2022 (3) TMI 600 - AT - Insolvency and Bankruptcy

Tribunal Upholds Appeal Dismissal, Directs NOIDA to Engage in CIRP Process

New Okhla Industrial Development Authority Versus Mr. Nilesh Sharma Resolution Professional of Dream Procon Pvt. Ltd., Victory Ace Social Welfare Society

The Tribunal dismissed the appeal, directing NOIDA to lodge its claim with the Resolution Professional and participate in the CIRP process. The judgment ... CIRP - Resolution process - Right of Noida Authority over leased assets - contention of appellant is that prior approval from the lessor has not been taken before sub-leasing portion of the land to the ‘Corporate Debtor’ for development of the Housing Project - appellant were ignorant of existence of the said JDA, GPA and Agreement to sell - HELD THAT:- The CONSTRUCTION Clause under the Lease Deed provides that the construction shall be as per the Building Plans approved by the Appellant/NOIDA. It is based on the Lease Deed, of M/s. Logix. The ‘Corporate Debtor’ has entered into the said JDA, whereby the development rights and other privileges over the said Project premises has been transferred by M/s. Logix in favour of the ‘Corporate Debtor’. As regarding the contention of the Appellant that NOIDA is completely unaware of the said Project and any sort of construction activity going on, is untenable specially in the light of Annexure R-3 which refers to the Project namely i.e., ‘Victory Ace’, the Registration Date being 18/03/2019 and the ‘signing Competent Authority’ being ‘NOIDA Authority’. It is seen that the Appellant/NOIDA had extended permissions for the Building Plans; that the Project ‘Victory Ace’ is registered under UPRERA which establishes that all copies of approvals and Commencement Certificate from the Competent Authority were submitted in compliance of Section 4(2) of RERA Act, 2016. Keeping in view these reasons, the stand taken by the Appellant that they were not in knowledge of the Group Housing Scheme at Plot H-02, Sector 143 NOIDA, is unsustainable. JDA is a valid contract in the eyes of law or not? - HELD THAT:- The material on record establishes that all details of the Project were in public domain and therefore the stand of the Appellant that they had absolutely no knowledge about the Project, holds no water. It is also seen from the record that the Project commencement date was 2012 and the completion date was 2019. There is no documentary evidence filed by the Appellant showing any sort of objection raised by them for this 7 year period - A perusal of the JDA shows that the Agreement only creates development rights in favour of the ‘Corporate Debtor’ which is authorised by a GPA to carry out construction and sale of the flats. There is no leasehold interest created in favour of the ‘Corporate Debtor’. There is no Clause in the Lease Deed which prevents M/s. Logix from transferring development rights or creating a sub-lease right to a third party. It is the case of the Appellant that the aforenoted JDA describes M/s. Logix as the ‘Owner’ which is illegal. A careful reading of the JDA shows that the Appellant/NOIDA is shown as ‘the sole owner’ of Plot No. GH-02. A comprehensive reading of all the terms and conditions show that pursuant to the registered Lease Deed dated 08/06/2011 leasehold rights were granted to M/s. Logix and it is clearly stated in the JDA that it considers itself the ‘sole lessee’ of the plot. The JDA read with the Allotment Letter and the Builder Buyer Agreement further strengthens the case of M/s. Logix that both M/s. Logix and the ‘Corporate Debtor’ have clearly repeated that the ‘NOIDA is the Owner of the Project land’ and M/s. Logix is only a ‘lessee of the plot’ - this Tribunal is of the earnest view that the issue raised by the Appellant regarding the usage of the word ‘Owner’ with reference to M/s. Logix in the JDA, is misconceived. Having accepted the lease premium amounts towards lease premium and lease rentals under the Lease Deed and benefited therefrom, the Appellant cannot now turn around and say that they are completely unaware of the Project or that the JDA is non-est in the eyes of the law. There are no substantial reasons given by the Appellant to have not exercised their rights to cancel the Lease Deed in view of their stand that M/s. Logix had sub-leased the property without their approval and in contravention of Clause 5 of the Lease Deed. Clause No. 12 clearly mentions that the lessee/sub-lessee shall not be allowed to change his role otherwise the lease/sub-lease can be cancelled and the entire amount deposited shall be forfeited - It is beyond comprehension as to how the Appellant/NOIDA could have overlooked this factual scenario for 7 long years, having approved the Building Plans, having accepted the premium amounts and the lease rentals and now at this stage of CIRP, stating that they were completely unaware of any such Housing