TMI Blog2023 (3) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... ted parties are not estopped from approving that a Transaction is a Loan Transaction . Contractual interpretation must ascertain the real intention of the parties. The genesis of an Agreement and the context is to be seen as a whole and the intent of a Transaction cannot be at variance with the actual objective. Clauses 7.1 and 7.2 of Part II of the DTD were amended which provide that the Principle Amount was to be paid by the Issuer Company in four instalments namely 31.03.2019, 30.06.2019, 30.09.2019 31.12.2019 meaning thereby that the Issuer Company and the Corporate Debtor were under legal obligation to pay the 1st instalment by March 2019 - This Tribunal is of the earnest view that the Corporate Debtor had failed to fulfil the obligations under the DTD and other documents executed to guarantee/secure the repayment of the amount disbursed by the Financial Creditors towards issuance of the Non-Convertible Debentures. In the instant case, keeping in view the flow of funds, the nature of transactions, the amended DTD, the Term Sheets and the entire material on hand, this Tribunal is of the earnest view that the amount received from the Issuer company is a Loan and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further direct the RP, not to include these 268 Flats in the pool of the Corporate Debtor . 3. It was averred that Nisus Finance and Beacon are Financial Creditors and claim their rights by virtue of the Debenture Trust Deed ( DTD ) dated 13.06.2017, executed between Nisus Finance as facility Agents/Debenture Holders, Beacon as Debenture Trustee , M/s. Earthcon Infracon Private Limited, ( EIPL ) and the capacity of the Issuer Company/Principal Borrower and the Corporate Debtor , Earthcon Universal Infratech Private Limited as a Corporate Guarantor as Issuer Company was to raise funds upto Rs.30Crs./-. It was averred that the DTD was amended on 20.12.2017 and on 24.12.2018 and the Principal Borrower raised an additional Rs.20Crs./- and Rs.2.5Crs./- for which additional 2,250 Debentures were issued. It is stated that the purpose of raising funds by the Issuer Company/EIPL was to purchase and acquire the units in the Real Estate Project developed by the Corporate Debtor . It is averred that in the event the Issuer Company had failed to fulfil its obligations under the DTD then the Corporate Debtor would be liable to fulfil the financial obligations as the guarantor u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction between the Corporate Debtor and EIPL as well as the charge in favour of Nisus. The Adjudicating Authority while allowing the Application preferred by Nisus and Beacon framed the following issues and observed as hereunder: 11. The moot questions which emerge from the above pleadings are as under: a) Whether 268 flats can be taken off from the assets of CD in terms of Section 18 of the IBC or whether RP is right in holding the said flats as CD' property in terms of Section 18 (f) of the Code. b) Whether the Applicants, in view of Mortgage Deeds executed by CD and due to failure of CD to honour its Guarantee obligation are in exclusive charge of the Applicants and therefore the said 268 flats should be taken out of the Information Memorandum (IM). 12. ANALYSIS: i) It is seen that the CD has failed to fulfil its obligations as secured through various Mortgage Deeds qua the said flats in favour of the Applicants, considering the provisions of DTD. It has executed all the documents with regard to payment of consideration in relation to the said flats. Even the lien earlier marked in favour of Punjab Sindh Bank concerning 205 flats (out of 268 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Sr. Counsel, Mr P. Nagesh appearing on behalf of the Appellants/Resolution Professional of the Corporate Debtor : Learned Sr. Counsel, Mr P. Nagesh submitted that the relationship of the Corporate Debtor and the Issuer Company is disputed and submitted that the Issuer Company gave a loan to the Corporate Debtor ; that Corporate Debtor sold Flats worth more than 1115.50Crs./- to the Issuer Company and Rs.5.79Crs./- represents the Sale Consideration of 268 Flats and after looking into the substance over form , it can be clearly seen that the amount involved is a loan , as a Sale Consideration is never required to be returned back, whereas a loan along with interest is required to be repaid. The Respondents are the secured Financial Creditors of the Corporate Debtor for these Flats and further in CIRP, the Assets mortgaged are available with the Corporate Debtor , and as per Section 52 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as The Code ), the Creditor can invoke the Security Interest in the Liquidation process only. The BBA sought to be relied upon by the Respondents proved the alleged sale of 205 Flats of EIPL as non-est. