TMI Blog2021 (11) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate debtor in the Respondent No. 2 Company, is over 97% in the asset of the Corporate Debtor and should therefore be part of Information Memorandum. Thus there exists a cogent case of undertaking joint CIRP. The cost of the project includes cost of land and cost of development. This total cost of the project forms the basis of the cost of each flat. Each home buyer pays for the proportionate share of land alongwith the cost of development and construction. Therefore, in considering their rightful interest in the resolution of the corporate debtor company, it is reasonable and logical to factor in the connected land parcel in the total assets base - it is considered just, fair and proper that the land held by Respondent No.2 M/s. Solitaire Infomedia Pvt. Ltd., is an integral part of the housing development project, and should be considered as a part of the total asset base for the insolvency resolution of the Corporate Debtor M/s. Premia Projects Limited. The inter-woven nature of the assets of the two companies is amply clear from the provisions of the Collaboration Agreement and the MOU respectively. The Corporate Debtor has provided valuable consideration to Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that there was an order of the Hon ble Delhi High Court, the Adjudicating Authority held in CP (IB) 104 (PB) of 2018 on 30.1.2019 that no proceedings under IBC can continue in view of proceedings before the Hon ble Delhi High Court. This order of the Adjudicating Authority was recalled vide order dated 11.3.2019 and the admission order under section 7 of IBC was restored. Thereafter, the Hon ble Delhi High Court transferred the proceedings pending before it with respect to the Corporate Debtor to the Adjudicating Authority vide order dated 30.9.2019 on transfer applications CA No. 984 of 2018, CA No. 918 of 2018 and CA No. 826 of 2018 in view of the fact that the proceedings before the Hon ble Delhi High Court had not progressed much. The Adjudicating Authority thereafter, on application by the Resolution Professional, excluded the time spent on pursuing the transfer applications vide its order dated 18.12.2019 and the CIRP period was extended by 150 days. 3. It is stated by the Appellant that a plot of land was allotted by Greater Noida Industrial Development Authority(GNIDA in short) by allotment letter dated 11.3.2009 to the landowning company M/s Solitaire Infomedia Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Adjudicating Authority: (i) Allow RP to take charge of assets of the subsidiary company M/s. Solitaire Infomedia Private Limited, or (ii) Allow RP of the Corporate Debtor to initiate joint CIRP of both the holding company and its subsidiary (i.e. the Corporate Debtor and its subsidiary Respondent No.2). By the impugned order dated 29.10.2020 (attached at page 55 of the Appeal Paperbook) the Adjudicating Authority denied the prayed relief holding that there was no provision in the IBC to grant such relief. 5. The Collaboration Agreement provided that the Respondent No. 2 will hand over the possession of land to developer after receiving a valuable consideration, and the CD will develop the project and have exclusive right of sales and marketing of 90% of the constructed area and the owner of the land (Respondent No.2) will be entitled to ownership and right to sell 10% of the constructed area apart from receiving ₹ 4.5 Crores as cash both being part of consideration as contained in the Collaboration Agreement. The relevant portion regarding Consideration to be paid to the landowning company Respondent No. 2 by the CD is reproduced below:- CONS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) authority to develop and construct the complex; (c) ability to operate and maintain the complex. Furthermore, the consideration to be paid by the second party to the first party is included in the MOU as follows (attached at page 178 of the Appeal Paperbook in Vol I): 2) CONSIDERATION a. The Second party has opted for Down Payment Plan / Flexi Payment Plan / Installment Plan / SIP and has paid and/or shall pay amount(s) towards Unit sale consideration as per Annexure B attached hereto. It is already explained and clarified by the First Party to the Second Party and hereby again expressly understood by the Second party, that the amount(s) paid and/or agreed to be paid by the Second Party under the Application Form and this MOU is/are only the basic sale price/consideration for the said Unit and the Second Party hereby assures and undertakes to pay to the First Party all other levy(s), charges, amount(s), taxes etc. as may be applicable for the said Unit including but not restricted to IDC/EDC/FFC/IFMS/EEG/Service Tax etc. b. The Second Party who has opted for the Flexi payment plan/installment plan hereby assures the First Party that the payment(s) as in Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue assumes significance since the land on which the project was to be developed is an integral constituent of the project through which the flats were being constructed and this asset of land could be instrumental in insolvency resolution of CD if a joint CIRP for the CD and Respondent No. 2 is undertaken. 11. The Learned Counsels for both parties presented their respective arguments before us. The Learned Counsel for the Appellant has submitted that the Corporate Debtor had entered into the Collaboration Agreement with Respondent No. 2 Company and MoU with the home buyers. It was done to collect booking amounts by the Corporate Debtor which otherwise would have no assets. In the event of failure to construct the flats, the Corporate Debtor would not have any asset to extinguish the liabilities of the home buyers. His submission is that the Corporate Debtor-Developer got the right to market the flats so that it could collect money from the home buyers. The money so collected was siphoned off by Tarun Sheinh and the Corporate Debtor was not left with any assets. Hence the financial creditors and other creditors would be left high and dry. Since the home buyers as creditors se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the Collaboration Agreement and MoUs with the nefarious objective of siphoning off money collected from home buyers and defrauding and cheating them. Therefore, he has agreed,that this is a fit case where the corporate veil of both the companies be lifted for the truth to come out, in order to understand the role of the two companies and their director Tarun Sheinh who collaborated for developing the land in question, constructing flats thereon, collecting money from home buyers and siphoning off collected monies, thereby defrauding the home buyers. He has cited the judgment of NCLAT in Mrs. Mamtha versus AMB Infrabuild Pvt. Ltd.