Rajendra Surana & Anr vs Jayesh Sangharjka & Ors

[Arising out of Order dated 02.05.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-IV in IA-2953/2021 in CP/IB/4469(MB)2019]

In the matter of:

Rajendra Surana & Anr. ....Appellants

Vs.

Jayesh Sangharika & Ors. ...Respondents For Appellants: Mr. Neeraj Malhotra, Sr. Advocate with Ms. Garima Singh, Nimish and Mr. Sandesh, Advocates For Respondents: Mr. Abhijeet Sinha, Mr. Puneet Singh Bindra, Mr. Rishabh Gupta, Mr. Sameer Sethi, Mr. Aditya Shukla, Ms. Simran Jeet, Mr. Akshay Sharma, Advocates for R-2/SRA Mr. Tishampati Sen, Ms. Riddhi Sancheti, Mr. Himanshu Kaushal, Mr. Anurag Anand, Advocates for R-1

JUDGMENT

(2 November, 2023) nd

Ashok Bhushan, J.

1. This Appeal has been filed against the order dated 02.05.2023 passed

by the Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench IV rejecting IA No.2953 of 2021 filed by the Appellant praying for

rejection of the Resolution Plan approved by the Committee of Creditors (CoC).

2. Brief facts of the case necessary to be noticed for deciding this Appeal

are:-

2

2.1. Appellants are homebuyers of the project 'The Grove Towers'. Appellant

No.1 and the Corporate Debtor entered into an Agreement for Sale dated

18.08.2018 for Unit No.1907 admeasuring 2050 sq. ft. on the 19th Floor for a

total consideration of Rs.4,69,64,883/-. The Adjudicating Authority by order

dated 29.06.2020 admitted Section 7 Application against the Corporate

Debtor- 'Ornate Spaces Private Limited' which was financed by 'IDBI

Trusteeship Services Limited', the Financial Creditor. Appellant submitted its

claim vide Form CA on 11.07.2020. IRP invited Expression of Interest for

Corporate Debtor. The Resolution Plan submitted by 'Ashdan Properties

Private Limited' (Respondent No.2) was approved by 80.86% voting share. All

the homebuyers including the Appellant having voting share of 18.34% voted

against the Resolution Plan. On 16.12.2021, Appellant filed an IA No.2953 of

2021 before the Adjudicating Authority seeking rejection of the Resolution

Plan submitted by Respondent No.3. The Adjudicating Authority heard the

Appellant as well as Resolution Professional and vide order impugned partly

allowed IA No.2953 of 2021. Appellant aggrieved by the said order has come

up in this Appeal.

3. We have heard Shri Neeraj Malhotra, Learned Senior Counsel appearing

for the Appellant, Shri Abhijeet Sinha, Learned Counsel appearing for

Respondent No.2- Successful Resolution Applicant and Mr. Tishampati Sen,

Learned Counsel appearing for Respondent No.1.

4. Shri Neeraj Malhotra, Learned Senior Counsel challenging the

impugned order submits that the Adjudicating Authority has wrongly held that

Comp. App. (AT) (Ins.) No. 795 of 2023 3

the Real Estate (Regulation and Development) Act, 2016 will not have

jurisdiction for future violation by the Resolution Applicant. It is submitted

that the Appellants are deprived of exercising their rights under RERA for the

future violations/ default by the Resolution Applicant. The Resolution Plan

deserves to be rejected on account of various clauses seeking to circumvent

RERA to the detriment of the homebuyers and in particular of violation of

Section 30(2)(e) of the IBC. It is submitted that the Adjudicating Authority has

failed to appreciate that the Corporate Debtor had agreed to sell flats to each

of the homebuyers at the rate of Rs.13,500/- to Rs.21,000/- per sq. ft. whereas

as per the revised Resolution Plan, the homebuyers are required to pay an

additional consideration which is more than the contractually agreed

consideration. The Successful Resolution Applicant has fixed the MSP for the

Residential premises as Rs.33,000/- per sq. ft. It is submitted that the

Resolution Plan contains clauses designed to circumvent RERA. Learned

Counsel for the Appellant has referred to various clauses in the Resolution

Plan including Clauses 8.6, 9.1.2 and 10.3 which as per the submission of the

Appellant are in violation of Section 34(f),(g)&(h), Sections 37 and 38 of the

RERA. It is submitted that there are further clauses in the plan which violates

Section 14 of the RERA. Resolution Applicant has never provided any means

or clarity with regard to per sq. ft. rate that the homebuyers of the sold unit

shall need to pay. No details for determination of MSP as Rs. 33000/- per sq.

ft. has been given. CoC has not exercised its commercial wisdom in approving

the plan.

