellant its minimum

statutory entitlement as a dissenting financial creditor and instead

sought to compel the Appellant to recover substantial dues from

third-party debtors.

(xiv) The Insolvency and Bankruptcy Board of India also intervened

in the proceedings through I.P. No.4 of 2023 and opposed ACRE's

interpretation regarding entitlement of dissenting financial creditors

under the Code.

(xv) Ultimately, by the Impugned Order dated 19.07.2023, the Ld.

Adjudicating Authority approved the Resolution Plan submitted by

Page 14 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Purvanchal Projects Private Limited, allowed the Approval Application

filed by the Resolution Professional and rejected the objections filed

by ACRE, Dhankalash and NOIDA in their respective IAs.

Submissions of ACRE in CA (AT) (Ins.) No. 949 of 2023

9. Ld. Sr. Counsels Mr. Arun Kathpalia and Mr. Abhijeet Sinha

appearing for Appellant/ACRE submitted that it is a Dissenting Financial

Creditor ("DFC") having voted against the Resolution Plan submitted by

Respondent No. 2/Purvanchal Projects Private Limited (SRA). The

Resolution Plan, though approved by 71.11% voting share of the Committee

of Creditors and thereafter approved by the Ld. Adjudicating Authority, is

contrary to Section 30(2)(b) read with Section 53(1)(b) of the Code, 2016,

since the same fails to provide the minimum liquidation value legally

payable to ACRE as a dissenting secured financial creditor.

10. Ld. Counsel submits that ACRE's admitted claim amounting to

Rs.200,27,42,110/- is fully secured by way of mortgage over the Corporate

Debtor's real estate project situated on 5.15 acres of land at Plot No. SC-

02/N, Sector-150, Noida ("Project"). It is submitted that the Information

Memorandum as well as the Resolution Plan itself expressly acknowledge

that ACRE's mortgage extends over the entire project of the Corporate

Debtor, including both sold and unsold units. Thus, there is no dispute

regarding the subsistence and extent of the mortgage rights of ACRE over

the entirety of the project assets.

Page 15 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

11. It is further submitted that apart from the mortgage over the Project

land and units, ACRE also possesses a hypothecation over the receivables

arising from the Project. Such receivables include receivables from 858 sold

units amounting to Rs.328.61 crores and receivables from unsold units

amounting to Rs.213 crores. The existence of such hypothecation is

admitted not only in the Information Memorandum and Resolution Plan,

but also in the reply filed by the Successful Resolution Applicant itself.

Accordingly, the entire admitted debt of ACRE stands fully secured by

mortgage and hypothecation. ACRE submits that the Respondents cannot

selectively ignore portions of the admitted security interest while

determining ACRE's entitlement under the Code.

12. Ld. counsel submits that Section 30(2)(b) of the IBC categorically

mandates that a dissenting financial creditor must receive an amount not

less than what such creditor would have received under Section 53(1) in the

event of liquidation of the Corporate Debtor. Section 53(1)(b) further

provides that secured creditors relinquishing their security interest rank

immediately after CIRP costs and pari passu with workmen's dues. It is

submitted that the Explanation to Section 53 further clarifies that where

debts rank equally, either all debts are to be paid in full or, if insufficient

funds are available, distribution must occur in equal proportion within the

same class.

13. It is submitted that ACRE and the workmen belong to the same class

of recipients under Section 53, since ACRE is the sole secured financial

creditor of the Corporate Debtor. Consequently, after deduction of CIRP

Page 16 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 costs, the entire liquidation value ought to have been distributed

proportionately between ACRE and the workmen. The liquidation value of

the Corporate Debtor, as determined by the Registered Valuers on

29.10.2020, was Rs.151,00,41,336/-. After deducting estimated CIRP costs

of approximately Rs. 6 crores, the remaining liquidation value comes to

Rs.145,00,41,336/-. Out of this amount, the workmen's entitlement is only

Rs.8,49,978.04, whereas ACRE's entitlement works out to

Rs.144,91,91,357.95, which represents 72.36% of its admitted debt.

14. ACRE submits that despite the aforesaid statutory entitlement, the

Resolution Plan proposes payment of merely Rs. 70 crores to it, payable

over a staggered period of 42 months from the Transfer Date. Such payment

is grossly below the statutory minimum guaranteed under Section 30(2)(b)

read with Section 53(1)(b) of the IBC and therefore renders the Resolution

Plan non-compliant with mandatory provisions of law.

15. Ld. counsel submits that ACRE's entire admitted debt remains fully

secured not only by way of mortgage over the Project, but also by way of

hypothecation over receivables arising from sold and unsold units. As per

the Resolution Plan itself, the net receivables from 858 sold units amount

to Rs.335,38,32,853/-, while the value of 222 unsold units over which

ACRE has an uncontested mortgage amount to Rs.214,23,00,000/-. Thus,

the aggregate value of receivables and assets over which ACRE possesses

security interest exceeds Rs.549.61 crores.

Page 17 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

16. It is submitted that the calculations undertaken by the RP and SRA

while determining ACRE's entitlement as a dissenting financial creditor

completely ignore the hypothecation over receivables despite such

hypothecation being expressly admitted in all material documents. The

Impugned Order also fails to take note of this crucial aspect. The Appellant

submits that Section 3(31) of the IBC specifically includes hypothecation

within the definition of "security interest". Therefore, the valuable

contractual and statutory security rights of ACRE over receivables

amounting to nearly Rs.550 crores cannot simply be extinguished or

disregarded.

17. The counsel further submits that neither the RP nor the SRA had

previously argued before the Learned Adjudicating Authority that

hypothecation rights stood extinguished by operation of the Resolution

Plan. Such contention was allegedly raised for the first time during final

arguments before this Appellate Tribunal. Therefore, the issue was never

properly adjudicated upon by the Learned Adjudicating Authority while

passing the Impugned Order.

18. Ld. counsel submits that the contention of the RP and SRA that

ACRE's security interest is limited to only 25.64% of the Project is based

upon an erroneous interpretation of Section 11(4)(h) of the Real Estate

(Regulation and Development) Act, 2016 ("RERA"). It is submitted that

Section 11(4)(h) merely restricts promoters from creating mortgages or

charges over apartments after execution of agreements for sale. However,

the provision itself contemplates the possibility of such mortgages being

Page 18 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 created and merely safeguards the rights of homebuyers by ensuring that

such mortgage does not prejudice their interests. The provision nowhere

invalidates the mortgage itself or extinguishes the rights of the mortgagee.

19. It is submitted that under the present Resolution Plan, the interests

of homebuyers are already protected since the SRA has undertaken to

complete the Project and deliver possession of units to allottees. Therefore,

no conflict exists between the rights of homebuyers and the statutory

entitlement of ACRE as a dissenting secured financial creditor.

Furthermore, the valuation reports already factor in the costs of

construction and completion of the Project while arriving at the liquidation

value. Consequently, payment of ACRE's lawful entitlement would not

adversely affect homebuyers in any manner.

20. Without prejudice, ACRE further submits that even assuming that its

mortgage rights over 858 sold units stand affected by Section 11(4)(h) of

RERA, ACRE nevertheless continues to possess hypothecation rights over

receivables from those units amounting to Rs. 328.61 crores, apart from

uncontested mortgage and hypothecation rights over the 222 unsold units

valued at Rs.214.23 crores. Thus, even on the Respondents' own

interpretation, ACRE remains substantially secured.

21. Ld. Counsel further distinguishes the judgment relied upon by the

SRA in Kotak Mahindra Bank Limited v. Resolution Professional of Universal

Buildwell Private Limited, Company Appeal (AT) (Ins.) No. 661 of 2021. It is

submitted that in Kotak, the entire sale consideration for the units had

Page 19 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 already been received and no further receivables existed. Moreover, in that

case, the secured creditor did not possess hypothecation rights over

receivables, unlike the present matter. Hence, the said judgment has no

applicability to the facts of the present case.

22. Ld. Counsel submits that the interpretation sought to be advanced

by the RP and SRA regarding Section 11(4)(h) of RERA stands directly

contradicted by the valuation reports prepared by the Registered Valuers

themselves. It is submitted that the addendum to the valuation report dated

03.09.2021 prepared by Registered Valuer Mr. Anil Kumar Saxena records

that the total value of the 858 sold units over which ACRE's mortgage rights

subsist is Rs.722,59,57,994/-. After deducting the amount already received

from homebuyers amounting to Rs.387,21,25,141/, the net receivables

from sold units work out to Rs.335,38,32,853/-. In addition, the 222 unsold

units are valued at Rs.214,23,00,000/-. Consequently, the total receivables

and assets secured in favour of ACRE amount to Rs.549,61,32,853/-. The

Valuation Report further notes that the total construction expenditure

required for completion of the Project is Rs.322,17,34,067/-. After

accounting for the same, the net market value was assessed at

Rs.227,43,98,786/-.

23. It is submitted that the aforesaid valuation exercise clearly

demonstrates that the rights of homebuyers were fully accounted for while

arriving at the liquidation and fair market value. The liquidation value of

Rs.159,20,79,150/- also specifically factors in construction costs and

contemplates completion and delivery of all units. Thus, the valuation itself

Page 20 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 proceeds on the footing that receivables from sold units form part of the

realizable value of the Corporate Debtor.

24. Similarly, the addendum prepared by Registered Valuer Mr. Ashish

Kumar also computes expected receivables from the Project at

Rs.950,15,73,994/-, out of which Rs.387,21,25,141/- had already been

received from homebuyers. After considering construction costs of

Rs.360,23,65,761/-, the fair market value was arrived at Rs.

202,70,83,092/- and the discounted liquidation value at

Rs.141,89,58,164/-. These figures also fully account for completion costs

and homebuyers' interests.

25. ACRE submits that the valuation reports fundamentally negate the

Respondents' contention that ACRE's security interest is confined to merely

25.64% of the Project. The valuers deducted construction costs for the

entire Project while determining liquidation value, rather than restricting

such deductions only to unsold units. Therefore, it would be wholly

inconsistent and inequitable to burden ACRE's valuation with liabilities

relating to the entire Project while simultaneously restricting its security

interest to a small fraction thereof. It is further submitted that the RP's

subsequent deduction of the 858 sold units amounts to impermissible

"double dipping" designed solely to artificially depress the value of ACRE's

security interest.

26. The counsel submits that Clause 7.3(iii)(A)(j) of the Resolution Plan

seeks to justify payment of only Rs. 70 crores to ACRE on the basis that

Page 21 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 ACRE would continue to retain rights against co-borrowers, guarantors and

third-party securities. It is submitted that the Resolution Plan seeks to

satisfy ACRE's statutory entitlement partly through deferred payment and

partly through enforcement of third-party securities. Such an arrangement

is contrary to Section 30(2)(b) of the IBC.

27. It is submitted that Section 53 of the IBC contemplates payment in

accordance with the waterfall mechanism strictly from the assets of the

Corporate Debtor. The debts of each class must be satisfied before

distributions are made to lower-ranking stakeholders. However, under the

impugned Resolution Plan, ACRE's payment has been deferred into four

tranches spread over 42 months, namely Rs. 14 crores in the 33rd month,

Rs. 14 crores in the 36th month, Rs. 21 crores in the 39th month, and Rs.

21 crores in the 42nd month from the Transfer Date. Such staggered and

delayed payments cannot satisfy the mandatory statutory protection

granted to a dissenting secured creditor.

28. The Appellant further submits that Section 30(2)(b) requires payment

to a dissenting financial creditor to come from the coffers of the Successful

Resolution Applicant or the Corporate Debtor itself. The burden of

recovering the statutory minimum entitlement cannot be shifted onto third-

party recoveries at the expense and risk of the dissenting creditor.

29. Reliance has been placed upon the judgment of the Hon'ble Supreme

Court in Jaypee Kensington Boulevard Apartments Welfare Association &

Ors. v. NBCC (India) Ltd. & Ors., (2022) 1 SCC 401, wherein it was held that

Page 22 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 payment under Section 30(2)(b) must be in monetary terms and may

include enforcement of security interest. However, the Appellant submits

that the "security interest" referred to therein pertains only to security

interests created over assets of the Corporate Debtor and not third-party

securities. This is evident from the fact that Section 53 itself deals

exclusively with distribution of proceeds from liquidation of assets of the

Corporate Debtor. Therefore, third-party guarantees or securities cannot

form part of the computation of statutory entitlement under Section

30(2)(b).

30. The counsel for the Appellant submits that though the commercial

wisdom of the Committee of Creditors ordinarily deserves deference, the

same is not absolute and cannot override mandatory statutory protections

granted under Section 30(2)(b) of the IBC. Reliance is placed upon the

judgment of the Hon'ble Supreme Court in Committee of Creditors of Essar

Steel India Limited v. Satish Kumar Gupta, (2020) 8 SCC 531, wherein it was

expressly held that judicial review is permissible to ensure that the

commercial decision of the CoC remains within the four corners of Section

30(2) of the Code.

