2024 (2) TMI 1027 - AT - Insolvency and Bankruptcy

Creditors with 95.97% voting power reject resolution plan, homebuyers' challenge dismissed for improper party addition

The NCLAT Chennai Bench dismissed an appeal regarding rejection of a resolution plan by creditors with 95.97% voting against it. Homebuyers challenged the ... Rejection of Resolution Plan by the Committee of Creditors with 95.97% voting against the said Resolution Plan - prime grievance of the Homebuyers who filed the ‘Applications’, was that the ‘interest’ was not adequately protected and ‘Liquidation’ would worsen their position - addition of parties - necessary/proper party as third respondent or not - HELD THAT:- The ‘addition of parties,’ is one of discretion to be exercised by the concerned Tribunal / Court of Law based on the facts and circumstances of the case - The ‘power of the Court’ to ‘add parties’ is succinctly pointed out by the Hon’ble Supreme Court in the decision in ‘Razia Begum v. Anwar Begum’ [1958 (5) TMI 50 - SUPREME COURT] wherein it is observed that the question of addition of parties under Rule 10 of Order 1 of CPC is generally not one of ‘initial jurisdiction’, of the ‘Court’ but of a ‘judicial discretion’, which has to be exercised in view of all facts and circumstances of a particular case; but in some cases it may raise controversies as to the power of the Court in contra distinction to its inherent jurisdiction or in other words of jurisdiction in the limited sense in which it is used in Section 115 of the Civil Procedure Code. This Tribunal bearing in mind of a crystalline fact that the Petitioner in IA 57/2024 in Comp. App. (AT)(CH)(Ins.) No. 446 of 2023 is a creditor to the Corporate Debtor is not to be impleaded in the instant Appeal as a third Respondent because of the fact that it is neither a necessary party nor a proper party to the instant Appeal’ to be decided by this Tribunal on merits, at the time of ‘Final Hearing’. In view of well settled principle in law that ‘to add a person as a prospective – proposed Respondent’ is not a substantive right but undoubtedly, it is one of procedure. As such, this Tribunal unhesitatingly holds that a mere ‘interest of a party’ in the ‘Fruits of Litigation cannot be an ‘acid test’ for it being, impleaded as a ‘party’ - Indeed, an ‘Appellant/Plaintiff’ in an ‘Appeal / suit’ proceedings cannot be coerced to join a ‘person’ as ‘party’ against whom, he/it does not desire to contest, unless it is a compulsion of Law, in the considered opinion of this Tribunal. This Tribunal bearing in mind of the entire facts and circumstances of the instant case, in an ‘encircling manner’, comes to a resultant conclusion that the Petitioner/Appellant is not a necessary / proper party, to be arrayed as third Respondent - Appeal dismissed. Issues Involved:1. Whether the Petitioner/Applicant should be impleaded as a necessary and proper party in the main Appeal.2. Whether the Liquidation order was valid and justified.3. Whether the interests of the Homebuyers and other stakeholders were adequately protected.Summary:Issue 1: Impleadment of Petitioner/ApplicantThe Petitioner, a Secured Financial Creditor and Debenture Holder of the Corporate Debtor, JBM Homes Private Limited, sought to be impleaded as a necessary and proper party in the main Appeal. The Petitioner argued that it held a significant voting share in the Committee of Creditors (90.05%) and had submitted the action plan based on which the Liquidation order was passed. The Petitioner contended that it was essential to the Appeal due to its substantial involvement and interest in the Corporate Insolvency Resolution Process (CIRP) and Liquidation process.The 1st Respondent/Appellant opposed the impleadment, arguing that only a person aggrieved and whose right is affected in law must be made a necessary and proper party. They contended that the Petitioner, being a Creditor, had no locus standi to challenge the Liquidation order and that the interests of the Creditors and Stakeholders were already represented by the Liquidator and the Resolution Professional.The Tribunal, citing various legal precedents, concluded that the Petitioner, despite being a major stakeholder, was neither a necessary nor a proper party to the Appeal. The Tribunal emphasized that the addition of parties is a matter of judicial discretion and that a mere interest in the outcome of litigation is not sufficient for impleadment. Consequently, the Tribunal dismissed the Petitioner's application for impleadment.Issue 2: Validity of Liquidation OrderThe Liquidation order was passed based on the action plan submitted by the Petitioner and was supported by the Committee of Creditors with a 95.97% voting share. The 1st Respondent/Appellant argued that the Liquidation order was against the interests of the Corporate Debtor and that a Resolution Plan submitted by the Promoters could potentially revive the Corporate Debtor.The Tribunal noted that the Liquidation order was an order in rem, operating against the Corporate Debtor and its interests. The Tribunal upheld the Liquidation order, emphasizing that the decision was made following due process and with significant support from the Committee of Creditors.Issue 3: Protection of Interests of Homebuyers and StakeholdersHomebuyers had contested the constitution of the Committee of Creditors and the decision to liquidate, arguing that their interests were not adequately protected. The Petitioner had proposed a plan to address the concerns of Homebuyers and other stakeholders during the Liquidation process.The Tribunal acknowledged the formation of a special committee by the Adjudicating Authority to protect the interests of Homebuyers and other stakeholders. However, it noted that the committee's recommendations were not directly relevant to the question of whether the Petitioner was a necessary or proper party to the Appeal.Conclusion:The Tribunal dismissed the Petitioner's application for impleadment, concluding that the Petitioner was neither a necessary nor a proper party to the Appeal. The Liquidation order was upheld as valid and justified, and the Tribunal recognized the efforts to protect the interests of Homebuyers and other stakeholders through the special committee. The Appeal will proceed based on the available materials on record.