TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 1366
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....warya 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 this common judgment. 2. The Company Appeal (AT) (....
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....e 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 Party shall only have the permission to enter into the Scheduled Land only for carry....
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....egarding 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 Authority vide its order dated 05.04.2021. Alpha Corp Development Pvt. Ltd. submitted its Resolution Plan for four Projects. The R....
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....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 that a registered Lease Deed dated 01.09.2010 was executed in favour of Earth Towne Infrastructure Pvt. Ltd. in respect of Plot No. GH- 04, Sector-01, Greater Noid....
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.... 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 enforced against the Appellant which was not party to the Development Agreement. The Appellant could not have been directed to transfer the lease hold rights. No con....
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....essional 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 consideration was paid by the Corporate Debtor including stamp duty. The responsibility of project implementation and payment to the Appellant lies with the Corporate Debtor. A....
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....ce 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 on their financial, physical and mental health. It is submitted that members of the Earth Towne Flat Buyers Welfare Association had meeting with the Additional CEO of ....
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....gal 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. could not have been considered in CIRP of the Corporate Debtor namely Earth Infrastructure Ltd. which is A completely separate legal entity. Under the terms of the Lease Dee....
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....ofessional 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 Corporate Debtor. After decision of the CoC in 8th meeting held on 20.05.2019 inviting project-wise resolution plans, the Respondent No.2 submitted plan for both the projects ....
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.... 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 Debtor. On 11.11.2019, the plan submitted by Alfa Corp Development Pvt. Ltd. was approved by the CoC. The Appellant had many opportunities to work towards solution and revival of the....
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....h 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 sought to be dealt with by the Corporate Debtor and the Resolution Applicants. The Resolution Plan deserves to be rejected. The transfer of land of the Appellant in favour of any other....
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.... 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 Adjudicating Authority. The Resolution Plan Para 4.1.6 refers to dues of GNIDA and Para 18.2 refers to reliefs claimed by Resolution Applicant were mentioned. Resolution Plan is binding on the....
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....itted 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 2022 32 Learned counsel submitted that the Appellant was well aware that Earth Infrastructure Ltd. is developing the land and is the developer carrying out the construction. Learned counsel has....
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....arge 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. on the request of consortium members (as mentioned above) in accordance with the clause= C-8(e) of the brochure of the scheme, to develop and market the project on demarcated plot No.GH-04, Sector-....
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....he 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 an interest @ 15% p.a. compounded every half yearly shall be charged for the defaulted amount for such delayed period. In case Lessee fails to pay the above charges it would be obligatory on the part or its members/ sub Lessee to pay proportion....
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....quest 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. F. The Second Party has approached the First Party and has expressed its willingness to develop the said Scheduled Land. Further, A Memorandum of Understanding (MOU) dated 22.07.2010, had been executed between the parties in this regard. Whereby, the First Party has agreed to acquire/buy S....
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....on 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. Basement 2 12077.0 3. Ground Floor 6428.6 4. First Floor 6428.6 5. Second Floor 6428.6 6. Third Floor 6428.6 7. Fourth Floor 6428.6 8. Fifth Floor 3494.0 9. Sixth Floor 3218.0 10. Seventh Floor 1514.0 11. Eight Floor 945.7 12. Ninth Floor 945.7 13. Tenth Floor 945.7 14 . Eleventh Floor 945.7 15. Twelfth Floor 945.7 16. Thirteenth Floor 945.7 17. Fou....
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.... 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 Present Condition of Buildings Structure of the above mentioned blocks completed. Some of the block like Residential blocks have brick work done in some portions and in some buildings Ground Floors is also having partition walls done but mostly structures are bare. The access to some blocks like Residential is not developed. No finishing works in any of the blocks. 4) Earth Towne S. No. Particulars Remarks 1. Name of Land Owner M/s Earth Infrastructure Ltd M/s Raus Infras Limited M/s Shalini Holdings Limited 2. Name of Developer M/s Earth Infrastructure Limited 3. Source Documents Memorandum of understanding Dr. 12/02/2010 between M/s Earth Infrastructure Limited & M/s Raus Infras Li....