Comp. App. (AT) (Ins.) No. 795 of 2023 4

5. Learned Counsel for the Respondent No.2 refuting the submissions of

the Counsel for the Appellant submits that the submissions of the Appellant

that there is violation of the provisions of RERA insofar as future claims and

defaults are concerned is not correct. It is submitted that the Resolution Plan

only precludes filing complaints under RERA with regard to past act i.e. the

claim and breaches up to the date of approval of the Resolution Plan. The

Resolution Plan deals with the claims prior to effective date as per the

Resolution Plan and the plan does not deal with future claim or default. It is

submitted that the Resolution Professional has already given a clarification to

the above effect before the Adjudicating Authority. It is submitted that the

Adjudicating Authority itself in the impugned order has observed that the

remedy under RERA in relation to past default of the Corporate Debtor has

been forfeited. It is further submitted that during pendency of this Appeal

Adjudicating Authority by an order dated 06.10.2023 has already approved

the Resolution Plan allowing the IA No.2772 of 2023 filed by the Resolution

Professional. The order dated 06.10.2023 has also been brought on record

along with an application and in view of the order approving the Resolution

Plan which has been passed after rejecting objection raised to the Resolution

Plan, it is submitted that nothing survives in the appeal to be decided. The

order approving the Resolution Plan having not been challenged by the

Appellant, no relief can be granted to the Appellant.

6. Learned Counsel for the Resolution Professional also adopted the

submissions raised by the Respondent No.2.

Comp. App. (AT) (Ins.) No. 795 of 2023 5

7. We have considered the submissions of the Counsel for the parties and

perused the record.

8. From the fact which has been brought on record, it does appear that the

Appellants are homebuyers who although voted against the plan but the plan

stood approved by the requisite votes. Adjudicating Authority in the impugned

order has referred to the judgment of the Hon'ble Supreme Court in "Jaypee

Kensington Boulevard Apartments Welfare Association & Ors. vs. NBCC

(India) Ltd. & Ors.- Civil Appeal No.3395 of 2020" for holding that

Appellant has no right to challenge the approval of the Resolution Plan

however, the Adjudicating Authority having proceeded to consider the

submission advanced before the Adjudicating Authority on merits, we proceed

to examine the submissions raised by the Counsel for the parties in this

Appeal.

9. The first submission which has been raised by the Appellant challenging

the approval of the plan by the CoC is that the Resolution Plan violates the

provisions of RERA Act, thus, leads to non-compliance of Section 30(2)(e) of

the IBC. It is submitted that the Resolution Plan illegally debars the

homebuyers including the Appellant from enforcing any of their rights and

future claims by filing a complaint under the RERA Act which is not

permissible. Resolution Plan, thus, clearly obstruct the lawful and statutory

prerogatives of a statutorily authorized body. Learned Counsel for the

Appellant has in support of his submissions referred to Clauses 8.6, 9.1.2 and

10.3 of the Resolution Plan. It is relevant to notice the Clauses 8.6, 9.1.2 and

Comp. App. (AT) (Ins.) No. 795 of 2023 6

10.3 of the Resolution Plan which according to the Appellant violates the

future rights or claims of the homebuyers. Clauses 8.6, 9.1.2 and 10.3 of the

Resolution Plan as follows:-

"8.6. The Home Buyers shall accept the new delivery dates and shall also not make any claims towards interest or compensation for past acts and shall make claims only to the extent of breaches if any committed in respect of the terms contained for new projects. The Home Buyers shall be entitled to similar built-up areas in the new project on the commercial terms contained herein. The Home Buyers shall not raise any objection or reach out to RERA objecting to any future development of the Properties or any part thereof."

