TaxTMI 
TaxTMI 
2021 (11) TMI 661
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.... was filed against the Corporate Debtor to initiate CIRP which was admitted vide order dated 30.5.2018 and an IRP was appointed. The Corporate Debtor, in an earlier proceeding before the Hon'ble Delhi High Court, had been sent in liquidation and a provisional liquidator was appointed in the matter. On finding that there was an order of the Hon'ble Delhi High Court, the Adjudicating Authority held in CP (IB) 104 (PB) of 2018 on 30.1.2019 that no proceedings under IBC can continue in view of proceedings before the Hon'ble Delhi High Court. This order of the Adjudicating Authority was recalled vide order dated 11.3.2019 and the admission order under section 7 of IBC was restored. Thereafter, the Hon'ble Delhi High Court transferred the proceedings pending before it with respect to the Corporate Debtor to the Adjudicating Authority vide order dated 30.9.2019 on transfer applications CA No. 984 of 2018, CA No. 918 of 2018 and CA No. 826 of 2018 in view of the fact that the proceedings before the Hon'ble Delhi High Court had not progressed much. The Adjudicating Authority thereafter, on application by the Resolution Professional, excluded the time spent on pursuing the transfer applicati....
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....and Memoranda of Understanding entered into with home-buyers for booking and sale of flats constructed on it, defrauded and cheated the home buyers who had booked flats in the project being developed by the Corporate Debtor. Through this IA No. 4132 of 2020, the RP sought the following directions from the Adjudicating Authority: - (i) Allow RP to take charge of assets of the subsidiary company M/s. Solitaire Infomedia Private Limited, or (ii) Allow RP of the Corporate Debtor to initiate joint CIRP of both the holding company and its subsidiary (i.e. the Corporate Debtor and its subsidiary Respondent No.2). By the impugned order dated 29.10.2020 (attached at page 55 of the Appeal Paperbook) the Adjudicating Authority denied the prayed relief holding that there was no provision in the IBC to grant such relief. 5. The Collaboration Agreement provided that the Respondent No. 2 will hand over the possession of land to developer after receiving a valuable consideration, and the CD will develop the project and have exclusive right of sales and marketing of 90% of the constructed area and the owner of the land (Respondent No.2) will be entitled to ownership and righ....
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....rbook in Vol I). Clause (iii)(b) there in mentions the first party's rights and title in the said land. The MoU also mentions that the 'second party' has agreed, confirmed and acknowledged that it is satisfied in all respects as to the first party's (a) right, title, and interest in the said land and the complex; (b) authority to develop and construct the complex; (c) ability to operate and maintain the complex." Furthermore, the consideration to be paid by the 'second party' to the 'first party' is included in the MOU as follows (attached at page 178 of the Appeal Paperbook in Vol I): "2) CONSIDERATION a. The Second party has opted for Down Payment Plan / Flexi Payment Plan / Installment Plan / SIP and has paid and/or shall pay amount(s) towards Unit sale consideration as per Annexure 'B" attached hereto. It is already explained and clarified by the First Party to the Second Party and hereby again expressly understood by the Second party, that the amount(s) paid and/or agreed to be paid by the Second Party under the Application Form and this MOU is/are only the basic sale price/consideration for the said Unit and the Second Party hereby assures and undertakes to ....
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....rate Debtor received the booking amounts from the home buyers, it is the allegation of the RP and home buyers that the ex-director of the CD Tarun Sheinh siphoned off the amounts so received in other companies controlled by Tarun Sheinh and hence no significant monies are available with the CD for its meaningful insolvency resolution. The issue assumes significance since the land on which the project was to be developed is an integral constituent of the project through which the flats were being constructed and this asset of land could be instrumental in insolvency resolution of CD if a joint CIRP for the CD and Respondent No. 2 is undertaken. 11. The Learned Counsels for both parties presented their respective arguments before us. The Learned Counsel for the Appellant has submitted that the Corporate Debtor had entered into the Collaboration Agreement with Respondent No. 2 Company and MoU with the home buyers. It was done to collect booking amounts by the Corporate Debtor which otherwise would have no assets. In the event of failure to construct the flats, the Corporate Debtor would not have any asset to extinguish the liabilities of the home buyers. His submission is that the ....
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....ts Limited is the 'first party' therefore, the corporate debtor also includes its subsidiaries, in particular M/s. Solitaire Infomedia Limited. The Learned Counsel for Respondent No.1 has further claimed that Tarun Sheinh is the common Director of both the Corporate Debtor and M/s. Solitaire Infomedia Private Limited, who was instrumental in executing the Collaboration Agreement and MoUs with the nefarious objective of siphoning off money collected from home buyers and defrauding and cheating them. Therefore, he has agreed,that this is a fit case where the corporate veil of both the companies be lifted for the truth to come out, in order to understand the role of the two companies and their director Tarun Sheinh who collaborated for developing the land in question, constructing flats thereon, collecting money from home buyers and siphoning off collected monies, thereby defrauding the home buyers. He has cited the judgment of NCLAT in Mrs. Mamtha versus AMB Infrabuild Pvt. Ltd.(supra) to emphatically state that both the companies should be treated to be from same group of companies for the purpose of a joint Corporate Insolvency Resolution Process (CIRP). 15. The Appellant filed ....
