TMI Blog2024 (3) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... ant of related party status of the Financial Creditor/Respondent No. 2 and the Corporate Debtor, it is not inclined to subscribe to the bogey of related party issue raised by the Appellant. Having failed to adequately demonstrate the related party status of the Financial Creditor/Respondent No. 2, and the Corporate Debtor, there are no irregularity on the part of the RP in constituting the CoC with the Financial Creditor/Respondent No. 2 as a member thereof. Financial Creditor/Respondent No. 2 was assigned a higher vote share than its entitlement - HELD THAT:- There was discriminatory treatment of the claims made by the Appellant as against what was offered to the Financial Creditor/Respondent No. 2 is clearly misconceived since the RP was diligently updating the claims and the corresponding vote share of the financial creditors. Not having pointed out any irregularity on the part of the RP in constituting the CoC with the Financial Creditor/Respondent No. 2 having majority vote share prior to the CoC approving the resolution plan, it cannot be agitated now at this belated stage when the resolution plan stands approved. Thus, to answer the second issue, the CoC is found to have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that when the resolution plan came up for consideration and approval before the Adjudicating Authority, the SRA improvised and upwardly revised its offer by way of an affidavit agreeing to pay 100% of the principal amount of the Homebuyers as against refund of approximately 40% of the claim amount admitted by the RP which was initially contained in the CoC approved resolution plan. This amount was acceptable to the Homebuyers and has not been objected to by any of the 77 Homebuyers. Whether in the given circumstances, the Appellant as a disgruntled solitary homebuyer or at best representing 77 Homebuyers can raise objections against the collective business decision taken by the CoC approving the resolution plan of the SRA? - HELD THAT:- In the present matter at hand, neither any contravention of law nor material irregularity has been brought on record. It is settled law that once the CoC has approved the resolution plan by requisite majority and the same is in consonance with applicable provisions of law and nothing has come to light to show that the RP had committed any material irregularities in the conduct of the CIRP proceedings, the same cannot be a subject matter of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity in IA-2319/2023. Aggrieved by this impugned order, the present appeal has been preferred by the Appellant. 2. Coming to the factual matrix at hand, the salient points are as outlined below: The Appellant and other Home Buyers had purchased flats in the real estate project - Nirmal Sports City of the Corporate Debtor- Modella Textile Industries Ltd. in 2012-13. ECL Finance Limited ( ECLF in short), which was a part of the Edelweiss group granted a Term Loan to the Corporate Debtor on 24.07.2013. The Corporate Debtor/Respondent No. 4 passed a resolution on 10.03.2016 for the issuance of unlisted, unrated, secured, redeemable, Non-Convertible Debentures ( NCD in short) by way of private placement which were offered to the Edelweiss group. The Debenture Trustee for the issue was IDBI Trusteeship Services Ltd. and a Debenture Trust Deed ( DTD in short) was executed between the Corporate Debtor and IDBI Trusteeship Services Ltd. on 22.03.2016. ECLF granted another loan on 28.09.2016 to the Corporate Debtor. The Corporate Debtor passed another resolution for the issuance of NCD on 02.11.2017 by way of private placement again to the Edelweiss group companies and another DTD was execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted into CIRP on 04.05.2022, the Respondent No. 2/Financial Creditor filed a claim of Rs. 998.96 crores which comprised a principal amount of Rs. 502.91 crores and an exorbitant interest amount, basis which the Resolution Professional constituted the CoC with Respondent No. 2/Financial Creditor having 88.95% voting share and the remaining 11.05% voting share being vested with the Homebuyers. It was therefore contended that the CoC had a skewed composition and therefore irregularly constituted. 5. Further submission was made that the Corporate Debtor had received term loans from ECLF which was a part of Edelweiss Group of Companies. The Corporate Debtor had issued NCDs which were offered to the Edelweiss Group of Companies. It was alleged that the term loans were disbursed even though there was no development of the property and that the first term loan was repaid even without any investment/development in the Nirmal Sports City project. It has been contended that the Respondent No. 2/Financial Creditor had been disbursing money without satisfying itself as to the condition precedent listed out in the DTD and loans were paid off using the debentures issued. This was a clear ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No.2/Financial Creditor and the Corporate Debtor. It has been further contended that inspite of these peculiar financial transactions, the RP did not take necessary steps to investigate these transactions. The RP conducted a transaction audit review which was limited to two years prior to the insolvency commencement date rather than covering the entire period from 2013-14 onwards when the term loans were disbursed. This time reduction of the review to two years was decided by the Resolution Professional on his own without obtaining the consent of the CoC at a time when the 2nd CoC had approved transaction audit to be conducted for a period of a five years. 