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....t 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. Some blocks has been constructed till date. In Towers T1, T2, T3, T4, T5, T6, T7, T8, T9, T25, T26, T27 structure is complete with Brick work and partition wall on some floors. In some towers it is still pending. T10, T11, T12, T12A, T19, T20, T21, T22 Bare Structure with columns and roof slab of some floors has been casted. No brick work. T19, T20, T21, T22 only part basement casted." 30. The Information Memorandum, thus, clearly mentions that land of the above three Projects are leased land, leased by Greater Noida Industrial Development Authority and M/s Earth Infrastructure Limited is the developer. 31. We may also notice that the Appellant had issued notices demanding outstanding dues addressed to M/s Earth Towne Infrastructures Pvt. Ltd., which has been brought on record of the Appeal dated 04.04.2019, 01.05.2020, 29.01.2020 and 16.07.2019. The notice dated 04.04.2019 issued by the Appellant reads: "GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY Administrative Office Plot No....
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....e Infrastructure Pvt. Ltd. including transfer of leasehold rights for the remaining period of lease in favour of any person without liquidating or fully securing the debt payable to GNIDA. Also kindly intimate all other claims lodged against M/s. Earth Towne Infrastructure Pvt. Ltd. You are requested to intimate the date and proceedings by which you shall be examining the claims against M/s. Earth Towne Infrastructure Pvt. Ltd. Kindly acknowledge receipt. Yours faithfully, Sd/- (NEM SINGH) Manager (Fin.) GNIDA" 33. Along with the above letter, the Appellant has filed Form-C, giving the details of total defaulted amount as Rs.148,37,46,148/-, as on 31.09.2019. The RP in its reply has admitted receipt of the letter dated 18.09.2019 of the Appellant, but no response was given by the RP to the aforesaid letter, nor any communication was issued thereafter to the Appellant informing the Appellant about the Resolution Plan of the Earth Towne, which had already been approved by the CoC on 07.08.2019. 34. We may also notice at this stage certain portion of the Resolution Plan approved by Adjudicating Authority by order dated 05.04.2021, which relates to the dues of the Appellan....
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..... However, if such waiver is not granted to the Resolution Applicant by GNIDA, then such dues shall be proportionately distributed amongst all the Allottees of "Earth Sapphire Court". 36. Similarly, in paragraph 3, relating to Earth Techone Project, Clause 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. Further, the Resolution Applicant seeks waiver of "GNIDA Dues". However, if such waiver is not granted to the Resolution Applicant by GNIDA, then such dues shall be proportionately distributed amongst all the Allottees of "Earth TechOne". 37. The Adjudicating Authority by the impugned order dated 05.04.2021 while approving the Resolution Plan of Roma Unicon Designex Consortium has issued following directions in paragraph-15: "15. All waivers, Reliefs, Concessions and exemptions as prayed for in the Resolution Plan by the Resolution....
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....been dealt and the Resolution Plan could legally contain a clause for transfer of the lease hold rights by the Appellant in favour of Successful Resolution Applicant without there being any prior permission from the Appellant? (III) Whether assets of the subsidiary companies can be dealt with in Corporate Insolvency Resolution Process of holding Company? (IV) Whether the Appellant was required to be made party to the CIRP proceedings and heard before approval of any resolution plan dealing with the Project land? (V) Whether, Resolution Professional acted within the ambit of I & B Code in giving a certificate that Resolution Plans submitted by Roma Unicon Designex Consortium and Alpha Corp Development Private Limited are in accordance with the provisions of the Code? (VI) Whether Appellant was aware of the development carried out by the Corporate Debtor on the lease land before commencement of the CIRP of the Corporate Debtor? (VII) What is the way out in the facts and circumstances of the present case? 41. We may first notice the objection raised on behalf of Successful Resolution Applicant and Flat Buyer Association regarding the delay in filing the Appeal. It is ....
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....iness operations for the previous two years; (ii) financial and operational payments for the previous two years; Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 56 (iii) list of assets and liabilities as on the initiation date; and (iv) such other matters as may be specified; (b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under Sections 13 and 15; (c) constitute a Committee of Creditors; (d) monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the Committee of Creditors; (e) file information collected with the information utility, if necessary; and (f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including- (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country; (ii) assets that may or may not be in possession of the corporate debtor; (iii) ta....
