Shubhkamna City Welfare Association ... vs M/S. Shubhkamna Buildtech Pvt. Ltd. ...

Comp. App. (AT) (Ins) No. 1468 of 2022 & I.A. No. 4626, 4627 of 2022

IN THE MATTER OF:

Shubhkamna City Welfare Association Through its Authorized Signatory & Anr. ...Appellants

Versus

Shubhkamna Buildtech Pvt. Ltd. Through Resolution Professional & Anr. ...Respondents

Present: For Appellants: Mr. Ajit Singh, Advocate. For Respondents: Mr. Abhishek Anand, Mr. Nipun Gautam, Ms. Kashish & Mr. Anand Sonbhadra, RP in person.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal has been filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 (in short 'Code') by Shubhkamna City Welfare

Association, through its Authorised Representative Ramesh Chandra

Gupta and Subhkamna City Welfare Association, through its Authorised

Representative Surya Kant Tyagi, for setting aside the order dated

12.09.2022 passed by the Adjudicating Authority (National Company Law

Tribunal, New Delhi) in CA No. 485 /ND/ 2019 filed in C.P. No. (IB)-

1059/ND/2018 by which an application filed by the Resolution Professional

(in short 'RP') under Sections 30(6) and 31(1) of the Code r/w Regulation

39(4) of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 (in short

'Regulations') seeking approval of the resolution plan submitted by

Comp. App. (AT) (Ins) No. 1468 of 2022 2

Successful Resolution Applicants (in short 'SRA") i.e. Surender Kumar

Singhal and Sunil Kumar Agarwal, approved by the Committee of Creditors

(in short 'CoC') in its 6th meeting held on 09.10.2019, has been allowed.

2. In brief, M/s Concord Infrastructure Pvt. Ltd. (Operational Creditor)

filed an application i.e. C.P. No. (IB)-1059/ND/2018 under Section 9 of the

Code against M/s Shubhkamna Buildtech Pvt. Ltd. (Corporate Debtor)

which was admitted on 26.11.2018.

3. The Corporate Debtor is in the business of real estate construction

and development. Greater Noida Industrial Development Authority (GNIDA)

leased out a plot no. GH-02A, Sector 01, Greator Noida, admeasuring

32,296 sq. mts. vide lease deed dated 04.04.2011 to the Corporate Debtor

for a period of 90 years.

4. The Corporate Debtor, after taking possession of the aforesaid site,

started construction and development of the project, namely, Shubhkamna

City, as per the plans approved by GNIDA.

5. Subsequently on 27.09.2016, a tripartite registered agreement was

executed between the Corporate Debtor, Arham Escon Pvt. Ltd. and GNIDA

and a portion of site i.e. 10,627.229 sq. mts. was sub-leased to Arham

Escon for construction and development of the projects.

6. The Homebuyers entered into agreements for purchase of

flats/commercial areas in two projects of the Corporate Debtor, namely,

Shubhkamna Advert Techomes Projects, situated at Sector 137,

Comp. App. (AT) (Ins) No. 1468 of 2022 3

Expressway, Noida and Shubhkamna City, Plot No. GH-02A, Sector 01,

Greater Nodia West (Noida Extension).

7. After the initiation of the Corporate Insolvency Resolution Process (in

short 'CIRP'), Interim Resolution Professional (In short 'IRP') made a public

announcement in form A on 30.11.2018 and 07.01.2019. The IRP also

constituted the CoC based on the claims received from the creditors of the

Corporate Debtor. A tabular representation of the voting percentage

alongwith the claim admitted of the creditors in each class/entity of the

Corporate Debtor is as under: -

Name of the Class/Entity Voting Share Claim Admitted (INR)

Homebuyers/Allottees 87.6% 536,70,62,437

Merina Commotrade Pvt. Ltd. 1.67% 102,125,000

Canara Bank 0.11% 6,815,374

DHFL 3.51% 215,039,400

Rishi Kapoor 1.82% 111,221,500

UCO Bank 5.16% 316,377,832

Corporation Bank 0.13% 7,920,250

Total 100% 612,65,61,793/-

8. It is pertinent to mention that in the first meeting of the CoC held on

07.02.2019, the IRP was replaced and Anand Sonbhadra was appointed as

the RP.