Project coming up, is completely untenable. The ‘development rights’ construe ‘Property’ of the ‘Corporate Debtor’ and hence the Resolution Professional has duly performed his duties as per Section 18(1)(a)(iii) and has taken control and custody of the assets of the ‘Corporate Debtor’ mentioned in the Balance Sheet in compliance of the provisions of Section 18(1)(f) and resultantly there are no deficiency of service on behalf of the RP. The appeal is dismissed. Issues Involved:1. Validity of the Joint Development Agreement (JDA) between M/s. Logix and the Corporate Debtor.2. NOIDA's knowledge and approval of the JDA and related agreements.3. Rights of the Corporate Debtor over the subject premises.4. Participation of NOIDA in the Corporate Insolvency Resolution Process (CIRP).5. Protection of homebuyers' interests.6. Jurisdiction and powers of the Adjudicating Authority and the Appellate Tribunal.Detailed Analysis:1. Validity of the Joint Development Agreement (JDA):Appellant's Argument:The appellant argued that the JDA was executed clandestinely without prior approval from NOIDA, which is against the terms of the Lease Deed. The JDA, GPA, and Agreement to Sell are non-est in the eyes of the law, and the Corporate Debtor has no rights over the subject premises.Tribunal's Analysis:The Tribunal found that the JDA is a valid contract. The JDA only creates development rights in favor of the Corporate Debtor, authorized by a GPA to carry out construction and sale of flats. There is no leasehold interest created in favor of the Corporate Debtor. The Tribunal noted that the Lease Deed does not prevent M/s. Logix from transferring development rights or creating a sub-lease right to a third party.2. NOIDA's Knowledge and Approval of the JDA:Appellant's Argument:The appellant claimed that they had no knowledge of the JDA, GPA, and Agreement to Sell until the CIRP proceedings commenced.Tribunal's Analysis:The Tribunal found this claim unsustainable. The construction and development activities were well within NOIDA's knowledge, as evidenced by the approvals given for building plans and the registration of the project under UPRERA. NOIDA had extended permissions for the building plans, and the project was registered with UPRERA, indicating that all necessary approvals were obtained.3. Rights of the Corporate Debtor over the Subject Premises:Appellant's Argument:The appellant contended that the Corporate Debtor had no legal rights over the subject premises as the JDA and related agreements were executed without NOIDA's approval.Tribunal's Analysis:The Tribunal held that the development rights vested in the Corporate Debtor constitute a proprietary right. The Corporate Debtor is defined as a Joint Developer in the JDA, and the development rights over 6,00,000 sq. ft. of FSI were granted in favor of the Corporate Debtor. The Tribunal emphasized that NOIDA had accepted lease premium amounts and lease rentals, benefiting from the agreement, and cannot now claim ignorance of the project.4. Participation of NOIDA in the CIRP:Appellant's Argument:NOIDA sought directions to exclude the subject premises from the pool of assets of the Corporate Debtor and contested the validity of the JDA.Tribunal's Analysis:The Tribunal directed NOIDA to lodge its due claim with the Resolution Professional as per law and participate in the CIRP process. NOIDA's contradictory stand of contesting the JDA's validity while seeking to file a claim was noted. The Tribunal emphasized that NOIDA should have exercised its legal right to cancel the Lease Deed if it believed there was a contravention.5. Protection of Homebuyers' Interests:Appellant's Argument:The appellant did not directly address the interests of homebuyers.Tribunal's Analysis:The Tribunal took a holistic view to protect the interests of homebuyers. It noted that more than 500 homebuyers would be adversely affected if NOIDA's objections were upheld. The Tribunal cited the Supreme Court's decision in Bikram Chatterjee & Ors. Vs. Union of India, emphasizing that innocent homebuyers cannot be left in the lurch.6. Jurisdiction and Powers of the Adjudicating Authority and the Appellate Tribunal:Tribunal's Analysis:The Tribunal reiterated that it does not have equity jurisdiction and can only exercise powers expressly conferred by the statute. The Tribunal emphasized the importance of adhering to timelines in the CIRP process, as highlighted by the Supreme Court in Ebix Singapore Pvt. Ltd. Vs. Committee of Creditors of Educomp Solutions Ltd. & Anr.Conclusion:The Tribunal dismissed the appeal, directing NOIDA to lodge its claim with the Resolution Professional and participate in the CIRP process. The Tribunal emphasized the need to protect homebuyers' interests and adhere to statutory timelines. The judgment underscores the validity of the JDA and the proprietary rights of the Corporate Debtor over the development project.