TaxTMI 
TaxTMI 
2020 (9) TMI 795
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....r Housing Limited, Chennai at the instance of an Operational Creditor, namely Prism Johnson Limited Hyderabad. The other applications are primarily filed opposing the withdrawal as sought for in MA.67 of 2020 from being allowed on the ground that Committee of Creditors (COC) Meeting in which the decision was taken, namely the 2nd COC held on 14.01.2020 was not validly constituted as the applicants, even though in the said applications were treated by the IRP initially as Financial Creditors of the Corporate Debtor and as such recognized as part of the COC however, subsequently were never made privy to the 2nd COC meeting as their names seem to have been omitted as part of the COC and in the circumstances the decision to withdraw under Section 12A of IBC, 2016 had been taken by a COC in effect not validly constituted and held and hence the resolution passed seeking for withdrawal cannot be sustained. 2. The facts in brief as averred in the respective applications are briefly given hereunder for better appreciation of the decision arrived at in conclusion by applying the provisions of IBC, 2016 and also considering the powers of the IRP in adding or revising a claim and thereby al....
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.... of IBC, 2016 and in addition not being a Financial Creditor or an Operational Creditor, in the 2nd COC meeting held on 14th January 2020, save their participation in view of the incapacity as aforesaid, after detailed discussions of the 8 members of the COC all of whom had unanimously resolved/approved seeking the withdrawal of the application (main petition), by filing an application under Section 12A of IBC, 2016. d) That the details of the 8 members who had attended the 2nd COC meeting held on 14.01.2020 and who had conveyed their acceptance to the Section 12A withdrawal under IBC, 2016 has been given by the IRP and being material taking into consideration the objections raised by the objectors are extracted from his application as follows: - S. No. Creditor's Name Form Submitted and type of Creditor claimed in the Form Claim Accepted Total Amount No. Of Installments 1 Nuvoco Vistas Corporation Ltd. Mumbai- 400070 Email :[email protected] Form B Operational Creditor 7,53,932 1 2 Utracon Structural Systems Pvt. Ltd. Chennai -600 020 Email: [email protected] Form B Operational Creditor 55,020 1 ....
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....he joint development agreement as between the parties and the claim arising thereunder cannot be treated as an 'Operational Debt' and as the same principles are required to be applied and in the circumstances an issue had arisen whether it should be considered as an 'Operational Creditor' and thereby part of the COC itself. ii) In relation to the claim of Sree Sankeswara Foundations and Investments, it is averred in the application that its claim was submitted in Form C as a Financial Creditor of the Corporate Debtor, however at the time of disposal of MA No. 1505/2019 (of which reference has already been made in paragraph 3(b) supra of this Order) even though to provide the copy of the order passed by NCLT dated 10.04.2019, since adequate documents were not provided and further the Hon'ble NCLAT in its decision dated 25.11.2019 has held that in any case the claim of the said entity as time barred debt in its own case referred in the earlier paragraph and also the books of the corporate debtor reflecting that sums are payable by the said entity to the Corporate Debtor and the dispute being referred to the Arbitrator appointed by the Hon'ble High Cou....
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....nga Securities Company Pvt. Ltd. and M/s. Dugar Housing Limited which is yet to be arrived in Arbitration as per High Court Order No: OP No. 305 of 2019 dated 21/11/2019. e) To direct/order as deemed fit u/s 60(5) of IBC, 2016 that the 3 land owners who entered Joint Development Agreement with M/s. Dugar Housing Ltd. i. M/s. Gurudev Foundations Pvt. Ltd. - Land owner, Joint Promoter and also Partner ii. M/s. Sree Sankeswara Foundations and Investments - Land owner, Joint Promoter and also Partner iii M/s. Kanchanjanga Securities Company Pvt. Ltd. - Land owner, Joint Promoter and also Partner are neither Operational Creditor nor Financial Creditor under the purview of IBC, 2016 4. Now moving on to MA/68/2020, it being an application filed by Sree Sankeswara Foundations and Investments, a partnership firm aggrieved by the action of the COC in seeking for the withdrawal under Section 12A of IBC, 2016 without its consent, its being a part of the COC as a financial creditor and further having been allowed to also attend in the said capacity in the 1st COC held on 19.12.2019, however subsequently the respondent in the application, namely the IRP wit....