31. It is further submitted that the discretion vested in the CoC under

Section 30(4) remains subject to compliance with Section 30(2)(b). The

Hon'ble Supreme Court in Essar Steel has categorically held that while the

CoC enjoys discretion regarding feasibility and viability of plans and

distribution mechanisms, such discretion remains subordinate to

compliance with statutory safeguards protecting stakeholders. The use of

Page 23 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 the expression "shall" in Section 30(2)(b) clearly indicates the mandatory

nature of the provision, whereas Section 30(4) merely uses the expression

"may". Hence, a Resolution Plan that violates the statutory entitlement of a

dissenting financial creditor can and ought to be interfered with in judicial

review.

32. The Appellant submits that Section 30(2)(b) is a beneficial provision

intended to protect vulnerable members of the CoC. In the present case,

ACRE, despite being the sole institutional secured financial creditor, held

only 28.60% voting share, whereas homebuyers constituting financial

creditors in a class held 71.11% voting share. Consequently, ACRE's

interests stood entirely vulnerable to the will of the majority.

33. It is submitted that the comparative chart circulated by the RP itself

demonstrates that other competing Resolution Plans offered significantly

higher payouts to ACRE and operational creditors while simultaneously

ensuring delivery of units to homebuyers without escalation in costs.

Hawelia Builder Private Limited offered Rs. 130 crores to ACRE payable

within 32 months, Ace Infra offered Rs. 110 crores, and Eldeco offered Rs.

90 crores, whereas Purvanchal's plan offered only Rs. 70 crores payable

over 42 months. Despite this, the CoC approved the plan offering the least

value to ACRE and the least infusion towards discharge of institutional

debt. ACRE submitted that keeping in view the interests of homebuyers and

overall value maximization, it voted in favour of the Resolution Plan

submitted by Hawelia Builder Private Limited, since the same proposed the

Page 24 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 highest recovery for financial and operational creditors while also ensuring

completion of the Project without additional burden upon homebuyers.

34. It is finally submitted that the approval of Purvanchal's Resolution

Plan reflects an arbitrary exercise of majority voting power by the CoC,

which failed to maximize the value of assets of the Corporate Debtor in

accordance with the core objectives of the IBC. The CoC ignored

substantially higher monetary offers without any corresponding benefit to

the financial creditors in class and thereby unfairly prejudiced the sole

institutional secured creditor. Such misuse of commercial wisdom

artificially depresses the statutory entitlement of the dissenting financial

creditor and undermines the integrity of the insolvency resolution process.

Therefore, the Impugned Order approving such Resolution Plan deserves to

be set aside by this Hon'ble Tribunal.

Submissions of Resolution professional

35. Ld. Sr. Counsel Vaibhav Gaggar, appearing on behalf of the

Resolution Professional, submitted that two loan facilities were extended by

Punjab National Bank Housing Finance Limited ("PNBHFL") under a

Composite Loan Agreement dated 08.03.2017 in favour of the Corporate

Debtor, Fest Homes Developers Private Limited and Villa Stone Propbuild

Private Limited as borrowers and co-borrowers. On the insolvency

commencement date, an amount of Rs.113,15,56,725.92/- was

outstanding under Facility-I and an amount of Rs.90,84,40,732.48/- was

outstanding under Facility-II. The said facilities were secured through

various securities including mortgage over the project land of the Corporate

Page 25 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Debtor comprising land admeasuring 50,000 sq. meters along with

structures thereon situated at Sector-79, Noida, as well as mortgage over

land admeasuring 20,863 sq. meters situated at Sector-150, Noida,

belonging to the co-borrower i.e. Villa Stone Propbuild Private Limited.

Apart from this, hypothecation over project receivables; pledge of shares;

personal guarantees; corporate guarantees; and DSRA of Rs.10 Crores were

also created in favour of the lender. Therefore, it is evident that apart from

the project land of the Corporate Debtor, additional security in the form of

co-borrower's land was also available in respect of the said loan facilities.

36. It is submitted that the principal contention raised by the ACRE is

that the Resolution Plan allegedly violates Section 30(2)(b) read with Section

53(1) of the Code. According to the ACRE, under Section 30(2)(b), the

amount payable to a dissenting financial creditor cannot be less than the

amount payable to such creditor under Section 53 in the event of liquidation

of the Corporate Debtor. The Appellant has further relied upon the waterfall

mechanism contained in Section 53(1) and contended that after payment of

CIRP costs and workmen dues, the entire liquidation value ought to have

been distributed to the Appellant as it claims to be the sole secured creditor

of the Corporate Debtor.

37. He submitted that ACRE has further argued that the liquidation value

of the Corporate Debtor is Rs.151 Crores as reflected in Form-H and since

its admitted debt is approximately Rs.200 Crores, the entire liquidation

value ought to be paid to it. The Appellant has also contended that even

assuming its security interest is restricted to unsold inventory, it

Page 26 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 additionally possesses security interest and hypothecation over receivables

of the project amounting to approximately Rs.350 Crores as on the

insolvency commencement date.

38. Ld. Counsel submits that a conjoint reading of Sections 30(2)(b),

30(4), 52 and 53 of the Insolvency and Bankruptcy Code clearly establishes

that the minimum liquidation value payable to a dissenting secured

financial creditor is linked to and limited by the value of the security interest

held by such creditor. The Appellant's contention that its entire admitted

claim should fall under Section 53(1)(b) merely because of a deemed

relinquishment of security under Section 53 is legally untenable and

contrary to the scheme of the Code.

39. It is submitted that even if there is a deemed relinquishment under

Section 53 at the stage of approval of a Resolution Plan, the amount

recoverable by a secured creditor under Section 53(1)(b) cannot exceed the

realizable value of the underlying security interest. Sections 52 and 53 when

read harmoniously make it abundantly clear that the secured creditor is

only entitled to recover the realizable value of the security, which could

otherwise have been enforced outside the liquidation estate. Consequently,

where the admitted debt exceeds the realizable value of the security interest,

only the secured portion can rank under Section 53(1)(b), whereas the

balance unpaid portion would necessarily fall within the lower priority

category contemplated under Section 53(1)(e).

Page 27 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

40. He further submitted that Section 53(1)(e)(ii) itself supports the

aforesaid interpretation since it specifically refers to "any amount unpaid

following the enforcement of security interest". Thus, the statutory

framework itself recognizes that the secured creditor may recover only to

the extent of realizable security value and the remaining unpaid debt stands

relegated to a lower category. The Insolvency Law Committee Report dated

20.02.2020 also recognizes and clarifies this position in clauses 7.1 to 7.4

thereof.

41. Ld. Counsel submitted that the Hon'ble Supreme Court in Committee

of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. has

categorically held that Section 30(2)(b) refers to Section 53 only for ensuring

minimum payment and does not restrict the Committee of Creditors from

classifying creditors as secured or unsecured and distributing amounts on

the basis of the value of their security interests. The Hon'ble Supreme Court

further recognized that secured creditors may be paid on the basis of the

realizable value of their security, which otherwise they could have realized

independently outside the insolvency process.

42. He submitted that the legislative intent behind Section 53(1)(b)(ii) has

always been that a secured creditor can realize only the amount equivalent

to the value of its security interest, where the debt exceeds the value of the

security. In this regard, the amendment introduced vide IBC Amendment

Act, 2026 further clarifies the legislative intent by expressly recognizing that

where the debt exceeds the value of security, the creditor shall be treated

as secured only to the extent of the secured amount. The said amendment

Page 28 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 is clarificatory in nature and clarifies the legislative position existing since

inception of the Code.

43. It is submitted that ACRE is merely the successor-in-interest of

PNBHFL, the original lender, and therefore cannot claim any superior or

enlarged rights beyond what was available to the original lender itself. In

this regard, reliance is placed upon the Demand Notice dated 22.02.2022

issued by PNBHFL under Section 13(2) of the SARFAESI Act, wherein the

lender itself had specifically restricted its claim to the unsold inventory of

the project. Consequently, ACRE's security interest is also confined only to

the unsold inventory and cannot extend to units already allotted to

homebuyers.

44. It is further submitted that Section 11(4)(h) of the Real Estate

(Regulation and Development) Act, 2016 prohibits creation of mortgage or

charge over units already allotted to homebuyers. Therefore, any charge

purportedly created over units sold prior to 27.03.2017 in favour of PNBHFL

would be legally unenforceable. Hence, the charge of ACRE can only extend

to unsold flats and no right can be asserted over units already allotted to

homebuyers.

45. Ld. Counsel submits that it is now well settled that agreements

executed between builders and homebuyers create enforceable rights in

favour of homebuyers even prior to execution of conveyance deeds, and

such rights take precedence over the claims of secured creditors. Reliance

is placed upon the judgment of the Hon'ble Supreme Court in Bikram

Page 29 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Chatterji and Ors. v. Union of India and Ors. and the judgment of this Hon'ble

Appellate Tribunal in Kotak Mahindra Bank Limited v. Resolution

Professional of Universal Buildwell Private Limited, wherein it has been held

that flats allotted to homebuyers do not form part of the assets of the

Corporate Debtor for the purpose of determining liquidation value payable

to dissenting secured creditors.

46. He submits that in light of the aforesaid legal position, the Resolution

Professional correctly computed the value of ACRE's security interest. The

project consisted of 1080 flats/units, out of which 858 flats had already

been allotted to homebuyers as on the insolvency commencement date.

Since the project was only around 30% complete, conveyance deeds had not

yet been executed. However, as on the date of creation of mortgage, 806

units having an area of approximately 15,21,415 sq. ft., representing nearly

74.36% of the total project area, had already been allotted. Therefore, only

25.64% of the project area comprising 274 flats remained unsold as on the

date of creation of security interest. Consequently, the value of ACRE's

security interest was correctly computed at Rs.38,71,74,598.55/-, being

25.64% of the total liquidation value of Rs.151,00,41,336/-.

47. It is submitted that the ACRE cannot seek to independently rely upon

project receivables for the purpose of determining minimum liquidation

entitlement. The registered valuers appointed by the Resolution

Professional had categorically stated in their valuation reports that the

value of receivables had already been factored into the overall valuation of

the project and therefore receivables were not separately valued.

Page 30 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Significantly, the valuation reports were never challenged by any

stakeholder at any stage of the CIRP process.

48. It is submitted that the valuation of the project was undertaken on

the assumption that the incomplete project would ultimately be completed

and the flats would thereafter be handed over or sold. This necessarily

means that the receivables would be utilized towards completion and

construction costs and would not remain independently available for

distribution to secured creditors. Accordingly, the liquidation value of

Rs.151 Crores already represents the completed project value after

accounting for utilization of receivables towards construction and allied

costs.

49. Ld. Counsel submits that Section 4(2)(l)(D) of RERA mandates that

70% of receivables collected from homebuyers are required to be maintained

in an escrow account and can be utilized only towards construction and

land costs. The remaining 30% may be utilized only for limited project-

related purposes and contingencies. Therefore, such receivables cannot be

freely appropriated or distributed in favour of secured creditors outside the

project framework.

50. He submits that the legal fiction under Section 30(2)(b) requires that

the Corporate Debtor be notionally treated as liquidated on the insolvency

commencement date. In such a hypothetical liquidation scenario,

homebuyers would not be expected to continue making future payments

towards their units and therefore no future receivables would remain

Page 31 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 available. Regulation 2(k) of the CIRP Regulations itself defines liquidation

value as the estimated realizable value of the assets of the Corporate Debtor

if liquidated on the insolvency commencement date. Thus, future

receivables cannot be included separately for determination of liquidation

entitlement.

51. It is further submitted that in the event of liquidation of the Corporate

Debtor, there could be no future cash flows or receivables from the project

and consequently ACRE could never have enforced or realized such

receivables independently. It is also pertinent to mention that the actual

CIRP cost in the present matter is Rs.13,86,60,438/-.

52. Ld. Counsel finally submits that in view of the aforesaid facts and

settled legal position, the Resolution Plan approved by the Learned

Adjudicating Authority is fully compliant with the provisions of the

Insolvency and Bankruptcy Code, 2016 and ACRE has failed to establish

any violation of Section 30(2)(b) or Section 53 of the Code and seeks

dismissal of the Appeal.

Submissions of Successful Resolution Applicant/ Respondent No. 2

53. Ld. Sr. Counsel Mr. Krishnendu Dutta appearing for SRA submitted

that the entire challenge raised by the Appellant/ ACRE proceeds on a

fundamentally incorrect assumption that its security interest extends over

the whole project including units already allotted to homebuyers. It was

submitted that such a contention is directly contrary to the provisions of

the Real Estate (Regulation and Development) Act, 2016 ("RERA"), settled

Page 32 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 judicial precedents, and even the Appellant's own documents. It was

contended that Section 11(4)(h) of RERA expressly prohibits a promoter

from creating any mortgage or charge over apartments, plots or buildings

once the same have already been allotted to homebuyers. Consequently,

once allotments were made in favour of homebuyers, no valid security

interest could survive in favour of the Appellant or its predecessor with

respect to those allotted units. Therefore, the security interest of ACRE was

confined only to the unsold inventory available in the project.

