2023 (6) TMI 14 - AT - Insolvency and Bankruptcy

Appeal allowed under IBC Section 61, intervention permitted in CIRP proceedings, focus on fraud

The appeal under Section 61 of the IBC was allowed by the Tribunal, setting aside the Adjudicating Authority's order and permitting the Appellant to ... Maintainability of application - permission sought to intervene in Section 7 application against Ascot Projects - Adjudicating Authority merely on the ground that a “third person” is not a necessary party in Section 7 proceedings, rejected the application - HELD THAT:- It is noted that the CIRP of Intellicity Business Park as corporate debtor was initiated on 27.05.2019 after admission of a section 7 application of the IBC. It is also noted that the proposed resolution plan in respect of Intellicity Business Park has been filed by Respondent No.4 - M/s SSR Townships Private Limited, which is pending approval of the Adjudicating Authority after being approved by the CoC. It is also noted that the land obtained on lease by M/s Ascot Projects Pvt. Ltd. from GNIDA is the land on which the project Intellicity Business Park is being developed and which is included in the proposed resolution plan filed by Respondent No.4 for insolvency resolution of M/s Intellicity Business Park Ltd. It is also noted that the proposed resolution plan of Intellicity Business Park includes merger of Ascot Projects Pvt. Ltd. with its holding company Intellicity Business Park. It stands to reason that admission of Section 7 application against M/s Ascot Projects Pvt. Ltd. and initiation of a separate CIRP would create hurdle in the full and proper implementation of the proposed resolution plan of Intellicity Business Park filed by the Respondent No.4 once it is approved by the Adjudicating Authority. It also cannot be denied that the interest of the unit buyers and creditors of Intellicity Business Park is intricately and closely linked with the land which is held in lease by company M/s Ascot Projects Pvt. Ltd. Therefore the continuation of Ascot Projects Pvt. Ltd. as a financially healthy and viable company is a necessity for successful insolvency resolution of Intellicity Business Park. It is noted that issue of alleged fraud in the filing of Section 7 application against Ascot Projects was brought to the notice of the Adjudicating Authority, which was filed under Sections 60(5) and 65 of the IBC. A perusal of the application makes it clear that the Appellant Airwil Intellicity Social Welfare Society had pleaded the matter relating to alleged fraud being played by Airwil Infra Ltd. on the unit holders and creditors of M/s Intellicity Business Park Ltd. and also the collusion of its ex-directors Mr. Sanjay Kumar, Mr. Manoj Kumar Chaudhary and Mr. Kamal Aggarwal (who are the current directors of M/s Airwil Infra Ltd.) in this regard. When an allegation of fraud being played on the financial creditors and unit buyers of Intellicity Business Park was brought to the notice of the Adjudicating Authority when it was considering section 7 application CP (IB) No. 2356(ND)/2019 with regard to corporate debtor Ascot Projects it ought to have been taken note of by the Adjudicating Authority and the Appellant should have been provided an opportunity to present its case in the Section 7 proceedings of M/s Ascot Projects Pvt. Ltd. in view of the requirement of natural justice and to avoid miscarriage of justice to the Appellant who could have been adversely affected by the admission of section 7 application. The Adjudicating Authority should have allowed application and permitted the Appellant to intervene and participate in the Section 7 proceedings with relation to the corporate debtor M/s Ascot Projects Pvt. Ltd. This was necessary to avoid miscarriage of justice and would have allowed the Appellant to substantiate its allegation. The impugned order is set aside permitting the Appellant to intervene and participate in the proceedings under consideration of the Adjudicating Authority - appeal allowed. Issues Involved:1. Intervention and participation of the Appellant in the CIRP proceedings of Ascot Projects Pvt. Ltd.2. Allegation of fraud and malicious intent in the filing of the Section 7 application against Ascot Projects Pvt. Ltd.3. Relationship and impact of CIRP of Ascot Projects Pvt. Ltd. on the resolution of Intellicity Business Park Ltd.Summary:Intervention and Participation of the Appellant:The Appellant filed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging the order dated 23.07.2021 by the Adjudicating Authority (NCLT, New Delhi) which denied the Appellant's intervention in the CIRP proceedings of Ascot Projects Pvt. Ltd. The Appellant, a society of unit buyers in the project of Intellicity Business Park Ltd., sought to intervene on the grounds that the CIRP against Ascot was initiated fraudulently and with malicious intent to disrupt the ongoing CIRP of Intellicity Business Park Ltd.Allegation of Fraud and Malicious Intent:The Appellant argued that the Section 7 application against Ascot Projects was filed by Airwil Infra Ltd., a related entity, with fraudulent and malicious intent. The Appellant claimed that the directors of Ascot were appointed by the ex-directors of Intellicity Business Park, who colluded to create a sham settlement resulting in the issuance of post-dated cheques that were dishonored, leading to the Section 7 application. The Appellant contended that this action falls under Section 65 of the IBC, which deals with fraudulent or malicious initiation of proceedings.Relationship and Impact on Intellicity Business Park Ltd.:The Appellant emphasized that Ascot Projects is a wholly owned subsidiary of Intellicity Business Park, holding 99.94% shares, and the land for Intellicity's project is leased to Ascot by GNIDA. The successful resolution of Intellicity Business Park is intricately linked with Ascot Projects. The Appellant argued that a separate CIRP for Ascot would complicate the resolution process of Intellicity Business Park, which includes a proposed merger of Ascot into Intellicity to ensure smooth project completion.Judgment:The Tribunal noted that the CIRP of Intellicity Business Park was initiated on 27.05.2019, and the resolution plan by SSR Townships Pvt. Ltd. is pending approval. The Tribunal acknowledged the intricate connection between the two companies and the potential adverse impact of a separate CIRP for Ascot on Intellicity's resolution plan. The Tribunal cited the Supreme Court's judgment in Beacon Trusteeship Limited Vs. Earthcon Infracon Private Limited, emphasizing the need to address allegations of fraud under Section 65 of the IBC.The Tribunal concluded that the Adjudicating Authority should have allowed the Appellant to intervene in the Section 7 proceedings of Ascot Projects to ensure natural justice and avoid miscarriage of justice. The impugned order was set aside, and the Appellant was permitted to intervene and participate in the proceedings.Conclusion:The appeal was allowed, enabling the Appellant to intervene in the CIRP proceedings of Ascot Projects Pvt. Ltd., thereby ensuring that allegations of fraud and the interconnected interests of Intellicity Business Park's resolution are adequately addressed. No order was made regarding costs.