(supra) to emphatically state that both the companies should be treated to be from same group of companies for the purpose of a joint Corporate Insolvency Resolution Process (CIRP). 15. The Appellant filed an affidavit vide Diary No. 26753 dated 12.4.2021 whereby it has submitted certain documents relevant to show the intricate connection between the Corporate Debtor and Respondent No. 2. With this affidavit, the Appellant has filed the following documents: (i) Annual return of M/s Solitaire Infomedia Pvt. Limited (Respondent No. 2) in form MG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aces, commercial spaces and other constructions as allowed by the relevant authorities under the law (hereinafter called DEVELOPMENT OF LAND ), and for this purpose, is willing to transfer the entire development rights of the said Land; AND WHEREAS, the Developer on the request of the Owner and also on basis of representations and assurances of the Owner has agreed to develop the said Land and accept from the Owner the exclusive rights of development of the said Land on the terms and conditions as mutually agreed between the parties. 18. The Covenants of the land owner and the Developer (attached at pp 168 -171 of Appeal Paperbook in Vol I.) of special note are sub-clauses (e) and (g) of the Owners Covenants which are reproduced below: e. The Owner shall not interfere with or obstruct in any manner with the execution and completion of work of development and construction of any building on the said Land. However, the Owner shall have a right to supervise and monitor the project either by himself or through its representative, particularly to satisfy himself about the progress and quality of construction as per specifications annexed and agreed by the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he project, was to be entitled to 90% of the fully constructed area on the said land. Hence, it is clear that there was a valuable consideration given to the landowning company (Respondent No.2) by the developer company (Corporate Debtor). In turn, the Corporate Debtor was given the possession of land and the rights to develop the said land within a period of four years after obtaining necessary approvals and the rights to sell 90% of the constructed area on the said land. The MOU, a sample of which is attached at pp 174 189 of the Appeal Paper book in Vol I, shows that the Corporate Debtor as first party is entitled to develop the said land and the complex and receive monies from the home buyers/allottees as consideration. 22. It is therefore clear that Tarun Sheinh, who effectively controlled the landholding Respondent No.2 company ( Solitaire Infomedia Limited) and the developer company - Corporate Debtor (Premia Projects Limited), made the dual instruments of Collaboration Agreement and MoU as a clever stratagem to give by one hand land to the developer and receive monies as the price of allotted flats in the other hand, all along claiming the right hand does not know wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt answer. Hence for successful resolution of the Corporate Debtor piercing of the corporate veil of the two companies Corporate Debtor (Developer) and Landowning subsidiary company (Respondent No. 2) becomes absolutely necessary and imperative. 24. The relevant definitions from IBC are reproduced below for ready reference:- Section 3(27) property includes money, goods, actionable claims, land and every description of property situated in India or outside India and every description of interest including present or future or vested or contingent interest arising out of, or incidental to, property. Section 3(33) transaction includes a agreement or arrangement in writing for the transfer of assets, or funds, goods or services, from or to the corporate debtor. Section 3(34) transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien. Section 29. Preparation of information memorandum (1) The resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of sections, Section 3(27) of the code defines property as one which includes present or future or vested or contingent interest arising out of, or incidental to, property. Section 3(33) of IBC covers transaction, which includes a agreement or arrangement in writing for the transfer of assets, or funds, goods or services, from or to the Corporate Debtor. Section 3(34) of the IBC includes transfer of right, title and possession or lien of property. Section 29 of IBC and Regulation 36 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides for the forming of a Information Memorandum, which contains the details of assets and liabilities with their description of the Corporate Debtor. 25. When we read the definitions of property , transaction , transfer along with the provisions of section 29 (regarding provision of Information Memorandum) in a constructive manner and consider meaning along with the spirit and letter of the IBC as contained in the preamble of IBC, it becomes clear that such assets, which are transferred to or from the Corporate Debtor, and which are germane to the insolvency resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stakeholders consulted were of the view that substantive consolidation may be provided for where there is no real separation between group members, and it would not be economically feasible to separate the assets of different group members. This may be ascertained using factors such as the profitability of consolidation at a single physical location, the co-mingling of assets and business functions leading to inter-dependency amongst the group companies, the unity of interests and ownership between the various corporate entities, the degree of difficulty in segregating and ascertaining individual assets and liability, the existence of parent and inter-corporate guarantees on loans, complex security structures, and the transfer of assets without formal observance of corporate formalities. 