9. Further submission was pressed that the Resolution Professional did not pro-actively acquire information about the reservation in respect of the subject parcel of land raised by Thane Municipal Corporation ( TMC in short). It was contended that TMC reservation was only at the initial proposal stage and no notification had been issued inviting objections to any such acquisition. Even the legal opinion received by the RP indicated that TMC reservation may not be applicable to the said parcel of land. Since this apprehens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. 11. It has also been vehemently contended that the resolution plan has already been implemented and all the 77 Homebuyers including the present Appellant have accepted the payment of 100% principal amount in terms of the approved resolution plan. Moreover, the Home Buyers not having objected to the said receipt of payments as per the resolution plan cannot now raise objections. The Homebuyers having received their entire 100% due, the present appeal has been rendered infructuous. The Appellant after maintaining a class action with 77 Homebuyers before the Adjudicating Authority cannot maintain an individual action before this Tribunal. This would be impermissible in law. The relief claimed by the Appellant to restart the entire the CIRP process at a time when resolution plan is fully implemented amounts to derailment of the resolution process. This would amount to restarting the clock of CIRP which is not the intent of the IBC and that too when the Appellant is the lone homebuyer out of the entire class of creditors. 12. It is also the case of the Respondents that the appeal deserves to be dismissed since it is in the teeth of the decision of the Hon ble Supreme Court in Jay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (iv) provision of essential technical information to, or from, the corporate debtor; 16. It has been contended by the Learned Counsel for the Appellant that the DTDs executed by the Corporate Debtor on 22.03.2016 and 17.11.2017 reveal that the Corporate Debtor and the Financial Creditor/Respondent No. 2 are related parties as defined under Section 5(24)(h) and 5(24)(m). It was pointed out that the Financial Creditor/Respondent No. 2 had controlling powers over the operations of the Corporate Debtor. The DTDs provided the control of the Financial Creditor/Respondent No. 2 over the decisions of the Board of Directors of the Corporate Debtor; control over appointment and removal of key managerial personal of the Corporate Debtor; the powers of the Financial Creditor/Respondent No. 2 as Monitoring Agent; control over business plan of the Corporate Debtor; control over modalities of sale of units besides control over revenue and other accounts of Corporate Debtor. These features clearly amplified their related party status. Consequently, the constitution of the CoC with the Financial Creditor/Respondent No. 2 being a related party therein renders the constitution of CoC to be invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on the part of the Financial Creditor/Respondent No. 2 in the day to day functioning of the Corporate Debtor or in the appointment of managerial staff and employees of the Corporate Debtor. There is no material placed before us to either suggest that essential technical information was exchanged between the Financial Creditor/Respondent No. 2 and the Corporate Debtor. 19. At this stage, we would also like to add that it is an undisputed fact that the Appellant by virtue of being a member of the class of creditors of Homebuyers was represented on the CoC through the AR of the Homebuyers. The AR of the Homebuyers had participated all through the CIRP process including at the stage of filing I.A. No. 2688/2023. Perusal of the CoC meetings shows that at no stage was the issue of related party status of the Respondent No. 2/Financial Creditor and Corporate Debtor voiced before the CoC. It is also an undisputed fact that the related party status was not raised in the reliefs sought or prayers made before the Adjudicating Authority while filing IA No. 2688/2023. 20. Given this position, that on both counts, that is, absence of material placed on record and lack of substantiation of pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving at voting rights of each financial creditor on the CoC. That the RP was working out the admitted claims of all the financial creditors diligently and assigning them corresponding vote share is evident from the fact that while in the 1st CoC meeting, the vote share of the Financial Creditor/Respondent No. 2 was 99.52%, the same got reduced to 93.94% in the 6th CoC meeting and then further reduced to 88.95% in the 12th CoC meeting as against the vote share of the Homebuyers rising from 0.48% in the 1st CoC meeting to 11.05% in the 12th CoC meeting. In none of these CoC meetings, the AR had raised any objections either on the claims admitted in respect of the Financial Creditor/Respondent No. 2 or raised any objections on their vote share. Thus, to say that there was discriminatory treatment of the claims made by the Appellant as against what was offered to the Financial Creditor/Respondent No. 2 is clearly misconceived since the RP was diligently updating the claims and the corresponding vote share of the financial creditors. Not having pointed out any irregularity on the part of the RP in constituting the CoC with the Financial Creditor/Respondent No. 2 having majority vote sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2022. The Resolution Professional had also sought legal opinion from DSK Legal on23.12.2022 and had appointed M/s J Sagar Associates for filing appropriate writ petition. 