2022 (12) TMI 614 - AT - Insolvency and Bankruptcy

Appellate Tribunal Upholds Decision Dismissing Homebuyers' Appeal

Innova Home Buyers Neyveli Association Versus P Dot G Construction Pvt. Ltd., Mr. Sundaresan Nagarajan, DMI Finance Private Limited, RCC E-Construct Private Limited

The Appellate Tribunal upheld the decision of the National Company Law Tribunal, dismissing the appeal challenging the denial of claims by 'Homebuyers' ... CIRP - Fairness of Resolution plan - appellant being Association of the ‘Homebuyers’ - plan challenged on various issued including, the ‘Resolution Plan’ amount being lower than the ‘Liquidation Value’, ‘exorbitant interest charges’ by the ‘Financial Creditors’ in their claims, denial of claims of the ‘Appellant’ etc. - HELD THAT:- The contention of the ‘Appellant’ with regards to equitable treatment with the financial creditor and not being treated at par with them does not seems to hold ground as the Hon’ble Supreme Court of India had established in case of Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors [2019 (11) TMI 731 - SUPREME COURT]. Hence the challenge to the ‘impugned order’ on ground that percentage recovery available to members of the association is lower than ‘Financial Creditor’ is not palatable. Therefore, this ‘Appellate Tribunal’ do not find any error in the ‘impugned order’ on this ground. Whether the amount under the ‘Resolution Plan’ can be less than the ‘Liquidation Value’ ? - HELD THAT:- The Resolution professional in its submissions has said that the liquidation value was strictly according to the regulations of the I & B Code, 2016 and were valued by two independent registered valuers. It has also been said that the ‘Resolution Plan’ amount was approved by ‘Committee of Creditors’ including, majority of the of the ‘Homebuyers’. All apartments forming part of pending projects of the ‘Corporate Debtor’ had been included and made part of the information memorandum, which was approved by the ‘Committee of Creditors’. - no fault can be found in view of judgment of the apex court in the case of Maharashtra Seamless Ltd Vs Padmanabhan Venkatesh & Ors. [2020 (1) TMI 903 - SUPREME COURT] and therefore the ‘Adjudicating Authority’ rightly held that the resolution plan amount need not match the Liquidation value. Whether the 4th Respondent who is ‘Successful Resolution Applicant’ is close associate of 3rd Respondent who is ‘Financial Creditor’ of the 1st Respondent (Corporate Debtor) and whether the 4th Respondent as such can be barred by I &B Code, 2016 for submission of the ‘Resolution Plan’.? - HELD THAT:- as the I & B Code, 2016 places no embargo upon a financial creditor from voting upon a ‘Resolution Plan’ which is fully funded by it or partly funded by the ‘Successful Resolution Applicant’. This ‘Appellate Tribunal’, does not find ‘any material irregularity’ or ‘patent illegality’, in the ‘impugned order’ Issues Involved:1. Error in refusal to admit claims of the 'Homebuyers' members of the Appellant's Association.2. Percentage recovery available to members of the association lower than 'Financial Creditor'.3. Differential treatments to different classes of 'Homebuyers' by charging different premium rates.4. Amount under the 'Resolution Plan' being less than the 'Liquidation Value'.5. Alleged collusion between the 'Successful Resolution Applicant' and the 'Financial Creditor'.Issue-wise Analysis:Issue No. 1: Error in refusal to admit claims of the 'Homebuyers' members of the Appellant's Association- The Appellant challenged the denial of claims and additional payment demands for handing over flats. The I & B Code, 2016, and several Supreme Court judgments establish that the distribution of proceeds of the 'Resolution Plan' is subject to the 'Committee of Creditors' (CoC) wisdom and cannot be challenged.- Section 30(4) of the I & B Code obligates the CoC to assess the viability and feasibility of the Resolution Plan. Once the CoC approves the plan by the requisite voting share, it is placed before the 'Adjudicating Authority' under Section 31.- The Supreme Court in K. Sashidhar v. Indian Overseas Bank and Ors. held that no ground is available to question the 'commercial wisdom' of the CoC in approving or rejecting a resolution plan.- The Supreme Court in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors. reaffirmed that neither the 'Adjudicating Authority' nor the 'Appellate Tribunal' could interfere with the CoC's business decision.- The Appellate Tribunal observed that different 'Homebuyers' entering at different times can be treated separately. The CoC, including 53% of 'Homebuyers', approved the 'Resolution Plan' by an overwhelming 81% majority, indicating fairness and equity.- The contention of the Appellant regarding equitable treatment with financial creditors does not hold ground as per the Supreme Court's established view. Hence, no error was found in the 'impugned order' on this ground.Issue No. 2: Amount under the 'Resolution Plan' being less than the 'Liquidation Value'- The Supreme Court in Maharashtra Seamless Ltd Vs Padmanabhan Venkatesh & Ors. clarified that no provision in the code mandates that a resolution plan must match the liquidation value.- The Resolution Professional stated that the liquidation value was strictly according to I & B Code regulations and approved by the CoC, including the majority of 'Homebuyers'.- The contention regarding the 'Resolution Plan' value being lower than the 'Liquidation Value' is not sustainable in view of the Supreme Court's judgment in Maharashtra Seamless Ltd Vs Padmanabhan Venkatesh & Ors. Therefore, the 'Adjudicating Authority' rightly held that the resolution plan amount need not match the Liquidation value.Issue No. 3: Alleged collusion between the 'Successful Resolution Applicant' and the 'Financial Creditor'- The Appellant contended collusion between the 4th Respondent (Successful Resolution Applicant) and the 3rd Respondent (Financial Creditor). However, the Respondent denied this and stated that the 4th Respondent had a formal financial support arrangement with the 3rd Respondent, which is permissible under the I & B Code, 2016.- The Appellate Tribunal agreed with the Respondent, noting that the I & B Code places no embargo on a financial creditor voting on a 'Resolution Plan' funded by it or partly by the 'Successful Resolution Applicant'.- The Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Assn. vs. NBCC (India) Ltd. held that once homebuyers as a class vote in favor of a resolution plan, any constituent of that class cannot oppose the plan by objection or appeal.Conclusion:The Appellate Tribunal found no material irregularity or patent illegality in the 'impugned order' dated 13.12.2019 by the National Company Law Tribunal, Division Bench-I, Chennai Bench. The appeal was dismissed as devoid of merits, and any connected pending 'Interlocutory Applications' were closed.