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....ion 18 of IBC, 2016. In addition, it is averred by the applicant that the IRP had alleged that the applicant has outstanding dues to be paid to the corporate debtor as per the books of the corporate debtor thereby causing a great doubt about the integrity of the IRP who had initially chosen to admit the claim of the applicant as a Financial Creditor and allowed it to participate in the COC, however subsequently had sought to remove the name of the applicant from the COC itself which makes the applicant believe about the falsification of accounts of the Corporate debtor with the connivance of the IRP and the IRP seems to be ded by the promoters of the corporate debtor instead of acting as an officer of this Tribunal and thereby not acting in an independent manner and in the circumstances the above application in MA-68/2020 opposing the premature withdrawal as well to take cognizance of the acts of the IRP and suitably deal with the same. 5. MA 82 of 2020 in MA No. 67 of 2020 is an application filed by M/s. Gurudev Foundations Pvt. Ltd., again, aggrieved by the actions of the IRP almost based on similar set of facts as that of the applicant in MA-68 of 2020 as noted above and ther....
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....ations, 2016 in this regard as the applicant constitutes not less than 10% of the total debt and in the circumstances for its impleadment as a necessary party to MA.67 of 2020. 6. MA/9/2020 in IB/222/2019 is an application filed again by Gurudev Foundations Pvt. Ltd. as mentioned in MA 82 of 2020 being prior in time to the filing of the said application and as mentioned therein based on identical set of facts and aggrieved by the actions of the IRP in effect excluding the applicant from the COC and in the circumstances seeking for constituting the COC including all the financial creditors of the Corporate Debtor as reflected in the latest financial records and also direct the respondent IRP to clarify on the status of the claim filed by the applicant in Form B dated 23.11.2019. 7. Coming to MA/1428/2019 in IBA/222/2019 it is an application filed by one of the home buyers of the Corporate Debtor, namely an individual by the name of Mr P. Velmurugan on the basis that the Corporate Debtor being primarily engaged in real estate development and alleging that the claim arises out of debt to be paid by the corporate debtor incurred due to non-completion of the project in time in "SK....
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....Ready to Occupy letter" received by him and also the amount demanded by the company for final settlement. There is no correspondence from Mr. P Velmurugan to M/s. Dugar Housing Limited for the amount of Rs. 1,01,31,511/- claimed and also not mentioned any letter reference in this regards in the Claim Form C submitted. This clearly indicates that there is a malicious intention in hiding the facts in the Form C, submitted by Mr. P. Velmurugan. c. In the S.No. 10 of the Claim Form C "LIST OF DOCUMENTS ATTACHED TO THIS CLAIM IN ORDER TO APPROVE THE EXISTENCE AND NON PAYMENT OF CLAIM DUE TO THE FINANCIAL CREDITOR" there is no reference of letter/correspondence for the Claim amount of Rs. 1,01,31,511/-made by him officially to M/s. Dugar Housing Limited which awaits justification from the Applicant Mr. P Velmurugan failing which his claim Form C submitted on 01.12.2019 is a false claim and not tenable as mentioned in the above paragraphs as per Sections 5(8) and 5(7) of IBC 2016. Thus, in view of the completion of flat which became ready for occupation but not taken up, it is the contention of the IRP that the application filed in MA No. 1428 of 2019 is liable to be dismissed....
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....ted resulting in the initiation of CIRP of the Corporate Debtor by this Tribunal sitting as an Adjudicating Authority as named under IBC, 2016. The approval of 90% of voting share has been held to be mandatory as held by the Hon'ble Supreme Court as decided in the matter of Swiss Ribbons (P) Ltd. and another v. Union of India and others vide paragraph 53 of the judgement rendered on 25.01.2019 which threshold limit has not been in any way disturbed, even after the amendment made to IBC, 2016 by way of Insolvency and Bankruptcy Code (Amendment) Act, 2019 in relation to dealing with exercise of voting rights by the financial creditors through their Authorized Representatives and more particularly by insertion of sub section 3A and proviso thereunder to Section 25A, to overcome the impasse, in view of the peculiar situation which arose in Jaypee Infratech Ltd. matter and those matters similarly placed due to large scale absentations in voting on the part of Home Buyers or to give voting instructions to their Authorized Representative, all of which had already been dealt with in detail by one of us (namely R. Varadharajan) while sitting in the Reference Bench in the matter of IDBI ....
