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 claiming inadequate protection of interests and that liquidation would worsen their position. The primary issue concerned addition of parties as third respondent. The Tribunal held that adding parties is discretionary based on facts and circumstances. Following Supreme Court precedent in Razia Begum v. Anwar Begum, the Tribunal ruled that mere interest in litigation fruits cannot justify impleading a party. The petitioner creditor was neither necessary nor proper party to the appeal, and appellants cannot be coerced to join unwanted parties unless legally compelled.

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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/Applicant
The 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 Order
The 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 Stakeholders
Homebuyers 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.

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