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TMI Blog2024 (3) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... vedi, Ms. Shivani Bhushan, Ms. Diksha Tyagi, Ms. Aishwarya Singh, Advocates for R-3/SRA. JUDGMENT [ Per : Barun Mitra , Member ( Technical ) ] The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 ('IBC' in short) by the Appellant arises out of the Order dated 06.10.2023 (hereinafter referred to as 'Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court-IV) in IA-2688/2023 in CP.IB.68(MB)2021. By the Impugned Order, the Adjudicating Authority dismissed the I.A. No. 2688/2023 filed by present Appellant representing 77 Homebuyers as a class of creditor seeking rejection of the Committee of Creditors ('CoC' in short) approved resolution plan filed by the Resolution Professional ('RP' in short) pending for approval of the Adjudicating Authority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Professional; Shri P. Nagesh and Shri Amit Sibal Learned Sr. Counsels for the Respondent No.2/Financial Creditor and Shri Arvind Verma, Learned Sr. Counsel appearing for the SRA. 4. Making his submissions, the Learned Counsel for the Appellant submitted that the Appellant is a creditor in a class who represents 77 Homebuyers of the Corporate Debtor. The Homebuyers had purchased flats in the 'Nirmal Sports City' real estate project of the Corporate Debtor. As this project did not take off, the project was relaunched as Godrej Alive. Under this project, the Homebuyers were given the option to either continue in the project or exit the project with 9% compound interest. It is the contention of the Appellant that the Homebuyers of which the Appellant was also a part, chose to continue in the project. When this project did not take off and the Corporate Debtor was 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to the failure of the RP to conduct proper investigation into the claims made by the Respondent No. 2/Financial Creditor, this led to skewed composition of the CoC. Thus, the CoC with Respondent No. 2/Financial Creditor thereon could not have approved the resolution plan of the Corporate Debtor by dint of being a related party. Consequently, the constitution of the CoC with the Respondent No. 2/Financial Creditor being a related party renders the constitution of CoC as invalid and hence all actions/decisions of the CoC deserves to be set aside. 8. It was asserted that the repeated disbursement of loan by the Respondent No. 2/Financial Creditor without any development of the real estate project taking place on ground coupled with nil revenue generation and allowing of loan repayments through subsequent disbursal of term loans showed the questionable conduct of the Respondent 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 comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile this appeal as creditor in class. It is also pointed out that the Homebuyers constitute a "creditor in class" and are represented by an AR. The Appellant has failed to substantiate his status as AR. It is contended that the cause title of the application shows that it has been filed by one, Mr. Girish Nalavade, in his individual capacity. Furthermore, the Appellant failed to disclose the name and detailed particulars of the 77 Homebuyers whom it claims to represent. Moreover, the Appellant was only authorised by 77 Homebuyers to file I.A. 2688/2023 before the Adjudicating Authority. The emails issued by the Homebuyers authorising the Appellant to file I.A. 2688/2023 was prior to the issue of impugned order. There is nothing on record which refers to any subsequent authorisation from this group of Homebuyers to the Appellant to file this appeal on their behalf before this Tribunal. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties we have decided to go into the contentious issue of the related party status raised by the Appellant. To begin with, we may notice Section 5(24)(h) and (m) which have been relied upon by the Appellant to claim that the Financial Creditor/Respondent No. 2 is a related party and hence could not have found a place in the CoC. The relevant clauses read as follows: "5(24) "related party", in relation to a corporate debtor, means- (h) any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act; (m) any person who is associated with the corporate debtor on account of- (i) participation in policy making processes of the corporate debtor; or (ii) having more than two directors in common between the corporate debtor and such person; or (iii) interchange of managerial personnel between the corporate debtor and such person; 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again there has to be tangible and specific material that the Appellant is required to produce to substantiate their standpoint on each of the subclauses distinctively and separately. We however notice that the Appellant merely adverted attention to the fact that DTDs contain certain clauses by virtue of which it can be inferred that Section 5(24)(m) is attracted, however, no further details have been provided to provide a foundational basis to their contention. Participation by the Financial Creditor/Respondent No. 2 in policy making process could have been possible only through Director of the Corporate Debtor which is not the case in the present matter. There is no sign of any evidence either before us to establish that Financial Creditor/Respondent No. 2 by their conduct participated in the policy making process of the Corporate Debtor. Nothing concrete has been placed on record which amplifies interference 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 info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if that amount is not considered, the vote share of R2 shall remain more than the minimum threshold required for approving the plan, hence, this objection is meaningless. We find merit in this argument and are of conscious that the issue of inflated claim is dealt by us separately in IA3327 /2023, where we had found no infirmity in the admission of claim of R2. Accordingly, we reject this contention." 