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...., Lessee is the subsidiary Company of the Corporate Debtor Earth Infrastructure Ltd. Earth Infrastructure Ltd., the holding Company had initially 78% share in the subsidiary Company, which subsequently increased to 98%. The Scheme of the Code has referred the assets of the subsidiary, assets of any Indian or foreign subsidiary of the Corporate Debtor. Thus, assets of the Corporate Debtor and assets of subsidiary of the Corporate Debtor have been separately recognised and dealt with. Section 18, sub-section (1), Explanation further clarifies the law when it says that assets shall include the assets, meaning thereby assets of the Corporate Debtor, shall not include assets of any Indian subsidiary. In the CIRP of Corporate Debtor, thus, assets of subsidiary Company, i.e., Earth Towne were not to be taken into consideration or treated as the assets of the Corporate Debtor. As regards, the law relating to resolution process of a corporate person is concerned, the law is concerned with assets of the Corporate Debtor and its liabilities, so as to focus the resolution on the assets of the Corporate Debtor. The natural corollary to the above provision is that the assets of the subsidiary Co....
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.... of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word "assets", while Section 20(1) uses the word "property" together with the word "value". Sections 18 and 25 do not use the expression "property". Another important aspect is that under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Sections 25(1) and 25(2)(b) reads as follows: "25. Duties of resolution professional.-(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions: (a) *** (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings;" (emphasis supplied)....
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....with the rights conferred by a mining lease especially on a government land. What is granted under the deed of mining lease in ML 2293 dated 4-1-2001, by the Government of Karnataka, to the corporate debtor, was the right to mine, excavate and recover iron ore and red oxide for a specified period of time. The deed of lease contains a schedule divided into several parts. Part I of the Schedule describes the location and area of the lease. Part II indicates the liberties and privileges of the lessee. The restrictions and conditions subject to which the grant can be enjoyed are found in Part III of the Schedule. The liberties, powers and privileges reserved to the Government, despite the grant, are indicated in Part IV. This Part IV entitles the Government to work on other minerals (other than iron ore and red oxide) on the same land, even during the subsistence of the lease. Therefore, what was granted to the corporate debtor was not an exclusive possession of the area in question, so as to enable the resolution professional to invoke Section 14(1)(d). Section 14(1)(d) may have no application to situations of this nature. 46. Therefore, in fine, our answer to the first question wo....
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....nd M/s. Shalini Holdings Limited, which was not correctly mentioned, since the lease hold rights were with Earth Towne Infrastructure and the Information Memorandum itself noted that property is on lease hold right and Lessor is Greater Noida Industrial Development Authority. With regard to other two Projects, the Information Memorandum mentions name of land owners as M/s Nishtha Software Pvt. Ltd. and M/s Neo Multimedia Ltd. Further, it has noted that it has a lease land whose Lessor is Greater Noida Industrial Development Authority. When we look into the Information Memorandum as a whole, it is clear that land was a lease land, leased by the Appellant to land holding Company. However, Information Memorandum does not indicate that Project land belong to the Corporate Debtor in any manner. Only mention in the Information Memorandum is a Development Agreement with land holding Company of the Corporate Debtor. Thus, the Information Memorandum also in no manner represented that Corporate Debtor is the owner of Project land. When the Information Memorandum did not include the Project land as the asset of the Corporate Debtor, there was no occasion to include the Project land in the Res....
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....uthority by which order the Adjudicating Authority directed the NOIDA Authority to lodge its claim with Resolution Professional and participate in the CIRP Process. The Appeal against the said Order was dismissed by this Tribunal by the above Judgment. The Judgment of this Tribunal in "Nilesh Sharma, RP" (supra) has several distinguishable features from the present case. The NOIDA Authority was challenging the Order of the Adjudicating Authority by which NOIDA Authority was directed to participate in the CIRP Process and file its claim. In the present case, the Appellants were never asked to participate in the CIRP Process and Resolution Professional wrote to the Appellant only after approval of the Resolution Plan by the Adjudicating Authority. The Adjudicating Authority in the case of "Nilesh Sharma, RP" (supra) has held Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 68 the NOIDA Authority to be necessary party in the CIRP Process whereas in the present case in the CIRP process, NODIA Authority was never asked to participate rather information was given to the NOIDA Authority only after the approval of the Resolution Plan. The Adjudicating Authority in the above case....