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....e Code provides upon determination of the financial position after collation of all claims received against the Corporate Debtor the IRP shall constitute the COC and in terms of Section 21(2) it shall comprise of all the financial creditors of the corporate debtor. As per the proviso to Section 21(2), in case the financial creditor happened to be a related party of the corporate debtor it shall not have any right of representation, participation or voting in a meeting of COC. In the absence of any financial creditor(s) in relation to a corporate debtor, proviso to Section 24(8) of the Code contemplates the COC to be constituted in such manner as may be specified. IBBI, being the Regulator has framed regulations to meet such an eventuality in terms of Regulation 16 of Insolvency and Bankruptcy Board of India(Insolvency Resolution Process of Corporate Persons) Regulations, 2016 for brevity hereinafter called as IRCP Regulations which reads as follows: 16. Committee with only operational creditors. (1) Where the corporate debtor has no financial debt or where all financial creditors are related parties of the corporate debtor, the committee shall be set up in accorda....
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....ession of interest under regulation 36A. (2) The application in sub-regulation (1) shall be accompanied by a bank guarantee towards estimated cost incurred for purposes of clauses (c) and (d) of regulation 31 till the date of application. (3) The committee shall consider the application made under sub-regulation (1) within seven days of its constitution or seven days of receipt of the application, whichever is later. (4) Where the application is approved by the committee with ninety percent voting share, the resolution professional shall submit the application under sub-regulation (1) to the Adjudicating Authority on behalf of the applicant, within three days of such approval. (5) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (4).] 14. Now looking into the pleadings and averments made by the respective parties it is evident that in relation to the constitution of the COC and the report filed by the IRP before this Tribunal with a view to ascertain the compliance by the IRP with respect to the CIRP process after initiation of the CIRP on 13.11.2019 as provided under IBC, 2016 read with IRCP Reg....
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....uired to be completed within a period of 30 days and within which he has to perform the duties as provided of him under IBC, 2016 including those prescribed under Section 18 of the Code, for all of which co-operation of the Corporate Debtor and its personnel as well as the claimants who have lodged their claims are required, all of which are taken for granted being an ideal situation contemplated under the law, however experiences with the implementation of the law suggests that the conditions are not so idealistic as invariably the IRP is not even being handed over with the books of accounts and records of a corporate debtor by its management and personnel, leave alone taking possession of the assets, which leads the IRP to classify the claims in accordance with documents filed in support of the claim by the creditors and of his best estimate. A combined reading of Regulation 7 to Regulation 14 falling under Chapter IV of IRCP Regulations, 2016 dealing with proof of claims makes this position clear, particularly in relation to the role of IRPs and the claimants Regulation 10, 12 and Regulation 14 of the IRCP Regulations, 2016 which for ready reference are extracted below:- ....
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....seen that under Regulation 14(1) as extracted above, again there is a scope for change in the constitution of the COC, if the IRP according to his best estimate comes to a decision that a particular claimant can be admitted to the COC, but subsequently upon obtaining additional information, which may come from any source, shall revise the amounts of claim admitted including the estimates of claim as soon as practicable. The power of revision provided to the IRP/RP it must be noted is not only confined when the claim came to be admitted on best estimate as provided under Regulation 14(1), but is also available to claims admitted even other wise as well, as the term which has been used in Regulation 14(2) is to the effect that "shall revise the amounts, including the estimates of claim made under sub-regulation(1)" Thus from the above regulations it is seen that the IRP is having a power to re-constitute the COC based on his decisions, including by way of addition of claims as well as by revision of claims admitted previously based on additional information thereby connoting that he has the power to revise the claimant from one class to another class for e.g.) from a financial credit....
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....rporate debtor herein in IBA/236/2019 and the material portion of the said order reads as follows after discussion of facts:- 4. On reading the averments and hearing the submissions of either side, we are given to understand that it is an agreement entered into between the parties for development of a property way back in the year 2012, not falling under any of the kinds of debt defined u/s clause 21 of section 5 of the Code, therefore it cannot be treated as "creditor-debtor" relationship between the parties and this Joint Development Agreement no way indicates that the applicant is entitled to a claim against the developer falling within the purview of "operational credit", hence forth we are of the considered view that no debt payable to the applicant is in existence. 5. Another supplementary point is, this Joint Development Agreement was executed in the year 2012, ever since no acknowledgement from the developer side disclosing that the developer is under obligation to pay to the applicant until before 04.05.2018, since there is no acknowledgement within three years from the date of agreement, this claim is otherwise also barred by limitation whereby this Comp....