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shes that the amount received from the Issuer Company is a loan and not a Sale Consideration. Clauses 4 9 of the DTD are contradictory to each other and if two constructions are possible, the one which gives effect to all the Clauses of the document must be preferred to over that which defeats some of its Clauses. The BBAs were not acted upon at the time of sale to the actual end user. No sale was recorded by the Corporate Debtor in its Balance Sheet and in fact, the Balance Sheet shows an amount of Rs.43.04Crs./- as a loan from the Issuer Company. The Issuer Company did not have any business, Real Estate Project and the same was submitted by the Respondents themselves in I.A. filed by the Respondents under Section 65 of the Code for quashing CIRP of the Issuer Company. The real net worth of the Company was Rs.61,511/- only. BBAs provided by the Respondent cannot be equated with the BBAs of a Homebuyer because the Corporate Debtor entered into BBAs with Homebuyer at hundred percent Real Value of the Property, whereas the Issuer Company BBAs were executed at roughly 45% of the Real Value of the Property. No guarantee was given by the Corporate Debtor to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e units from the Issuer Company, which reinforces the existence of BBAs entered into between the Corporate Debtor and the Issuer Company. It also establishes that the ownership of the units is vested with the EIPL the Corporate Debtor was appointed as a selling Agent on behalf of EIPL to sell the units to a third party. On the same date i.e., 13.06.2017, a Deed of Corporate Guarantee was executed by the Corporate Debtor in favour of the Respondents. The right of subrogation as surety/guarantor is not available to the Corporate Debtor until and unless the entire debt of Nisus and Beacon has been paid by the Corporate Debtor . On 16.06.2017, the first Mortgage Deed was entered into and Clauses 3 4 depict the exclusive and first charge over the units mortgaged to Beacon. On 05.12.2017, the second Mortgage Deed was executed whereby 54 Units of Casa Royal was mortgaged to the Respondent. In December 2018, the third party Mortgage Deed was executed whereby 63 Units of Casa Royal was mortgaged to the Respondent. It is averred that in November 2017, the Corporate Debtor and EIPL, executed an irrevocable Power of Attorney in favour of Respondent No. 1 2 authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mortgage Deeds if the title of EIPL/Mortgagor for the Units was not perfect or if EIPL did not have the title. The BBAs entered into between the Corporate Debtor and EIPL are valid, bona fide, and independent sale and purchase transactions. BBAs entered into with more than 1900 Homebuyers are exactly the same, and none of these BBAs are registered or stamped, yet the claims of all the Homebuyers have been admitted by the RP. It is submitted by Mr. Sinha that the terms of the BBAs are very clear and the amounts have been paid as a Sale Consideration and the BBAs are testimony to it as they are commercial contracts and there is no occasion for the Adjudicating Authority to go behind the valid contracts and therefore it has rightly allowed the exclusion of these 268 Flats. Any incorrect recording of entries in the Books of Accounts by the Corporate Debtor would not nullify or frustrate the duly executed Agreements between the parties and the Legal Rights created thereunder. Clause 7(c)(v) of the Mortgage Deeds (i) (ii) are substantially the same except for the fact that Mortgage Deed (ii) refers to the Additional Units . These 268 Flats have not been un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Offer to Purchase Agreement, Corporate Guarantee etc., and the Adjudicating Authority did not consider whether these 268 Units had been actually sold by the Corporate Debtor to the Issuer Company or whether the claimed documents were executed merely to secure the Financial Facilities extended by Respondents 1 2 to the Corporate Debtor through the Issuer Company. Corporate Debtor had already availed one Escrow Account with Punjab and Sindh Bank hence second Escrow Account could not have been opened by the Corporate Debtor . The Promoters had meticulously planned to bring into existence a new Corporate Entity through which these Financial Facilities could be routed. It is to be noted that the Management of the EIPL is almost the same as that of the Corporate Debtor . The sample BBA does not speak of all the other BBAs and the rate mentioned is much below the Market Rate which is around Rs.3,000 per square foot + GST. The rates mentioned by the Respondents in their Counter Affidavit as to the Sale Consideration Price is much below the circle rate fixed by the concerned authority. The future of the Flat Buyers to whom Flats have been finally sold from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Homebuyers the Corporate Debtor has not exposed itself to the loan of Homebuyers. As the director, Shareholder of the EIPL are common with the Corporate Debtor , there was no reason for Corporate Debtor to sell the flats in EIPL because the director, Shareholder could earn profits by selling of 205 flats in Corporate Debtor itself and that there was no commercial expediency for the Corporate Debtor to give Corporate Guarantee or enter into other documents. Comp. App. (AT) (Ins.) No. 703/2021 A. This Appeal has been preferred by Sanskriti Allottee Welfare Association 6 Ors./Homebuyers, aggrieved by the Impugned Order dated 23.07.2021 in I.A. 1606/2021. It is submitted that the Appellants/ Applicants have locus to file the present Appeal as they are part of the Stakeholders in the process of CIRP and Liquidation Process and Section 61(1) of the Code authorised any person aggrieved by the Order of the Adjudicating Authority under this part to prefer an Appeal before the Appellate Tribunal. The part refers to Part II of the Code which comprises CIRP and Liquidation Process. It is submitted that the Appellants are the major Stakeholders and that the Impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s preferential, Undervalued and Fraudulent Transactions under the Code. The Builder Buyer Agreement entered with EIPL for 205 Flats, mortgaged with Respondent No. 2 as one of the obligor to the Debenture Trust Deed were sold at Rs. 49.52 crores which is considerably lower to the prevailing average rate in 2017. The undervalued amount was assessed as Rs. 69.83 crores. It is submitted that Respondent No. 1, Corporate Debtor, EIPL and the Directors of the Corporate Debtors are in connivance with each other to divert the funds of the Homebuyers by making fraudulent entries. As per the Debenture Trust Deed, money received by EIPL from the issue of Debenture should be utilized for purchase of 205 Units in the project of Earthcon Construction Private Limited and for other general office expenses. It is also confirmed from the fact that EIPL and Earthcon Universal Infratech Private Limited Corporate Debtor entered into Builder Buyer Agreement for sale 205 Units having total carpet area of 3,61,790 sq. ft. to EIPL at Rs. 49.52 crores at a square feet rate of Rs. 1,369. The sale of 205 Units is booked at a significant undervalued rate as the average rate in the same project at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the first Appellant and the Corporate Debtor . This fact is clearly evidenced from the BBAs executed by the Corporate Debtor with the Appellant and Tripartite Agreement executed between the Corporate Debtor , the Appellants and the Lenders who have financed the Homebuyers Loan to the Appellants wherein knowing regarding any NoC issued by Respondents 1 2 finds mentioned. Most of the Appellants have made the payments in respect of the Flats allotted to them directly to the Corporate Debtor and or EIPL and the same is mentioned in their Transaction Audit Report. Respondent 1 was duly represented on the board of EIPL since 14.06.2017 and was well aware of the Transactions that ensued between the Appellants and EIPL, but fail to inform the Homebuyers about the alleged Pre-Existing Mortgage Offer for those Flats. Admittedly, Respondents 1 2 received a sum of Rs.12.43Crs./- in the Escrow Account against sale of Flats in Sanskriti and Casa Royal Project. However as per the Transaction Audit Report, a sum of Rs.15.10Crs./- was received by EIPL in its HDFC Escrow Account and Rs.8.52Crs./- was deposited directly in the Bank Account of the Corporate Debtor . Additionally, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transfer/sub-Lease of the Units developed by the Corporate Debtor was concealed by the Respondents before the Adjudicating Authority. In terms of the restrictions contained therein the Corporate Debtor could not have been sold, transfer or assign the units in favour of any third Party without making payments to Greater Noida in accordance with the schedule. It is submitted that neither the Homebuyers nor the SRA made parties to the Application filed before the Adjudicating Authority. Comp. App. (AT) (Ins.) No. 694/2021 A. This Appeal has been preferred by the Committee