TaxTMI 
TaxTMI 
2023 (1) TMI 1366
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.... Aishwarya Adlakha, for R-1. Aishwarya Adlakha, for Erstwhile RP. Mr. Abhishek Anand, Mr. Prateek Kushwaha, Mr. Nipun Gautam, Mr. Sajal Jain, Advocates for R-1/SRA Mr. Vivek Kohli, Sr. Advocate with Mr. Sandeep Bhuraria, Ms. Parijat Singh, Mr. Arinjay Singh, Advocates for R-2. Mr. Arshdeep Singh Khurana, Mr. Hitesh Rai, Mr. Harsh Mittal, Advocates for R-3. Mr. M.P. Sahay, Ms. Awantika and Mr. Sachin Kharb, Advocates for Homebuyers. Mr. Akshya Makhija, Sr. Advocate, Mr. Shashank Raghav, Ms. Shubhangini Yadav, Advocates for Intervenor. Mr. Abhishek Anand, Mr. Nipun Gautam, Mr. Sajal Jain, Mr. Sandeep Bhuraria, Ms. Parijat Singh, Mr. Arinjay Singh, Advocates for R-2. Mr. Abhijeet Sinha, Ms. Charu Sangwan, Mr. Krishna Raj, Mr. Saikat Sarkar, Advocates for R-6 Mr. Akshya Makhija, Sr. Advocate, Mr. Shashank Raghav, Ms. Shubhangini Yadav, Advocates for Intervenor. JUDGMENT ASHOK BHUSHAN, J. These three Appeal(s) filed by the same Appellant challenges orders passed by the National Company Law Tribunal, Delhi Bench III, arising out of same Corporate Insolvency Resolution Process, have been heard together and are being decided by t....
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.... and M/s Raus Infrastructure and M/s Shalini Holdings Ltd. as Members. The Earth Infrastructures Ltd. had 78% of shareholding and other two Members had 11% of shareholding in the Special Purpose Company. (iv) As per terms and conditions of the registered Lease Deed dated 01.09.2010 M/s Earth Towne Infrastructures Pvt. Ltd. was to develop and market the project on demarcated Plot No.GH-04, Sector 01, Greater Noida. The Lease Deed was executed for consideration of the total premium of Rs.74,26,95,000.00 and 10% premium was paid. Balance 90% premium was to be Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 7 payable in 16 half-yearly instalments. Interest @ 12% per annum was to be paid after 24 months. (v) After the execution of the Lease Deed on 01.09.2010 an unregistered Development Agreement dated 09.09.2010 was entered between Earth Towne and Earth Infrastructures Ltd., where First Party - Earth Towne was to develop the land. The development rights were given to the Earth Infrastructures Ltd. by the Development Agreement. The Development Agreement also stipulated that Earth Towne shall remain the lease right holder of the Scheduled Land and the Second....
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....ntly Shri Akash Singhal was appointed as RP. (x) The RP prepared the Information Memorandum in June 2019 regarding the Corporate Debtor, where details of all the three Projects (which are subject matter of three Appeal(s) under consideration) were given. Form-G was issued inviting Expression of Interest for the Corporate Debtor on 19.04.2019. Thereafter on 22.05.2019. while issuing Expression of Interest the Resolution Plans were invited for the entire Project of the Corporate Debtor, individually or collectively. (xi) The Appellant on 18.09.2019 has sent a letter to RP claiming dues on the subsidiary of the Corporate Debtor namely Earth Towne for an amount of Rs.148,37,46,148/-, arising out of the Lease Deed executed on 01.09.2010. (xii) In pursuance of the request for Resolution Plan, Resolution Plans were submitted. Roma Unicon Designex Consortium filed its Resolution Plan for the Earth Towne Project, which Resolution Plan was approved by the Committee of Creditors ("CoC") in their 14th Meeting held on 26.08.2019 with 100% voting share. The said Resolution Plan was subsequently on an Application filed by the RP has been approved by the Adjudicating Aut....
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....t in pursuance of direction issued in the impugned order approving the Resolution Plan, the Appellant shall not be obliged to transfer the leasehold land in favour of the Successful Resolution Applicant. Against the interim order dated 01.06.2022 an Appeal was filed being Civil Appeal No.4748 of 2022 by Earth Towne Flat Buyers Welfare Association before the Hon'ble Supreme Court, which Appeal was dismissed on 14.07.2022. 6. We have heard Shri Krishnendu Datta, learned Senior Counsel appearing for Appellant with Shri Manish Kumar Srivastava and Shri U.N. Singh; Shri G.P. Madaan, learned Counsel appeared for RP. We have heard learned Counsel appearing for Successful Resolution Applicants in both the Appeals. We have also heard Shri Abhijeet Sinha, learned Counsel appearing for Earth Towne Flat Buyers Welfare Association. We have also heard other Counsel appearing for the other Respondent(s) and Intervenors. 7. Before proceeding to notice the respective submissions of learned counsel for the parties, we may briefly note the case taken up by the Appellants, Respondents and Intervenors in these Appeals. Company Appeal (AT) (Ins.) No. 630 of 2022 8. The Appellant's case is th....
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....imited and that the approval of the Resolution Plan is illegal. Corporate Debtor is neither the Lease Holder nor has any right, title, or interest in the Subject Property. The Resolution Professional and the Resolution Applicant have shown complete bias and have suppressed and concealed the true and correct facts from the NCLT. As on 31.03.2022, Lessee i.e., Earth Towne Infrastructures Pvt. Ltd. is liable to pay an amount of Rs.215,87,18,190/-. The Resolution Plan is in clear disregard of the terms and conditions of the Lease Deed. The Adjudicating Authority has granted certain waiver in Para 15 in utter disregard of the law. The order passed by the Adjudicating Authority dated 05.04.2021 is also in violation of the principles of natural justice since neither any notice was received from the Adjudicating Authority at the time of approval of the Resolution Plan nor Resolution Professional informed about the Resolution Plans. The CoC is not competent to consider and vote on the property which do not belong to the Corporate Debtor. The Development Agreement dated 09.09.2010 entered between the Corporate Debtor and the Lessee - Earth Towne, being an unregistered document cannot be enfo....