54. Ld. Counsel further submitted that the Hon'ble Supreme Court in

Bikram Chatterji v. Union of India, [(2019) 19 SCC 161], has categorically

recognized and protected the rights of homebuyers in real estate projects

and held that rights in favour of homebuyers crystallize even prior to

execution of formal conveyance deeds. It was submitted that the Hon'ble

Supreme Court clearly held that the interests of homebuyers take

precedence over the interests claimed by secured creditors and financial

institutions. Reliance was specifically placed upon paragraphs 133 to 139

of the said judgment. It was argued that in view of the law laid down therein,

the Appellant cannot assert any superior right over flats already allotted to

homebuyers.

55. He submitted that the NCLAT in Kotak Mahindra Bank Limited v.

Resolution Professional of Universal Buildwell Private Limited relied upon the

judgment in Bikram Chatterji and categorically held that flats already

allotted to homebuyers do not form part of the assets of the Corporate

Debtor for the purpose of liquidation value determination. It was submitted

Page 33 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 that the Hon'ble Appellate Tribunal therefore held that such allotted flats

cannot be considered while determining the minimum liquidation value

payable to a dissenting secured financial creditor. Reliance was placed upon

paragraphs 5, 7, 19 and 22 to 29 of the said judgment. It was argued that

the same principle squarely applies in the present case and completely

demolishes the Appellant's contention regarding valuation of its security

interest.

56. It is further submitted that a Division Bench of the Rajasthan High

Court in Union Bank of India v. Rajasthan Real Estate Regulatory Authority

& Ors., reported in 2022 (1) RLW 343 (Raj), following the judgment in

Bikram Chatterji, held that Section 11(4)(h) of RERA protects the rights of

homebuyers and in the event of any inconsistency between the SARFAESI

Act and RERA, the provisions of RERA would prevail. It was submitted that

the High Court further held that the rights of homebuyers over allotted units

are superior to the rights claimed by secured creditors. It was pointed out

that the aforesaid judgment has already been affirmed by the Hon'ble

Supreme Court in SLP (Civil) No. 1861-1871/2022 vide order dated

14.02.2022. Therefore, according to the Respondent, the Appellant cannot

claim any enforceable security interest over units already allotted to

homebuyers.

57. Ld. Counsel further submits that even PNBHFL, which was the

predecessor-in-interest of ACRE, had itself acknowledged and admitted in

the SARFAESI notice issued to the Corporate Debtor that its security

Page 34 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 interest extended only to "unsold flats". It was argued that the Appellant is

therefore estopped from now taking a contrary position before this Tribunal.

58. Ld. Counsel submitted that the project in question consists of a total

of 1080 flats/units. It was submitted that as on the Insolvency

Commencement Date, out of the total 1080 units, 858 flats had already

been allotted to homebuyers. It was further submitted that although

conveyance deeds had not yet been executed in favour of homebuyers

because the project was only around 30% complete, the absence of

registered conveyance deeds does not dilute or extinguish the rights already

created in favour of homebuyers under RERA and applicable law.

59. Ld. Counsel referred to paragraphs 27, 28 and 35 of the Reply filed

by the Resolution Professional and submitted that the security interest in

favour of PNBHFL was created only on 20.03.2017. It was submitted that

by that date, 806 units had already been allotted to homebuyers having a

total area of 15,21,415 sq. ft., which constituted approximately 74.36% of

the total project area. Consequently, only 25.64% of the project area

corresponding to 274 flats remained unsold on the date of creation of the

security interest. Therefore, according to the Respondent, the Appellant's

security interest could extend only to those 274 unsold flats and nothing

beyond that.

60. He submitted that the liquidation value attributable to the security

interest available to secured creditors was correctly assessed at

Rs.37,01,96,308/-. It was contended that despite such valuation, the ACRE

Page 35 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 has already been offered and is entitled to receive substantially more under

the approved Resolution Plan. Therefore, the grievance raised by the ACRE

regarding inadequate recovery is entirely misconceived and contrary to the

factual valuation exercise undertaken during CIRP.

61. Ld. Counsel submitted that the ACRE is incorrectly attempting to

claim a separate valuation over "receivables" despite the fact that such

receivables had already been factored into the overall project valuation. It

was submitted that both valuation reports relied upon during CIRP, clearly

recorded that the value of receivables had already been considered while

valuing the project and therefore no separate valuation of receivables was

undertaken.

62. It was further submitted that the valuation exercise proceeded on the

assumption that the incomplete project would eventually be completed and

the flats would thereafter be sold or handed over to homebuyers. Therefore,

the receivables from homebuyers were inherently considered as funds to be

utilized towards construction and project completion and not as separate

distributable assets available for appropriation by the secured creditor. Ld.

Counsel submitted that after accounting for construction costs and

utilization of receivables, the liquidation value of the completed project had

been assessed at approximately Rs. 151 crores. Thus, the Appellant cannot

seek double counting of receivables for enhancing its liquidation

entitlement.

Page 36 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

63. Ld. Counsel fully endorsed the contention of RP regarding

applicability of Section 4(2)(l)(D) of RERA in this case. He submitted that

under the Uttar Pradesh Real Estate Project (Maintenance and Operation of

Separate Bank Account) Directions, 2020, the entire 100% receivables of

the project are required to be maintained in a "separate bank account",

which is specifically designated as a "no-lien account". It was argued that

such statutory protection itself defeats the Appellant's claim that

receivables can be separately enforced or appropriated in satisfaction of its

debt. It was therefore submitted that the provisions of RERA would override

any contractual hypothecation arrangement relied upon by the Appellant.

According to the Respondent, the Appellant cannot enforce any alleged

charge over receivables in a manner contrary to the statutory mandate of

RERA.

64. Ld. Counsel submitted that Section 30(2)(b) of the IBC proceeds on a

deeming fiction that the Corporate Debtor stands liquidated on the

Insolvency Commencement Date for the purpose of determining liquidation

value. It was argued that if liquidation were to take place on the Insolvency

Commencement Date itself, there would be no question of future receivables

arising from homebuyers because homebuyers cannot reasonably be

expected to continue making future payments in respect of an incomplete

and liquidated project.

65. Ld. Counsel referred to Regulation 2(k) of the CIRP Regulations

defining "Liquidation Value" as the estimated realizable value of the assets

of the Corporate Debtor if the Corporate Debtor were to be liquidated on the

Page 37 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 insolvency commencement date. It was submitted that in such a

hypothetical liquidation scenario, no future cash flows or receivables would

exist for realization. Therefore, the Appellant cannot artificially inflate its

liquidation entitlement by relying upon speculative future receivables which

would never arise in liquidation. It was accordingly submitted that in the

event of liquidation, ACRE would not be capable of enforcing or realizing

any future receivables from the project and therefore the same cannot form

part of the liquidation value payable to it under Section 30(2)(b) of the IBC.

66. Ld. Counsel submitted that the ACRE has already been provided an

amount far exceeding the value of its actual security interest. It was

submitted that under the approved Resolution Plan, ACRE is being paid a

total amount of Rs. 70 crores, which is substantially higher than the

liquidation value attributable to its security interest assessed at

approximately Rs. 37 crores. Therefore, the ACRE cannot claim any

prejudice whatsoever under the approved Resolution Plan.

67. Ld. Counsel referred to Clause 7.3(iii)(A)(a) to (d) of the Resolution

Plan which details the debt and security interest of ACRE. It was submitted

that Clause 7.3(iii)(A)(e) specifically provides for payment of Rs. 70 crores to

ACRE in four instalments commencing from the 33rd month and ending in

the 42nd month from the Transfer Date. It was further submitted that

Clause 7.3(iii)(A)(f), additionally preserves ACRE's entitlement to

independently recover from co-borrowers and from other securities

available to it. Thus, ACRE is not only receiving more than its liquidation

Page 38 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 entitlement under the Plan, but is also retaining independent recovery

rights against third-party securities and co-borrowers.

68. Ld. Counsel further submitted that the ACRE has deliberately

concealed from this Tribunal the fact that it is already in possession of

substantial third-party securities. It was submitted that PNBHFL, being the

predecessor-in-interest of ACRE, had already taken symbolic possession

under the SARFAESI Act of the co-borrower's land valued at approximately

Rs. 96.90 crores. Therefore, apart from receiving Rs. 70 crores under the

Resolution Plan, ACRE also continues to enjoy enforcement rights over

additional valuable securities. It was contended that ACRE is thus

positioned to substantially recover, if not entirely recover, its outstanding

debt.

69. It is submitted that the scheme of Sections 52 and 53 of the IBC

clearly demonstrates that a secured creditor is entitled to priority only to

the extent of the value of its actual security interest. It was argued that any

remaining unpaid debt after exhaustion of the value of the security interest

would necessarily rank lower under Section 53(1)(e)(ii). Therefore, ACRE

cannot insist that its entire admitted claim must rank equally as secured

debt irrespective of the actual value of the underlying security available with

it. He submitted that a plain reading of Section 53(1)(e)(ii) itself provides

that "any amount unpaid following the enforcement of security interest"

shall fall under clause (e). It was argued that clauses (b)(ii) and (e)(ii) of

Section 53 must be harmoniously interpreted, and such harmonious

Page 39 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 interpretation clearly supports the position that only debt equivalent to the

realizable value of security can enjoy secured priority.

70. Ld. Counsel further submitted that the aforesaid interpretation

stands fortified by the Insolvency Law Committee Report dated 20.02.2020,

particularly paragraphs 7.1 to 7.4 thereof. It was submitted that the Hon'ble

NCLAT in Small Industries Development Bank of India (SIDBI) v. Vivek

Raheja, Company Appeal (AT) (Ins.) No. 570 of 2022 decided on 16.09.2022,

has also recognized the correct legal position emerging from paragraph 7.3

of the Insolvency Law Committee Report.

71. Ld. Counsel finally submitted that the Legislature itself has now

clarified the legal position through the IBC Amendment Act, 2026 by

inserting an Explanation to Section 53(1)(b)(ii). It was submitted that the

amendment has already received Presidential assent and has been notified

in the Official Gazette on 06.04.2026. Reliance was also placed upon

paragraph 32.5(v) of the Select Committee Report wherein the clarification

has been expressly described as "retrospective". It was therefore submitted

that the position canvassed by the Respondent now stands legislatively

affirmed as well.

Submissions of Intervener/President of Lotus Arena Buyers

Association

72. Ld. Counsel Mr. Gaurav Mitra appearing on behalf of the Intervener,

namely Mr. Vishwanath Sharma, President of Lotus Arena Buyers

Association ("LABA"), submitted that he is supporting the case of the

Page 40 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 homebuyers/financial creditors in a class of CD. He submitted that by order

dated 07.11.2023 passed by this Appellate Tribunal, IA No. 4004 of 2023

filed by the Intervener had already been allowed, thereby permitting the

Intervener to participate in the present proceedings. It was further

submitted that the present submissions are being filed in the appeals filed

by ACRE and NOIDA.

73. The Ld. Counsel submits that ACRE cannot claim any rights either

over the flats already allotted to the homebuyers or over the receivables

arising from such allotted units. Such an action would be directly contrary

to the legislative intent underlying the Real Estate (Regulation and

Development) Act, 2016 ("RERA"), which is a beneficial legislation enacted

specifically for the protection of homebuyers. The Counsel submitted that

the rights of homebuyers stand statutorily protected under Section 11(4)(h)

of RERA and any attempt by ACRE to divert the receivables from

homebuyers towards satisfaction of its claims would defeat the entire

statutory scheme meant for safeguarding allottees.

74. Ld. Counsel supported the contention of RP that the security interest

of ACRE could not be more than National Bank Housing Finance Limited

("PNBHFL"), predecessor of ACRE. In this regard, he invited attention to

Section 13(2) notice of SARFAESI Act, which clearly stipulates that the

secured assets comprised only 171 unsold units and expressly excluded the

909 flats already sold to homebuyers.

Page 41 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

75. The Ld. Counsel submitted that under Section 30(2)(b) of the

Insolvency and Bankruptcy Code, 2016 ("IBC"), the minimum amount

payable to a creditor is required to be computed with reference to the

amount receivable under Section 53 "in the event of liquidation" and not on

the basis of an assumed or hypothetical liquidation value. It was submitted

that the only meaningful asset available with the Corporate Debtor is the

incomplete skeletal structure existing at the project site, which in reality

possesses negligible scrap value. The Counsel argued that the liquidation

value relied upon by ACRE is based upon an unrealistic assumption that

the project is fully constructed, all dues stand paid and flats are complete

and deliverable to homebuyers, which is factually incorrect.

76. It was therefore submitted that in an actual liquidation scenario, the

realizable value would be substantially lower and ACRE would not even be

entitled to receive the amount of Rs. 70 crores already allocated under the

approved resolution plan. Consequently, the argument that the approved

resolution plan unfairly treats ACRE is wholly misconceived and contrary

to the statutory framework governing liquidation distributions.

77. The Ld. Counsel submits that the controversy concerning the extent

of entitlement of a secured creditor now stands clarified by virtue of the

Explanation added to Section 52(b)(ii) through Section 32 of the Insolvency

and Bankruptcy Code (Amendment) Act, 2026. It was submitted that the

Select Committee Report on the Insolvency and Bankruptcy Code

(Amendment) Bill, 2025 specifically clarifies that the amendments are

declaratory and clarificatory in nature and therefore operate retrospectively.