of Creditors ( CoC ) aggrieved by the Impugned Order dated 23.07.2021 in I.A.1606/2021. B. Submissions of the Learned Counsel appearing on behalf of the CoC: It is submitted that the Appellants/CoC was not impleaded as a party to the said Application despite being directly concerned with the subject matter. It is submitted that the Corporate Debtor sold Flats worth Rs.115.50Crs./- to Issuer Company for Rs.51.75Crs./- and may it appear like a transaction, which however is a Loan Transaction. Sale Consideration is never required to be returned back whereas the loan along with int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the execution of the Impugned Order, there shall be no Financial viability for SMA to undertake a Project and sizeable amounts of haricuts would be given and additional contribution would have to be paid by the Homebuyers. Nisus Finance was the Applicant under Section 7 of the Code which triggered the CIRP and Nisus claiming to be a Financial Creditor , preferred the Section 7 Application, which was set aside by this Tribunal vide Order dated 29.05.2020, aggrieved by which Nisus Finance approached the Hon ble Supreme Court vide Civil Appeal No. 2807/2020 and the Hon ble Supreme Court has restored the matter. The conduct of Nisus in the entire process has been questionable and associate Company of the erstwhile Promoters namely EIPL was put under CIRP under Section 9 of the Code and Nisus filed its Claim before the IRP of EIPL and the Claim was admitted by the RP. Nisus Finance became the lone Member of the CoC being the only Financial Creditor of the EIPL. However, the Order stated by the Hon ble Supreme Court in Civil Appeal No.764/2019. It is submitted that Nisus had already staked its claim in the CIRP of EIPL. In this case, Nisus Finance filed its Claim as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our attention to a Flow Chart depicting the flow of funds. The DTD dated 13.06.2017 was executed between the Issuing Company Earthcon Infracon Private Limited, Beacon Trusteeship Limited, Earthcon Constructions Private Limited and Earthcon Universal Infratech Private Limited (Obliger 3)/defaulter/co-Mortgagor and Nisus Finance and Investment Manger LLP. Learned Counsel Mr. Suri placed reliance on the following terms of Deed: A. The Company is engaged in the business builders, developers, real estate consultant, real estate contractor, buying, selling and trading real estate and immovable properties and allied services; B. This Obligor 3, is engaged in the business of real estate construction and development; C. The Obligor 3 is in the process of developing the Projects (as defined below); D. The company is desirous of buying and Obligor 3 is desirous of selling the Units (as defined below) forming part of the Projects, pursuant to which the Obligor 3 has agreed to allot and perform an outright sale in favour of the Company in relation to the Units; E. The Company requires funds for funding of the acquisition of the Units from Obligor 3 as well as for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault amounts, DSRA, statutory dues and other costs and charges due and payable by the Company under the terms of this Deed, Provided further that upon the occurrence of an Event of Default, 100% (one hundred percent) of the entire amounts transferred to the Obligor 3 Current Accounts from the Obligor 3 Escrow Account shall be swept in daily into the Escrow Account. It shall be the sole responsibility of the Obligor 3 to obtain the 1 requisite no objection certificates from CF Lender in this regard as well as effecting amendments in its Articles of Association as may be required to give effect to the same. The Company and Obligor 3 shall issue necessary standing instructions to CF Lender to transfer on a daily/weekly basis 10% of the amounts transferred to the Obligor 3 Current Accounts to the Escrow Account. The said instruction cannot be amended or revoked without prior written consent of the Debenture Trustee. The Debenture Trustee and the Facility Agent shall also be provided with online view rights of the Obligor 3 Current Accounts. 