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....proceeding since vide letter dated 28.05.2019 in respect of all the three projects namely Earth Tech-one, Earth Sapphire Court and Earth Towne, the Resolution Professional has asked for relevant information/documents from the Appellant. The Appellant on 18.09.2019 filed claim towards the dues of subsidiary of the Corporate Debtor namely Earth Towne of Rs.148,37,46,148/- against the lease deed dated 01.09.2010. The Appellant was, however, not vigilant to either follow up the matter or file application before the Adjudicating Authority for non-admission of its claim. The Resolution Plan refers to the dues of the Appellant and claims relief in terms of entire dues. The Approved Resolution Plan is binding on all stakeholders including the Appellant. 10. The Successful Resolution Applicant i.e. Roma Unicon Designex Consortium (Respondent No.2) after narrating the details of allotment and lease deed pleads that Special Purpose Company namely Earth Towne Infrastructure Pvt. Ltd., a wholly owned subsidiary of the Corporate Debtor, was formed after the allotment of land. The Earth Towne Infrastructure Pvt. Ltd. was incorporated for sole purpose of obtaining lease rights. Part considerati....
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....tion (hereinafter referred to as 'Association') in its reply after noticing the initial background facts has pleaded that the construction of project is not taking place since 2016. The Home/Flat Buyers have perspective that it is one company and same group that was developing the project. In response to the public announcement, the creditors of the Corporate Debtor filed their respective claims with regard to Earth Towne project. It has been submitted that Appellant has also filed a claim of Rs.148,37,46,148/- on account of dues of Earth Towne. Even though the claim is filed in the name of Earth Towne, the liability to pay the debt of the Appellant lies with the Corporate Debtor as the Corporate Debtor was responsible to arrange finance. It is submitted that there is irreparable loss incurred to the Home Buyers due to incompletion of the project. The Home Buyers are suffering huge loss monthly. The Resolution Professional has admitted claims of 1878 unit holders amounting to Rs.438 crores. Since Home/Flat Buyers could not receive possession of their respective apartments, many of them are forced to live in rental houses for the past 10 years which has caused an exponential burden ....
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.... was applied by the Lessee which was approved by the Appellant. The Appellant's case is that the Development Agreement dated 25.04.2011 and 20.02.2010 respectively are illegal and non-est and not enforceable against the Appellant. The property which was leased out to the Lessee have been dealt with in the Resolution Plan submitted by M/s Alfa Corp Development Pvt. Ltd. On default being committed in payment of land premium and lease rent default notices were served dated 09.01.2019 on Nishtha Software Pvt. Ltd. The default notice dated 09.01.2019 was also issued on Neo Multimedia Pvt. Ltd. Several notices to both the Lessees were issued thereafter. As on 24.03.2022, Neo Multimedia Pvt. Ltd. is liable to pay an amount of Rs.19,76,10,064/- and as on 25.03.2022, Nishtha Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 21 Software Pvt. Ltd. is liable to pay an amount of Rs.11,15,15,009/-. Further, amount towards lease rent and towards additional compensation is payable by the lessee. The CoC of the Corporate Debtor had no power and jurisdiction to deal with the Lessee's property. The properties which were leased out to Neo Multimedia Pvt. Ltd. and Nishtha Software Pvt. Ltd. c....
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.... filed an application CA 818/2019 in CP(IB) No. 401/2017 for consideration of his Resolution Plan. On their application, the Adjudicating Authority directed the Resolution Professional to make a comparative chart. Comparative Chart was submitted by the Resolution Professional before the Adjudicating Authority. In Point No. 15.6, treatment of dues of Appellant was dealt with. In the Information Memorandum, the dues of the Appellant were mentioned. The Appellant was well aware of the initiation of CIRP against the Corporate Debtor. Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 23 Resolution Plan refers to the dues of the Appellant and seeks waiver from payment of the dues. 15. Reply has also been filed by Alpha Corp Development Pvt. Ltd. - Successful Resolution Applicant (Respondent No.2). In the reply filed by the Successful Resolution Applicant, all relevant documents including the Information Memorandum has been brought on record. The Successful Resolution Applicant has given details of the project, name of the land owning company with regard to projects Earth Sapphire Court and Earth Tech-one. The land owning companies are wholly owned subsidiary companies of the....
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....ebtor started collecting money for these projects. The Corporate Debtor had launched both the projects under the scheme of 12% assured return and in most of the cases the assured return was paid to all the investors till September 2015. After September 2015, the Corporate Debtor stopped paying return on investment to the investors. A builder buyer meeting was held on 20.05.2016 which was attended by two directors of the Corporate Debtor and almost 100 buyers of different projects, where the CEO of the GNIDA gave warning for action against the Corporate Debtor in case it does not resolve the grievances of the investors. A complaint was filed to Economic Offences Wing, Delhi Police and after preliminary investigation FIR No.43/2016, 111/2016, 112/2016 & 113/2016 were registered against the Corporate Debtor and its officials. The investors gave a representation on 27.07.2016 to the Appellant praying to take strict action against the Corporate Debtor. Investor also met with CEO of the Appellant. Meeting was also held on 08.05.2017 and 16.05.2017. The Appellant did not take any action against the Corporate Debtor and thereafter on 06.06.2018 CIRP was initiated against the Corporate Debt....
