2024 (11) TMI 1186 - AT - IBC

Home buyers lose appeal for equal creditor treatment after accepting unit cancellations and partial refunds

Mrs. Supriya Singh, Mrs. Namrata Singh, Mrs. Shilpi Sharma, Mr. Prabin Kumar, Mr. Sandeep Singh Gill, Mrs. Anjali Dabral Versus M/s Ansal Urban Condominiums Pvt. Ltd. (Through Resolution Professional Mr. Rajesh Ramnani), One City Infrastructure Pvt. Ltd.

Mrs. Supriya Singh, Mrs. Namrata Singh, Mrs. Shilpi Sharma, Mr. Prabin Kumar, Mr. Sandeep Singh Gill, Mrs. Anjali Dabral Versus M/s Ansal Urban ... Issues Involved:1. Equitable treatment of the appellants compared to other creditors in class.2. Amendment of the Information Memorandum to reflect the status of the appellants' units.3. Restoration of the appellants' units and treatment under the Resolution Plan.4. Compliance with UPRERA decrees and implications of partial payments.5. Validity of the cancellation of units by the Corporate Debtor prior to CIRP initiation.6. Application of judicial precedents and principles of natural justice.Issue-wise Detailed Analysis:1. Equitable Treatment of the Appellants:The appellants sought equitable treatment with other creditors, claiming their units were unjustly cancelled without their knowledge, unlike other unit holders who retained their units despite receiving refunds. The tribunal noted that the appellants were treated as financial creditors in class until the resolution plan was received. However, the tribunal found that the appellants had accepted partial refunds, which implied acceptance of unit cancellation. The tribunal concluded that the appellants could not be treated at par with other homebuyers due to the acceptance of partial refunds and the subsequent cancellation of their units.2. Amendment of the Information Memorandum:The appellants requested the amendment of the Information Memorandum to include their units under the same category as other unit holders. The tribunal observed that the Information Memorandum was prepared based on the records of the Corporate Debtor, which showed the units as cancelled prior to CIRP initiation. The tribunal held that the RP had no adjudicatory power to reverse the cancellation and found no merit in the appellants' claim for amendment, as the Information Memorandum accurately reflected the status of the units.3. Restoration of Units and Treatment under the Resolution Plan:The appellants sought restoration of their units and equal treatment under the Resolution Plan. The tribunal noted that the Resolution Plan, approved by the CoC with 100% majority, provided specific treatment for cancelled units, allowing appellants to choose new units at a base selling price or receive a partial refund. The tribunal upheld the CoC's commercial wisdom in approving the plan and found no grounds to restore the units or alter the plan's provisions.4. Compliance with UPRERA Decrees and Partial Payments:The appellants argued that partial payments under UPRERA decrees were insufficient, and the Corporate Debtor failed to comply fully. The tribunal acknowledged the decrees but noted that the appellants accepted partial payments, indicating acceptance of cancellation. The tribunal agreed with the respondents that the decrees did not override cancellation or prevent actions under the Insolvency and Bankruptcy Code, 2016.5. Validity of Unit Cancellation Prior to CIRP:The tribunal examined the cancellation of units by the Corporate Debtor before CIRP initiation. It concluded that the RP could not reverse pre-CIRP cancellations, as they were based on records and partial refunds accepted by appellants. The tribunal found that the appellants did not challenge cancellations promptly and participated in CIRP without raising objections, undermining their claims.6. Application of Judicial Precedents and Principles of Natural Justice:The appellants contended that the AA wrongly relied on certain judgments and violated principles of natural justice. The tribunal distinguished the cited cases based on factual differences, noting that the appellants' units were cancelled before CIRP, unlike cases where cancellations were informed. The tribunal found that the appellants had opportunities to raise objections during CIRP and CoC meetings but failed to do so. It concluded that the process followed was fair and dismissed claims of natural justice violations.Conclusion and Order:The tribunal concluded that the cancellation of units was based on UPRERA's order, which was not challenged, and the Information Memorandum accurately reflected this status. The CoC acted within its commercial wisdom in approving the Resolution Plan, and the tribunal found no fault in the process followed by the AA. Consequently, the appeal was dismissed for lack of merit, with no orders as to costs.