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 intervene in the CIRP proceedings of Ascot Projects Pvt. Ltd. The Tribunal emphasized the need to address fraud allegations under Section 65 of the IBC and recognized the interconnected interests of Intellicity Business Park's resolution. The decision aimed to ensure natural justice, avoid miscarriage of justice, and facilitate a smoother resolution process for Intellicity Business Park.

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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.

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