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.... land of the Appellant regarding which they have no jurisdiction. The Resolution Plan adopts a very novel method of taking away the land of the Appellant and denying its dues, which are owned by lessee on the land leased to it. Against the Earth Towne, the dues of the Appellant is about Rs.200 crores. The dues payable to a Public Authority, which is performing public functions cannot be allowed to be negated in the manner as has been done in the Resolution Plan. The RP has not discharged his duties in accordance with the provisions of the Code while giving a certificate that Resolution Plan complies with the provisions of the Code. The Resolution Plan could not have dealt with the land of the Appellant, which was not asset of the Corporate Debtor and only assets of the Corporate Debtor can be made subject in the Resolution Plan. The Adjudicating Authority also failed to apply its mind and ignored the vital fact while approving the Resolution Plan. The mere fact that Corporate Debtor has written certain letters to the Appellant containing information about the Project, does not in any manner mean that Appellant was aware of the nefarious manner in which the Appellant's land was soug....
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....ease Deed executed dated 01.09.2010 and the land owning company was "Earth Towne Infrastructure Pvt. Ltd.". 19. The Learned Counsel for the Resolution Professional, Mr. G. P. Madaan refuting the submissions of learned counsel for the Appellant submits that the Resolution Professional in the Information Memorandum has given all the details regarding the land owning companies and the details of the developer who has development and selling rights over the five projects. It is submitted that the Information Memorandum has also given details of the claim which was received from the Appellant. The Resolution Professional has also shared the letter of its dues of Rs.148,37,46,148/- received from the Appellant claiming to be dues of Earth Towne. It is submitted that it was the Corporate Debtor which was making all payments against the Lease Deed dated 01.09.2010 and Earth Towne was nothing but alter ego of Corporate Debtor. Appellant was not vigilant of its claim. Appellant was well aware of the insolvency process which was initiated against the Corporate Debtor. The Successful Resolution Applicant had sought relief in respect of dues of the Appellant which was accepted by the Adjudica....
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....undertaken to bear the dues. It is submitted that in view of the aforesaid clause in the Resolution Plan, order approving the Resolution Plan need to be approved in this Appeal. It is submitted that the Resolution Applicant has undertaken to carry on the construction and deliver the flats to the home buyers within a period of five years. The land on which Project Earth TechOne and Earth Sapphire Court of the Corporate Debtor was being developed, is leased by the Appellant in favour of the wholly owned subsidiary companies of the Corporate Debtor, namely M/s Neo Multimedia Limited and M/s Nishta Software Private Limited respectively. 22. Shri Abhijeet Sinha, learned counsel appearing for Earth Towne Flat Buyers Welfare Association submitted that property as defined under Section 3(27) of the Code is very wide definition. The statute does not exclude development rights from the definition of property. It is submitted that initially allotment of land by the Appellant was in favour of the Consortium of which Corporate Debtor is the lead member. Corporate Debtor has 98% shareholding of the Earth Towne Infrastructure Pvt. Ltd. Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 202....
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....lotment Letter dated 19.03.2010 to Consortium, consisting of one M/s. Earth Infrastructures Limited - Lead Member; M/s Raus Infrastructure and M/s Shalini Holdings Ltd. for Builders Residential/ Large Group Housing Plot No.GH-04, Sector 01, Greater Noida, Uttar Pradesh with area of 73900 sq. mtrs. The allotment was on quoted rate of Rs.10050/- per sq. mtrs. The letter contained the detailed payment plan of the balance premium instalments. A letter dated 22.07.2010 was written by Earth Infrastructures Ltd. to the Appellant that as per Clause 8(e) of Application Form, a Special Purpose Company (SPC) "Earth Towne Infrastructure Pvt. Ltd." was formed for the purpose of getting Lease Deed executed and registered in favour of Earth Towne Infrastructure Pvt. Ltd. The Appellant approving the request of M/s Earth Infrastructures Ltd. executed the Lease Deed in favour of M/s Earth Towne Infrastructure Pvt. Ltd. to develop and Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 34 market the Project on demarcated Plot. The Lease Deed dated 01.09.2010 contained following statement - ".... AND WHEREAS the Lessor approved the name and status of M/s Earth Towne Infrastructures Pvt. Ltd. o....
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....) Delay in payment of the advance lease rent will be subject to interest @15% per annum compounded half yearly on the defaulted amount for the defaulted period. (v) The Lessee has to pay lease rent equivalent to 11 years @ 1% of the premium of the plot as "One Time Lease Rent" phasewise before getting permission to execute Tripartite SubLease Deed in favour of their prospective byers unless the Lessor decided to withdraw this facility. On payment of One Time Lease Rent, no further annual lease rent would be required to be paid for the balance lease period. This option may be exercised at any time during the lease period, provided the Lessee has paid the earlier lease rent due and lease rent already paid will not be considered in One Time Lease Rent option. b) The Lessee shall be liable to pay all rates, taxes, charges and assessment leviable by whatever name called for every description in respect of the plot of land or building constructed thereon assessed or imposed from time to time by the Lessor or any Authority/ Government. In exceptional circumstances the time of deposit for the payment due may be extended by the Lessor. But in such case of extension of time....
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....fer done by the Lessee shall have to be registered before the physical possession of the flat/ plot is handed over. The Lease Deed further contemplated that the first sale/ transfer of flat/ plot to an allottee shall be through a Sub-lease/ Lease Deed to be executed on the request of the Lessee to the Lessor in writing. 27. The Lease Deed executed in favour of Neo Multimedia Ltd. and Nishtha Sofware Pvt. Ltd. also contained the similar terms and conditions, which are not being repeated. After the execution of the Lease Deed, the Corporate Debtor entered into a Development Agreement with Earth Towne dated 09.09.2010. The Development Agreement was an unregistered document executed on a stamp paper of Rs.50. In the Agreement, First Party was Earth Towne Infrastructures Pvt. Ltd. and Second Party was Earth Infrastructures Ltd. It is useful to extract Clauses D, E and F of the Development Agreement, which are to the following effect: "D. The First Party is suitably authorised to develop, construct market and sale/ sub-lease the said scheduled Land. E. The Second Party is engaged in the business of; inter alia, development and construction of real estate projects. ....
