Appeals rejected; allottee treated as unsecured financial creditor under IBC, resolution plan final and cannot be reopened

The NCLAT dismissed both appeals filed by the appellant-allottee seeking recognition as a secured financial creditor. It reaffirmed the earlier NCLT order holding that the appellant is not a secured financial creditor, clarifying that the appellant may at best be treated as an unsecured financial creditor and rejecting the argument that the loan agreement constituted an allotment as a homebuyer. The NCLAT further held that the subsequent application filed after approval of the resolution plan was not maintainable, as the resolution plan had already been upheld and could not be reopened. No costs were awarded.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether a creditor who filed a claim in Form C as a financial creditor and was admitted as an unsecured financial creditor can subsequently be reclassified and treated as an allottee (homebuyer) or secured financial creditor for the purpose of altering an already approved resolution plan.

2. Whether an application filed to amend an approved resolution plan (including remand to the Committee of Creditors for reclassification of a claimant) is maintainable after (a) the claimant participated in the Corporate Insolvency Resolution Process (CIRP) and in CoC votes with a known status, (b) the Tribunal has adjudicated on the claimant's status, and (c) the resolution plan has been approved and the approval upheld on appeal.

3. Whether reliefs seeking rejection or modification of an approved resolution plan and disciplinary action against the Resolution Professional can be granted where the claimant failed to timely challenge classification and voting rights attributed during the CIRP.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Reclassification from admitted unsecured financial creditor to allottee or secured financial creditor

Legal framework: The Code and Regulations require creditors to submit claims during CIRP (Form C) and for the IRP/RP to admit claims and allocate voting rights. Classification as a secured creditor, unsecured financial creditor, or homebuyer/allottee depends on documentary proof of security interest, registration of charge with RoC where required, and the nature of the underlying transaction (loan versus allotment/advance for allotment).

Precedent Treatment: The Tribunal previously held (in I.A. No. 510/2019) that absent documentary proof of creation/registration of security interest, a claimant who advanced funds treated as loan cannot be recognised as secured creditor; the Tribunal's reasoning invoked the principle that a resolution applicant/CoC should not be put to hardship by reopening classification after plan approval, a principle which reflects higher-court guidance on finality of approved plans.

Interpretation and reasoning: The Court notes: (a) the claimant filed Form C as a financial creditor and was admitted as an unsecured financial creditor; (b) the claimant participated in CoC meetings and voted with that status; (c) the alleged security was not evidenced by requisite documents or RoC registration; (d) the Tribunal earlier adjudicated the claimant is an unsecured financial creditor (though it did not expressly rule on allottee status, it treated claimant at par with homebuyers in unsecured class); and (e) participation and voting with a particular status, and failure to timely challenge classification, undermine a later attempt to recharacterise the claim as allottee or secured creditor. The Court accepts the Tribunal's conclusion that treating the claimant "at par with homebuyers" denotes being an unsecured financial creditor in that class and does not equate to recognition as an allottee entitled to treatment as a secured creditor.

Ratio vs. Obiter: Ratio - where a claim was admitted in Form C as an unsecured financial creditor and no documentary proof of security/registered charge exists, the claimant cannot later be reclassified as a secured creditor or allottee to alter the distribution under an approved plan. Obiter - observations on nuances of "at par with homebuyers" explaining it does not convert a loan-creditor into an allottee are explanatory but support the ratio.

Conclusion: Reclassification is not warranted. Absent documentary proof of security interest and RoC registration, and given prior admission and participation as an unsecured creditor, the claimant cannot be treated as an allottee or secured financial creditor for the purpose of reopening or altering an approved resolution plan.

Issue 2 - Maintainability of applications to amend or reject an approved resolution plan after participation and after appellate affirmations

Legal framework: The Code and jurisprudence favour finality of approved resolution plans; remedies to challenge classification or plan must be pursued within the statutory/acceptable procedural window and prior to final approval being made unassailable by participation and appellate dispositions. The RP and CoC act within their statutory duties and plan approval by the Adjudicating Authority (Tribunal) is subject to challenge in appeals, but subsequent uncontested approvals and appellate dismissals limit later attempts to reopen the plan.

Precedent Treatment: The Tribunal's earlier order declining reclassification was unchallenged by substantive remedy or was unsuccessfully pursued, and subsequent approvals of the plan were upheld on appeal. The Court relies on the principle (as applied by the Tribunal and higher courts) that post-approval tinkering with an approved resolution plan is not permissible, especially when the claimant took part in CIRP with the contested status and did not timely challenge the plan approval.

Interpretation and reasoning: The Court emphasises: (a) the applications seeking amendment/remand of the plan were filed after plan approval; (b) the claimant had ample opportunity earlier to contest classification and the plan but either did not challenge the plan at the time of approval or unsuccessfully sought secured status and later withdrew an appeal; (c) the resolution plan received Tribunal approval on 12.09.2022 and that approval was subsequently upheld by appellate orders; and (d) in such circumstances, the plan cannot be "tinkered with" and post-approval applications seeking wholesale modification or rejection on classification grounds are not maintainable.

Ratio vs. Obiter: Ratio - once a resolution plan is approved and appellate remedies have been exhausted or not timely pursued, applications to amend or remand the plan on classification grounds are not maintainable. Obiter - comments on procedural propriety of raising classification disputes earlier and on the unfairness to the CoC/resolution applicant from late challenges.

Conclusion: The applications to amend or reject the approved resolution plan post-approval and after appellate affirmations are not maintainable and must be dismissed.

Issue 3 - Requests for remedial reliefs including 100% delivery of flats at parity and disciplinary action against the Resolution Professional

Legal framework: Reliefs against an approved plan (including demands for enhanced distribution or in-kind delivery at parity with other secured/unsecured creditors) must be grounded in demonstrable legal entitlement and timely proceedings. Disciplinary proceedings against the RP under the IBBI/Code require proof of dereliction of statutory duties and are distinct from reclassification disputes.

Precedent Treatment: The Tribunal and this Court treated the claimant's plea for parity (100% by delivery of flats) as derivative of the reclassification claim; absent successful reclassification, parity reliefs cannot be sustained. Disciplinary allegations require separate maintainable proceedings with cogent evidence of RP's breach.

Interpretation and reasoning: The Court finds that the reliefs sought (rejection of plan, 100% delivery at parity, disciplinary action) are contingent on reclassification that has not been established. The claimant's non-challenge of the approved plan at the appropriate time and absence of evidence of security interest foreclose substantive entitlement to enhanced in-kind relief. The application for disciplinary action is not supported by findings of deliberate breach by the RP in the record before the Court.

Ratio vs. Obiter: Ratio - accessory reliefs contingent on successful reclassification fail when reclassification is denied; requests for disciplinary action require independent and timely prosecution supported by evidence. Obiter - observations on the procedural impropriety of seeking such reliefs post-approval.

Conclusion: The reliefs seeking rejection/modification of the plan, parity delivery of flats, and disciplinary action against the RP do not succeed given the dismissal of reclassification claims and the finality of the approved plan.

Overall Conclusion and Disposition

Given (a) admission and participation of the claimant as an unsecured financial creditor via Form C, (b) absence of documentary proof of security interest or RoC charge registration, (c) prior adjudication by the Tribunal that the claimant is an unsecured financial creditor, (d) failure to timely and successfully challenge classification or the approved plan, and (e) appellate affirmations upholding plan approval, the Court finds no merit in the applications to reclassify the claimant, to remand or modify the approved resolution plan, or to grant ancillary reliefs. The appeals are dismissed without order as to costs.

---