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.... in the instant case in the light of the ratio laid down by the Hon'ble Supreme Court in the matter of Bikram Chatter & Ors. Vs. Union of India & Ors., (supra). The same is relied upon by the Resolution Professional in his reply. 19. The counsel for NOIDA has heavily relied upon the judgement of Hon'ble Supreme Court in the matter of Municipal Corporation of Greater Mumbai (MGM) Vs. Abhilash Lal & Ors, in Civil Appeal No. 6350 of 2019 in support of his contention that NOIDA authority cannot be asked to become member of CoC. However, the facts of present case are different from those of the above case. In the instant case, the Applicant is seeking participation of NOIDA authority in CIRP to ensure that the said process could go on without any hindrance and objection from any quarter, since NOIDA is a necessary party being owner (Lessor) of the land upon which CD is constructing the project in terms of JDA entered into with Logix (the Lessee). In any case, even otherwise, when NOIDA becomes part of COC to the extent of its dues against CD in terms of JDA, the same shall be protected in terms of the Claim, which it may file before Resolution Professional. 20. To sum up, ....
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....04/2021, this Tribunal had rejected the prayer for filing of claim by the Appellant observing that the Resolution Plans were pending approval before the CoC. This Order has not been challenged and has attained finality. In the meantime, the CoC has approved the Resolution Plan by a majority of 90% votes on 07/05/2021." 54. In view of the factors as noticed above, it is clear that the Judgement of this Tribunal in "Nilesh Sharma, RP" does not help the Respondents in the present case. In "Nilesh Sharma" case, the Adjudicating Authority directed the NOIDA Authority to participate in the CIRP Process and file its claim in the Insolvency Resolution Process whereas in the present case neither the Appellant were asked to participate in the CIRP nor file their claim rather they were informed by the Resolution Professional only after approval of the Resolution Plan. It is further to be noted that the Judgement do not consider the provisions of Section 18 hence can not be held to be a binding precedent holding that assets of a subsidiary can be included in the assets of holding company. We thus are of the view that the Judgement of this Tribunal in "Nilesh Sharma, RP" does not help the Res....
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....d Counsel for the Appellant in the above reference has relied on Judgement of the Hon'ble Supreme Court in "Bacha F. Guzdar, Bombay Vs. Commissioner of Income Tax, Bombay" [(1955) 1 SCR 876] Paragraph 7. It was held by the Hon'ble Supreme Court that shareholder does not acquire any interest in the assets of the company by purchasing shares of company. Following was observed in paragraph 7 of the Judgement: Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 75 "It was argued by Mr. Kolah on the strength of an observation made by Lord Anderson in Commissioners of Inland Revenue v. Forrest that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word 'assets' in the passage quoted above cannot be exploited to warrant the inference that a shareholder,....
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....Pockets/Flats/Plots (in case of plotted development) on the detailed terms and conditions set out in the said approved the name and status of M/s. Earth Towne Infrastructures Pvt. Ltd. on the request of consortium members (as mentioned above), in accordance with the Cluase - C-8 (e) of the brochure of the scheme, to develop and market the project on demarcated plot no. GH-04, Sector-01, GREATER NOIDA measuring 73942.00 sq. mtrs. AMN WHEREAS the lessee is a Speacial Purpose Company comprising of S. No. Name of Member Shareholding Status 1. M/s Earth Infrastrucrure Ltd. 78% Lead Mmeber 2 M/s. Raus Infras Ltd. 11% Relevant Member 3 M/s. Shalini Holdings Ltd. 11% Relevant Member And it has been represented to the Lessor that the Special Purpose Company members have agreed amongst themselves that M/s. EARTH Infrastructure Ltd., having its office at 26, First Floor, Pusa Road, Karol Bagh, New Delhi - 110005 shall remain always be the Lead Member of the Special Purpose Company and whose shareholding in the Special Purpose Company shall remain unchanged till the occupancy/completion certificate of at least one phase of the project is obtained from the less....