Comp. App. (AT) (Ins) No. 1468 of 2022 4

9. It is also pertinent to mention that Brij N. Kalra was appointed as

Authorised Representative for class of creditors being allottees under a real

estate project as per Regulation 16A of the Regulations.

10. The appointment of the RP was confirmed by the Adjudicating

Authority on 12.02.2019 and also the appointment of authorised

representative vide order dated 25.01.2019.

11. The RP issued the Expression of Interest (in short 'EOI') in form G.

Three Prospective Resolution Applicants (in short 'PRAs') submitted their

resolution plans. The final list of PRAs is as under:-

S. No. Prospective Resolution Type of Industry Date of

applicant submission

1. Consortium - Executive of Homebuyers 04.08.2019

Association of Homebuyer

2. Sunder Kumar Singhal & Real Estate 02.08.2019

Sunil Kumar Agarwal Sector

3. Mahaluxmi Buildtech Real Estate 04.08.2019

Limited Developer

12. However, the resolution plan of two PRAs was received i.e.

Consortium-Executives of Association of Home Buyers and Surender Kumar

Singhal and Sunil Kumar Agarwal on the last date for submission of the

resolution plan. The plan was circulated amongst the authorised

representative, the homebuyers and CoC members which was discussed in

Comp. App. (AT) (Ins) No. 1468 of 2022 5

the 6th CoC meeting held on 09.10.2019. The CoC declared Surender Kumar

Singhal and Sunil Kumar Agarwal as the highest bidder (H1) and also

decided to amend the clause relating to the performance security from Rs. 5

Cr. to Rs. 30 Cr.

13. The resolution plan submitted by Successful Resolution Applicant was

approved by the CoC with an affirmative voting percentage of 87.60%. The

details of the dissenting financial creditors alongwith the liquidation value is

as under:-

Liquidation Value for Dissenting Financial Creditors

Particulars of Voting Status Admitted Provided in Liquidation

Dissenting Claim plan value

Creditor

Secured Financial Creditors

Dewan Abstained 21.5 1.5 0

Housing

Finance

Limited

Canara Bank Abstained 0.68 0.2 0.1820000

Merino Dissent 10.21 1 0.7955513

Commotrade

Pvt. Ltd.

Unsecured Financial Creditors

UCO Bank Dissent Delivery of

Comp. App. (AT) (Ins) No. 1468 of 2022 6

31.64 units against

borrower's

allotment &

BBA

Corp. Bank Abstained 0.79 Delivery of

units against

borrower's

allotment &

BBA

Rishi Kapoor Dissent 11.12 0.9 1.5231208

14. The RP filed an application i.e. CA No. 485 of 2019 before the

Adjudicating Authority under Section 30(6) and 30(1) of the Code r/w

Regulation 39(4) of the Regulations seeking approval of the resolution plan

submitted by the SRA, approved by the CoC on 09.10.2019.

15. Objections were filed by the four set of objectors to the approval of the

resolution plan. The first set of objector was a group of five dissenting

homebuyers i.e. Commander Rohtash Kumar Sharma, Anil Kumar

Kulshrestha, Shalini, Ranjan Singh and Prashant Gaur. It was their

objection that two projects i.e. Shubhkamna City and Shubhkamana

Techomes were merged for the purpose of the resolution plan and the same

is against the principle of reverse corporate insolvency which has to be

followed in respect of real estate infrastructure companies, the Corporate

Debtor had illegally sub-leased a part of the project to Arham Escon Pvt.

Comp. App. (AT) (Ins) No. 1468 of 2022 7

Ltd. The second set of objectors was filed by M/s Merina Commotrade Pvt.

Ltd., a dissenting financial creditor and the third set of objector was filed by

New Okhla Industrial Development Authority (Noida) and 4th set of objector

was GNIDA.

16. In so far as the first set of objection is concerned, it was held that

since the homebuyers as a class assented to the plans, any individual

homebuyers, group of homebuyers or association of homebuyers cannot

maintain any challenge to the resolution plan nor could be treated as

carrying any legal grievance. Thus, the objection was dismissed on this

ground alone while following the decision of the Hon'ble Supreme Court in

the case of Jaypee Kensington Boulevard Apartments Welfare Association &

Ors. Vs. NBCC (India) Limited & Ors. (2022) 1 SCC 401.