"9.1.2. That the Hon'ble NCLT be pleased to give or issue necessary directions, instructions to the Home Buyers to accept the new delivery dates of the Projects and not to make any claims towards interest or compensation for past acts and not to raise any objection or approach RERA objecting to any future development of the Properties or any part thereof."

"10.3. The RERA authority shall dispose off and extinguish all claims, cases and order against the Corporate Debtor prior to the Approval date. The RERA authority shall further not admit any new claims or cases pertaining to the project under the control and management of Resolution Applicant/

Comp. App. (AT) (Ins.) No. 795 of 2023 7

Corporate Debtor pertaining to claims prior to the Effective Date as per this Resolution Plan."

10. When we look into the aforesaid clauses, in clauses 8.6 and 9.1.2 the

words 'for past acts' has been specifically mentioned. Thus, the plan clearly

prohibits any claim under the RERA only with regard to past acts. Coming to

clause 10.3, Clause 10.3 reads the RERA authority shall dispose off and

extinguish all claims, cases and order against the Corporate Debtor prior to

the Approval date and further RERA authority shall further not admit any new

claims or cases pertaining to the project under the control and management

of Resolution Applicant/ Corporate Debtor pertaining to claims prior to the

Effective Date as per the Resolution Plan. Thus, the above clauses clearly

contemplate provisions with regard to past acts and past claims prior to

effective date. These clauses cannot be read for creating any future embargo

with regard to future claims for violation by the Resolution Applicant. The past

claims under RERA does not survive and have to give way to the provisions of

the Resolution Plan, hence, we do not find any infirmity in the aforesaid

clauses and the aforesaid clauses clearly does not relate to any claims or

violation subsequent to effective date which are not subject matter of the

Resolution Plan. The above submission was also pressed before the

Adjudicating Authority and the Adjudicating Authority has also observed that

no prejudice is caused to the applicant in case their remedy under RERA in

relation to past defaults stands forfeited. In paragraph 7.4 of the impugned

order, following observed has been made:-

Comp. App. (AT) (Ins.) No. 795 of 2023 8

"7.4. As regards clause 11.1 seeking immunity from payment of any compensation for delay in delivery and bar on filing fresh claims before RERA authority, this Bench finds that the Hon'ble Supreme Court in the case of Jaypee Kensington Boulevard Apartments Welfare Association (Supra) held that the provisions of the Code would override those in the RERA. Consequently, contentions relating to the claims under RERA that do not conform with the resolution plan would be rejected and this Bench does not find that any prejudice is caused to the applicants in case their remedy under RERA in relation to past defaults of the Corporate Debtor stands forfeited. Further, it was also held by the Hon'ble Supreme Court that the CoC would have full powers to decide the treatment of the agreement that the resolution plan would propose with financial creditors such as homebuyers, accordingly proposed delivery of the flats after 4.5 years and supersession of the existing flat buyers agreement by the clause(s) of the Resolution plan, to the extent such agreement is in contradiction with the proposed Resolution Plan, cannot be objected so long as the plan is found viable and feasible in the commercial wisdom of the CoC."

11. Counsel for the Appellant has raised exception to the provision of Clause

8.7 which according to the Appellant violates Section 14 of the RERA. Clauses

8.7, 8.9 and 8.20 which have been referred by the Resolution Applicant are as

follows:-

Comp. App. (AT) (Ins.) No. 795 of 2023 9

"8.7 The Resolution Applicant/ Corporate Debtor may alter the layout and/ or the building plans including the height and location of the buildings and the common areas. The carpet area, in respect of Home Buyers whose claims have been admitted by the Resolution Professional, shall not exceed the area admitted by the Resolution Professional. In case the carpet area to be given the Home Buyer is reduced then the Sales Value as per the allotment letter shall be proportionately reduced and in the event the carpet area is increased then the consideration payable by the Home Buyer on such increased Carpet Area will be equivalent to the Project launch price."