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.... Debtor and its subsidiary landing holding company (Respondent No. 2). In the recital of the Collaboration Agreement (attached at pp 165 - 173 of Appeal Paperbook), the intent of the landowner and the developer in executing the said Collaboration Agreement is stated as follows: "Whereas, the Owner is desirous of developing "the said Land" and to construct IT Spaces, ITes Spaces, commercial spaces and other constructions as allowed by the relevant authorities under the law (hereinafter called "DEVELOPMENT OF LAND"), and for this purpose, is willing to transfer the entire development rights of the said Land; AND WHEREAS, the Developer on the request of the Owner and also on basis of representations and assurances of the Owner has agreed to develop the "said Land" and accept from the Owner the exclusive rights of development of the said Land on the terms and conditions as mutually agreed between the parties." 18. The Covenants of the land owner and the Developer (attached at pp 168 -171 of Appeal Paperbook in Vol I.) of special note are sub-clauses (e) and (g) of the Owners Covenants which are reproduced below: "e. The Owner shall not interfere with or ob....
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....fomedia Limited, entered into a Collaboration Agreement on 1.10.2012 regarding development of the land owned by Respondent No.2 company by the Corporate Debtor. The Collaboration Agreement gave the Corporate Debtor, development rights at a valuable consideration of Rs. 4.5 crores as well as 10% of the fully constructed area on the said land. The developer, after completion of construction in the project, was to be entitled to 90% of the fully constructed area on the said land. Hence, it is clear that there was a valuable consideration given to the landowning company (Respondent No.2) by the developer company (Corporate Debtor). In turn, the Corporate Debtor was given the possession of land and the rights to develop the said land within a period of four years after obtaining necessary approvals and the rights to sell 90% of the constructed area on the said land. The MOU, a sample of which is attached at pp 174 - 189 of the Appeal Paper book in Vol I, shows that the Corporate Debtor as 'first party' is entitled to develop the said land and the complex and receive monies from the home buyers/allottees as consideration. 22. It is therefore clear that Tarun Sheinh, who effectively co....
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....r. Later, if the Corporate Debtor were to go into liquidation, there would be hardly any tangible assets available for liquidation, and hence the creditors would be left completely high and dry. What happens to the home-buyers who have sunk their hard-earned incomes, often their lifetime savings, in the booking and payment of instalments for the to-be-built flats is a question that has difficult answer. Hence for successful resolution of the Corporate Debtor 'piercing of the corporate veil' of the two companies - Corporate Debtor (Developer) and Landowning subsidiary company (Respondent No. 2) becomes absolutely necessary and imperative. 24. The relevant definitions from IBC are reproduced below for ready reference:- "Section 3(27) - "property" includes money, goods, actionable claims, land and every description of property situated in India or outside India and every description of interest including present or future or vested or contingent interest arising out of, or incidental to, property. Section 3(33) -"transaction" includes a agreement or arrangement in writing for the transfer of assets, or funds, goods or services, from or to the corporate debtor. ....
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....x (4) The resolution professional shall share the information memorandum after receiving an undertaking from a member of the committee to the effect that such member or resolution applicant shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub-section (2) of section 29." On above reading of sections, Section 3(27) of the code defines property as one which includes present or future or vested or contingent interest arising out of, or incidental to, property. Section 3(33) of IBC covers transaction, which includes a agreement or arrangement in writing for the transfer of assets, or funds, goods or services, from or to the Corporate Debtor. Section 3(34) of the IBC includes transfer of right, title and possession or lien of property. Section 29 of IBC and Regulation 36 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides for the forming of a Information Memorandum, which contains the details of assets and liabilities with their description of the Corporate Deb....
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....report mentions as follows:- " 3.3.1. Applicability Consistent with international practice, stakeholders consulted by the WG suggested that substantive consolidation should be applicable in limited circumstances. Some stakeholders consulted were of the view that the framework should be applicable only in those cases where there is evidence of fraud or sham, or it would be just and equitable to order substantive consolidation. Other stakeholders consulted were of the view that substantive consolidation may be provided for where there is no real separation between group members, and it would not be economically feasible to separate the assets of different group members. This may be ascertained using factors such as the profitability of consolidation at a single physical location, the co-mingling of assets and business functions leading to inter-dependency amongst the group companies, the unity of interests and ownership between the various corporate entities, the degree of difficulty in segregating and ascertaining individual assets and liability, the existence of parent and inter-corporate guarantees on loans, complex security structures, and the transfer of assets....
