2025 (9) TMI 1543 - AT - IBC

Form CA secured homebuyer claim fails under IBC; injunction not a security interest, homebuyers treated as unsecured creditors

M/s. Star Maxx Properties Versus Arunava Sikhdar and Victory Ace Social Welfare Society, Noida

NCLAT held that the appellant's Form CA claim as a secured homebuyer failed because the arbitral award's injunction restraining allotment did not create a ... Appellant is Secured Financial Creditor - Appellant’s claim filed in Form CA need to be accepted as Financial Creditor in class i.e. a homebuyer - whether the transaction (Arbitral Award dated 28.08.2019) or Articles of Agreement can be held to create a security interest? - HELD THAT:- On looking into the Arbitral Award Clause V, direction was issued by Arbitrator that corporate debtor is restrained from allotting or alienating or dealing with or disposing off or creating any sort of third party right or interest in the secured disputed properties. Arbitrator had not examined the question as to whether Articles of Agreement which was basis of arbitration proceedings by the Appellant creates any security interest within the meaning of IBC. Provisions of the IBC was not under consideration before Arbitrator and the direction of restraining the corporate debtor was at best in injunction from not allotting or alienating or dealing with the assets by the corporate debtor, however, the said direction which is injunction in nature cannot be held to be creating a security interest in the assets. The present was a case there was no decree obtained by the Appellant by RERA rather arbitral award was obtained on the basis of Articles of Agreement. Thus, there was no determination in the arbitral award that Appellant was allottee within the meaning of provisions of IBC. In the present case, however, the categorisation of Appellant was not change from financial creditor only modification was made that security interest which was noticed by the CoC in the meeting held on 23.12.2019 was not found to be proved and hence, in the list of creditors uploaded on 17.06.2019, security interest was shown as ‘nil’. It is already noticed that in the meeting of the CoC dated 23.12.2019 both homebuyers and Appellant were treated as having security interest wherein it is undisputed that the homebuyers who have been allotted a unit are not secured creditors they are all unsecured creditors, hence, in the facts of the present case, no error can be said to have been committed by the Adjudicating Authority holding that the Appellant as unsecured financial creditor. There are no error in the impugned order. There is no merit in the appeal - appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the creditor's claim, based on an arbitration award restraining allotment/alienation of specific flats until payment, amounts to a 'security interest' within the meaning of the Insolvency and Bankruptcy Code and thereby qualifies the claimant as a secured financial creditor. 2. Whether the claimant, who executed 'Articles of Agreement' (not a registered Builder-Buyer Agreement) and obtained an arbitral money decree (without a specific determination under IBC or registration of charge), can be classified as a financial creditor in a class (homebuyer) for purposes of CIRP, including consideration of a Form CA filed after approval of the resolution plan by the Committee of Creditors. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether the arbitration award / Articles of Agreement created a 'security interest' so as to make the claimant a secured financial creditor Legal framework: Section 3(30) and 3(31) IBC define 'secured creditor' and 'security interest' (right, title, interest or claim to property created by a transaction securing payment or performance; includes mortgage, charge, hypothecation, assignment, encumbrance, or any other agreement securing payment). Precedent treatment: Authorities considered include (a) common law principle that attachments or injunctions preventing alienation do not by themselves create a charge or lien (Full Bench Calcutta High Court, Frederick Peacock v. Madan Gopal), (b) decisions indicating that where a statutory/regulatory framework or express registration creates/recognises a charge the creditor may be secured (Paschimanchal Vidyut Vidyut example), and (c) authorities on the effect of decrees incorporating or preserving unregistered charge (Indian Bank / decree jurisprudence) and on finality/character of decrees. Interpretation and reasoning: The arbitration award granted monetary relief and issued a restraint (permanently restraining allotment/alienation/creation of third-party rights in specified flats until payment). The Court examined whether that restraint operates as a security interest under IBC. The Tribunal concluded: (a) the Arbitrator did not adjudicate under IBC nor decide that the Articles of Agreement created a security interest as defined under IBC; (b) an injunction or restraint preventing alienation is, at best, an equitable prohibition and does not ipso facto create a charge, lien or security interest over the property; (c) absent express creation/registration/recognition of a security interest (e.g., by records of information utility, RoC charge registration, or Central