Page 42 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Reliance was placed upon the observations contained in the Select

Committee Report to contend that the legislative intent was always to limit

the entitlement of secured creditors only to the actual value of the

relinquished security interest.

78. Reliance was placed upon the judgment of the Hon'ble Supreme Court

in Sree Sankaracharya University of Sanskrit & Ors. v. Dr. Manu & Anr.,

2023 SCC OnLine SC 640, particularly paragraphs 8.1 to 8.4, 9 and 10.1,

to contend that clarificatory amendments are retrospective in operation. The

Counsel submitted that the actual value of ACRE's security interest is

approximately Rs. 37.8 crores and therefore ACRE cannot seek priority

beyond such value.

79. The Ld. Counsel submitted that ACRE itself had voted in favour of the

resolution plan submitted by Hawelia Builders Private Limited despite the

fact that the Havelia plan also offered ACRE an amount lower than

Rs.144.91 crores, which according to ACRE itself represented its alleged

minimum liquidation entitlement. It was argued that ACRE cannot now

challenge the approved resolution plan on grounds of inadequate allocation

when it had earlier supported another plan offering it substantially lower

value.

80. It was further submitted that the Hawelia plan was financially weak

and commercially unviable. The Counsel pointed out that Hawelia proposed

to spend approximately Rs. 40 crores less towards construction while

simultaneously projecting sales approximately Rs. 60 crores higher than

Page 43 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 those estimated by Purvanchal. This substantial divergence of nearly Rs.

100 crores between lower construction expenditure and significantly

inflated projected sales raised serious doubts regarding the viability and

feasibility of the Hawelia plan.

81. The Counsel submitted that Purvanchal proposed a construction

budget of Rs. 337 crores as against Hawelia's Rs. 299.45 crores, indicating

a more robust commitment towards project completion. Purvanchal also

projected more realistic sales estimates and proposed completion within 36

months as compared to 48 months proposed by Hawelia. It was further

submitted that Purvanchal possessed significantly greater experience,

having completed 21 projects including projects in Greater Noida, whereas

Hawelia had experience of only two low-cost housing projects accompanied

by a history of delays and customer dissatisfaction. Purvanchal additionally

offered multiple benefits to homebuyers including discounts on timely

payments, free maintenance for the first year, sharing of all litigation

recoveries with homebuyers and greater financial contribution towards

Sports City obligations. Further, Purvanchal's payment plan adhered to

RERA-compliant interest rates and construction-linked payments without

seeking modification of Buyer Builder Agreements, unlike Hawelia which

sought imposition of 18% interest and accelerated payment obligations

upon homebuyers. It was also pointed out that Purvanchal provided

representation to homebuyers in the monitoring committee whereas

Hawelia did not contemplate any such representation.

Page 44 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

82. The Ld. Counsel submitted that any enhancement in allocation

towards ACRE would necessarily come at the direct cost of the homebuyers.

It was submitted that Clause 7.3 of the Resolution Plan itself specifically

provides that any increase in allocation to ACRE would effectively require

additional infusion from homebuyers. Therefore, any attempt to increase

ACRE's share would place an unbearable financial burden upon already

distressed homebuyers who have been awaiting possession for more than a

decade.

83. The Ld. Counsel submitted that the allocation of Rs. 70 crores to

ACRE under the approved resolution plan is fully fair, equitable and

consistent with the statutory mandate contained in Explanation 1 to

Section 30(2)(b) of the IBC. It was argued that the distribution mechanism

under the approved plan appropriately balances the interests of all

stakeholders while simultaneously ensuring completion of the project and

protection of homebuyers. The Counsel submitted that the objections raised

by ACRE are commercially untenable and legally unsustainable.

84. The Ld. Counsel also relied upon the judgment of the Hon'ble

Supreme Court in Bikram Chatterji (supra) and judgment of this Appellate

Tribunal in Kotak Mahindra Bank (supra), to support the proposition that

the insolvency framework must be interpreted in a manner that advances

the interests of homebuyers and facilitates completion of projects rather

than liquidation.

Page 45 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Submission of Appellant/ Dhankalash in CA AT Ins. No. 1117 of 2023

85. Ld. Counsel for Dhakalash Distributors who is the unsecured

Financial Creditor and the Appellant in second appeal, has contended that

the Ld. Adjudicating Authority proceeded to approve the Plan without

adjudicating the Appellant's Restoration Application (RA No.111 of 2023)

and without considering the objections raised by the Appellant in IA No.

3986 of 2022. The Appellant's application had been dismissed for non-

prosecution on 04.07.2023 solely due to a technical glitch during the virtual

hearing, despite the Appellant having diligently appeared on all previous

dates. Pursuant to the directions of the Adjudicating Authority, the

Appellant filed written submissions on 18.07.2023; however, the Resolution

Plan was approved on 19.07.2023 without hearing or deciding the

Restoration Application. Consequently, the Appellant was condemned

unheard, causing grave prejudice and rendering the Impugned Order liable

to be set aside for violation of the principles of natural justice.

86. Ld. Counsel further submits that the approved Resolution Plan is

non-compliant with Section 30(2)(b) of the Insolvency and Bankruptcy

Code, 2016. Being a dissenting Financial Creditor, the Appellant was

entitled to receive at least the amount payable under the liquidation

waterfall mechanism prescribed under Section 53 of the Code. However, the

Resolution Plan merely states that the proposed payment constitutes the

minimum liquidation value without disclosing any calculation or

quantification thereof. The Plan proposes payment of only Rs.50,00,000/-

against the Appellant's admitted claim of Rs.2,02,11,057/-, which is

Page 46 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 substantially below the liquidation value payable under the Code. The

Resolution Professional failed to ensure compliance with Section 30(2)(b)

before placing the Resolution Plan before the Committee of Creditors,

thereby violating Section 30(3) of the Code.

87. It is further submitted that the Resolution Plan of the Successful

Resolution Applicant (SRA) was not compliant with the Evaluation Matrix

approved by the CoC. The Evaluation Matrix required 70% upfront cash

recovery amount, subject to a minimum of Rs.30 crores, to be kept in an

escrow account for restarting construction. Only the Resolution Plans

submitted by Ace and Cambell's Consortium complied with this

requirement. Therefore, the Resolution Plan of the SRA ought not to have

been considered or approved.

88. Ld. Counsel submits that the SRA's Resolution Plan had the lowest

plan value among all competing Resolution Applicants. RP and CoC

nevertheless preferred the SRA's Plan despite superior plans offering greater

value maximization for stakeholders. Further, the matrix scores were never

disclosed to the CoC, thereby depriving creditors of an informed decision-

making process.

89. He further submits that the feasibility and viability of the competing

Resolution Plans were never properly assessed as mandated under

Regulation 39 of the CIRP Regulations. The CoC failed to undertake any

meaningful discussion or deliberation regarding the feasibility and viability

of the plans, and the minutes of the CoC meetings reveal that only

Page 47 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 compliance charts were circulated without substantive evaluation.

Consequently, the approval process stands vitiated for non-compliance with

Regulation 39.

90. Ld. Counsel alleges that the valuation of the Corporate Debtor was

manipulated and drastically reduced shortly before submission of the SRA's

Resolution Plan. The original valuation reports assessed the average fair

value of the Corporate Debtor at Rs.611.09 Crores and the average

liquidation value at Rs.421.31 Crores. The timing and extent of the

reduction indicate that the valuation exercise was altered to suit the SRA

and reduce the minimum liquidation value payable to dissenting Financial

Creditors.

91. It is further contended that the RP abused his powers by discarding

the existing resolution process and issuing a fresh Form-G after replacing

the erstwhile IRP, despite receipt and opening of Resolution Plans from four

applicants. The SRA ultimately submitted its Resolution Plan, only after

repeated extensions granted at the instance of homebuyers and with the

support of the RP. Such conduct demonstrates favoritism and

accommodation towards the SRA to the detriment of other Resolution

Applicants.

92. Ld. Counsel further alleges collusion between the RP, representatives

of the homebuyers and the SRA throughout the CIRP process. Fresh Form-

G was issued on the insistence of homebuyers despite objections from other

Financial Creditors. Requests by homebuyers for reassessment of valuation

Page 48 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 and facilitation of the SRA's participation were entertained and acted upon.

Objections raised by the Appellant and ACRE were consistently ignored or

dismissed without proper consideration.

93. Ld. Counsel submits that exorbitant CIRP costs were approved by the

CoC at the instance of the RP. The RP and his support team secured

substantial enhancement of professional fees, including a success fee of Rs.

2 Crores. Legal fees and liquidation expenses were also approved without

adequate justification or disclosure, and objections raised by Financial

Creditors regarding such costs were disregarded.

94. He further submits that in the circumstances, the actions of the RP

and CoC resulted in approval of a Resolution Plan offering the lowest value

amongst competing plans, while better and more beneficial plans were

ignored. The CIRP process was conducted contrary to the objective of

maximization of value of the assets of the Corporate Debtor.

95. Ld. Counsel finally submits that the Impugned Order dated

19.07.2023 was passed without adjudicating the Appellant's objections and

Restoration Application, and the approved Resolution Plan suffers from

statutory non-compliances, procedural irregularities, valuation

manipulation, lack of feasibility assessment, and discriminatory treatment

of dissenting Financial Creditors. Accordingly, the Impugned Order

approving the Resolution Plan is liable to be set aside.

Page 49 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 CA (AT)(Ins) No. 949 & 1117 of 2023 -Analysis & Findings

96. We have heard the Ld. Counsels of the parties, gone through the

records of the case including the written submissions filed by the parties.

We take up the issues in first two appeal together as both allege non-

compliance with provisions of 30(2)(b) of the Code. In the first Appeal ACRE

has also contended non-compliance with Sectio 53(1) of the Code.

97. There are two issues to be decided in these two appeals:

(i) Whether the disbursement proposed for ACRE in the resolution plan is in accordance with Section 30(2)(b) & 53(1) of the Code.

(ii) Whether the CIRP proceedings have been carried out in accordance with provisions of the Code and the resolution plan is compliant with Section 30(2) of the Code

98. The first appeal has been filed by Assets Care & Reconstruction

Enterprise Limited ("ACRE"), claiming to be the sole secured financial

creditor of the Corporate Debtor. The case of ACRE is that its admitted debt

is approximately Rs. 200 Crores and since it is the sole secured financial

creditor of the Corporate Debtor, it is entitled to receive the entire

liquidation value of the Corporate Debtor under Section 30(2)(b) read with

Section 53 of the Code. According to ACRE, the Resolution Plan provides

only Rs. 70 Crores and therefore the Plan is contrary to the provisions of

the Code.

99. On the other hand, the Respondents have contended that the

entitlement of ACRE cannot exceed the value of its underlying security

interest. It has been submitted that the Appellant's security interest was

Page 50 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 restricted only to the unsold units of the project and certain additional

securities and therefore the amount of Rs. 70 Crores provided under the

Resolution Plan is substantially higher than the liquidation value

attributable to the Appellant's actual security interest.

100. ACRE claims a larger entitlement under the Resolution Plan on the

basis that its security interest covered the entire project of the Corporate

Debtor. Therefore, before examining the amount payable to the Appellant,

it is necessary to first determine the actual extent of the security interest

available in its favour.

101. The record shows that ACRE is not the original lender. The loan was

originally granted by Punjab National Bank Housing Finance Limited

("PNBHFL") and was subsequently assigned to ACRE. Therefore, ACRE

derives its rights from PNBHFL and cannot claim any right greater than

what was available to the original lender. The assignment only transfers the

existing debt and the security attached to it; it does not create any new

security or enlarge the scope of the existing security interest.

102. In this regard, the Demand Notice dated 22.02.2022 issued by

PNBHFL under Section 13(2) of the SARFAESI Act assumes significance.

The relevant portions of the SARFAESI Notice u/s 13(2) dated 22.02.2022

of Schedule-II are extracted below: -

"All that piece and parcel of project land admeasuring 50,000 square meters (12.35 acres) of Plot No. SC-01/A2 along with the structure thereon (including unsold stock) of residential project "Arena-I" located at Sector-79, Gautam

Page 51 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Budh Nagar, Noida, Uttar Pradesh, including 171 unsold units as on 18.02.2020, details whereof are mentioned in Annexure-2 below and excluding the 909 sold units as on 18.02.2020, details whereof are mentioned in Annexure-2 below:-

"All that piece and parcel of land admeasuring 20,863 square meters (5.15 acres) bearing Plot No. SC-02/N located at Sector-150, Noida".

The repayment of the said loan(s) was further secured inter-alia by way of Hypothecation and escrow of future Receivables from the project "Arena-I", pledge of Shares of Addressee No. 1 to 3 and pledge of Shares of M/s Reverent Developers Private Limited."

103. It can be seen from the notice u/s 13(2) of SARFAESI Act that on the

date of the notice the security interest of PNBHFL was limited to 171 unsold

Units only and specifically excluded 909 sold units. The said notice shows

that PNBHFL itself treated its security as being limited to the unsold

inventory of the project. Thus, even the original lender did not claim a

charge over all the units forming part of the project. Once PNBHFL itself

proceeded on this basis, ACRE cannot now claim a wider security interest

than what was claimed by the original lender.

