2025 (7) TMI 1211 - AT - IBC

NCLAT dismisses appeal claiming ownership of retail shops during insolvency proceedings, assets belong to corporate debtor

The NCLAT Principal Bench dismissed an appeal challenging an order regarding commercial complex assets during CIRP proceedings. The appellant sought to ... Construction of commercial complex much prior to commencement of the CIRP - conference of additional right by settlement agreement or not - seeking discovery of documents regarding the commercial structure - HELD THAT:- There is no dispute between the parties that in the Information Memorandum, the commercial block i.e. lower ground retail shop and lower ground floor and upper ground floor were mentioned as assets of the CD. After commencement of the CIRP, the Appellant after correspondence with the RP and Members of the CoC, entered into settlement dated 30.05.2023. The Settlement Agreement is brought on the record of the Appeal. The Settlement Agreement clearly noticed that the Resolution Plan of the CD has already been approved on 19.07.2020 and M/s SMV Agencies Pvt. Ltd. (SRA), who also joined as one of the parties in the Settlement Agreement. The prayer made in the Appeal by the Appellant are to set-aside order dated 24.07.2024 with regard to IA No.3926 of 2023 along with connected IAs and pass an order restoring the IAs as the assets of the Appellant and restrain the RP and SRA from dealing and treating asset of the Appellant in any manner except for payments as provided and agreed upon in Settlement Agreement dated 30.05.2023. Being already held that the said assets belong to the CD, the above prayers made by the Appellant, cannot be accepted. On looking into the directions contained in paragraph 79 (e), the Adjudicating Authority has further directed that nevertheless, it would be open for the SRA to deal with the same in accordance with the provisions of Regulation 37(1) (a) of IBBI (CIRP) Regulations 2016. As regards the IA filed for approval of Resolution Plan, the same was remitted back to the CoC. The prayers made in the Appeal to set-aside order cannot be granted - Appeal dismissed. 1. ISSUES:1.1 Whether the commercial complex ('i-Ring') constructed by the appellant prior to commencement of CIRP can be excluded from the assets of the Corporate Debtor (CD) during insolvency proceedings.1.2 Whether a Settlement Agreement entered into between the appellant, Resolution Professional (RP), and Successful Resolution Applicant (SRA), and approved by the Committee of Creditors (CoC), can be enforced without approval of the Adjudicating Authority.1.3 Whether a single homebuyer/allottee has locus to challenge the Resolution Plan or Settlement Agreement approved by the CoC under the Insolvency and Bankruptcy Code (IBC).1.4 Whether the Adjudicating Authority erred in permitting withdrawal of applications filed under Sections 46, 66, and 74 of the IBC relating to avoidance of transactions and objections to the Resolution Plan, without approving the Settlement Agreement.1.5 Whether the directions issued by the Adjudicating Authority in paragraph 79 of the impugned order, including treatment of the 'i-Ring' project as asset of the CD and remitting the Resolution Plan back to the CoC, are legally sustainable.2. RULINGS / HOLDINGS:2.1 The commercial complex 'i-Ring' is part of the assets of the Corporate Debtor and cannot be excluded from the CD's asset pool despite the Agreement to Sell and Settlement Agreement; 'the commercial complex 'i-Ring' continues to be asset of the CD.'2.2 The Settlement Agreement entered between the appellant, RP, and SRA, though approved by the CoC with requisite majority, requires approval of the Adjudicating Authority to become binding and enforceable; withdrawal of related IAs does not amount to approval of the settlement.2.3 A single homebuyer/allottee lacks locus standi to challenge the Resolution Plan or Settlement Agreement approved by the CoC; 'decision taken by more than 50% of the Financial Creditors in a class is binding on all Homebuyers.'2.4 The Adjudicating Authority did not err in permitting withdrawal of IA Nos. 3926 of 2023, 3325 of 2020, and 3330 of 2020, while clarifying that such withdrawal shall not be construed as approval of the Settlement Agreement.2.5 The directions in paragraph 79 of the impugned order, including remittance of the Resolution Plan to the CoC for reconsideration and forensic audit, replacement of RP, and treatment of the 'i-Ring' project as asset of the CD, are upheld as appropriate and within the powers of the Adjudicating Authority.3. RATIONALE:3.1 The Court applied the framework of the Insolvency and Bankruptcy Code, 2016, specifically Sections 7, 25A(3A), 46, 60(5), 66, and 74, and relevant IBBI (CIRP) Regulations, 2016, including Regulations 27, 35, and 37(1)(a).3.2 Precedents affirm that allotment or agreements for sale of commercial spaces prior to CIRP commencement do not confer ownership or exclude such assets from the CD's insolvency estate; the CD continues to own such assets during CIRP.3.3 The CoC's commercial wisdom and majority decision bind all classes of creditors and homebuyers, limiting the challenge rights of individual allottees or homebuyers.3.4 The Settlement Agreement's Clause 17 explicitly conditions its binding effect on CoC and Adjudicating Authority approval, underscoring that unilateral settlements cannot override insolvency processes without judicial sanction.3.5 The Adjudicating Authority's directions for forensic audit and fresh valuation reflect a doctrinal emphasis on transparency and accurate asset valuation in CIRP, ensuring equitable resolution for all stakeholders.3.6 The judgment clarifies that withdrawal of applications related to avoidance or objections does not imply acceptance of underlying settlements, maintaining procedural propriety and judicial oversight.