Registry of Securitisation and Asset Reconstruction and Security Interest registration), the claim cannot be treated as secured merely because an award restrained alienation; and (d) the Minutes of the CoC initially noting security do not convert the nature of the underlying right where no supporting documentary/registrational evidence exists. Ratio vs. Obiter: Ratio - an arbitral injunction restraining allotment/alienation does not itself create a security interest under IBC; determination of security requires consideration of statutory definitions and evidence of creation/registration of charge. Observational/illustrative references to prior authorities (e.g., appellate cases on charges created by statute or regulation; decree jurisprudence) are treated as supporting reasoning. Conclusion: The restraint in the arbitration award and the Articles of Agreement do not establish a security interest under Section 3(31) IBC. The claimant is not a secured financial creditor; the adjudicating authority was correct in showing 'NIL' security in the updated list where no documentary proof of a charge/registered security was produced. Issue 2 - Whether the claimant qualifies as a financial creditor 'in a class' (homebuyer) for CIRP and whether a Form CA filed post-approval of a resolution plan could be considered Legal framework: IBC recognizes 'financial creditors in a class' such as homebuyers; classification depends on the nature of contractual relationship (e.g., allotment under Builder-Buyer Agreement) and on the timing and admissibility of claims in CIRP. The Code and precedent treat the RP/IRP as responsible for collating and verifying claims, and for uploading the list of creditors; changes to categorisation require proof and cannot be fabricated by minutes alone. Precedent treatment: Considered authorities include (a) Supreme Court decisions holding that statutory/regulatory instruments may create charges (Paschimanchal Vidyut) where a regulatory framework expressly creates a charge; (b) decisions holding that decree from RERA crystallising claim does not change the status of an allottee as a financial creditor and that claimants obtaining such decrees cannot be artificially excluded from a class (Vishal Chelani); (c) Tribunal authority that RP/IRP cannot arbitrarily change the categorisation of a claimant accepted as a financial creditor but may collate/verify claims (Rajnish Jain v. Manoj Kumar Singh); and (d) RPS Infrastructure principle that claims filed after approval of a resolution plan by CoC may not be considered. Interpretation and reasoning: The Court analysed two sub-questions: (a) whether the Articles of Agreement amounted to an allotment/Builder-Buyer Agreement entitling the appellant to be treated as a homebuyer in a class, and (b) whether the Form CA filed after CoC approval could be accepted. Findings: (i) The Articles of Agreement evidenced an agreement to allot upon payment and contained an option to cancel/convert booking to absolute ownership upon default, but were not formal Builder-Buyer Agreements nor evidence of actual allotment; (ii) no Builder-Buyer Agreement was executed and the units in question were in fact allotted to third-party allottees who had BBAs; (iii) the arbitral award was a money decree and did not determine that the claimant was an allottee within the IBC meaning; (iv) a claim in Form CA filed after the CoC approved a resolution plan cannot be considered in view of the settled position that claims filed post-approval are not to be entertained (RPS Infrastructure principle); and (v) the RP properly admitted the appellant's monetary claim but, on verification, recorded security as nil and classified the claimant as an unsecured financial creditor - a position supportable where no documentary proof of security or allotment exists. Ratio vs. Obiter: Ratio - absence of a Builder-Buyer Agreement or other documentary/registrational proof of allotment/charge means the claimant cannot be treated as a homebuyer in class; a Form CA filed after CoC approval of a resolution plan is not to be accepted for modifying creditor classification. Observations regarding distinctions with cases where RERA decrees or statutory/regulatory charges exist are explanatory. Conclusion: The claimant cannot be reclassified as a financial creditor in a class (homebuyer) on the basis of the Articles of Agreement or the arbitral award; the Form CA filed after approval of the resolution plan is not admissible for altering classification. The adjudicating authority's rejection of the I.A. seeking reclassification was proper and the claimant remains an unsecured financial creditor. Cross-references and final disposition The Court relied on the distinction between injunctive restraints and true security interests (see paras on arbitrator's restraint and Calcutta Full Bench principle) and distinguished precedents where statutory/regulatory instruments or final decrees expressly preserved or created charges. The principles in Rajnish Jain regarding limits on RP/IRP/CoC adjudicatory power were applied to clarify that a mere minute or prior CoC note cannot supersede absence of documentary proof of security. Consequently, the Court affirmed the adjudicating authority's order rejecting reclassification.