TMI Blog2023 (12) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... iating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - HELD THAT:- The statutory construct of IBC clearly puts the onerous responsibility of pursuing avoidance applications on the RP. In terms of Section 25(2)(j) of the IBC, it is the duty of the RP to file appropriate applications for avoidance of transactions which fall under the ambit of preferential, fraudulent, undervalued or extortionate transactions. When the statutory scheme clearly states that it is the duty of Resolution Professional to determine the nature of such transactions and file an appropriate application before the Adjudicating Authority, neither the Appellants-1 being home buyers themselves nor the GSC as unsuccessful resolution applicant are entitled on their own to file applications seeking avoidance of transactions. The ratio of the Jayanta case [ 2022 (2) TMI 305 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI ] cannot come to the aid of the Appellant-1 since in that case the RP without verifying the claims submitted by the Financial Creditors had allotted voting share. Further, the RP had not prepared the Information Memorandum and the CIRP proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal filed under Section 61 of Insolvency and Bankruptcy Code, 2016 ( IBC in short) by the Appellants/Homebuyers (hereinafter referred to as Appellants-1 ) arises out of the Order dated 11.08.2023 (hereinafter referred to as First Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-V) in IA No.1777 of 2021 in CP (IB) No.2995/MB/2019. By the first impugned order, the Adjudicating Authority dismissed the challenge raised by the Appellants-1 to the constitution of the Committee of Creditors ( CoC in short) for the purposes of initiating Corporate Insolvency Resolution Process ( CIRP in short) against the Corporate Debtor. These Appellants have also challenged another Order dated 11.08.2023 (hereinafter referred to as Second Impugned Order ) passed by the said Adjudicating Authority in IA No.1150 of 2021 in the same company petition at supra by which the resolution plan of the Successful Resolution Applicant has been approved. The second set of appeal filed by M/s. G.S. Constructions (hereinafter referred to as Appellant-2 ) also arises out of the Order dated 11.08.2023 (hereinafter referred to as Third Impugned Order ) in I.A. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority was however challenged before this Tribunal in CA(AT)(Ins)No 26 of 2022 by the homebuyers who had been removed from the CoC. This matter was remanded back to the Adjudicating Authority for reconsideration without entering into the merits of the matter by this Tribunal on 08.03.2022. The IA 107 of 2021 continues to remain pending. The RP also filed IA No. 149 of 2021 under Sections 43 to 45 of the IBC for preferential transactions to bring back the amount siphoned through fraudulent/circuitous transactions in which adjudication remains pending. In the interim, in pursuance to duly published Form G, the CoC received resolution plans from 3 prospective resolution applicants namely, G.S. Constructions (sole proprietorship of Sushil Uttarwar); Mrs. Archana Sanap and Mrs. Asha Sanap. The 8th CoC meeting held on 20.04.2021 approved the resolution plan submitted by Asha Sanap with 79.60% vote share. Thereafter the RP filed IA No. 1150 of 2021 seeking approval of the resolution plan of Asha Sanap which was approved by the Adjudicating Authority vide second impugned order on 11.08.2023. Both Appellants-1 and Appellant-2 have come up in appeal again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-est; to reconstitute the CoC and call for fresh votes on each Resolution Plan and to direct the RP to conduct a thorough investigation on the purported transactions entered into by the fraudulent home buyers and that Resolution Plan of SRA be rejected. 4. It was further submitted that the RP admitted the claims of these illegitimate home owners who had committed irregularities by way of fraudulent transactions and gave them access to the CoC at a time when in IA 107 of 2021, the RP had himself prayed for reconstitution of the CoC. Further the RP not only allowed their entry into the CoC but also allowed these illegitimate home buyers to discuss and approve the resolution plan. Had the votes of the illegitimate home owners been excluded, the results of the voting on the resolution plan of SRA would have been different. It has, therefore, been contended that when the composition of the CoC itself is under cloud and the question of reconstitution of CoC was still pending in IA 107 of 2021, the approval of the resolution plan of the SRA by the Adjudicating Authority was against the fundamental tenets of IBC. The Appellants have relied on the judgment of this Tribunal in Jayanta Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application. It had only arrayed the RP and the Authorized Representative as parties before the Adjudicating Authority. It was also argued that the alleged suspect home buyers have been impleaded only at the appeal stage without seeking leave of this Tribunal to implead additional parties who were not parties in the application before the Adjudicating Authority. 