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....ies. Economic benefit ought to be the sole BEFORE THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH MA 1306/2018, MA 1416/2018, MA 393/2019, MA 115/2019, MA 1574/2019, MA 774 /2019, MA 778/2019, MA 1583/2018 Page 45 of 52 purpose and for that a preliminary searching enquiry is suggested which would yield benefit to stakeholders by off-setting any harm, if inflicted, if not consolidated. On due reading of all these judgements, one proposition of law emerges that the motion of 'consolidation' depends upon the facts and circumstances of each debtor/debtors. It is appropriate and suitable to give a ruling at this occasion that there is no single yardstick or measurement on the basis of which a motion of consolidation can or cannot be approved. With humility, this Bench herein below sets-out a list of examples, based upon reading the history of 'group insolvency', so that the presence of them can lead to a decisive conclusion of triggering of 'consolidation' of Insolvency process. Undisputedly, and also laid down by the courts, before ordering consolidation, a preliminary searching inquiry be ensured that whether consolidation yields benefits to stakeholders by offsetting the harm if not ....
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....tes that: " The Rupee Term loan has been sanctioned by the lenders for the purposes of refinancing of existing Rupee debt of the obligors, funding the capital expenditure in relation to the consumer electronics and home appliances business of the obligors and such other end uses permitted by the Facility Agent". (Emphasis Supplied). vii) Pooling of resources: Facts and evidences have demonstrated that there was common pooling of human resources, liaising and funding. Undisputedly, the directors are common using their contacts and relationship to run all the subsidiaries for which common office staff, accountants, and other human resources are mobilised to manage the affairs collectively. Further, common arrangement of capital/funds is an accepted position in Videocon group. viii) Co-existence for survival : An interlinked chain of business operations is also evident in this group case. Electronic gadgets/home appliances are manufactured by a unit. However, distribution and market chain is controlled by another entity. Interdependence upon each other is a unique feature visible in Videocon group. ix) Intricate link of subsidiaries : Consolidated a....
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....Corporate Debtors: As per the said two agreements the Debtors are combined together for the purpose of availing various loan facility. Therefore, this is a case where all the Debtors are independently as well as jointly liable for the repayment of loans facilities availed. We find that in the instant appeal, the two companies - Corporate Debtor Premia Projects Ltd. and the Respondent No. 2 landowning company M/s Solitaire Infomedia Private Limited broadly satisfy the points enumerated in the 14-point test. 30. In the matter of Mrs. Mamatha versus AMB Infrabuild Private Limited and Ors. (supra), the NCLAT has held that the developer and the land owner should be treated jointly for the purpose of initiation of CIRP against them. Hence, the Appellant remitted to the Adjudicating Authority for admission of the case after notice to the parties. The important point to note in this matter is that an application for initiation of CIRP jointly against 'developer' and the 'landowners' was filed, which was rejected by the Adjudicating Authority. In the instant appeal the initiation of CIRP has been ordered only against the Corporate Debtor (developer) but at this stage there is neither any....
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....e mentioned paragraph, the shareholding of the Corporate debtor in the Respondent No. 2 Company, is over 97% in the asset of the Corporate Debtor and should therefore be part of Information Memorandum. Thus there exists a cogent case of undertaking joint CIRP. 33. As is evident from the above referred portions of the Jaypee Kensington (supra) judgment the asset of the Corporate Debtor JIL were considered in the resolution plan. Inter- alia the 100% shares held by the corporate debtor JIL in JHL were also considered, wherein a lender of JHL Yes Bank raised objection about its interests being harmed in case the shareholding of the Corporate Debtor JIL is considered as an asset in the overall corporate insolvency resolution of JIL. The Hon'ble Supreme Court has taken note of the objection and held that the shares of JIL and JHL, which are regarded as assets of the Corporate Debtor JIL would be considered in the resolution plan, of course after giving due consideration to the lenders of JHL, to whom the share of JIL have been pledged. In the instant case, the shares of the Corporate Debtor in the Respondent No. 2 company are not shown as pledged or secured with any creditor. But the....
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....ssets of the two companies is amply clear from the provisions of the 'Collaboration Agreement' and the 'MOU' respectively. The Corporate Debtor has provided valuable consideration to Respondent No.2 and also taken possession of the land in question for developing the housing project through the Corporate Debtor. Hence, the asset of land is effectively transferred to the Corporate Debtor, on whose strength it has entered into Memoranda of Understanding with various homebuyers. On the basis of these MOUs the CD has collected monies from the home buyers. Moreover, in the costing of flats offered to homebuyers, the cost of land that proportionately is attached with each flat is a part of the total cost of each flat. In such a situation, it would not be fair and just to the creditors of the Corporate Debtor, which include the homebuyers, if the land in question is considered as part of the overall CIRP process and included in the information memorandum. In such a situation, a meaningful resolution plan could be proposed by an applicant. 37. In the instant matter the CIRP of the corporate debtor M/s Premia Projects Ltd. is under consideration. The landowning company M/s Solitaire Info....