24. Having found no merit in the contention raised by the Appellant of the RP having mishandled the TMC reservation issue, we now like to dwell upon a related issue raised by the Appellant that since the TMC reservation issue was not handled properly by the RP, it led to a situation where majority PRAs had withdrawn and only a solitary bidder was left in the fray. It is also the case of the Appellant that their apprehensions in this regard were expressed by the AR in the CoC but the RP did not give due weightage to the proposal of the Homebuyers to go in for fresh round of bidding to create room for better offers. 25. When we look at the impugned order, we find that the TMC reservation issue and concerns expressed by the AR of the Homebuyers has been dealt at length by the Adjudicating Authority in the impugned order before holding that there is no merit in this argument of the Appellant. The relevant excerpts of the impugned order are as reproduced below : 11. The other issue pertains to reservation of Thane Mun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld in Indian National Trust for Art Cultural Heritage Ors. Vs. The State of Maharashtra Ors., 2006 SCC Online Bom 527. Accordingly, we feel that there exists a doubt as whether the approval of Town Planning Authority will be after considering such proposed changes in the land use, which is still to be legally binding on the land-owners? We note that the R3 has proposed 100% payment of principal amount during the course of argument and has filed an additional affidavit to this effect. Since, a Resolution Plan is required to be certain as well as feasible, we feel that contemplation of flats to the home-buyers, as against proposed cash pay-out, will make the plan uncertain and will also put question mark on its feasibility. Accordingly, we do not find merit in this argument also. 26. To examine the tenability of the findings of the Adjudicating Authority, we proceed to look at the sequence of events in the CoC meetings and the role of RP in this context. We find that during the 6th CoC meeting, the AR had submitted that many Home buyers had requested the RP to communicate to the PRAs to allow existing Homebuyers to complete purchase of homes originally allotted to them on payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was reiterated by the AR of Homebuyers in this meeting that the Homebuyers wanted the SRA to accede to their option of continuing in the project at the same rate as agreed at the time of allotment failing which fresh bidding process be started. Accordingly, a meeting was facilitated by the RP between the Homebuyers and the SRA while also clarifying the position that it is the commercial call of the SRA while submitting their resolution plan. 29. During the 12th CoC meeting held on 18.05.2023, the AR requested the RP to discuss the possibility of further time extension of CIRP since the Homebuyers wanted the CoC with the help of RP to resolve the issue with respect the TMC reservation and initiate fresh bid process. However, the Financial Creditor/Respondent No. 2 had taken the view that since the resolution plan of the SRA is legally compliant and the CIRP process has already been extended beyond the 330 days period, the plan submitted by them should be put to vote. The RP had accordingly put the resolution plan to vote which resolution plan was approved by 88.95% vote share in the 12th CoC meeting. 30. Given this factual position, as borne out from the CoC meeting proceedings, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent No. 3 held on 25th March, 2023 is attached herewith as Annexure A10. D. That, the evaluation matrix should be suitably amended to provide for special attention to the needs of home buyers. E. That, the home buyers be required to contribute towards only those expenses which are approved and ratified by the homebuyers and not be bound to incur those expense which re approved by Respondent No. 2 on behalf of entire CoC. F. Any other suitable relief or direction which this Hon ble Tribunal may consider appropriate in the facts and circumstances of the case. For this act of kindness, the Applicant herein shall every prayer. G. The Applicant states that this Application is filed with the limited information that has come to the notice or information of the Applicant. The Applicant craves liberty to add, amend, and modify the statements, averments and grounds mentioned herein. The Applicant craves leave to produce additional documents and details. 32. It is an undisputed fact that the resolution plan of the SRA has been approved by the CoC with requisite vote share. This resolution plan duly approved by the CoC with 89.05% vote share was placed before the Adjudicating Authority whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be heard in opposition to the plan by way of objection or appeal. The statute, that is IBC, has itself provided for estoppel against any such attempted opposition to the plan by a constituent of the class that had voted in favour of approval. The misplaced assumptions on the part of dissatisfied homebuyers have gone to the extent that they have attempted to put themselves at par with the dissenting financial creditors like ICICI Bank, who carry an entirely different legal status in CIRP, for being not within the class of homebuyers and being of a different class of financial creditors. The said financial creditor has rightly opposed these submissions and has rightly pointed out that its rights in terms of Section 30(2)(b) of the Code stand at an entirely different footing. 34. The intent, objective and purpose of IBC being time bound resolution of insolvency of the Corporate Debtor, it clearly does not provide any leeway or scope to dissatisfied individual Homebuyers in a minority like the present Appellant to override the commercial wisdom of the majority in the CoC. We not find any merit in the contention of the Appellant to reject the CoC approved resolution plan which has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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