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....egrate as whole as though they are merely departments of one large undertaking owned by the holding company. But, the business of a subsidiary is not the business of the holding company (See Gramophone & Typewriter Ltd. v. Stanley, (1908-10) All ER Rep 833 at 837). 256. Subsidiary companies are, therefore, the integral part of corporate structure. Activities of the companies over the years have grown enormously of its incorporation and outside and their structures have become more complex. Multi National Companies having large volume of business nationally or internationally will have to depend upon their subsidiary companies in the national and international level for better returns for the investors and for the growth of the company. When a holding company owns all of the voting stock of another company, the company is said to be a WOS of the parent company. Holding companies and their subsidiaries can create pyramids, whereby subsidiary owns a controlling interest in another company, thus becoming its parent company. 257. The legal relationship between a holding company and WOS is that they are two distinct legal persons and the holding company does not own the assets of t....
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....that Resolution Plan essentially dealt with assets of the Corporate Debtor "JIL" and not that of its subsidiary. From the facts which was noticed in paragraph 180 it was clear that only shareholding of Jaypee Health Care Limited was sought to be divested by JIL which was owning 100% equity shareholding of JHL. The Judgement of Hon'ble Supreme also clearly indicates that only assets of the corporate debtor can be subject to a Resolution Plan. 62. The Judgement of the Hon'ble Supreme Court in above case "Jaypee Kensingoton" supra is also to be noticed on another aspect of the matter. In the above case, the Corporate Debtor was granted lease of the land by Yamuna Expressway Industrial Development Authority which was also constituted under Section 3 of Uttar Pradesh Industrial Area Development Act, 1976. It has provided land for execution of various projects by JAL/JIL under the concession agreement. It was observed by the Hon'ble Supreme that Resolution Plan could have modified the terms of contract but the same could not have been carried out without the approval and consent of the authority concerned. Following has been laid down in paragraph 141, 142 and 142.4: "141. The contrac....
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.... how the rights and obligations of the substituted concessionaire JIL could at all be transferred to another SPV? Looking to the pith and substance of the CA, the said Clause 18.1 has to be applied for creation of any SPV by or on behalf of JIL. 142.1. The other clauses in CA permitting creation of sub-lease could hardly be applied for en bloc transfer of land to the SPVs, as proposed in the resolution plan. The referred Clauses 4.3(d) and 4.3(e) were essentially meant for creation of sub-leases when the land given to the concessionaire for development, or part thereof, was to be sub-leased to the end-user/s. Even in that regard, the provisions were made for the concessionaire to make a request to the land providing agency to execute the lease-deed directly in favour of its subsidiaries, assigns or transferees; and in case the agency and the concessionaire would consider it appropriate, tripartite agreement for sub-lease may be executed. Taking all the relevant clauses together with the substance and purport of CA, it is difficult to countenance that the proposed transfer to SPVs could be treated as an ordinary sub-lease for which, no documentation involving YEIDA would be requi....
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....C with regard to MCGM's interest not being affected, in this court's opinion is insubstantial. SNMC's proposed insolvency plan on the one hand no doubt provided for the liquidation of MCGM's liabilities initially to the tune of 102 crores (later revised to over Rs. Rs.140 crores). However, the provisions of the resolution plan clearly contemplated infusion of capital to achieve its objectives. One of the modes spelt out in the plan for securing capital was mortgaging the land. Initially, no doubt, SNMC stepped into the shoes of SevenHills and assumed its control. What is important to notice is that the corporate restructuring was a way of taking over of the company's liquidation by SNMC as it was not only Seven Hills' project with shares and liquidation of debts, but also the restructuring of the company's liabilities if necessary, by creating fresh debts and mortgage of the land which directly affected MCGM. 35. Section 92 unequivocally prescribes the method whereby MCGM's properties can be dealt with through lease or by way of creation of any other interest. The only mode permitted is through prior permission of the corporation. It is a matter of record that in the....