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...., Sector Knowledge Park-5, Greater Noida, Sector 3, UP 6. Is property situated in residential/ Commercial/ Mixed area or Industrial Area Industrial Area for IT/ITES Activity 7. Land Area 20911.24 Sq. Mts 8. Is the property free hold or lease hold Lease hold 9. Name of the lessor/ lessee, nature of lease, date of commencement, termination of lease Lessor : Greater Noida Industrial Development Authority (GNIDA) Lease Date : 01/09/2009 Time Period : 90 years 10. Annual Lease Rent to be paid yearly Rs.10,39,623.00 The subject property is under constructed with Basement 2 Nos, Ground Floor + 16 floor building structure on industrial plot for development of IT. ITES services of Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 41 20911.24 sq. mts. With a total built up area of 73480.30 sq. mts approx. The neighbourhood of the subject property is Institutional Land/ Industrial land / Residential Land. Institutes like NIIMS, Millineaum School are in vicinity Statement of Built up Area S. No. Floor Built up Area as recorded (approx.. in sq. mt.) (A). Basement 1 12613.0 2. Ba....
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....ect property is Institutional Land/ Industrial land. On one side of plot is NIIT Technologies which is operational. Statement of Built up Area Tower No. of Floors Ht. of Floors Built up Area as recorded (approx. in sq.mt.) G1 B+g11 Basement 17ft/ 5.18 mt. Ground 16ft/4.87 mt Other Floors - 12ft/ 3.65 mts. 13190.0 G2 B+G+10 Basement 17ft/ 5.18 mt. Ground 16ft/4.87 mt Other Floors - 12ft/ 3.65 mts. 12610.0 G3 B+G+9 Basement 17ft/ 5.18 mt. Ground 16ft/4.87 mt Other Floors - 12ft/ 3.65 mts 11900.0 G4. B+G+7 Basement 17ft/ 5.18 mt. Ground 16ft/4.87 mt Other Floors - 12ft/ 3.65 mts. 13520.0 G5. B+G+10 Basement 17ft/ 5.18 mt. Ground 16ft/4.87 mt Other Floors - 12ft/ 3.65 mts. 14175.0 G6. Basement only Basement 17ft/ 5.18 mt. 1155.0 Residential A1 B+G+11 Basement 17ft/ 5.18 mt. Other Floors - 10ft/ 3.0 mts. 8560.0 Residential A2 B+G+9 Basement 17ft/ 5.18 mt. Other Floors - 10ft/ 3.0 mts. 5036.0 Residential A3 B+G+11 Basement 17ft/ 5.18 mt. Other Floors - 10ft/ 3.0 mts 7825.0 Total Built up Area 87971.0 sq. mts. approx ....
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.... 2.925 mt 5883.0 T5 G/S+19 9'-6" or 2.925 mt 6536.0 T6 G/S+19 9'-6" or 2.925 mt 7860.0 T7 G/S+19 9'-6" or 2.925 mt 6536.0 T8 G/S+19 9'-6" or 2.925 mt 6536.0 T9 G/S+19 9'-6" or 2.925 mt 6418.0 T4+T5+T6+ T7+T8+T9 Combined Basement Single Basement 15ft or 4.57 mts 4872.0 T10 2 Basement + G/s +2 Floor ht -9'-6" or 2.925 mt Basement Ht. 15ft or 4.57 mt 3124.0 T11 2 Basement + G/s +2 Floor ht -9'-6" or 2.925 mt Basement Ht. 15ft or 4.57 mt 2293.0 T12 2 Basement + G/s +2 9'-6" or 2.925 mt Basement Ht. 15ft or 4.57 mt 1245.0 T12A Basement only 12ft or 3.65 mt 450.0 T25 G/S+19 9'-6" or 2.925 mt 8020.0 T26 G/S+19 9'-6" or 2.925 mt 8020.0 T27 G/S+19 9'-6" or 2.925 mt 8020.0 T25+T26+ T27 Basement Combined Basement Ht. 15ft or 4.57 mt 2793.0 Tower T19 T20 T21 & T22 Combined Basement Ht. 15ft or 4.57 mt 1212.0 Total Built up Area 106671.0 sq. mts. approx Present Condition of Buildings The Subject property is under construction.....
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....Park-04, Greater Noida, District Gautambudh Nagar, UP *** *** *** __________________________________________________ L. GNIDA/FIN/BRS/2019 Dated Sept., 2019 To, Mr. Akash Singhal Insolvency Professional IP Regn. No.IBBI/IPA-001/IP-P00137/2017- 18/10279. Partner- Khandelwal Jain & Co. G-8 & 9, Ground Floor, Hans Bhawan 1, Bahadur Shah Zafar Marg New delhi-110002. Phone 9868145676 Email : [email protected] Subject: Proof of claim by Financial Creditor, namely Greater Noida Industrial Development Authority (GNIDA) in regard to Corporate Insolvency Resolution Process of M/s. Earth Infrastructure Pvt. Ltd. PLOT No. GH-04, SECTOR-01, GREATER NOIDA. Dear Sir, Kindly find attached herewith the proof of claim by the Financial Creditor namely, Greater Noida Industrial Development Authority in regard to Corporate Insolvency Resolution Process of M/s. Earth Towne Infrastructure Pvt. Ltd. it is therefore requested that the claim of GNIDA as a Financial Creditor be processed accordingly and no action be taken for disposal of any property of M/s. Earth Towne Infra....
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....ity of GNIDA that may arise for transfer of the land in the manner as proposed in this plan, as the admission of the said claim will make the project unviable for the reason the cost towards settling of such claim will have to be burdened upon the financial creditors being home buyers and also the fact that RUD will then not be able to satisfy the claims of the said financial creditors. The list of reliefs sought for the proposed transfer of the land from GNIDA has been proposed separately in this plan." 35. Similarly, we may also notice the relevant parts of the Resolution Plan submitted by the Alpha Corp Development Private Limited with regard to Project Earth Sapphire Court and Earth Techone. Part-C of the Plan, which deals with Earth Sapphire Court in paragraph 4, provides as follows: "4. Dues towards Noida Authority As per the IM, the claims admitted do not include dues payable to Greater Noida Industrial Development Authority (GNIDA). The Resolution Applicant proposes not to take any liability to GNIDA that may arise for transfer of the land in the manner as proposed in this plan, as such admission of any such claim will make the project unviable....