104. The factual position on record also supports this conclusion. The

security interest in favour of PNBHFL was created on 20.03.2017. By that

date, 806 units measuring approximately 15,21,415 square feet had already

been allotted to homebuyers. These units represented around 74.36% of the

total project area. As a result, only 274 flats, representing 25.64% of the

total project area, remained unsold when the mortgage was created.

Page 52 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

105. The project consisted of 1080 units in total. By the Insolvency

Commencement Date, 858 units had already been allotted to homebuyers.

It is true that conveyance deeds had not been executed, because the project

was only about 30% complete. However, the fact remains that a substantial

majority of the units had already been allotted before the creation of the

security interest and before commencement of CIRP.

106. The value of a secured creditor's security interest can only be

determined on the basis of the assets that were actually available as

security. Since only 274 flats remained unsold when the mortgage was

created, the Resolution Professional rightly proceeded on the basis that only

those flats formed part of the Appellant's security interest.

107. In this regard, we also take note of Section 11(4)(h) of RERA which is

extracted below: -

"11. Functions and duties of promoter-

(4) The promoter shall-

(h) after he executes and agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be;

108. We note that Section 11(4)(h) of RERA prohibits the creation of a

mortgage or charge over units already allotted to homebuyers, and even if

such a charge is created, it shall not affect the Rights and interests of the

Page 53 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 allottee. Hence any charge created by erstwhile promoters over the units

sold prior to 27.03.2017 i.e., the date of mortgage in favour of PNBHFL

would be void and the ACREs charge would be limited to unsold inventory

only. In this case, the RP has correctly held the security interest of ACRE

was limited to number of units unsold as on the mortgage date i.e., on 274

units as 806 units were already allotted to homebuyers.

109. The Respondents have relied upon "Bikram Chatterji and Ors. V.

Union of India and Ors.; 2019 19 SCC 161" and "Kotak Mahindra

Bank Limited v. Resolution Professional of Universal Buildwell

Private Limited; CA (AT) (Insolvency) No. 661 of 2021", which are

discussed here.

110. The judgment of the Hon'ble Supreme Court in Bikram Chatterji

(supra) is significant in the facts of the present case because it recognizes

and protects the rights of homebuyers in real estate projects. The principle

recognized in Bikram Chatterji supports the conclusion that the Appellant's

security interest could not extend to units that had already been allotted to

homebuyers and that such units could not be treated as available for

determining the value of the Appellant's security.

111. The judgment of this appellate Tribunal in Kotak Mahindra Bank

(supra) relies on the judgment of Hon'ble Supreme Court in Bikram Chatterji

(supra) the relevant paras 23 to 26, 29 & 30 are extracted below:

23. We have noticed that in the Valuation Report, both the Valuers have proceeded to value the super area, which was

Page 54 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 left after deducting the area conveyed. The Valuers proceeded on the premise that the Corporate Debtor has no ownership with respect to the area, which has been conveyed and rest of the area can be valued for the purpose of valuation of the Corporate Debtor. On the record, the RP has given details of name of allottees, which were given BBA with the date of BBA.

Annexure R-1 to the reply contains the details of BBA of Ground Floor and other Floors with the name of allottees and the date of BBA. All the BBA, which have been captured in Annexure R-1 are prior to September 2010. The details of areas sold through Conveyance Deed has also been given, which areas have already taken note by the Valuers. The stand taken by the RP and Resolution Applicant is that liquidation value of the Appellant has been treated as NIL, since on the date, the valuation was done, there was no super area left, which could be monetized for the Corporate Debtor. The Corporate Debtor has sold excess area both by Conveyance Deed and BBA. We are satisfied that by the BBA, executed prior to September 2010, when the charge and mortgage was created by Promoters in the project Universal Business Park, all areas were sold. The Valuers, technically were right in taking a view that those areas, which has been conveyed by Promoters, they do not have ownership, however, the Valuers proceeded to take into consideration the areas with regard to which no Conveyance Deed was executed to be the assets of the Corporate Debtor.

24. When we look into reality, which is apparent from the materials on record, it is clear that with regard to Universal Business Park, entire area was sold by Conveyance Deed and by BBA to the allottees and the Promoters have received the money through the Conveyance Deed and BBA and after execution of the BBA, the allottees acquired the right to receive possession of the units for which payments have been made.

Page 55 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

25. In this context, we may notice the judgment of the Hon'ble Supreme Court, where the Hon'ble Supreme Court had occasion to consider the nature of right, which accrue through a BBA to allottee and the protection, which homebuyers are required from the Courts of Law. We may refer to the judgment of the Hon'ble Supreme Court in Bikram Chatterji v. Union of India (2019) 19 SCC 161, where the Hon'ble Supreme Court had occasion to consider housing and real estate allotment, Sale Deed, transfer of flats by builders/ developers to homebuyers. The Hon'ble Supreme Court was considering the real estate Project namely - Amrapali Group. Writ petitions under Article 32 were filed by homebuyers praying for various reliefs from the Hon'ble Supreme Court. In the above context Hon'ble Supreme Court while considering the BBA made following observation in paragraph 133 and 134 of the judgment:

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

134. On behalf of Bank of Baroda, learned Senior Counsel submitted that the agreement of promoter/ builder with homebuyers is unregistered as such, no right has been created in the immovable property in view of the provisions contained in Section 49 of the Registration Act.

Page 56 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 The submission ignores and overlooks the provisions of RERA which intends to prevent such frauds on homebuyers and ensure completion of projects and that of the agreement between promoters and buyers. There are various rights under the agreement as well as under

RERA. The agreement entered into at the time of allotment is the basis of the investment in the projects made by homebuyers, it cannot be said to be a scrap of paper. It is their valuable investment which is required to be protected and cannot be permitted to be Company Appeal (AT) (Insolvency) No. 661 of 2021 20 taken away by builder or secured creditors in an illegal manner. The provisions of Section 17 of the Registration Act no doubt provide that a document of title requires compulsory registration, no doubt registered document has to be executed that also has to be taken care of by the Court so as to protect the interest of homebuyers."

26. In the above case before the Hon'ble Supreme Court, the Banks, who had security interest contended that they have agreements with the Promoters. In reference to the claim of the Banks regarding mortgage, Hon'ble Supreme Court had observed that in the facts and circumstances of the case, rights or interest of the allottees are not affected by the mortgage created by the Bankers. In paragraph 136 of the judgment, following has been held:

"136. The learned Senior Counsel on behalf of Bank of Baroda submitted that the provisions of Section 11(4)(h) of RERA provides that the promoter, after he executes an agreement for sale for any apartment, plot or building, cannot mortgage or create a charge on such an apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then it shall not affect the right and interest of the allottee who Page 57 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 has taken or agreed to take such apartment, plot or building, as the case may be. The provision has a non obstante clause. As the provision has given an overriding effect by non obstante clause, the provision is of no help to the banks as the agreement had been by promoters with homebuyers entered into earlier in point of time to the creation of the mortgage. There could not have been any mortgage created subsequently and even if validly created, it would not affect the right and interest of the allottee as intended by RERA. Thus, the right and interest of the allottee are safeguarded by virtue of the provisions contained in Section 11(4)(h). As the project was pending, the provision intends to confer a right on the allottee and save the allottees and also their interests from such liability. Even if the provision is held not applicable on the ground that RERA came into force later, since there was no valid mortgage as held by us, it was incapable of affecting the right or interest of the allottee. Had it been ensured that the money due to Noida and Greater Noida Authorities was paid by the promoters to the authorities, the fraud of siphoning of money would not have taken place to the extent it has been done. Moreover, the money borrowed from banks has not been invested in the projects. In fact, projects required no funding. It would be iniquitous to charge the allottees with the bankers' money. Thus, in the peculiar facts and circumstances of the case, we hold that rights or interests of the allottees are not at all affected by the mortgage created by the bankers or by the dues of the Noida or Greater Noida Authorities."

29. We have also noticed the caveats given by the Valuers in their Report. The valuation of the different projects including

Page 58 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 project Universal Business Park was with the caveats as noted above. The Valuers did not enter into issue of encumbrance over the assets. The finding has been recorded by the Adjudicating Authority in paragraph 49 that since the units have already been sold, are no longer the asset of the Corporate Debtor, hence, the liquidation value of the Universal Business Park project is NIL. The Adjudicating Authority has rightly come to the above conclusion after considering the facts and circumstances of the present case. We fully concur with the observations made by the Adjudicating Authority in paragraph 49."

112. The judgment of this Appellate Tribunal in Kotak Mahindra Bank

(supra) takes into consideration the judgment of Hon'ble Supreme Court in

Bikram Chatterji and clearly lays down that security interest of any lender

in housing projects would be limited to unallotted units/ area. The

allotments made by Builder-Buyer Agreement (BBA) would be outside the

purview of security interest of the lender. The judgment also notes the effect

of Section 11(4)(h) of the RERA Act on the relative rights of Homebuyers,

Builders and Financial Institutions having mortgage on such properties. We

are of the view that the ratio laid down by these judgements squarely applies

to the facts of the present case.

113. The record before us shows that out of 1080 units in the project, 806

units had already been allotted before creation of the mortgage and 858

units stood allotted by the Insolvency Commencement Date. Although

conveyance deeds had not been executed, the rights of homebuyers had

already come into existence. Therefore, ACRE cannot proceed on the

assumption that all allotted units continued to remain freely available as

Page 59 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 part of its security. Looking at the entire factual record, we are satisfied that

the Appellant's security interest could not have extended over the entire

project. The assignment in favour of ACRE did not enlarge the rights

originally available to PNBHFL. The Demand Notice issued by PNBHFL itself

shows that the lender treated its security as limited to the unsold inventory.

Further, only 274 flats representing 25.64% of the project area remained

unsold when the mortgage was created. We therefore find no error in the

finding of the RP, subsequently confirmed by the Adjudicating Authority

that the ACRE's security interest was confined to the unsold inventory and

did not extend to units already allotted to homebuyers.

114. After determining the extent of the Appellant's security interest, the

next question is whether the value of such security interest was correctly

assessed and whether the Appellant could nevertheless claim the entire

liquidation value of the Corporate Debtor.

115. The liquidation value of the Corporate Debtor was assessed at

Rs.151,00,41,336/-. Once it is accepted that only 25.64% of the project

area remained available as security on the date of creation of the mortgage,

the value attributable to the Appellant's security interest necessarily has to

be restricted to that proportion. The record shows that the Resolution

Professional applied the proportion of unsold inventory, namely 25.64%, to

the overall liquidation value of Rs.151,00,41,336/-. On this basis, the value

of the Appellant's security interest was calculated at Rs.38,71,74,598.55/-

The calculation made by the Resolution Professional is based on figures

available on record. The number of units already allotted; the date of

Page 60 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 creation of the mortgage; the extent of unsold inventory; and the liquidation

value of the project are all supported by the documents placed before us

and are admitted by all parties. No material has been shown to establish

that these figures are incorrect.

116. The Appellant's case is that since its admitted claim is approximately

Rs.200.27 Crores, and since it is the sole secured financial creditor of the

Corporate Debtor, it should receive the entire liquidation value of the

Corporate Debtor after subtracting the CIRP costs.

117. However, the amount of debt and the value of the security interest

are two different concepts. A secured creditor can claim priority only to the

extent of the security actually available in its favour. Merely because the

admitted debt is larger than the liquidation value does not automatically

entitle the creditor to the entire liquidation value irrespective of the extent

of its security. In this regard we take notice of Section 52(9) of the code,

which is extracted below:

52. Secured creditor in liquidation proceedings. --

.....(9) Where the proceeds of the realisation of the secured assets are not adequate to repay debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquidator in the manner specified in clause (e) of sub-section (1) of section 53.

Section 52(9) clearly lays down that in liquidation proceedings, where the

secured creditor decides to enforce its security interest outside liquidation

proceedings u/s 52 of the Code, then after realizing proceeds from the

realisation of the secured asset, the balance claim if any of the Secured

Page 61 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 creditor would be paid from the liquidation proceeds in accordance with

section 53(1)(e)(ii) of the code, which is much lower in priority for

distribution; and not in accordance with 53(1)(b)(ii) of the Code.

118. Once the value of the Appellant's security interest is determined at

approximately Rs.38.71 Crores, the basis for claiming the entire liquidation

value of Rs.151 Crores no longer survives. The balance claim of the ACRE

has to be necessarily considered under section 53(1)(e)(ii) of the code. The

Appellant cannot seek distribution in respect of assets, which did not form

part of its actual security interest. We also note that an amount of Rs.70 Cr

has been provided to ACRE in the Resolution Plan, which is much more

than its security interest.

119. We are therefore of the view that the valuation exercise carried out by

the Resolution Professional is based on objective facts and a logical

assessment of the security available. We find no infirmity in the conclusion

that the value of the Appellant's security interest stood at approximately

Rs.38.71 Crores.