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....djudicating authority or the NCLAT." 65. Ultimately, the Hon'ble Supreme Court allowed the Appeal and set aside the Order of the NCLT. The above Judgement also fully supports the view that Adjudicating Authority could not have approved the plan implicating the land which was owned by the Appellant in the CIRP Process of the Corporate Debtor. 66. At this stage, we may also notice the provisions of Uttar Pradesh Industrial Area Development Act, 1976. This Act, 1976 was enacted to provide for the constitution of an authority for the development of certain areas in the State into industrial and urban township and for matters connected therewith. The Appellant is an authority constituted under Section 3 of the Act. Section 7 of the Act provides: "the Authority may sell, lease or otherwise transfer whether by auction allotment or otherwise any land or building belonging to the Authority in the industrial development area on such terms and conditions as it may, subject to any rules that may be made under this Act, think fit to impose". 67. The transfer of land thus is statutorily governed and terms and conditions lays down by authority are statutorily protected. Resolution Plan whi....
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....t/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. (vii) No transfer charges will be payable in case of first sale, including the built-up premises on the subdivided plot(s) as described above. However, on subsequent sale, transfer charges shall be applicable on the prevailing rates as fixed by the LESSOR. (viii) Rs. 1000/- shall be paid as processing fee in each case of transfer of flat in addition to transfer charges." 70. The transfer of plot as per terms and conditions of the lease could not have been effected without approval of the Appellant. The Respondent themselves realized that without Appellant transferring the plot no right can be accrued in favour of allottees or SRA that is why the conditions was provided in the Resolution Plan asking the direction to the Appellant to transfer the project land in favour of the SRA or Special Purpose Entity. Thus, Resolution Plan could not have contained clause for transfer of land without there being any approval of the Appellant for such transfer. Further direction to the Appellant to transfer while waiving of its entitlement and charges is clearl....
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....ning four or more apartments, or two or more buildings in any area designated as a block, each containing two or more apartments with a total of four or more apartments in all such buildings; Provided that an independent house constructed in a row with independent entry and exit, whether or not adjoining to other independent houses, shall not constitute a building." 72. Section 4(5) of 2010 Act lays down following: "4. General Liabilities of Promoter- ............ (5) An apartment may be transferred by the promoter to any person only after obtaining the completion certificate from the prescribed sanctioning authority concerned as per building byelaws. The completion certificate shall be obtained by promoter from prescribed authority within the period of two years from the date of sale agreement. Provided that if the construction work is not completed within the stipulated period, with the permission of the prescribed authority : Provided further that if the completion certificate is not issued by the prescribed sanctioning authority within three months of submission of the application by the promoter complete with all certificates and other documents required, the....
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....mation from the Appellant and thereafter only informed about the approval of the Resolution Plan, at no point of time the Appellant was asked to participate in the CIRP Process of the Corporate Debtor. The Resolution Plan which was approved by the Committee of Creditors on 26.08.2019 clearly has dealt with the lease land of the NOIDA Authority. Resolution Professional was well aware that Appellant has its dues on the lease land which have not been paid so far. It was incumbent on the Resolution Professional to inform the Appellant about the Resolution Plan which have been received in the CIRP Process of the Corporate Debtor. The Resolution Professional is an insolvency professional who has been entrusted with various obligations and duties under the I&B Code and the regulations framed thereunder. The Resolution Professional has to take into consideration all liabilities which corporate debtor owns to different and various creditors including government and public authorities. The judgement of the "Nilesh Sharma, RP" (supra) as noticed above indicates that in the said case, application was filed by the association of allottees themselves for impleading the NOIDA Authority which appl....
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....he Appellant that Appellant's dues are not being taken care in resolution plan. The Appellant is also a public authority who is engaged in public functions. Dues of public authority cannot be so casually and negligently dealt with by the Resolution Professional. It is relevant to notice that vide letter dated 18.09.2019 the appellant informed the Resolution Professional about its dues against Towne Infrastructure, the lessee. The Appellant further wrote to RP to intimate the date and proceedings. The RP did not communicate with Appellant nor informed that Resolution Plan has already been approved by CoC dealing with its Land. We are feeling that RP did not reply the letter dated 18.09.2019 since he wanted to conceal from appellant the details of Resolution Plan and proceedings of its approval. 79. In the facts of the present case, we are thus satisfied that the Resolution Professional did not act within the ambit of the Code while certifying that Resolution Plan submitted by Roma Unicon Designex consortium and Alpha Corp Development Private Limited is in accordance with the provisions of the Code. Ans. 5. We answer question no. 5, accordingly. We direct the Registry to forward t....