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....he Resolution Plan, all the pending statutory dues including taxes, cess/ interest/ penalty and other liabilities due to the operational creditors shall stand discharged/ satisfied/ waived off." 38. Similarly, by order dated 08.06.2021, while approving Resolution Plan submitted by M/s. Alpha Corp Development Private Limited, the Adjudicating Authority has provided for concessions or abatement as claimed in the Resolution Plan. 39. Having noticed certain contents of the Lease Deed, Development Agreement, details in Information Memorandum and some other details, we now need to consider the respective submissions of learned Counsel for the parties. 40. From the submissions of learned Counsel for the parties and materials on record, following are the issues which arise for consideration in these Appeal(s): (I) Whether in the CIRP proceedings of the Corporate Debtor, i.e. Earth Infrastructures Limited, the assets of the land holding companies, i.e., subsidiary of the Corporate Debtor can be treated to be assets of the Corporate Debtor? (II) Whether, in the Resolution Plans submitted by the Successful Resolution Applicants, i.e., Roma Unicon Designex Consortium....
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....al (AT) (Insolvency) Nos.180, 629 & 630 of 2022 55 cannot be held to be barred by time. The objection regarding the limitation is overruled. 42. The Issue Nos. (I), (II) and (III) being inter-related, are taken up together. 43. The Insolvency and Bankruptcy Code, 2016 has been enacted to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons and for matters connected therewith or incidental thereto. The 'Corporate Debtor' means a corporate person who owes a debt to any person. The CIRP begins against a Corporate Debtor when he owes a debt and commits default in repayment of the debt. After appointment of IRP, the IRP comes into picture by issuing a Public Announcement of CIRP against the Corporate Debtor. The IRP is vested with the management of the Corporate Debtor from the date of his appointment. Section 18 of the I&B Code deals with 'Duties of interim resolution professional'. Section 18, sub-section (1) is as follows: "18. Duties of interim resolution professional.-(1) The interim resolution professional shall perform the following duties, namely- (a) collect all information relating to the assets, finan....
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....ations of the Corporate Debtor for determining the financial position of the Corporate Debtor, including information relating to liabilities on the date of initiation of CIRP. Section 18 uses the expression 'assets', 'finances' and 'operations'. We, in the present case, are concerned with the Project land, which is an immovable property leased to Earth Towne and other two land holding Companies with respect to other two Projects where Special Purpose Company was incorporated for the purpose of lease of the land. While noticing the facts of the case, we have noted that allotment of land was initially in the name of a Consortium consisting of Earth Infrastructure Ltd. as Lead Member. The Scheme of allotment itself has envisaged that Special Purpose Company, as suggested by Consortium/ Allottees shall lease out the land for purposes of carrying out development work. The land holding Company was incorporated as Special Purpose Company, only for the purpose of carrying out development in the land. We have noticed the terms of the Lease Deed dated 01.09.2010 executed by Appellant in favour of Earth Towne. The Special Purpose Company was "TO DEVELOP AND MARKET THE PROJECT ON DEMARCATED PL....
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.... seeking a declaration that mining lease should be deemed to be valid upto 31.03.2020, which Writ Petition was subsequently withdrawn and thereafter Resolution Professional moved an Application before the NCLT, praying for set-aside the order of Government of Karnataka and seeking a declaration that lease should be deemed to be valid upto 31.03.2020. In the above context, the Hon'ble Supreme Court had occasion to consider the provisions of Section 18 of the Code and the jurisdiction of NCLT to consider the Application of Resolution Professional. In paragraph 39, the Hon'ble Supreme Court extracted provision of Section 18(1) (g) and explanation and in paragraph 40 made the following observations: "40. If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(1)(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contract....
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.... stages. This is why when the Government of Karnataka did not grant the benefit of deemed extension, even after the expiry of the lease on 25-5-2018, the resolution professional moved the High Court by way of a writ petition in WP No. 23075 of 2018. The prayer made in WP No. 23075 of 2018 was for a declaration that the mining lease should be deemed to be valid up to 31-3- 2020. If NCLT was omnipotent, the resolution professional would have moved the NCLT itself for such a declaration. But he did not, as he understood the legal position correctly." In paragraphs 45 and 46, it was further held: "45. A lot of stress was made on the effect of Section 14 of the IBC, 2016 on the deemed extension of lease. But we do not think that the moratorium provided for in Section 14 could have any impact upon the right of the Government to refuse the extension of lease. The purpose of moratorium is only to preserve the status quo and not to create a new right. Therefore nothing turns on Section 14 of the IBC, 2016. Even Section 14(1)(d) of the IBC, 2016, which prohibits, during the period of moratorium, the recovery of any property by an owner or lessor where such property is occup....
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.... explanation for the purpose of Section 18(1), the term 'assets' do not include assets owned by a third party in possession of the corporate debtor held under contractual arrangements including bailment. It also do not include assets of any Indian or foreign subsidiary of the corporate debtor and such other assets as may be notified by the Central Government." 49. This Tribunal in Company Appeal (AT) (Insolvency) No. 182 of 2018 in Bhavik Bhimjyani vs. Uday Vinodchangra Shat, RP of Neelkanth Township & Construction Pvt. Ltd. & Ors. has reiterated that Resolution Professional has no jurisdiction to take over any assets of the subsidiary Company of the Corporate Debtor. In paragraph 8 of the judgment, following has been laid down: "8. We make it clear that the Resolution Professional/ Liquidator has no jurisdiction to take over any asset of the subsidiary company of the Corporate Debtor including 'Urban Rupi Infrastructure Private Limited' and 'Neelkanth Palm Realty Private Limited', therefore, the Resolution Professional cannot take the original documents available with the subsidiary companies though he may take authenticated photocopies of those documents." 50. We m....