120. Regarding the Appellant's claim that it had a charge over receivables

arising from the project and that such receivables should be separately

taken into account while determining its entitlement under the Resolution

Plan, we note that at the time of initiation of CIRP, the project was only

around 30% complete. Any receivables from homebuyers were therefore

linked to the future completion of the project. Such receivables could not

be viewed as independent assets completely separate from the project itself.

Page 62 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 More importantly, liquidation value is determined on the assumption that

the Corporate Debtor stands liquidated on the Insolvency Commencement

Date. If liquidation were to take place on that date, there would be no

continuing project generating future cash flows or future receivables.

Homebuyers cannot reasonably be expected to continue making payments

towards an incomplete project that has gone into liquidation. Therefore,

future receivables cannot be treated as independently realizable assets

while determining liquidation entitlement.

121. The Appellant's claim over receivables also overlooks the statutory

framework governing real estate projects. Receivables generated from

homebuyers are connected with the completion of the project and cannot

be appropriated in a manner contrary to the regulatory framework

applicable to such projects under RERA. Therefore, the alleged charge over

receivables cannot be viewed in isolation from the obligations attached to

those funds.

122. The actual treatment provided to the Appellant under the approved

Resolution Plan is also relevant. Clause 7.3(iii)(A)(a) to (d) records the debt

and security interest of ACRE. Clause 7.3(iii)(A)(e) provides for payment of

Rs.70 Crores to ACRE in four instalments commencing from the 33rd

month and ending in the 42nd month from the Transfer Date. Further,

Clause 7.3(iii)(A)(f) preserves ACRE's right to independently proceed against

co-borrowers and other securities available under the transaction

documents. Thus, apart from receiving Rs.70 Crores under the Resolution

Page 63 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Plan, ACRE continues to retain its rights against co-borrowers, guarantees

and other available securities.

123. The record also shows that valuable third-party securities were

available in connection with the loan transaction. Therefore, the recovery

avenues available to the Appellant do not come to an end with the amount

payable under the Resolution Plan.

124. The Appellant's security interest was limited to the unsold inventory

of the project. The value of such security interest was correctly assessed at

approximately Rs.38.71 Crores on the basis of the material available on

record. The claim regarding future receivables cannot be accepted in the

context of liquidation value, since liquidation proceeds on the assumption

that the Corporate Debtor stands liquidated on the Insolvency

Commencement Date. Further, the Resolution Plan provides Rs.70 Crores

to the Appellant, which is significantly higher than the assessed value of its

security interest, while also preserving its rights against co-borrowers and

other available securities.

125. After examining the entire factual record, the chronology of creation

of the security interest, the extent of units already allotted to homebuyers,

the valuation exercise carried out by the Resolution Professional, the issue

relating to receivables, the actual CIRP costs and the treatment provided to

the Appellant under the approved Resolution Plan, we do not find any error

in the approach adopted by the Adjudicating Authority.

Page 64 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

126. The Appellant has placed reliance on the Judgement of Hon'ble SC in

"Jaypee Kensington Boulevard Apartments Welfare Association &

Ors. v. NBCC (India) Ltd. & Ors., (2022) 1 SCC 401". We note that in

Jaypee Kensington (Supra) Hon'ble SC was considering the manner in

which the entitlement of a dissenting financial creditor could be satisfied

under a resolution plan, including through enforcement of security interest.

In the present case, however, the dispute is not regarding the mode of

payment, but regarding the extent of the Appellant's entitlement itself. The

issue before us is whether the Appellant is entitled to the entire liquidation

value of the Corporate Debtor or only to the value attributable to its actual

security interest. We note that the aforesaid judgment does not deal with

determination of the value of a dissenting secured creditor's entitlement in

CIRP as is the matter herein, the same does not assist the case of ACRE.

127. ACRE has also placed reliance upon the Judgement of Hon'ble SC in

"Committee of Creditors of Essar Steel India Limited v. Satish Kumar

Gupta & Ors., [(2020) 8 SCC 531]" wherein the Hon'ble Supreme Court

held that the Adjudicating Authority can exercise judicial review to ensure

that a resolution plan complies with Section 30(2) of the Code. In the

present case, the Adjudicating Authority has in fact examined the objections

raised by the ACRE concerning its security interest; liquidation entitlement;

and treatment under the Resolution Plan, before recording its findings.

Therefore, the principle laid down in Essar Steel stands fully satisfied in the

present case. The judgment does not support the proposition that merely

because a dissenting financial creditor disagrees with the findings recorded

Page 65 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 by the Adjudicating Authority, the approved Resolution Plan must be

interfered with.

128. In these circumstances, we find no legal or factual infirmity in the

Impugned Order. The findings recorded by the Adjudicating Authority are

based on the material available on record and do not call for any

interference.

129. We now examine the second issue, which has been raised by

Unsecured Financial Creditor Dhankalash in the second appeal, wherein it

has argued that it has not been provided opportunity of being heard, as its

restoration application was not decided by the Adjudicating Authority before

approval of the Resolution Plan; and the CIRP was not conducted in a fair

and transparent manner, without discussing feasibility and viability of

competing Resolution plans. It is the submission of Dhankalash that

Resolution Plan approved by the Adjudicating Authority therefore suffers

from illegality and material irregularity and is liable to be quashed as its not

compliant with Section 30(2) of the Code.

130. The record shows that the Resolution Plan was not approved in a

hurried manner. The CIRP remained under consideration of the Committee

of Creditors for a considerable period during which 20 CoC meetings were

held. Several prospective resolution applicants participated in the process

and multiple resolution plans were received and evaluated. Thereafter, a

fresh Form-G was issued, additional applicants entered the process, revised

plans were invited, and competing proposals were considered by the CoC.

Ultimately, after several rounds of deliberations and evaluation, the

Page 66 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Resolution Plan of Purvanchal Projects Pvt. Ltd. was approved with 71.1%

voting share in the 19th Meeting of CoC. Thus, the approved plan was the

outcome of a competitive process involving various bidders and extensive

consideration by the CoC.

131. The Appellant which has 0.29% voting share in the CoC, has

questioned the issuance of a fresh Form-G; the valuation exercise; the

evaluation of competing plans; and the conduct of the Resolution

Professional. However, these aspects were discussed during the CIRP

process itself and were known to all the members of the CoC. The CoC

proceeded to approve the Resolution Plan of SRA, after considering all

available options, and after deliberating the pros and cons of each proposal.

Merely because the Appellant with a miniscule stake in CIRP disagrees with

the manner in which the CoC evaluated the plans cannot by itself render

the process illegal, which was carried out after extensive discussion in the

CoC. The Hon'ble SC in a catena of judgements has clearly laid down than

the commercial wisdom of the CoC is supreme.

132. The Appellant has also contended that other resolution plans were

more beneficial to stakeholders. However, the assessment of which plan is

more feasible, viable and beneficial is a matter that falls within the

commercial wisdom of the CoC. The CoC had majority of Homebuyers and

it had before it several competing plans and, after considering their

respective merits, it chose to approve the plan submitted by the Successful

Resolution Applicant, which was the most beneficial to majority members

Page 67 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 of CoC viz. Homebuyers. We cannot substitute our own view for the

commercial decision taken by the CoC after due deliberation.

133. It is the submission of Dhankalash that they have been provided only

Rs.50 lakhs in the Resolution Plan, against an admitted claim for Rs.2.02

Crore. We note that Dhankalash is an unsecured Financial Creditor with

no security interest on the assets of the CD. Accordingly, its claim under

the waterfall mechanism would be governed by section 53(1)(d) of the code.

Dhankalsh is claiming parity with ACRE, which is also a Dissenting

Finanncial Creditor, however, we note that ACRE is a secured financial

creditor and its claim would be dealt according to Section 53(1)(b)(ii) of the

code, which is higher in priority than that of the Dhankalsh. The resolution

Plan provides Rs.70 Cr to ACRE against an admitted claim of Rs.200.27 Cr,

which in percentage terms comes to 34.95%. The claim satisfaction

percentage of Dhankalash on the other hand comes to 24.75%, as it is on

lower priority than ACRE. We find no infirmity in the allocation for

Dhankalash in the Resolution Plan, as it seems to be compliant with the

waterfall mechanism provided in Section 53(1) of the Code. The claim of

Dhankalash is lower in priority to that of CARE, so the question of

equivalence solely due to both being Dissenting Financial Creditor has no

merit.

134. As regards the grievance that IA No. 3986 of 2022 and the subsequent

Restoration Application were not separately adjudicated before approval of

the Resolution Plan, it is necessary for us to examine, whether any real

prejudice was caused to the Appellant. The objections sought to be raised

Page 68 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 by the Appellant substantially related to valuation, evaluation of plans,

CIRP costs and other commercial aspects of the resolution process. These

were matters which had already been considered during the CIRP and by

the CoC while evaluating the competing plans. Therefore, no material has

been placed on record to show that the outcome of the CIRP would have

been different had the Restoration Application been separately decided.

135. The allegations of collusion, bias and manipulation also remain

unsupported by any cogent evidence. On the contrary, the facts show

participation of multiple resolution applicants, consideration of several

competing plans, repeated opportunities for revision of plans and eventual

approval by the requisite majority of the CoC. These circumstances indicate

that the resolution process was subjected to adequate scrutiny before the

Resolution Plan came to be approved.

136. The facts on record show that the CoC considered several resolution

plans, evaluated competing proposals and thereafter approved the

Resolution Plan with the requisite majority after due deliberations. The

objections raised by the Appellant essentially seek a re-examination of

commercial decisions already taken by the CoC. We do not find any violation

of a mandatory provision of the Code or any material illegality in the

approval process.

137. We are therefore of the view there is no material irregularity in

approval of the plan, which is compliant with Section 30(2) of the Code.

Page 69 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 CA AT Ins. No. 1231 of 2023

Submission of Appellant/NOIDA

138. We now take up the third appeal filed by the NOIDA Authority. Main

grievance of NOIDA is that they have been treated as an Operational

Creditor whereas based on the documents on record, they should have been

treated as Secured Creditor. So, the only issue to be determined in this

appeal is whether the claim of NOIDA is that of a Secured Creditor.

139. Ld. Counsel Mr. Rachit Mittal appearing on behalf of the

Appellant/New Okhla Industrial Development Authority ("NOIDA")

submitted that the Appellant is a statutory authority constituted under the

provisions of the Uttar Pradesh Industrial Area Development Act, 1976, and

is the lawful owner of the project land in question. The Corporate Debtor

was merely a lessee under a registered Sub-Lease Deed dated 19.10.2012

and was under a continuing obligation to pay lease premium, annual rent,

extension charges and other dues arising from the said lease arrangement.

It was submitted that the Appellant had duly filed its claim in Form-C for

an amount of Rs.84.19 Crores, out of which only Rs.68.90 Crores was

admitted. However, despite the statutory nature of the dues and the

existence of a charge in favour of the Appellant, the Resolution Professional

illegally classified the Appellant as an "Operational Creditor" and denied it

the status of a secured creditor, thereby causing grave prejudice to the

Appellant.

Page 70 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

140. Ld. Counsel submits that the Resolution Professional acted wholly

beyond the scope of his statutory authority by classifying the Appellant as

an "Operational Creditor" and by rejecting a substantial portion of the

Appellant's claim. Such an exercise, according to the Appellant, amounts to

adjudication of rights and liabilities, which falls exclusively within the

jurisdiction of the Adjudicating Authority and the Appellate Tribunal. He

further submitted that the Resolution Professional acted in complete excess

of jurisdiction by treating the Appellant's secured statutory claim as an

ordinary operational debt. It was contended that such action is ultra vires

the provisions of the IBC and contrary to the settled principles laid down by

the Hon'ble Supreme Court. The Appellant therefore submitted that the

rejection and downgrading of its claim is illegal, arbitrary and liable to be

set aside by this Hon'ble Tribunal.

141. In support of the aforesaid contention, the Ld. Counsel for the

Appellant placed reliance upon the following judgments:

a. Swiss Ribbons Pvt. Ltd. vs. Union of India - particularly paragraphs 88 to 91;

b. Anuj Jain, IRP of Jaypee Infratech Ltd. vs. Axis Bank Ltd.

- particularly paragraph 53.2;

c. GNOIDA Vs. Prabhjit Singh Soni - particularly paragraphs 21 and 22.

142. It is submitted that the Ld. Adjudicating Authority committed a grave

error in treating the Appellant merely as an Operational Creditor instead of

recognizing it as a Secured Operational Creditor. According to the Appellant,

such wrongful classification has resulted in extinguishment of all rights

Page 71 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 guaranteed to the Appellant under the Sub-Lease Deed and under the

statutory framework governing the Authority. It was argued that despite the

debt arising from the lease deed exceeding Rs.84 Crores, the Resolution

Plan arbitrarily allocates only approximately Rs.7-8 Crores to the Appellant

without any reasonable or justifiable basis.