7. In support of their contention, the Learned Counsel for the SRA has relied upon the judgment of the Hon ble Supreme Court in the case of Moreshar Yadaorao Mahajan v. Vyankatesh Sitaram Bhedy LR Ors. (2022) SCC OnLine SC 1307 wherein it has been held that in the absence of a necessary party, in whose absence no effective decree could be passed by the Court, the suit itself is liable to be dismissed. 8. It was also contended that in terms of Section 25(2)(j) of the IBC, it is the duty of the RP to file applications for avoidance of transactions. The Appellants-1 being homebuyers of the Corporate Debtor and Appellant-2 being an unsuccessful resolution applicant are not entitled to file such avoidance applications. Hence on this count itself the IA 1777 was not maintainable. Further even if the issue of avoidance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding, the Adjudicating Authority without deciding on the said IA should not have dismissed IA No. 1777 of 2021 filed by them praying for removal of alleged illegitimate home owners from the CoC and to disregard the votes cast by them during CoC meetings as well as to reconstitute the CoC with genuine home buyers. Under such circumstances, where 17 out of 53 home buyers had irregularly and illegally gained access to the CoC, it has been the contention of the Appellants-1 that the constitution of CoC was clearly rendered illegal and decisions taken by the said CoC is invalid. 13. Before we delve into the sustainability of the first impugned order of the Adjudicating Authority in IA 1777/2021, it would be constructive to note the status of IA 107/2021 as filed by the RP seeking reconstitution of the CoC. It is the claim of the Appellants-1 that the Adjudicating Authority in its order dated 17.11.2021 in IA 107/2021 had removed the alleged fraudulent home buyers from the CoC. On the other hand, it is the counter claim of the Respondents that the said order was challenged by the expelled home buyers before this Tribunal in CA(AT)(Ins)No 26 of 2022 and was set aside by this Tribunal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, who has admitted the claims of the homebuyers under challenge has not been made a party in the present Interlocutory Application. Further, the allottees, whose claims have been challenged in the present IA, are also not made a party in this IA. In the given situation no order can be passed at the back of such allottees without providing them an opportunity of being heard. 15. This bench has further observed that the present application is filed by the owners of holiday homes/villas in the Project collectively having 25.55% voting share in the COC out of which 2 applicants namely Applicant nos. 3 4 having 2.85% and 3.17% voting share have already sought removal of their names form the present application which had been allowed by this Bench vide daily order dated 04.05.2023. Furthermore, the individual homebuyers who have been sought to be removed from the list of home buyer/ Committee of Creditors constitute just about 12% voting share in the COC. Therefore, assuming if their names are excluded, even that would not alter the final outcome and the plan of Mrs. Asha Sanap would still fetch more than 66% of voting share. Even otherwise, the applicants as the Home Buyers do n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstituent of that class cannot be heard in opposition to the Resolution Plan by way of objection as there is no concept of dissenting homebuyers within Creditors in class. The relevant extracts of this judgement are reproduced below:- 164.4 Having regard to the scheme of IBC, and the law declared by this Court, it is more than clear that once a decision is taken, either to reject or to approve a particular plan, by a vote of more than 50% of the voting share of the financial creditors within a class, the minority of those who vote, as also all others within that class, are bound by that decision. There is absolutely no scope for any particular person standing within that class to suggest any dissention as regards the vote over the resolution plan. It is obvious that if this finality and binding force is not provided to the vote cast by the authorize representative over the resolution plan in accordance with the majority decision of the class he is authorized to represent, a plan or resolution involving large decision of the class he is authorized to represent, a plan or resolution involving large number of parties (like an excessively large number of homebuyers herein) may n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellants-1 