9.8 The Company shall ensure that at all times the Secured Properties shall have a value equal to 3 (three) times or more than the Outstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are feet. Learned Counsel also drew our attention to the Security Interest created for Rs.42Crs./- stating that the total is Rs.115.5Crs./- i.e., Rs.73.5Crs. + Rs.42Crs./- but the amount which has come in is only Rs.59Crs./-. Learned Sr. Counsel Mr. Datta placed reliance on Clause E from the DTD dated 13.06.2017. At the cost of repetition, the same is being reproduced as hereunder: E. The Company requires funds for funding of the acquisition of te units from Obligor 3 as well as for other general corporate purposes and has therefore agreed to raise funds up to Rs.30,00,00,000/- (rupees Thirty Crores Only) through the issue and allotment of up to 3,000 (Three Thousand) senior, secured, transferable, unlisted, unrated, redeemable, non-convertible debentures carrying a face value of Rs.1,00,000/- (Rupees One Lakh Only) each ( Debentures ) in one or more tranches as determined by the Debenture Trustee (as instructed by the Facility Agent) (the Issue ) on the terms and conditions set forth under this Deed. He also drew our attention to Clause 4 PURPOSE AND USE OF PROCEEDS which is reproduced as hereunder: PURPOSE AND USE OF PROCEEDS It is understood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany held by the Promoters of the Company in favour of the Debenture Trustee vide the Pledge Assessment : 8. The brief point which falls for consideration in Comp. Apps. (AT) (Ins.) Nos. 593, 659, 694, 703, 736 912/2021 is whether the Adjudicating Authority was justified in excluding 205 Flats from the pool of the Assets of the Corporate Debtor . 9. The issue which arises in Comp. App. (AT) (Ins.) No. 656/2021 filed by Nisus Finance and Beacon Trusteeship Limited is whether the Adjudicating Authority was justified in not including the Balance 68 Units and also in reducing their Voting Rights. 10. For the sake of brevity, the facts with respect to the terms of the DTDs, BBAs and OPA are not being repeated as they have already found place in the submissions of the Learned Counsels. It is the main case of Nisus Finance and Beacon that the relationship of EIPL and the Corporate Debtor is that of a buyer and seller and not of Debtor and Creditor and that Rs.51.79Crs./- paid by EIPL to the Corporate Debtor is a Sale Consideration and not a loan . It is contended that Nisus Finance and Beacon are Financial Creditors of the Corporate Debtor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an English mortgage. (Emphasis Supplied) 14. It is the case of Nisus Finance and Beacon as per Section 48 of the Transfer of Property Act, 1882, the rights if any of the Homebuyers in their Flats shall be subject to the Mortgage which is created by the Issuer Company/EIPL as Mortgager and Corporate Debtor as Co-Mortgagor in favour of Beacon for the benefit of Debenture Holders. Section 48 of the Transfer of Property Act 1882 reads as follows: 48. Priority of rights created by transfer. Where a person purports to create by transfer at different times rights in or over the same immoveable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created. (Emphasis Supplied) 15. It is submitted by the Home Buyers/Allottees that the challenge in the Appeals is not to these documents but the Claim and Transfer of Title under them. Section 54 of the Transfer of Property Act, 1882 mandates that sale of Tangible Immovable Property for the value of Rs.100/- and upwards can only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed therein or received as evidence of any transaction affecting such property, unless it has been registered. Registration of a document gives notice to the world that such a document has been executed. 18. Registration provides safety and security to transactions relating to immovable property, even if the document is lost or destroyed. It gives publicity and public exposure to documents thereby preventing forgeries and frauds in regard to transactions and execution of documents. Registration provides information to people who may deal with a property, as to the nature and extent of the rights which persons may have, affecting that property. In other words, it enables people to find out whether any particular property with which they are concerned, has been subjected to any legal obligation or liability and who is or are the person(s) presently having right, title, and interest in the property. It gives solemnity of form and perpetuate documents which are of legal importance or relevance by recording them, where people may see the record and enquire and ascertain what the particulars are and as far as land is concerned what obligations exist with regard to them. It ensures t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot go to their assistance, as that would amount to perpetuating illegalities. If there was no bar, then the questions that arise are: why should a company hold a property in a state of suspended animation from 1991? How can a company verbally agree to sell a property to someone? What is the reason for the delay in lodging the complaints? If the petitioner had purchased the property under a registered sale deed, numerous disputes, litigations and criminal proceedings could have been avoided. The illegal and irregular process of power of attorney sales spawns several disputes relating to possession and title, and also results in criminal complaints and cross-complaints and extra-legal enforcement and forced settlements by land mafia. We are, therefore, of the view that the situation warrants special measures. 