143. Ld. Counsel submits that the Appellant is the lawful owner of the

commercial plot which had been leased to the Corporate Debtor under the

registered Sub-Lease Deed dated 19.10.2012. The aforesaid lease deed is a

tri-partite lease deed between "New Okhla Industrial Development

Authority- the Lessor" and "M/s Sequel Buildcon Pvt. Ltd.- the Lessee" and

"M/s Arena Superstructures Pvt. Ltd.- the Sub-lessee". By virtue of the said

arrangement, the Appellant became entitled to receive lease premium,

annual ground rent and all other dues payable under the lease documents.

The sub-lease also provides that the lessor shall have the first charge on

the plot towards payment of all dues of Lessor.

144. He submits that Sections 13 and 13-A of the Uttar Pradesh Industrial

Area Development Act, 1976 expressly create a statutory charge in favour

of the Authority with respect to all amounts payable on account of transfer

of site, building or rent due in respect of the lease. Therefore, according to

the Appellant, the dues in question are not ordinary contractual claims but

statutory dues backed by a statutory charge created by operation of law.

145. It is further submitted that the Ld. Adjudicating Authority failed to

appreciate that the aforesaid statutory charge squarely falls within the

Page 72 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 ambit of "security interest" as defined under Section 3(31) of the IBC,

thereby making the Appellant a "Secured Creditor" within the meaning of

Section 3(30) of the Code. The Resolution Plan, however, completely ignored

the statutory charge and illegally treated the Appellant as an ordinary

Operational Creditor. It was submitted that the admitted claim of the

Appellant was arbitrarily reduced and the treatment accorded under the

Resolution Plan is contrary to the express provisions of law and violative of

the statutory rights vested in the Appellant.

146. The Ld. Counsel placed reliance upon the judgment of the Hon'ble

Supreme Court in State Tax Officer v. Rainbow Papers Limited and

submitted that the Hon'ble Supreme Court has categorically held that a

statutory charge created in favour of a statutory authority constitutes a

"security interest" under the Insolvency and Bankruptcy Code. It was

further submitted that the Hon'ble Supreme Court has clearly observed that

if a Resolution Plan ignores statutory dues payable to a State Government

or statutory authority, such Resolution Plan deserves rejection. According

to the Appellant, the Resolution Plan in the present case suffers from the

very same illegality and therefore deserves to be set aside by this Hon'ble

Tribunal.

147. He submitted that the Resolution Plan fails to satisfy the mandatory

requirements prescribed under Section 30(2) of the IBC read with

Regulations 37 and 38 of the CIRP Regulations, 2016 and has caused

serious prejudice to the rights and interests of the Appellant. The Ld.

Counsel relied upon the judgment of the Hon'ble Supreme Court in Greater

Page 73 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr. and

particularly paragraph 54(b), wherein statutory authorities such as the

Appellant have been recognized as Secured Creditors.

148. He further submitted that the Resolution Plan approved by the Ld.

NCLT is contrary to Section 30(2)(b) of the Insolvency and Bankruptcy Code,

2016 insofar as it proposes payment to the Appellant below even the

liquidation value. It was argued that such treatment of statutory dues

payable to a public authority is impermissible in law and the Resolution

Plan could never have been approved in its present form.

149. In the end, Ld. Counsel submitted that NOIDA has suffered an

enormous loss of public revenue due to the wrongful classification and

discriminatory treatment accorded under the Resolution Plan. Against the

admitted claim of Rs.68.90 Crores out of the total claim of Rs.84.19 Crores,

the Resolution Plan arbitrarily proposes payment of only Rs.7-8 Crores to

the NOIDA Authority. According to him, such drastic reduction of statutory

dues payable to a public authority undermines public revenue and is wholly

contrary to Section 30(2)(b) of the IBC. It was submitted that the Resolution

Plan stands vitiated on this ground alone and deserves to be set aside in

entirety.

150. Summing up, Ld. Counsel prayed that appropriate directions be

issued to the Resolution Professional to recognize the Appellant as a

Secured Creditor, and further remand the Resolution Plan for proper and

Page 74 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 lawful treatment of the Appellant's claim in accordance with the provisions

of law.

Submissions of Resolution Professional

151. Mr. Palash Singhai, Ld. Counsel for RP submitted that the present

Appeal was nothing, but an attempt by the Appellant, despite being a

statutory authority, to take a completely contradictory stand from the one

adopted during the Corporate Insolvency Resolution Process ("CIRP"). It was

submitted that the Appellant had itself submitted its claim before

Respondent No. 1 in Form C dated 12.05.2021, wherein the Appellant had

categorically admitted that it did not possess any "security interest" over

any asset or property of the Corporate Debtor. He further submitted that

subsequent to filing Form C, the Appellant had also addressed a Letter

dated 16.08.2021 to Respondent No.1, whereby certain clarifications and

documents pertaining to the land and project were furnished. However,

even in the said communication, the Appellant never asserted that it was

required to be treated as a "Secured Creditor." It was emphasized that the

claim seeking status as a "Secured Creditor" was raised for the very first

time only through Written Submissions dated 03.07.2023 filed before the

Adjudicating Authority.

152. He submitted that under the settled principles of approbate and

reprobate, as well as principles governing procedural propriety, a litigating

party cannot be permitted to take a stand in appellate proceedings which is

completely contrary to the position consistently maintained throughout the

proceedings before the Adjudicating Authority. It was argued that once the

Page 75 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Appellant had itself categorically disclaimed any security interest in its own

statutory claim form, the Appellant stood estopped from subsequently

asserting the status of a Secured Creditor at the appellate stage.

153. Ld. Counsel further submitted that the definition of "Security

Interest" under the Code is clear, specific, and leaves no scope for

ambiguity. Reliance was placed upon Section 3(31) of the IBC, which defines

"security interest" to mean a right, title, interest, or claim to property

created in favour of a secured creditor through a transaction securing

payment or performance of an obligation, including mortgage, charge,

hypothecation, assignment, encumbrance, or any similar arrangement.

154. The Learned Counsel further submitted that a plain reading of

Section 3(31) demonstrates that two essential conditions are required for

existence of a "security interest" under the Code. Firstly, such right, title,

interest, or claim must be created by a "transaction"; and secondly, such

transaction must secure payment or performance of an obligation. It was

pointed out that the term "transaction" itself is defined under Section 3(33)

of the Code to include an agreement or arrangement in writing involving

transfer of assets, funds, goods, or services from or to the Corporate Debtor.

155. The Ld. Counsel submitted that a conjoint reading of Sections 3(31)

and 3(33) of the Code leaves no room for doubt that a "security interest"

under the IBC can arise only from a bilateral written agreement or

arrangement entered into between parties. It was argued that any right or

encumbrance arising unilaterally merely by operation of statute, without

Page 76 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 any written agreement or arrangement between the creditor and the

Corporate Debtor, cannot qualify as a "security interest" within the meaning

of the Code.

156. It was further submitted that the above position becomes even more

apparent when contrasted with Section 100 of the Transfer of Property Act,

1882, which expressly recognizes charges created either "by act of parties

or operation of law." The Learned Counsel argued that while framing Section

3(31) of the IBC, the legislature consciously omitted the words "or operation

of law," thereby making a deliberate departure from the broader language

contained in Section 100 of the Transfer of Property Act. Such omission

clearly reflected legislative intent to exclude statutory charges from the

category of "security interests" entitled to priority under the insolvency

waterfall mechanism.

157. The Ld. Counsel also submitted that the aforesaid interpretation is

fully consistent with Section 77(3) of the Companies Act, 2013, which

provides that no charge created by a company shall be taken into account

by a liquidator or any creditor unless such charge is duly registered under

Section 77(1) and a certificate of registration is issued by the Registrar of

Companies. It was argued that a statutory lien arising purely by operation

of law, without any registered charge under the Companies Act, cannot

qualify as a "security interest" under the IBC framework.

158. He further relied upon Regulation 21 of the IBBI (Liquidation Process)

Regulations, 2016, which prescribes the specific modes through which

Page 77 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 security interest may be proved, namely: (a) records maintained with an

information utility; (b) certificate of registration of charge issued by the

Registrar of Companies; or (c) proof of registration with the Central Registry.

It was submitted that none of the aforesaid methods of proof were available

to the Appellant in respect of any alleged statutory charge under the U.P.

Industrial Area Development Act, 1976 ("UPIADA"). Accordingly, it was

argued that any right allegedly arising merely by operation of law could not

be proved in accordance with Regulation 21 and therefore cannot be

recognized as a valid security interest under the Code.

159. He submitted that the Insolvency and Bankruptcy Code (Amendment)

Act, 2026 (No. 6 of 2026), which received Presidential assent on 06.04.2026

and was published in the Official Gazette, inserted a specific Explanation to

Section 3(31) of the Code. The said Explanation expressly clarified that a

"security interest" would exist only where a right, title, interest, or claim to

property is created pursuant to an agreement or arrangement by the act of

two or more parties, and further clarified that security interests created

merely by operation of law shall not fall within the ambit of Section 3(31).

160. The Learned Counsel submitted that the Explanation had been

inserted specifically "for the removal of doubts," which is a recognized

legislative drafting device used to clarify the true import and meaning of an

already existing statutory provision. It was argued that such an Explanation

is clarificatory in nature and does not amount to a substantive amendment

of the law. Reliance was placed upon the judgment of the Hon'ble Supreme

Court in Commissioner of Income Tax v. Podar Cement (P) Ltd. to contend

Page 78 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 that an Explanation inserted "for the removal of doubts" merely clarifies the

true meaning of the original provision rather than introducing a new legal

principle.

161. It was further submitted that even if the Amendment Act had not yet

been brought into force through a commencement notification, the same

still possessed significant persuasive value while interpreting Section 3(31)

of the Code because clarificatory amendments are retrospective in operation

and are deemed to have always formed part of the original enactment.

Reliance in this regard was placed upon the judgments of the Hon'ble

Supreme Court in J.K. Lakshmi Cement Ltd. v. Commercial Tax Officer and

Zile Singh v. State of Haryana. It was argued that the Explanation merely

reiterated what was already implicit in the original statutory language of

Section 3(31).

162. He submitted that the 2026 Amendment explicitly clarifies that a

security interest shall not include any right created merely by operation of

law. According to the Learned Counsel, this clarification directly defeats the

Appellant's claim that any alleged statutory rights under the UPIADA could

amount to a "security interest" under the IBC.

163. Ld. Counsel submitted that the Appellant had heavily relied upon the

judgment of the Hon'ble Supreme Court in Greater Noida Industrial

Development Authority v. Prabhjit Singh Soni & Anr. However, it was argued

that the reliance placed upon the said judgment was entirely misplaced and

factually distinguishable. The Learned Counsel submitted that in the said

Page 79 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 case, the controversy related to payment of penalty under Sections 13 and

13A of the U.P. Industrial Area Development Act, 1976, where the Corporate

Debtor had committed default in payment of instalments and consequently

demand-cum-pre-cancellation notices had been issued invoking the penal

and recovery provisions under Sections 13 and 13A of the Act.

164. He submitted that the factual position in the present case was

materially different because admittedly the Appellant had never invoked

Sections 13 or 13A of the UPIADA prior to commencement of CIRP against

the Corporate Debtor. Therefore, according to the Learned Counsel, the

ratio and findings in the Greater Noida judgment were wholly inapplicable

to the facts of the present Appeal.

165. He submitted that the admitted claim amount of the Appellant was

approximately Rs. 68.90 Crores, which had been admitted by the Resolution

Professional in the category of Operational Creditor and treated accordingly

throughout the CIRP. It was emphasized that the Appellant never

challenged such categorization during the CIRP proceedings. It was further

submitted that the minimum liquidation value payable to Operational

Creditors in the present matter was nil because the aggregate admitted

claims of creditors ranking above Operational Creditors under the waterfall

mechanism substantially exceeded the liquidation value of the Corporate

Debtor. Therefore, according to the Learned Counsel, the treatment

accorded to the Appellant under the Resolution Plan was fully compliant

with Section 30(2)(b) read with Section 53(1) of the Code.

Page 80 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

166. Ld. Counsel also relied upon the judgment of this Appellate Tribunal

in Flat Buyers Association v. Umang Realtech Pvt. Ltd., wherein it was held

that assets of a real estate Corporate Debtor cannot be distributed amongst

secured creditors and are instead liable to be transferred in favour of

allottees/homebuyers. It was submitted that in the present case there are

more than 800 homebuyers who had already been allotted flats in the

project constructed over the land leased by the Appellant and therefore the

interests of such homebuyers deserved paramount consideration.

167. Lastly, he submitted that the Sub-Lease Deed executed between the

Appellant and the Corporate Debtor on 19.12.2012 continued to remain a

valid and subsisting instrument. It was pointed out that the Appellant itself

had participated in the CIRP proceedings on the basis of dues arising from

the said Sub-Lease Deed and had never terminated the lease agreement. It

was therefore argued that once the Resolution Plan stands approved, the

same becomes binding upon all stakeholders in terms of Section 31 of the

Code read with Section 238 thereof, which overrides all inconsistent

contractual provisions to the extent necessary for implementation of the

approved Resolution Plan.