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....;financial debt' or 'operational debt', the finding holds its position and in the circumstances the exclusion of M/s. Sree Sankeswara Foundations and Investments from the 2nd COC by the IRP, even though admitted and allowed to participate in the 1st COC cannot be questioned in light of Regulation 14 of IRCP Regulations, 2016. ii) Gurudev Foundations Limited:- In relation to the above entity it is seen that the claim originally had been filed in Form B as an 'Operational Creditor' with the IRP. Even though the claim is seen to have been admitted as such, from the report of the constitution of the COC as extracted in paragraph 14 supra filed by the IRP before this Tribunal, the IRP had made an observation as reflected in the 'remarks' column of the said report had remarked that Gurudev Foundations Limited is required to be considered as a 'Financial Creditor'. Following it up with it is the averment of the said entity that the IRP directed it to file as a 'financial creditor' which was also complied with. Be that as it may, in view of the decision rendered by the Hon'ble NCLAT that transactions in relation to joint ven....
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....ly persuaded by the decision and if all the above three parties, namely M/s. Sree Sankeswara Foundations and Investments, Gurudev Foundations Limited and Kanchanjanga Securities Company Pvt. Ltd. are to be treated as a 'related party' cannot be allowed either to be represented, participate or vote in a meeting of COC, be it a COC consisting of financial creditors or operational creditors as the case may be taking into consideration the 1st proviso to Section 21 of IBC, 2016 read with Regulation 16(4) of IRCP Regulations, 2016. This Tribunal is now confronted to deal with only the opposition as raised by a Home Buyer opposing the application seeking for withdrawal, namely one Mr P. Velmurugan. In his case it is the submission of the Ld. IRP that the claim is yet to be admitted inter alia as additional documents have been sought for and lack of disclosures in the claim form submitted and in the circumstances cannot be treated as a part of the COC. From the facts disclosed in the application filed by Mr. P. Velmurugan in MA No. 1428 of 2019 along with the response of the IRP, in totality it is seen that there has been a squabbling going on between him and the corporat....
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....project basis, as per approved plan by the Competent Authority. Any other allottees (financial creditors) or financial institutions/banks (other financial creditors) or operational creditors of other project cannot file a claim before the Interim Resolution Professional of other project and such claim cannot be entertained. So, we hold that Corporate Insolvency Resolution Process against a real estate company (Corporate Debtor) is limited to a project as per approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans approved. For example - in this case the Winter Hill - 77 Gurgaon Project of the 'Corporate Debtor' has been place of Corporate Insolvency Resolution Process. If the same real estate company (Corporate Debtor herein) has any other project in another town such as Delhi or Kerala or Mumbai, they cannot be clubbed together nor the asset of the Corporate Debtor (Company) for such other projects can be maximised. 22. Further, a 'Secured Creditor' such as 'financial institutions/banks', cannot be provided with the asset (flat/apartment) by preference over the allottees (....
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.... been invoked fraudulently, with malicious intent, or for any purpose other than the resolution of insolvency. This the real estate developer may do by pointing out, for example, that the allottee who has knocked at the doors of the NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment. They can also point out that in a real estate market which is falling, the allottee does not, in fact, want to go ahead with its obligation to take possession of the flat/apartment under RERA, but wants to jump ship and really get back, by way of this coercive measure, monies already paid by it. Given the above, it is clear that it is very difficult to accede to the Petitioners' contention that a wholly one-sided and futile hearing will take place before the NCLT by trigger-happy allottees who would be able to ignite the process of removal of the management of the real estate project and/or lead the corporate debtor to its death." Thus, in relation to an yet to be admitted and as yet not being part of the COC, the applicant-claimant cannot seek to oppose the resolution of withdrawal as passed by the COC unanimously seeking for withdrawal un....
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....ucture Housing Company on which a large number of allottees are dependent and if the 'Corporate Debtor' goes on 'Corporate Insolvency Resolution Process', then it may delay the completion, we in exercise of powers conferred under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 accept the settlement reached between the parties and allow Mr. Rajeev Shetty to withdraw the application under Section 9. 20. However in the instant case it is to be seen that the Corporate Debtor who is also engaged in the real estate sector and as compared to the facts in Company Appeal (AT) (Insolvency) 1501 of 2019 is better placed herein as even before the constitution of the COC, an application seeking for withdrawal had been filed in M.A. No. 1505 of 2019. In the circumstances in the fitness of things and also taking into consideration the decision of the COC in its 2nd meeting held on 14.01.2020 wherein the resolution was passed unanimously by the reconstituted members of the COC and after the IRP had rightly excluded exercising his power of revision as contained in Chapter IV of IRCP Regulations, 2016 after due intimation to the parties concerned about his objec....