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Issues: (i) Whether the resolution plan could include assets not owned by the corporate debtor and extinguish third-party rights. (ii) Whether the lease deed in favour of the lessee could be treated as terminated and the building standing on the leased land be taken over under the plan. (iii) Whether the claims of homebuyers based on allotment letters and registered agreements were wrongly rejected. (iv) Whether the valuation of the corporate debtor and the plan approved in favour of operational creditors and employees warranted interference.
Issue (i): Whether the resolution plan could include assets not owned by the corporate debtor and extinguish third-party rights.
Analysis: The assets of the corporate debtor alone can be taken into custody and dealt with in a resolution process. Property belonging to a third party, even if referred to in attached records or in possession of the corporate debtor, cannot be treated as the corporate debtor's asset unless ownership is established. On the facts, the land in Survey No. 326/1 at Bavdhan was not fully covered by the attachment basis relied upon by the resolution professional, and the portion recorded in the appellant's name could not be included in the corporate debtor's asset pool. Similarly, land covered by the gift deeds and the lease-related property could not be dealt with as if they were free assets of the corporate debtor.
Conclusion: The inclusion of third-party property in the resolution plan was impermissible. Relief was granted to the affected appellants, and the plan had to be modified to exclude the identified third-party asset.
Issue (ii): Whether the lease deed in favour of the lessee could be treated as terminated and the building standing on the leased land be taken over under the plan.
Analysis: A lease can be determined only in accordance with its terms and the law governing termination. The record showed that the lease was never actually terminated during the CIRP, although the plan purported to cancel it and extinguish the lessee's rights. The lease deed itself provided for re-entry only on specified defaults and after notice, and also contemplated payment of construction cost if re-entry occurred. Without lawful termination, the plan could not indirectly bring the lease to an end or extinguish the lessee's rights in the building constructed on the leased land. Such treatment would violate the statutory requirement that a resolution plan must not contravene law or extinguish valid third-party contractual rights without due process.
Conclusion: The clauses cancelling the lease and extinguishing the lessee's rights were unsustainable and were deleted from the resolution plan.
Issue (iii): Whether the claims of homebuyers based on allotment letters and registered agreements were wrongly rejected.
Analysis: The allotment letters issued by the corporate debtor acknowledged receipt of consideration, and in some cases the registered agreements and ledger entries also reflected the underlying transactions. The resolution professional adopted an unduly technical approach by rejecting the claims merely because the money was not directly credited in the corporate debtor's books in the exact manner asserted, notwithstanding the admitted allotments and supporting material. The rejection of the homebuyers' claims and the later disposal of their interlocutory applications as infructuous after plan approval did not properly address the substantive entitlement evidenced on record. Those claimants were entitled to be treated as allottees and to be included in the resolution plan in the same manner as other admitted homebuyers.
Conclusion: The homebuyers' claims were directed to be accepted, the rejection was set aside, and they were to receive treatment under the resolution plan as allottees.
Issue (iv): Whether the valuation of the corporate debtor and the plan approved in favour of operational creditors and employees warranted interference.
Analysis: The valuation exercise was carried out by two registered valuers under the CIRP Regulations, and no timely objection was raised before the adjudicating authority or by the committee of creditors. The appellate forum declined to interfere with the valuation merely because the appellants disputed the figures or asserted a higher book value. As to operational creditors and employees, the amounts proposed under the plan were low, but the challenge did not establish non-compliance with the minimum statutory requirements under the Code. In the absence of a demonstrated violation of the mandatory distribution framework, the court would not substitute its view for the commercial wisdom of the committee of creditors.
Conclusion: No interference was called for on the valuation challenge or on the treatment of operational creditors and employees.
Final Conclusion: The resolution plan was substantially upheld, but it had to be modified to exclude third-party assets and to preserve lease-related and homebuyer rights that had been unlawfully curtailed.
Ratio Decidendi: A resolution plan cannot transfer or extinguish rights in property not owned by the corporate debtor, nor can it terminate valid third-party contractual interests without lawful termination or due process; where allotment letters and related records establish homebuyer entitlement, the claims must be recognised in the resolution process.
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