"8.9. The Resolution Applicant shall have the right to reconfigure with revised specifications the said unit/project on the best judgment of the Resolution Applicant and the prevailing market conditions. The Resolution Applicant shall also have the right to remove/modify any amenities promised to the Home Buyer in the project. By approving this Resolution Plan, the Home Buyers expressly consent to the same and agree not to raise any objection regarding the modification in the amenities and the revised specifications of the unit/project and RERA and other authorities shall rely on this Resolution Plan as consent granted therefor."

8.20. With effect from the NCLT Approval Date and upon the payment of the Upfront Cash by the Resolution Applicant, the Resolution Applicant/ Corporate Debtor shall apply for the necessary

Comp. App. (AT) (Ins.) No. 795 of 2023 10

approvals for constructing two towers, however, in case the Resolution Applicant/ Corporate Debtor is unable to construct two towers then the Resolution Applicant/ Corporate Debtor shall construct only one tower."

12. When we look into the aforesaid clauses, the clauses only empower the

Resolution Applicant/ Corporate Debtor to alter the layout and the building

plan including the height, location and common area. It goes without saying

that the said alteration and modification has to be taken after obtaining

necessary approval from the Competent Authority which fact is clearly

mentioned in Clause 8.20. The aforesaid clauses cannot be read to mean that

the Resolution Plan empowers the Resolution Applicant to alter the layout and

modifying the building plan on its own. No exception can be taken to the

aforesaid clauses.

13. Learned Counsel for the Appellant has next contended that the

agreement with the Corporate Debtor was for receiving the flats at the rate of

Rs.13,500/- to Rs.21,000/- per sq. ft. which now stands modified to

Rs.33,000/- per sq. ft. which rewrites the contract between the Corporate

Debtor and no justification has been committed by the Resolution Applicant

for fixing MSP at the rate of Rs.33,000/- per sq. ft. The determination of MSP

Rs.33,000/- per sq. ft. has received the approval of the CoC which clauses

have been approved in exercise of the commercial wisdom of the CoC. The

fixation of the MSP of Rs.33,000/- is uniform for all homebuyers in a class.

The fixation of MSP depends on various factors including the cost of

Comp. App. (AT) (Ins.) No. 795 of 2023 11

construction which has now to be undertaken by the Resolution Applicant and

to complete the project.

14. We, thus, are of the view that the approval of the CoC of the Resolution

Plan cannot be faulted on the ground that MSP has been fixed @ Rs.33,000/-

per sq. ft. which is different from the amount at the rate of Rs.13,500/- to

Rs.21,000/- per sq. ft. which was initially promised by the Corporate Debtor.

The clause in the Resolution Plan effectively modify all earlier contract between

the parties and under the Scheme of the IBC, it is fully permissible to provide

for new arrangement and clauses for revival of the Corporate Debtor which is

the object of the IBC.

15. The submission of the Appellant is that CoC has not exercised its

commercial wisdom and has not looked into the relevant cost for construction

and fixation of the MSP of Rs.33,000 per sq. ft. When the plan is approved

with requisite vote, it has to be assumed that the said approval is in the

commercial wisdom. More so, fixation of MSP for allotment of flats to

homebuyers is a commercial decision. Further, escalation for prices of

allotment of flats can very well be undertaken to revive the Corporate Debtor

and Appellant cannot insist that the Resolution Applicant should also make

the allotment of flats on the same price on which the Corporate Debtor has

promised to make. It is further relevant to notice that by a subsequent order

passed by the Adjudicating Authority on 06.10.2023, the Resolution Plan now

stands approved, we, however, have proceeded to examine the submissions of

the Appellants on merits which were pressed in the appeal in reference to the

Comp. App. (AT) (Ins.) No. 795 of 2023 12

rejection of the Application IA No.2953 filed by the Appellant. We, thus, do not

find any substance in any of the submissions raised by the Appellant

challenging the approval of the Resolution Plan by the CoC.

16. The Adjudicating Authority in the impugned order has not committed

any error in rejecting IA No.2953 filed by the Appellant. We, thus, do not find

any merit in the appeal. The appeal is dismissed subject to observations and

clarifications as made above.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Anjali/nn

Comp. App. (AT) (Ins.) No. 795 of 2023