17. The present appeal has been filed by two set of similarly named

Welfare Association of the homebuyers, without mentioning in the memo of

appeal, as to how many members are in their association who have

preferred this appeal nor annexing the list of the members with the appeal

as well.

18. Be that as it may, the Respondent No. 1 at the outset, raised a

preliminary objection regarding the maintainability of the present appeal

alleging that as per Section 61 of the Code, the appeal can be filed only by

an aggrieved person and the Appellants do not fall within the category of

aggrieved person because the minority homebuyers have to necessarily flow

the majority within the class. This objection has also been taken as a

preliminary objection in the reply and in support, reliance has been placed

Comp. App. (AT) (Ins) No. 1468 of 2022 8

upon the decisions of the Hon'ble Supreme Court and this Tribunal in the

cases of Japee Kensington Boulevard Apartments Welfare Association & Ors.

(Supra) and Bipin Sharma Vs. Earth Infrastructure Ltd., CA (AT) (Ins) No.

916 of 2021 and Piya Puri & Ors. Vs. Debashish Nanda & Ors., CA (AT) (Ins)

No. 906 of 2022 in which the law laid down by the Hon'ble Supreme Court

in the case of Jaypee (Supra) has been followed. It is also submitted by the

Respondent that in the 6th CoC meeting held on 09.10.2019, the resolution

plan submitted by the SRA has been approved by voting share of 87.60%

and in this regard, it is submitted that the commercial wisdom of CoC has

been given paramount status without any judicial intervention and has

relied upon a decision of the Hon'ble Supreme Court in the case of K.

Sashidhar Vs. Indian Overseas Bank & Ors., (2019) 12 SCC 150 and a

decision of this Court in the case of Shrawan Kumar Agrawal Consortium

Vs. Rituraj Steel Pvt. Ltd., CA (AT) (Ins) No. 1490 of 2019 and also a decision

of the Hon'ble Supreme Court in the case of CoC of Essar Steel India Limited

through Authorized Signatory Vs. Satish Kumar Gupta & Ors., 2019 SCC

Online SC 1478 and a decision of this Court in the case of IMR Metallurtical

Resources AG Vs. Ferro Alloys Corporation Limited & Ors., CA (AT) (Ins) No.

272 of 2020.

19. Since, the preliminary objection, raised by the Respondent, goes to the

root of the case because the objection is about the competence of

maintaining the appeal by the present appellants, therefore, both the parties

were heard on the preliminary objection and order was reserved.

Comp. App. (AT) (Ins) No. 1468 of 2022 9

20. At this stage, we would like to mention that the RP had filed an

application i.e. CA No. 113 of 2019 in CP No. (IB)-1059/ND/2018 under

Section 60(5)(c) of the Code seeking reliefs against the sub-lessee M/s

Arham Escon Pvt. Ltd. and lessor GNIDA. As a matter of fact, the tripartite

agreement was challenged as void but the said application was dismissed by

the Adjudicating Authority vide its order dated 23.09.2019 against which

the RP filed the appeal i.e CA (AT) (Ins) No. 1231 of 2019 before this

Tribunal which was dismissed on 05.01.2022 holding that the RP had no

locus to file the application. It was further held that the transfer of portion of

plot by sub-lease was effected on 27.09.2016 whereas CIRP was initiated

after more than two years i.e on 26.11.2018. It was further held that the RP

has no ground to doubt the transaction which is more than two years prior

to commencement of CIRP. The association did not raise any plea of fraud in

transferring the plot by sub-lease and the RP failed to make out a case that

the sub-lease was executed for depriving the rights of homebuyers.

