Committee of Creditors' resolution plan approval upheld despite price escalation and layout modification challenges

The NCLAT Principal Bench dismissed an appeal challenging the Committee of Creditors' approval of a resolution plan. The appellant contested clauses allowing layout modifications and increased minimum selling price from Rs.13,500-21,000 per sq. ft. to Rs.33,000 per sq. ft. The tribunal held that modification clauses required competent authority approval and were permissible. Under IBC, resolution plans can modify earlier contracts and establish new arrangements for corporate revival. The CoC's commercial wisdom in approving the plan with requisite votes was presumed valid, and price escalation was deemed a legitimate commercial decision for corporate revival.

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Issues Involved:
1. Jurisdiction of RERA for future violations by the Resolution Applicant.
2. Validity of clauses in the Resolution Plan that allegedly circumvent RERA.
3. Fixation of Minimum Sale Price (MSP) for homebuyers.
4. Exercise of commercial wisdom by the Committee of Creditors (CoC).

Summary:

1. Jurisdiction of RERA for Future Violations:
The Appellant argued that the Adjudicating Authority wrongly held that the Real Estate (Regulation and Development) Act, 2016 (RERA) would not have jurisdiction over future violations by the Resolution Applicant. They claimed that the Resolution Plan deprived them of their rights under RERA for future defaults. The Respondents countered that the Resolution Plan only precluded complaints under RERA for past acts and not future claims. The Tribunal agreed with the Respondents, noting that the clauses in the Resolution Plan pertain only to past acts and claims prior to the effective date, and do not create any future embargo on claims for violations by the Resolution Applicant.

2. Validity of Clauses in the Resolution Plan:
The Appellant contended that certain clauses in the Resolution Plan (Clauses 8.6, 9.1.2, and 10.3) violated Section 30(2)(e) of the Insolvency and Bankruptcy Code (IBC) by obstructing lawful rights under RERA. The Tribunal found that these clauses only addressed past acts and claims and did not affect future claims. The Tribunal also upheld the Adjudicating Authority's view that no prejudice was caused to the applicants by forfeiting their remedy under RERA for past defaults, citing the Supreme Court judgment in "Jaypee Kensington Boulevard Apartments Welfare Association & Ors. vs. NBCC (India) Ltd. & Ors."

3. Fixation of Minimum Sale Price (MSP):
The Appellant argued that the Resolution Plan unjustly increased the MSP to Rs.33,000/- per sq. ft., which was higher than the originally agreed rate of Rs.13,500/- to Rs.21,000/- per sq. ft. The Tribunal noted that the CoC had approved the MSP in the exercise of its commercial wisdom, and the fixation of MSP was uniform for all homebuyers. The Tribunal found no fault with the CoC's approval of the Resolution Plan, emphasizing that the IBC allows for new arrangements and clauses for the revival of the Corporate Debtor.

4. Exercise of Commercial Wisdom by the CoC:
The Appellant claimed that the CoC did not exercise its commercial wisdom properly in approving the Resolution Plan. The Tribunal, however, held that the approval of the Resolution Plan by the requisite vote of the CoC should be assumed to be in the exercise of commercial wisdom. The Tribunal further noted that the escalation in prices for the allotment of flats was permissible under the IBC to revive the Corporate Debtor.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the Appellant's submissions challenging the approval of the Resolution Plan by the CoC. The Adjudicating Authority's order rejecting IA No.2953 filed by the Appellant was upheld.

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