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....g company in favour of the Corporate Debtor on an unregistered Agreement, but also contemplates transfer of title of land in favour of Successful Resolution Applicant/ Special Purpose Company as contemplated in the Resolution Plan, which is an impermissible. The Development Agreement, which was unregistered document, could not have dealt with any right in the Project land and the lease hold right as per Development Agreement continued with the Lessee. Hence, the Resolution Plan could not have provided for transfer of the lease land in favour of Successful Resolution Applicant/ Special Purpose Company. Admittedly, the Appellant was not party to the Development Agreement, which was executed between land holding Company of the Corporate Debtor. The Appellant not being the creditor of the Corporate Debtor nor stakeholder in the CIRP Resolution Plan could not bind the Appellant in any manner. It is also relevant to notice that development agreement dated 09.09.2010 being an unregistered agreement could not have transferred any right in the lease land in favour of the developer. The Appellant not being party to such development agreement, the same is not binding on Appellant. 52. Lear....
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....rity has allowed the IA filed by the Resolution Professional and dismissed I.A. 5050 of 2020 filed by NOIDA/the Appellant herein, observing as follows: 17. We are further in agreement with the contention of the Applicant/(that through the instrument of JDA, the CD has only right- inpersonam against the Lessee i.e., Logix and the said right of CD is limited developing the residential complex for which the allottees paid directly the CD upon various stages of completion of the project. All future FSIs remained with Logix (the original Lessee of the Land). It is clear from terms of JDA that CD has a limited role of undertaking development of residential project acting jointly with Logix. 18. In the present case, it is seen that existence of JDA was in the knowledge of NOIDA and all approvals as required under the Lease Deed have been granted by the said authority. In effect, there has been implied acceptance of the JDA by NOIDA authority. NOIDA Authority has raised the issue of entering into JDA by CD with Logix only when the Resolution Professional was asked by this Tribunal to approach the said authority and seek its participation in CIRP, and has come up with the ....
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....ss of the Corporate Debtor, the Adjudicating Authority directed Appellant-NOIDA Authority to file is claim and participate in the CIRP Process. The Adjudicating Authority while dismissing the Appeal has held that under the Development Agreement, the Corporate Debtor has proprietary right. This Tribunal also observed that no steps were taken by the Appellant to cancel the lease deed. Further this Tribunal held that the Tribunal vide Order dated 07th April, 2021 rejected the prayer of filing of the claim by the Appellant by that time Resolution was approved by the Committee of Creditors which Order was not challenged and had become final. The aforesaid facts have been noticed in paragraph 26 of the Judgement which are to the following effect: "26. Though the aforenoted para speaks of withdrawals and modifications of 'Plans' submitted by the Resolution Applicants, the stress placed on the importance of timelines to be adhered to cannot be undermined. The Adjudicating Authority has allowed IA 4538 of 2020 filed by M/s. Victory Ace Social Welfare Society seeking a direction to NOIDA to participate in the CIRP Proceedings. This Application was allowed by the Adjudicating Authori....
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....atter further, let the Resolution Professional represented by Mr. Dewan may revisit the Resolution Plan and furnish the revised proposal to the appellant which may take care of their interest as well by 12.08.2022. A joint meeting thereafter be held with the senior authorized officers of the New Okhla Industrial Development Authority (NOIDA), Resolution Professional, including the resolution applicant and others, if required, so as to find out some amicable solution, including the Lessee (M/s. Logix City Developers Pvt. Ltd.) within the ambit of IBC, if possible, within two weeks thereafter. List on 30th August, 2022 (NMD). In the meantime, further proceedings qua the appellant shall remain stayed. However, the Tribunal is at liberty to proceed with other aspects of the matter." 56. The Judgement of this Tribunal in "Nilesh Sharma" case thus is still under scrutiny by the Hon'ble Supreme Court. However, Hon'ble Supreme Court has granted liberty to Resolution Professional including Resolution Applicant and Others, if required, so as to find out some amicable solution between all parties including the lessee within the ambit of IBC. 57. We may also no....
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....ated formation of separate Special Purpose Company for carrying out the development on the allotted land. As noted above, allotment of land under Earth Towne was made in the name of three companies namely M/s. Earth Infrastructures Limited being lead member, the purpose and object of the allotment was for development of land for purposes of urban planning hence the scheme of the allotment insisted for formation of Special Purpose Company so as NOIDA Authority may deal with said Special Purpose Company to carry out the development. The lease deed further contemplated that lead member shall continue to always possess 51% shareholding in the Special Purpose Company. Lease Deed is fully cognizant of the entity of the Corporate Debtor who was a lead member of the SPV and SPV created for the purposes of development. The formation of Special Purpose Company was with an object and the submissions of Respondent cannot be accepted that both should be treated as one entity. The lease deed has noted that M/s. Earth Towne Infrastructure Pvt Ltd. on the request of consortium has been accepted to be Special Purpose Company. It is useful to notice following extract of the Lease Deed dated 01.09.20....
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....hould be treated to be one entity cannot be accepted. It is further relevant to notice that Learned Counsel for the Respondents have also contended that Corporate Veil of the land holding company be pierced and should be lifted in the facts of the present case which will make it clear that it is the corporate debtor which is behind the land holding companies. Lifting of Corporate Veil between the subsidiary and parent company have been legally accepted proposition. Hon'ble Supreme Court in "Vodafone International Holdings BV Vs. Union of India and Anr." [2012 6 SCC 613]. In paragraph 254-258, has noted the legal principle with regard to relationship between subsidiary company and holding company which is as follows: "254. Companies Act in India and all over the world have statutorily recognised subsidiary company as a separate legal entity. Section 2(47) of the Indian Companies Act 1956 defines "subsidiary company" or "subsidiary", a subsidiary company within the meaning of Section 4 of the Act. For the purpose of Indian Companies Act, a company shall be subject to the provisions of sub-section 3 of Section 4, be deemed to be subsidiary of another, subject to certain condi....