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....he corporate debtor is carrying out development in the project land is not akin to their knowledge of terms and conditions of Resolution Plan which was submitted in the resolution process of the corporate debtor. Ans. 6. The knowledge by the Appellant of carrying out development by the corporate debtor cannot be read as their consent to transfer the land in favour of the Successful Resolution Applicant or any other person. Question No. 7. 83. From the facts noticed above, it is clear that corporate debtor advertised three projects Earth Towne Infrastructure Pvt. Ltd., Earth Sapphire Court and Earth Tech One. Large number of home buyers have already been allotted flats in the three projects by the Corporate Debtor and huge amount has been received from the allottees of three projects by the Corporate Debtor. Hundreds of crores were taken by the Corporate Debtor from allottees of three projects. With effect from 2016, the Corporate Debtor has abandoned the projects and no development work has been carried out by the Corporate Debtor thereafter. 84. While noticing the facts of the I.A. No. 4533 of 2022 filed by the Association of two projects that is Earth Sapphire Court and Ea....
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....or the Successful Resolution Applicant that is [2011 6 SCC 508] in "NOIDA entrepreneurs Association Vs. NOIDA and Ors.". Hon'ble Supreme Court Company Appeal (AT) (Insolvency) Nos.180, 629 & 630 of 2022 103 in the said Judgement laid down that power vested in the State or in Public Authority should be viewed as a trust coupled with duty to be exercised in all social and public interest. In paragraph 38 to 41, following has been laid down: "38. The State or the public authority which holds the property for the public or which has been assigned the duty of grant of largesse etc., acts as a trustee and, therefore, has to act fairly and reasonably. Every holder of a public office by virtue of which he acts on behalf of the State or public body is ultimately accountable to the people in whom the sovereignty vests. As such, all powers so vested in him are meant to be exercised for public good and promoting the public interest. Every holder of a public office is a trustee. 39. State actions required to be non-arbitrary and justified on the touchstone of Article 14 of the Constitution. Action of the State or its instrumentality must be in conformity with some principle which meets the....
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....tration (Now NCT of Delhi) v. Manohar Lal, (2002) 7 SCC 222; and N.D. Jayal & Anr. v. Union of India & Ors., AIR 2004 SC 867)." 87. The facts which have been brought on record indicate that hundreds of crores have been received from the allottees and allottees are waiting for last several years to receive the possession of the flats whereas projects have not proceeded any further from the year 2016. It is due to these hopes that allottees in their meeting of the CoC approved the Resolution Plan so that Resolution Applicants may come and carry on the projects further. The hope and aspiration of the allottees are fully justified. However, as observed above, Resolution Plan could not have dealt with the land which was leased out by the Appellant without permission of the Appellant. 88. We have to find out ways and means to protect the interest of the allottees which is of paramount importance. The developer has failed to carry out the projects. We have also noticed in the written-submissions filed by the SRA and Home Buyer Association that land holding companies have been struck off from the record of the Registrar of Companies (RoC) after initiation of CIRP Process. We feel that s....
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.... of appellant is obtained for transfer of lease land. 93. The Roma Unicon as well as Alpha Corp shall also be permitted to file resolution plans. 94. The Appellant shall recalculate the dues and communicate to the Resolution Professional and Flat Buyers Associations without charging any penal interest within 15 days. Fresh Resolutions Plans so submitted will be considered and examined by the RP and be submitted before CoC for fresh consideration and approval. The application of Resolution Plan may be filed for approval of the plan, thereafter. 95. In view of the foregoing discussions, we dispose of these Appeals, in following manner: i. The Order dated 05th April, 2021 passed by the Adjudicating Authority, the Order dated 08th June, 2021 passed by the Adjudicating Authority and Order dated 07th December, 2021 passed by the Adjudicating Authority in I.A. No. 401(ND)2017 are set aside. ii. The Appellant is directed to recalculate its dues payable by the respective land holding companies without charging any penal interest and communicate the same to the Resolution Professional and the Flat Buyer Association(s) of three projects within 15 days of this order. iii. The appell....