28. The Insolvency and Bankruptcy Code, 2016 provides for the resolution of insolvent companies for the revival of those companies and for the benefit of financial and operational creditors. The preamble of the IBC states that the reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that the motion of consolidation depends upon the facts and circumstances of each debtor/debtors. It is appropriate and suitable to give a ruling at this occasion that there is no single yardstick or measurement on the basis of which a motion of consolidation can or cannot be approved. With humility, this Bench herein below sets-out a list of examples, based upon reading the history of group insolvency , so that the presence of them can lead to a decisive conclusion of triggering of consolidation of Insolvency process. Undisputedly, and also laid down by the courts, before ordering consolidation, a preliminary searching inquiry be ensured that whether consolidation yields benefits to stakeholders by offsetting the harm if not consolidated. Areas of inquisition and our finding on the facts of this case are:- i) Common Control : These companies are promoted by Dhoot Family. ii) Common directors : The family members of V.N. Dhoot are directors in all the Videocon group companies. iii) Common assets : There are many instances of interdependency between the group companies and the assets are common to such an extent that, for instance, one company has leased it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funding. Undisputedly, the directors are common using their contacts and relationship to run all the subsidiaries for which common office staff, accountants, and other human resources are mobilised to manage the affairs collectively. Further, common arrangement of capital/funds is an accepted position in Videocon group. viii) Co-existence for survival : An interlinked chain of business operations is also evident in this group case. Electronic gadgets/home appliances are manufactured by a unit. However, distribution and market chain is controlled by another entity. Interdependence upon each other is a unique feature visible in Videocon group. ix) Intricate link of subsidiaries : Consolidated accounts, pooling of resources, commingling of assets and business functions are the examples of intricate link among subsidiaries. x) Inter-twined accounts : The consolidated accounts of 15 months is one of the evidence to demonstrate that on demand by the lenders, all the subsidiaries have prepared a common position of their assets and liabilities, thereafter, prepared consolidated accounts, stated to be duly approved by an auditor. xi) Inter-looping of debts : On perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t test. 30. In the matter of Mrs. Mamatha versus AMB Infrabuild Private Limited and Ors. (supra), the NCLAT has held that the developer and the land owner should be treated jointly for the purpose of initiation of CIRP against them. Hence, the Appellant remitted to the Adjudicating Authority for admission of the case after notice to the parties. The important point to note in this matter is that an application for initiation of CIRP jointly against developer and the landowners was filed, which was rejected by the Adjudicating Authority. In the instant appeal the initiation of CIRP has been ordered only against the Corporate Debtor (developer) but at this stage there is neither any application for initiation of CIRP against the landowner/ landholder nor there is any order regarding initiation of the CIRP against the landowning company M/s Solitaire Infomedia Pvt. Ltd. 31. In the situation as obtains in the matter related to the present appeal, a joint CIRP would be possible only if there is an application for admission of CIRP under the IBC against the landowning entity and there is a strong case for undertaking joint CIRP. We have found, upon piercing of corporate veil, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered, wherein a lender of JHL Yes Bank raised objection about its interests being harmed in case the shareholding of the Corporate Debtor JIL is considered as an asset in the overall corporate insolvency resolution of JIL. The Hon ble Supreme Court has taken note of the objection and held that the shares of JIL and JHL, which are regarded as assets of the Corporate Debtor JIL would be considered in the resolution plan, of course after giving due consideration to the lenders of JHL, to whom the share of JIL have been pledged. In the instant case, the shares of the Corporate Debtor in the Respondent No. 2 company are not shown as pledged or secured with any creditor. But the basic point is that the shares of the Corporate Debtor in Respondent No.2 company should be considered as part of total assets of Corporate Debtor in the Resolution Plan. 34. The basis for considering land as a necessary asset in the insolvency resolution of the corporate debtor is evident from the manner of costing of a flat in an apartment complex. Since IBC does not provide any indication about costing of flats in a housing project, we turn our attention to the Real Estate (Regulations and Development) Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected monies from the home buyers. Moreover, in the costing of flats offered to homebuyers, the cost of land that proportionately is attached with each flat is a part of the total cost of each flat. In such a situation, it would not be fair and just to the creditors of the Corporate Debtor, which include the homebuyers, if the land in question is considered as part of the overall CIRP process and included in the information memorandum. In such a situation, a meaningful resolution plan could be proposed by an applicant. 37. In the instant matter the CIRP of the corporate debtor M/s Premia Projects Ltd. is under consideration. The landowning company M/s Solitaire Infomedia Pvt. Ltd. is not under CIRP, hence it would not be possible to include in the CIRP of the Corporate Debtor the asset of land on which the Corporate Debtor is developing the housing project but which is owned by the Respondent No. 2 company without following the due procedure as enumerated in law. We, therefore, direct that the matter be remanded to the Adjudicating Authority with further direction that an admission application for the landowning company M/s. Solitaire Infomedia Pvt. Ltd. be considered by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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