17. We find force in the contention of the Learned Counsel Mr. Nagesh appearing for the RP that the BBAs sought to be relied upon by the Respondents are compulsorily registrable documents as per Section 13 of UP RERA and Transfer of Property Act, 1882, Registration Act, 1908, as amended by the State of UP, but in the present case, the BBAs are not registered. The Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re reproduced as hereunder: Conclusion From perusal of above report, few points emerged as under: 1. There are a number of transactions involving huge amounts during the TRA period with related parties and others parties covered under 43 of IBC 2016. Most of debit balances Le amounts recoverable from the related parties have been adjusted by passing Journal entries without receipt of funds. Further flats have been allotted to supplier/vendors during the TRA period which has impact of putting such creditors in a beneficial position. 2. Our sample checking of Home Buyers files with Pinga Software revealed that cash received from Horne Buyers amounting to Rs. 13.65 crores is not accounted for the tally data and not disclosed in audited financial statements. In addition to this there have been undervalued transactions with respect to sale of flats amounting to Rs.28.90 crores. 3. There is sale of fixed assets during the TRA period amounting to Rs.2.42 crores without receiving any money in cash. 4. Investments in properties/units of other companies amounting to Rs.9.50 crores are not disclosed in the audited financial statements. 5. There are a num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for recovery of the amount. It is true that a sale letter is obtained from the customer, but the consideration for the sale letter is only the balance remaining payable to the dealer, after giving credit against the price of the vehicle the amount paid by the customer. The application for a loan, and the letter addressed to the appellants undertaking to insure the vehicle expressly mention that a loan is asked for and granted on the security of the motor-vehicle under the hire-purchase agreement. It is the customer who insures the vehicle, and in the books of the Motor Vehicle Authorities he remains, with the consent of the appellants, owner of the vehicle. Undue importance to the acknowledgment of sale in the sale letter and the recital of sale in the bill and in the receipt cannot therefore be attached. These documents sale letter , bill and receipt must be read with the application for granting a loan on the security of the vehicles, the letter in which the customer requests the appellants to pay the balance of the price remaining to be paid by him to the dealer, the promissory-note executed by him for that amount, the undertaking to insure the vehicle, and intimation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-purchase agreements must be distinguished from transactions in which the customer is the owner of the goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire-purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given the license to seize the goods. (Emphasis Supplied) 22. It is clear from the aforenoted ratio that Homebuyers and the effected parties are not estopped from approving that a Transaction is a Loan Transaction . Contractual interpretation must ascertain the real intention of the parties. The genesis of an Agreement and the context is to be seen as a whole and the intent of a Transaction cannot be at variance with the actual objective. Clauses 7.1 and 7.2 of Part II of the DTD were amended which provide that the Principle Amount was to be paid by the Issuer Company in four instalments namely 31.03.2019, 30.06.2019, 30.09.2019 31.12.2019 meaning thereby that the Issuer Company and the Corporate Debtor were under legal obligation to pay the 1st instalment by March 2019. The Corporate Debtor cannot now avoid the adheren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution professional shall provide to the resolution applicant access to all relevant information in physical and electronic form, provided such resolution applicant undertakes- (a) to comply with provisions of law for the time being in force relating to confidentiality and insider trading; (b) to protect any intellectual property of the corporate debtor it may have access to; and (c) not to share relevant information with third parties unless clauses (a) and (b) of this sub-section are complied with. Explanation. For the purposes of this section, relevant information means the information required by the resolution applicant to make the resolution plan for the corporate debtor, which shall include the financial position of the corporate debtor, all information related to disputes by or against the corporate debtor and any other matter pertaining to the corporate debtor as may be specified. 