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.... Meeting of the subsidiary. Holding companies and subsidiaries can be considered as single economic entity and consolidated balance sheet is the accounting relationship between the holding company and subsidiary company, which shows the status of the entire business enterprises. Shares of stock in the subsidiary company are held as assets on the books of the parent company and can be issued as collateral for additional debt financing. Holding company and subsidiary company are, however, considered as separate legal entities, and subsidiary are allowed decentralized management. Each subsidiary can reform its own management personnel and holding company may also provide expert, efficient and competent services for the benefit of the subsidiaries." 60. It was clearly held by the Hon'ble Supreme Court relating to relationship between holding company and wholly owned subsidiary that they are two distinct companies and holding company does not own the assets of the subsidiary. 61. We may also notice judgement of the Hon'ble Supreme Court in "Jaypee Kensington Boulevard Apartments Welfare Association and Ors. Vs. NBCC (India) Limited and Ors." [2022 1 SCC 401]. Insolvency Resolution....
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....to provide for various measures including 'necessary approvals from the Central and State Governments and other authorities'. The authority concerned in the present case, YEIDA, is the one established by the State Government under the U.P. Act of 1976 and its approval remains sine qua non for validity of the resolution plan in question, particularly qua the terms related with YEIDA. The stipulations/assumptions in the resolution plan, that approval by the Adjudicating Authority shall dispense with all the requirements of seeking consent from YEIDA for any business transfer are too far beyond the entitlement of the resolution applicant. Neither any socalled deemed approval could be foisted upon the governmental authority like YEIDA nor such an assumption stands in conformity with Regulation 37 of the CIRP Regulations. 142. Furthermore, the suggestion that Clause 18.1 of the CA had been a one-time measure and that stands exhausted with creation of JIL as SPV and transfer of original concessionaire's rights to JIL, has its own shortcomings. The concept and purport of Clause 18.1, of course, at the relevant time had been of the obligation on the original concessionaire to exec....
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....h Lal and Ors." [ 2020 13 SCC 234]. In the above case, Municipal Corporation of Greater Mumbai owned certain land in village Marol, Andheri (East), Mumbai. A contract was entered into with Seven Hills Health Care Pvt. Ltd. for development of the lease land and to construct 1500 bed hospital. The CIRP was initiated against the Seven Hills Health Care Pvt. Ltd. by Axis Bank where Resolution Plan was submitted by SNMC. Objections were raised by the Appellant to the approval of the plan which was rejected by NCLT and held that plan is in accordance with CIRP Regulations, 2016 and as per Section 29-A which was already approved by the CoC. The Order of NCLT was challenged before this Tribunal which Order was not interfered with by this Appellate Tribunal against which the Municipal Corporation filed an Appeal before the Hon'ble Supreme Court. Hon'ble Supreme Court had occasion to consider the provisions of MMC Act as well as provision of IBC. Hon'ble Supreme Court has in its Judgement held that the Adjudicating Authority could not have approved the plan which included the assets of the Municipal Corporation especially when corporate debtor had not fulfilled its obligation under the contr....
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.... plain reading of Section 92(c), that the Commissioner (of MCGM) is empowered to, with the sanction of the corporation, "lease, sell or otherwise convey any immovable property belonging to the corporation." It is not in dispute that the original contract entered into on 20-12-2005 contemplated the fulfilment of some important conditions, including firstly, the completion of the hospital project within a time frame; and secondly, timely payment of annual lease rentals. It is a matter of record that the hospital project was scheduled to be completed by 24th April, 2013. MCGM cites Clause 15(g) of the contract to urge that within a month of this event, i.e. completion of the hospital, a lease deed had to be executed. This event never took place. Therefore, the terms of the contract remained, in the opinion of the court, an agreement to enter into a lease; it did not per se confer any right or interest, except that in the event of MCGM's Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 88 failure or omission to register the lease (in the event SevenHills had complied with its obligations under the contract), it could be sued for specific performance of the agreement, and com....
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....f subsidiary company are entirely different from assets of the holding company and principle of lifting of veil cannot be invoked contrary to statutory prescription as in the present case that is Section 18(1)(f). 69. Now on the question as to whether the Resolution Plan could have contained the provision obligating the Appellant to transfer lease hold right in favour of SRA or any third entity. It is sufficient to notice the terms and Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 90 conditions of the lease deed under wh ich land was leased out to the land holding company. For transfer of plot, lease deed contains following terms and conditions in lease dated 01.09.2010: "TRANSFER OF PLOT 1. Without obtaining the completion certificate the Lessee shall have the right to sub-divide the allotted plot into suitable smaller plots as per planning norms and to transfer the same to the interested parties up to 31.03.2010 or as decided by the Lessor, with the prior approval of LESSOR on payment of transfer charges @ 2% of allotment rate. However, the area of each of such sub-divided plots should not be less than 20,000 sq. mts. However, individual flat/pl....
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....oject Earth Saphire Court and Tech One have heritable interest in the area of land leased by the Appellant from the date of execution of the respective apartment buyer agreement. Submission is that allottees themselves have become owner from the date of apartment buyers agreement has been executed. We may notice few provisions of Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act, 2010. Section 3, subclause (b) defines "apartment" in following manner: "Section 3(b), defines "apartment" means a part of any property, intended for any type of independent use, including enclosed spaces located on one or more floors or any part or parts thereof, in a building to be used for residential or official purposes or for the purpose of practicing any profession, or for carrying on any occupation, trade or business (excluding shopping malls and multiplexes) or for such other use as may be prescribed, and with a direct exit to a public street, road or to a common area leading to such street, road and includes any garage or room (whether or not adjacent to the building in which such apartment is located) provided by the promoter for use by the owner of such....