22. We have no cogent grounds to disagree with the above findings of the Adjudicating Authority. On going through the minutes of the CoC meetings, we find that since the 1st CoC meeting onwards, the RP had unceasingly placed on the agenda for discussion one Item which read as: "Take note of the list of creditors who have submitted their claims and the status of verification of such claims". The RP had in each CoC meeting ventured to apprise the CoC members on the statement of claims received and the methodology of arriving 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the Resolution Professional cannot be held responsible for having suppressed any material fact pertaining to the TMC reservation issue from the CoC members including the AR. Keeping in mind the above-cited multifarious efforts made by the RP, the bonafide of the RP in this regard cannot be doubted. Hence, we do not find any infirmity or error in the findings recorded by the Adjudicating Authority in respect of the conduct of the Resolution Professional which is to the following effect: "11.......We find from the minutes of 10th CoC meeting held on 10.3.2023 placed in IA 2319 of 2023 that the Resolution Professional had taken steps to find out the correct position relating to TMC reservations and have also filed an application to TMC for clarification on Development Plan vide letter dated 26.09.2022 through its Architect Sakaar Architects and also reminded TMC for withdrawal of said Reservation vide letter dated 26.12.2022. 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 mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this aspect without any additional advantage having been accorded to the Successful Resolution Applicant. It was not argued before us that the Successful Resolution Applicant knew what others didn't or the Successful Resolution Applicant was not told about such Reservation what others were told. Every Prospective Resolution Applicant is within its right to make a business decision based on its risk appetite and no collusion can be inferred merely from this fact. 13. We also find that the issue of TMC reservation was argued at length during the other Objector's IA, and it was also found that, no notification inviting objections to the proposed acquisition has so far not been made by the Competent Authority, as the reservation over the Project Land is at the initial proposal stage. However, we find that the Town Planning Authority can take into account future proposals also while according to the approval to the building plan as held 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reed upon at the time of the allotment. It was therefore decided that a joint meeting be held with the AR, RP, Financial Creditor/Respondent No. 2 as Lead Lender and the Home buyers. At all the stages outlined above, the RP had taken due note of the suggestions made by the AR of the Homebuyers and acted on these suggestions and there were no complaints made by the Appellant in this regard. Neither was any action taken by the RP which can be treated as patently collusive with the Financial Creditor/Respondent No. 2 or the SRA/Respondent No.3. 28. Meantime, since the 330 days of CIRP was ending on 30.03.2023, the RP placed the resolution for extension of CIRP by 60 days beyond 330 days so as to consider the resolution plan of the sole resolution applicant and this was approved by CoC members with 100% vote in the 10th CoC meeting held on 20.03.2023. This action of the RP was in order as it was in conformity with the timelines set by the IBC. It 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 starte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicating Authority deserves to be set aside or the CoC approved resolution plan be sent back for the SRA/Respondent No. 3 to make necessary changes to the plan in the order to cater to the needs and demands of the Homebuyers as has been urged by the Appellant. To put the matter in perspective we may first notice the prayers of the Appellant which is as extracted below: "A. That, the CoC approved resolution plan be rejected by this Hon'ble Tribunal and the application for the approval of CoC Approved Resolution Plan filed by the Resolution Professional shall be dismissed. B. That, the fresh bidding in the instant matter be ordered by the Hon'ble Tribunal. C. That, in alternative this Hon'ble Tribunal be pleased to send back the CoC approved resolution plan, and direct the Respondent No. 3 to make necessary changes to the plan in the order to cater to the needs and demands of the home buyers. Copy of the Minutes of Meeting of Home Buyers with Respondent 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 requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct of the CIRP proceedings, the same cannot be a subject matter of judicial review and modification. In any case, quite apart from the fact that the resolution plan is already under implementation it has also not been controverted by the Appellant that all the 77 Homebuyers including the Appellant have accepted the offer of 100% of their principal amount from the SRA. That being the case, the Appellant being a dissatisfied Homebuyer in a hopelessly minority position, he has no option but to 'sail along' or 'drag along' with the overwhelming majority which has accepted the resolution plan in terms of the legal precepts articulated in the Jaypee judgement supra which is to the effect: "212.... That is the purport and effect of 'drag along' or 'sail along' provisions in the scheme of the Code. ..... 214. The homebuyers as a class shall be deemed to have voted in favour of approval of the resolution plan of NBCC; and once having voted so, any particular constituent of that class cannot 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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