27. Once the Resolution Plan is approved by the CoC, the Financial Creditors are estopped from seeking any Amendments/Modifications in the Information Memorandum. In the instant case, the Information Memorandum was prepared on 14.01.2021 and the Resolution Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] at para 83, fn 3). 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three appeals before us. Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC. 245. If the legislature in its wisdom, were to recognize the concept of withdrawals or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal in Kalinga Allied Industries India Private Limited (Supra), has further observed that the Commercial Wisdom of the CoC is not justiciable until and unless any material irregularity, which in the instant case, we are of the considered view that the submissions made by the Financial Creditors do not fall within the provisions of the Section 30(2) of the Code. Having observed so, at the cost of repetition, it is noted that any modification after approval of the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, would only lead to further delay and defeat the very scope and objective of the Code. 30. The principle laid down by the Hon ble Apex Court in Ebix Singapore Pvt. Ltd. (Supra) with respect to timelines and modifications of the Resolution Plan once approved by the CoC is applicable to the facts of this case. The Information Memorandum is prepared by the RP under Section 29 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ( CIRP Regulations, 2016 ) which contains the relevant provisions with regard to publicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anabhan Venkatesh and others, (2020) 11 SCC 467. (iv) Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another, (2021) SCC OnLine SC 204. (v) Ghanashyam Mishra and Sons Private Limited Through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited Through the Director Ors., (2021) 9 SCC 657. ... 33. We may gainfully refer to the following observations of this Court in the case of Keshardeo Chamria v. Radha Kissen Chamria and others (1953) 4 SCR 136 while considering the scope of the words material irregularity , as are found in Section 115 of the Code of Civil Procedure, 1908: Reference may also be made to the observations of Bose, J. in his order of reference in Narayan Sonaji v. Sheshrao Vithoba [AIR 1948 Nag 258] wherein it was said that the words illegally and material irregularity do not cover either errors of fact or law. They do not refer to the decision arrived at but to the manner in which it is reached. The errors contemplated relate to material defects of procedure and not to errors of either law or fact after the formalities which the law prescribes have been complied wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91.46 8.54 - 37. From the aforenoted table, it is clear that Nisus Finance having 11.4% Voting Share has voted in favour of the Resolution Plan based on the Information Memorandum which included these 268 Flats. 38. We are also conscious of the fact that most of the Homebuyers have paid their amounts in full and that they are in possession of the Flats allotted to them by the Corporate Debtor and that the Respondent had failed to inform the Homebuyers about the Pre-Existing Mortgage, if any, over these Flats. Further, the exclusion of these Units from the Information Memorandum of the Corporate Debtor would tantamount to giving preference to one similarly placed Creditor over another similarly placed Creditor. 39. For all the forgoing reasons, Company Appeals (AT) (Ins.) Nos. 593, 659, 694, 703, 736 912/2021 are allowed and the Order of the Adjudicating Authority excluding the 205 Flats from the pool of the Assets of the Corporate Debtor , is set aside. Consequently, the Company Appeal (AT) (Ins.) No. 656/2021 is dismissed, accordingly. No order as to costs. The connected pending `Interlocutory Applications , ..... X X X X Extracts X X X X X X X X Extracts X X X X
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