to the constitution of the CoC or on the participation of the suspect home buyers in the voting process until the 7th CoC meeting. Even the Appellants never raised any objections to the appointment of the Authorised Representative or in the latter s participation in the voting process in CoC. It was only after the resolution plan of the SRA was approved that the Appellants approached the Adjudicating Authority by way of filing an IA 1777/2021 and challenging the constitution of the CoC. If the Appellants were genuinely aggrieved with the constitution of the CoC, we fail to comprehend as to what prevented them from objecting to the constitution of the CoC and participation in the CoC meetings at any stage prior to the 8th CoC meeting. This clearly shows that the Appellants sprang into action only after the resolution plan of GSC was not approved. 17. During the course of making oral arguments, the Learned Senior Counsel of the Appellants-1 handed over a chart containing revised calculations of the shares of the home buyers post the removal of the suspect/fraudulent homebuyers. We also notice that the FAR observations with respect to related party transactions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been assailed by both Appellants-1 and Appellant-2 on more or less similar grounds that the Adjudicating Authority failed to take cognizance of the fact that the decision of the CoC to approve the resolution plan stood vitiated since the constitution of the CoC itself was a nullity. The question before us is whether the CoC in the facts of the present case could lawfully consider approval of the resolution plan when the constitution of the CoC is claimed by both the Appellants to be tainted. 21. It is the contention of the Appellants-1 and 2 that the CoC was illegally constituted with illegitimate home buyers who had entered into collusive arrangements with the suspended directors of the Corporate Debtor. 16 out of 17 such suspect home buyers had voted in favour of the resolution plan of the SRA. Such a resolution plan approved by related parties is therefore liable to be set aside. It is therefore their case that the decision of CoC in the present set of facts cannot be validated on the pretext of exercise of commercial wisdom as the commercial wisdom of CoC cannot condone material irregularities in the conduct of CIRP. 22. We find that the Adjudicating Authority while con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those raised by Appellants-1 in IA 1777/2021. In the present IA 1609/2021 too, the prayers of the Appellant-2 have been rejected and the grounds are amplified by the Adjudicating Authority at paras 5.3, 5.4 and 5.5 of the third impugned order which is as reproduced below: 5.3 This Bench is of the opinion that, once the majority of CoC decide on one of the Resolution Plan, the decision of the CoC attains finality. It is observed by the Bench that, in the present case, since the CoC comprising of SIDBI and the home buyers approved the Resolution Plan presented by Mrs. Asha Sanap, the Unsuccessful Resolution Applicant has no locus to challenge the commercial decision of the CoC. Further, the prayer of the Applicant recalling the order dated August 18, 2020 passed by this Tribunal appointing Respondent No. 2 i.e. Mr. Jitender Kothari as the Authorised Representative of the Home Buyers of the Corporate Debtor on the ground that the same is vitiated by fraud perpetrated by the Fraudulent Home Buyers, has no merit in view of the above discussion by this Bench. 5.4 It is observed by the Bench that, the Applicant who himself was Prospective Resolution Applicant had submitted its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reverse them. We also notice that the avoidance applications are not statutorily bound by time as is the resolution process. Section 26 of IBC further provides that application for avoidance of transactions is not to affect CIRP proceedings and therefore such applications can continue even after completion of the CIRP. Section 26 of the IBC clearly stipulates that the pendency of any avoidance application shall not come in the way of the approval of the resolution plan. CIRP and avoidance applications are, thus by their very nature, a separate set of proceedings. The former is time bound whereas the latter requires a proper discovery of suspect transactions that are time consuming. The scheme of the IBC reinforces this difference and thus adjudication of an avoidance application is independent of the resolution of the corporate debtor and can survive CIRP. Recently, a division bench of the Delhi High Court in Tata Steel BSL Limited v. Venus Recruiter Private Limited and Others [(2023) SCC OnLine Del 155] has held that avoidance applications which are initiated by the RP shall continue irrespective of the finalisation of the Resolution Plan and the conclusion of the CIRP. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
