Security interest in real estate insolvency limits dissenting creditor recovery; registered sub-lease deed can create secured creditor status.

In real estate insolvency, a dissenting secured creditor's entitlement under the IBC is limited to the value of its actual and legally enforceable security interest; ACRE's security was confined to unsold inventory, excluding sold units and homebuyers' crystallised allotment rights, so the plan's payment above that assessed value was compliant and its challenge failed. Objections by Dhankalash on valuation, feasibility, viability, and alleged non-compliance with Section 30(2) were held to fall within the CoC's commercial wisdom, with no material prejudice or mandatory legal breach, so its appeal was dismissed. A registered sub-lease deed creating a first charge in favour of NOIDA amounted to a security interest, making its classification as an operational creditor erroneous; the plan distribution was required to be revised accordingly.

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Issues: (i) Whether the disbursement proposed for ACRE in the resolution plan was in accordance with Section 30(2)(b) and Section 53(1) of the Insolvency and Bankruptcy Code, 2016, including whether its security interest extended to allotted units and receivables. (ii) Whether the CIRP and approval of the resolution plan in the appeal filed by Dhankalash were vitiated by non-consideration of objections, alleged valuation defects, and non-compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016. (iii) Whether NOIDA was wrongly treated as an operational creditor, or whether it was entitled to be treated as a secured creditor on the basis of the registered sub-lease deed and the statutory framework.

Issue (i): Whether the disbursement proposed for ACRE in the resolution plan was in accordance with Section 30(2)(b) and Section 53(1) of the Insolvency and Bankruptcy Code, 2016, including whether its security interest extended to allotted units and receivables.

Analysis: ACRE derived its rights through assignment from the original lender and could not claim a wider security than what originally existed. The security was found to be confined to unsold inventory, since the lender's SARFAESI notice itself excluded sold units and the rights of homebuyers had crystallised prior to mortgage. Section 11(4)(h) of the Real Estate (Regulation and Development) Act, 2016 protected allottee rights, and the allotments could not be treated as part of the secured creditor's security pool. The Tribunal also held that the value of the security interest had to be assessed on the basis of the actual available security, not the entire admitted debt, and that future receivables could not be separately counted for liquidation entitlement in a hypothetical liquidation on the insolvency commencement date.

Conclusion: The proposed payment of Rs. 70 crores to ACRE was held to be above the assessed value of its security interest and the resolution plan was found compliant on this issue; the appeal by ACRE failed.

Issue (ii): Whether the CIRP and approval of the resolution plan in the appeal filed by Dhankalash were vitiated by non-consideration of objections, alleged valuation defects, and non-compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016.

Analysis: The CIRP involved multiple committee meetings, competing resolution applicants, revised plans, and extended deliberation. The objections raised by Dhankalash related principally to commercial evaluation, valuation, feasibility, and viability, all of which fell within the commercial wisdom of the committee of creditors. The grievance regarding non-decision of the restoration application did not establish material prejudice, and the record did not show collusion, bias, or any mandatory legal violation affecting approval of the plan. The allocation to Dhankalash, an unsecured financial creditor, was also held to be consistent with the priority under the waterfall mechanism.

Conclusion: The challenge by Dhankalash was rejected and its appeal was dismissed.

Issue (iii): Whether NOIDA was wrongly treated as an operational creditor, or whether it was entitled to be treated as a secured creditor on the basis of the registered sub-lease deed and the statutory framework.

Analysis: The registered sub-lease deed created a first charge in favour of NOIDA to secure payment of its dues and satisfied the requirements of a transaction creating security interest under Section 3(31) and Section 3(33) of the Insolvency and Bankruptcy Code, 2016. The Tribunal held that NOIDA's rights arose from the contractual sub-lease arrangement, supplemented by the statutory framework, and that the adjudicating authority had not meaningfully considered these rights while approving the resolution plan. The classification of NOIDA merely as an operational creditor was held to be erroneous.

Conclusion: NOIDA was held to be a secured creditor and the impugned order was set aside to the limited extent of distribution, with a direction to revise the resolution plan distribution accordingly.

Final Conclusion: The appeals of ACRE and Dhankalash were dismissed, while NOIDA succeeded only to the limited extent of securing reconsideration of its treatment in the distribution under the resolution plan.

Ratio Decidendi: In a real estate insolvency, the entitlement of a dissenting secured creditor under Section 30(2)(b) is confined to the value of its actual and legally enforceable security interest, whereas a registered sub-lease deed creating a first charge can constitute a security interest requiring treatment as that of a secured creditor.

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