Submissions of Vishwanath Sharma, Intervener on behalf of Homebuyers

168. Mr. Utkarsh Joshi, Ld. Counsel for the Homebuyer supported the

submissions of RP. He submitted that NOIDA had itself approved the layout

plans of the project in the year 2014. However, after approval of the

resolution plan and after the order dated 25.07.2023 passed by this Hon'ble

Page 81 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 Appellate Tribunal permitting implementation of the plan, NOIDA

deliberately obstructed implementation by refusing to comply with the

resolution framework despite there being no stay operating against the

approved plan.

169. He further submitted that Sections 31 and 238 of the IBC

unequivocally provide that an approved resolution plan shall be binding

upon all stakeholders including the Central Government, State Government

and local authorities in respect of statutory dues. Therefore, once the

resolution plan attained approval and implementation was permitted,

NOIDA became statutorily bound by the same. The Counsel argued that

NOIDA cannot selectively participate in the insolvency process when

convenient and subsequently refuse to honour the binding consequences of

the process.

170. He further submitted that NOIDA's actions are arbitrary,

unreasonable and violative of constitutional principles including the

fundamental rights guaranteed under Article 21 of the Constitution.

Reliance was placed upon the judgment in Mansi Brar Fernandes v. Shubha

Sharma & Ors., 2025 INSC 1110, particularly paragraphs 20.1 to 20.5.

171. Ld. Counsel placed reliance upon the order dated 29.04.2025 passed

by the Hon'ble Supreme Court in Himanshu Singh & Ors. v. Union of India

& Ors., SLP (C) No. 7649 of 2023, particularly paragraphs 4, 5, 14 and 23,

as well as the order dated 14.09.2023 in Virendra Singh Nagar v. State of

Uttar Pradesh & Anr., SLP (Crl.) No. 1251 of 2023, particularly paragraphs

Page 82 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 3 to 5, to demonstrate judicial concern regarding the conduct of authorities

and builders in real estate matters affecting homebuyers.

172. The Ld. Counsel finally submitted that being a public authority,

NOIDA ought to act in a manner that facilitates completion of the project

and protects the interests of thousands of homebuyers rather than

obstructing the resolution process. It was submitted that if NOIDA seeks to

recover amounts from the erstwhile promoters, it is always open to NOIDA

to initiate appropriate proceedings against such promoters. However, from

the information available to homebuyers, no meaningful action has been

initiated against the erstwhile promoters.

173. Ld. Counsel argued that NOIDA's present conduct raises serious

concerns regarding its bona fides, particularly when it seeks to extract

further money from already distressed homebuyers while allowing the

erstwhile promoters to escape liability. The Counsel submitted that the

actions of NOIDA should ultimately be guided by public interest and should

facilitate timely completion and delivery of homes to innocent purchasers

who have suffered for years.

Analysis & Findings

174. The only issue in this appeal is whether the Appellant/NOIDA is

entitled to a treatment different from that of an ordinary Operational

Creditor in view of the rights arising from the registered Sub-Lease Deed

dated 19.10.2012 and the statutory framework governing the project land,

Page 83 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 and whether the Resolution Plan approved by the Adjudicating Authority

adequately considered those rights in accordance with law?

175. The land on which the project of the Corporate Debtor is being

implemented is owned by NOIDA and it has been sub-lease to the Corporate

Debtor for a period of 90 years against payment of lease premium. NOIDA

filed its claim in the CIRP for an amount of Rs. 84.19 Crores out of which

the RP admitted Rs.68.90 Crores. The Resolution Plan proposes a payment

of only about Rs.8 Crores to NOIDA. The main contention of the NOIDA

Authority is, that it's the lawful owner of the project land and that the

Corporate Debtor derived its rights over the land only through the registered

Sub-Lease Deed dated 19.10.2012 executed between the parties. Under the

said deed, the Corporate Debtor was obliged to pay lease premium, annual

ground rent, extension charges and other dues payable to NOIDA.

According to the Appellant, the Resolution Plan failed to properly consider

these rights and wrongly treated NOIDA at par with an ordinary Operational

Creditor despite the unique nature of its relationship with the Corporate

Debtor.

176. NOIDA has relied upon the registered sub-lease deed claiming that it

creates a charge upon land and clearly creates a security interest under

Section 3(31) of the Code. It made a twofold contention; Firstly, such

charge/right has been created by the transaction namely the lease deed and

secondly, it obliges the corporate debtor to make payment of its dues.

Page 84 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

177. The Respondents on the other hand, have contended that NOIDA was

correctly treated as an Operational Creditor. They have placed reliance upon

the Explanation inserted in Section 3(31) of the Insolvency and Bankruptcy

Code, 2016 by Section 2 of the Insolvency and Bankruptcy Code

(Amendment) Act, 2026, which has been brought into force through Gazette

Notification S.O. 2625(E) dated 22.05.2026 with effect from 26.05.2026.

According to the Respondents, the amendment clarifies that a security

interest created merely by operation of law would not constitute a security

interest under the IBC and therefore NOIDA cannot claim any special status

on the basis of the statutory charge asserted by it.

178. At the outset, we find that the present dispute cannot be viewed as a

routine claim for recovery of dues. The Appellant is not a creditor whose

claim arises from supply of goods or services to the Corporate Debtor. The

project itself stands on land owned by NOIDA. The Corporate Debtor

acquired and continued to enjoy rights over the project land only by virtue

of the registered Sub-Lease Deed dated 19.10.2012. The foundation of

NOIDA's claim lies in the registered Sub-Lease Deed dated 19.10.2012,

which governs the relationship between the parties and regulates the

Corporate Debtor's rights and obligations in respect of the project land. The

statutory provisions relied upon by NOIDA merely supplement and protect

rights that already arise from the said lease arrangement. Therefore, the

rights asserted by NOIDA are intrinsically connected with the very source

from which the Corporate Debtor derived its entitlement to occupy and

develop the project land.

Page 85 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

179. In this case NOIDA Authority has relied on a Clause in Sub-lease

Deed made on 19.10.2012 between the "New Okhla Industrial

Development Authority- the Lessor" AND "M/s Sequel Buildcon Pvt.

Ltd.- a Relevant Member of M/s Xanadu Estates Pvt. Ltd. (Consortium)

Company which is the "Lessee" AND "M/s Arena Superstructures Pvt.

Ltd.,(100% owned subsidiary of M/s Sequel Buildcon Pvt. Ltd.) called as -

the "Sub-lessee". Citation portion of the Deed reads as follows:

"And whereas the Lessor approved the sub division of Sports City Plot No. SC-01/A Sector-79 measuring 1,00,000 Sqm. Into 2 parts numbering as SC-01/A1 Sector-79 measuring 50,000 Sqm. And SC-01/A2 Sector-79 measuring 50,000 Sqm. To be developed by (1) M/s Sequel Buildcon Pvt. Ltd. and (2) M/s Arena Superstructures Pvt. Ltd. (100% owned subsidiary company of M/s Sequel Buildcon Pvt. Ltd.), respectively and allowed the Lessee to sub lease as per the terms and conditions of the Brochure for the development of Sports City for recreational, commercial and residential including group housing of the scheme vide letter No. Noida/Commercial/2012/1187 dated 3rd October, 2012"

180. Further, Part II of the said Sub lease document deals with payment

by Sub-Lessee to Lessor. In sub-clause (f) the following declaration is given

about the charge: -

"II. AND THE SUB-LESSE DOTH HEREBY DECLARE AND COVENANT WITH THE LESSOR IN THE MANNER FOLLOWING:

(a)....

(f)....

Lessor shall have the first charge on the plot towards payment of all dues of Lessor."

181. We note the following from the aforesaid portions of Lease Deed:

Page 86 of 91

CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 a. It's a tripartite Sub-Lease Deed between NOIDA-the Lessor; Sequel

Buildcon the Lessee; and Arena Superstructures the CD herein as

Sub-Lessee.

b. The Sub-Lessee Arena Superstructures (CD) is a 100% subsidiary of

the Lessee.

c. The Sports City Plot No. SC-01/A Sector 79 having an area of

100,000Sqm was further divided by NOIDA in 2 plots having equal

area of 50,000Sqm each, and the second plot no. SC-01/A2 Sector

79 having an area of 50,000Sqm was further sub-Leased to Arena

Superstructures (CD).

182. We note from the registered sub-lease document that the Lessee and

Sub-Lesse are parent and 100% subsidiaries. The leasehold rights and

liabilities of the 2nd sub-Leased plot have been transferred to CD. We further

note that the Sub-Lease Deed creates a first charge on the property in favour

of Lessor NOIDA. Further the Deed secures payment to NOIDA for alludes

from Corporate Debtor. This document is a contract to which both NOIDA

and Corporate Debtor are parties, the third party being the Parent company

of the CD.

183. We now examine the aforesaid document with respect to 3(31) of the

Code which define 'security interest' is extracted below: -

"3(31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or

Page 87 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 arrangement securing payment or performance of any obligation of any person:

PROVIDED that security interest shall not include a performance guarantee;"

184. We note from the above that the aforesaid sub-lease deed creates the

first charge in favour of NOIDA to secure payment of its dues from the

corporate debtor. The charge is created by an agreement and not by

operation of a statute. We also note that the rights asserted by NOIDA are

based on this agreement and the its reliance on the statutory charge under

Sections 13 and 13-A of the Uttar Pradesh Industrial Area Development Act,

1976 is only to further strengthen its case.

185. We also note that the Parliament has inserted an Explanation to

Section 3(31) of the IBC through Section 2 of the Insolvency and Bankruptcy

Code (Amendment) Act, 2026, and the same has been brought into force

through Gazette Notification S.O. 2625(E) dated 22.05.2026. The

Explanation clarifies that a security interest created merely by operation of

law would not qualify as a security interest under the Code. However, in our

considered view, in this case the reliance is upon a registered lease deed

and not upon creation of statutory charge by operation of law.

186. It is to be noted that the RP in its submission has stated that two

elements are essential to constitute a security interest under Section 3(31)

of the Code: (i) the right, title, interest or claim must be created by a

transaction; and (ii) such transaction must secure payment or performance

Page 88 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023 of an obligation. Further the word 'transaction' is itself defines under

Section 3(33) of the Code as:

"3(33) Transaction" includes an agreement or arrangement in writing for the transfer of assets, or funds, goods or services, from or to the corporate debtor."

We are of the view that the registered sub-lease deed meets all the

requirements as laid down in Section 3(31) and 3(33) of the Code and

accordingly NOIDA should have been treated as the Secured Creditor in the

Resolution Plan.

187. The material placed before us shows that NOIDA had specifically

objected to the treatment accorded to it under the Resolution Plan and had

raised concerns regarding the impact of the Resolution Plan upon its rights

arising from the lease arrangement governing the project land. These

objections required a detailed examination by the Adjudicating Authority.

188. However, on a careful reading of the Impugned Order, we find that

there is no meaningful discussion regarding the nature of the rights arising

from the registered Sub-Lease Deed dated 19.10.2012 or the effect of the

Resolution Plan upon those rights. The Impugned Order primarily proceeds

on the basis that the Resolution Plan had received the approval of the

Committee of Creditors. While the commercial wisdom of the Committee of

Creditors deserves due deference, approval by the CoC cannot dispense with

the requirement of examining legal rights that arise independently under

contractual arrangements governing the project land.

Page 89 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

189. We are therefore of the view that the Adjudicating Authority failed to

adequately examine the distinctive position occupied by NOIDA as the

owner of the project land and as a party to the registered Sub-Lease Deed

dated 19.10.2012, from which the Corporate Debtor derived its rights. The

objections raised by NOIDA on this aspect deserved independent

consideration before approval of the Resolution Plan.

190. In these circumstances, we are satisfied that the issues raised by the

Appellant were not considered in their proper perspective. The Impugned

Order does not reflect any detailed examination of the consequences of the

Resolution Plan on the rights of NOIDA arising from the registered Sub-

Lease Deed dated 19.10.2012 and the statutory framework governing the

project land. Such consideration was necessary before the Resolution Plan

could be approved.

191. Accordingly, we are of the view that the claim of NOIDA requires

reconsideration, as their claim is held to be that of a Secured Creditor,

arising from the registered Sub-Lease Deed dated 19.10.2012. The

Resolution Plan incorrectly classifies the claim of NOIDA to be that of an

Operational Creditor.

192. In view of our findings above and in in earlier paragraphs, we dispose

of the appeals in the following manner:

(i) CA (AT) (Ins) No. 949 of 2023 and 1117 of 2023 are dismissed.

(ii) CA(AT) (Ins) No. 1231 of 2023 is disposed of in the following manner:

Page 90 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023

a) Impugned Order is set aside to the limited extent of distribution

proposed in the Resolution Plan. There would be no change to

the remaining part of the Resolution Plan.

b) RP is directed to propose an addendum to the Resolution Plan,

treating NOIDA as a Secured Creditor and revising the

distribution proposed in the Resolution Plan. CoC to consider

the revised distribution and after approval of the CoC, the same

may be placed before Ld. Adjudicating Authority for final

approval.

[Justice Ashok Bhushan] Chairperson

[Indevar Pandey] Member (Technical) Harleen/ Pragya (LRA)

Page 91 of 91 CA (AT) (Ins) Nos. 949, 1117 & 1231 of 2023