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....ment buyer agreement. Apartment Buyer Agreement is executed after completion and obtaining the completion certificate from the prescribed sanctioning authority. In the present case, in the Information Memorandum, it clearly gives the details of status of the project land which indicates that no project is complete. The apartment as contemplated in 2010 Act are not even in existence in the facts of the present case hence there is no question of applicability of Section 5. Section 5 of the Act deals with rights of apartment owners. Section 5(1) lays down following: "5 (1) Every person to whom any apartment is sold or otherwise transferred by the promoter shall subject to the other provisions of this Act, be entitled to the exclusive ownership and possession of the apartment so sold or otherwise transferred to him." 74. The present is not a case where any apartment has been transferred in favour of the allottees. We are of the view that submission made on behalf of the SRA relating to 2010 Act are misconceived. 75. In view of the aforesaid discussions, we answer question nos. 1, 2 and 3 in following manner: Ans. 1. In the CIRP Process of Corporate Debtor that i....
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....issions of Learned Counsel for the Appellant that they were necessary party in the CIRP process of the Corporate Debtor. It is to be noted that the Corporate Debtor was lead shareholder of the land holding company in case of Earth Towne Infrastructures Pvt. Ltd. it being 98% shares and with regard to other two land holding companies it had 100% shareholding. In the CIRP Process of such corporate debtor, the Appellant was necessary party and without they being before the CIRP Process the land leased out by them could not have been made subject matter of the Resolution Plan. We thus answer Question No. 4 in following manner: Ans. 4. Appellant was required to be made party to the CIRP Process before approval of any resolution plan dealing with project land. Question No. 5 77. The Resolution Professional was well aware that the project land is a leased out land which has been leased out by the Appellant to the land holding companies which fact has been clearly mentioned in the Information Memorandum. Information Memorandum also mentions few facts regarding the lease rent. Resolution Professional in his submission has also submitted before us that Resolution Profess....
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.... while noticing the facts of the case and submissions of the parties that in the year 2017, the associations of two projects namely Earth Sapphire Court and Earth Tech One met the additional Chief Executive Officer (CEO in short). Minutes of the proceedings were drawn by the association itself which have been brought on record which clearly indicate that appellants were aware that corporate debtor is developing the project. The letter written by the Appellant to the Police authorities in the year 2015 also indicate that appellants were aware that it is the corporate debtor who is developing the project land. We have also noticed that the lease deed contains provision under the heading "other clauses" clause 7 which is to the following effect: "7. The Lessor will monitor the implementation of the project. Applicants who do not have a firm commitment to implement the project within the time limits prescribed are advised not to avail the allotment." 81. The lease deed clearly cast an obligation on the Appellant to monitor the implementation of the project. It has been the case of the association of allottees that they have time and again brought to the notice of the Appell....
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....en letter dated 27th July, 2016 and 02nd August, 2016 bringing into the notice of the NOIDA Authority about the failure of the Corporate Debtor. A reply has also been filed by the Earth Towne Flat Buyer Association in Company Appeal (AT) Ins. No. 630 of 2022 where several other materials have been brought on record including complaints submitted to the Appellant regarding the failure of the corporate debtor. Complaint dated 20th June, 2017 filed as Annexure R-11 has been relied on by the Flat Buyers Association. It was mentioned that the home- buyers are paying bank EMI with interest as well as has paid huge amount to the Corporate Debtor. Reference of meeting with the CEO and Hon'ble Minister dated 11th May, 2017 has also been referred. In the complaint, reference has also been made to an order of the Allahabad High Court dated 23rd February, 2016 where home-buyers have raised various grievances in the writ petition where Allahabad High Court has permitted home-buyers to represent the matter to the CEO which authority was to deal with the matter. It is stated in the complaint that after the order of the High Court dated 23rd February, 2016, they have approached the authorities but....
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....neither be suggestive of discrimination, nor even apparently give an impression of bias, favouritism and nepotism. If a decision is taken without any principle or without any rule, it is unpredictable and such a decision is antithesis to the decision taken in accordance with the rule of law. 40. The Public Trust Doctrine is a part of the law of the land. The doctrine has grown from Article 21 of the Constitution. In essence, the action/order of the State or State instrumentality would stand vitiated if it lacks bona fides, as it would only be a case of colourable exercise of power. The Rule of Law is the foundation of a democratic society. (Vide: M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal & Anr., AIR 1975 SC 266; Ramana Dayaram Shetty v. The International Airport Authority of India & Ors., AIR 1979 SC 1628; Haji T.M. Hassan Rawther v. Kerala Financial Corporation, AIR 1988 SC 157; Shrilekha Vidyarthi etc. v. State of U.P. & Ors., AIR 1991 SC 537; and M.I. Builders Pvt. Ltd. v. Radhey Shyam Sahu & Ors., AIR 1999 SC 2468). 41. Power vested by the State in a Public Authority should be viewed as a trust coupled with duty to be exercised in larger ....
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....her entities. It is obvious that Appellant before granting any permission for transfer of the land shall require their dues pertaining to land premium, lease rent and other legal dues to be cleared. 90. We may also notice that during submissions, Learned Counsel appearing on behalf of Association of Flat Buyer Projects of Earth Sapphire Court and Earth TechOne submitted that they are ready to bear and pay the dues of the Appellant in the interest of the development of the projects. In the facts of the present case, we are of the view that the Appellant has not been diligent to take steps towards recovery of dues and are not entitled to charge any penal interest. We thus direct the Appellant to waive the penal interest and recalculate the dues of the Appellant which was due on the respective land holding companies as on date as held above. Ans. 7. 91. Looking to the stage at which the projects are as on date and looking to the fact that allottees have paid hundreds of crores rupees in the above three projects to the Corporate Debtor and waiting for possession of the flat for last several years, we have to find out ways and means to save the interest of the allottees as well....