21. While contesting the preliminary objection, Counsel for the Appellant

has reiterated the stand taken in the grounds of appeal but he could not

refer to any evidence on record as to how many members are in the

Appellant Association as nothing has been mentioned in the grounds of

appeal. He also could not cite any judgment to the contrary relied upon by

the Respondents i.e. Jaypee (Supra), Bipin Sharma (Supra) and Piya Puri

(Supra) in which it has been consistently held that "dissatisfied homebuyers

and associations are not entitled to put up any challenge to the resolution

plan contrary to the decision of the requisite majority of their class, all their

Comp. App. (AT) (Ins) No. 1468 of 2022 10

objections are required to be rejected outright". The relevant para in the case

of Jaypee (Supra) is 170 which is reproduced as under:-

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

22. In the case of Bipin Sharma (Supra), this Court has held as under:-

"9. We note that section 25-A of IBC provides a mechanism for participation of the Authorised Representative in the meetings of CoC on behalf of financial creditors in class. Subsection (2) of section 21 of IBC, the CoC is mandated to comprise of all financial creditors of the corporate debtor and for financial creditors in class, a provision is made for their representation through an Authorised Representative, whose selection is governed by Regulation 16-A of CIRP Regulations. Once the Authorised Representative is selected in the prescribed manner as per Regulation 16-A, he shall represent the financial creditors in class (in the present case homebuyers are the financial creditors in class) in the CoC as per section 21 of the IBC and shall participate in the meeting of the CoC as required under section 24 of the IBC. The manner of eliciting the views of the financial creditors in class by the Authorised Representative, is to be done by the Authorised Representative in accordance with sub- regulation 9 of Regulation 16-A of the CIRP Regulations.

10. A perusal of the provisions relating to selection of Authorised Representative, the manner and modality of her/his participation in the CoC meetings to represent the views of the financial creditors in class is provided very clearly and elaborately in the IBC and the CIRP Regulations. The Authorised Representative so selected to participates in the CoC meetings as well as in decision making in the CoC, he does so on behalf of all the home allottees/homebuyers and the view of individual homebuyer is therefore subsumed in the majority (of more than 50%) decision coming through that process when the financial creditors in class

Comp. App. (AT) (Ins) No. 1468 of 2022 11

express views and voted in any matter. This view is then placed before the CoC by the Authorised Representative.

11. Thus, the Authorised Representative's primary duty and responsibility is to present the views of the financial creditors in class in the CoC meetings. We note that there is no deficiency or irregularity pointed out by the Learned Counsel for Appellant in the selection of the Authorised Representative. The fifteen Appellants in the present appeal are homebuyers. The Respondent No. 1 has stated that out of these 15 appellants, the name of one homebuyer Mr. Sharad Bhatnagar does not appear in the record of CoC. Out of the rest 14 appellants, 8 homebuyers participated in the voting held by the Authorised Representative. Their votes are thus recorded in the voting whereas 6 have not voted at all. The views/votes of 8 voting homebuyers are therefore covered in the voting exercise, where we find that an overwhelming majority of 99.97% have voted to approve the resolution plan. Thus, it is clear that a miniscule number of homebuyers have come before us as applicants and out of this small number, six have not even cared to cast their vote, have to sail with the decision of the majority of homebuyers. This is the scheme of IBC."

23. Also in the case of Piya Puri (Supra) the same view has been taken

while discussing Section 25A of the Code and Regulation 16-A(9) of the

Regulations. It has been held that where the majority (more than 50%) have

voted in favour of the resolution plan approving the same, the dissenting

homebuyers who are in minority have to go alongwith the views of the

majority and are not entitled to prefer the appeal.

24. Thus, in view of the aforesaid law, laid down by the Hon'ble Supreme

Court and this Court coupled with the fact that the homebuyers as a class

through authorised representative have voted to the extent 87.60%

approving the resolution plan, the other homebuyers who are in minority

have to follow the decision of the majority and cannot challenge the

resolution plan in appeal as they do not fall within the definition of

Comp. App. (AT) (Ins) No. 1468 of 2022 12

'aggrieved person' and thus, the appeal at their instance is not

maintainable.

25. With this discussion, we are of the considered opinion that there is a

merit in the objection raised by the Respondent and hence, the appeal at the

instance of the present appellants is not maintainable and the same is

hereby dismissed though without any order as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Indevar Pandey] Member (Technical)

New Delhi

29th April, 2024

Sheetal

Comp. App. (AT) (Ins) No. 1468 of 2022