TaxTMI 
TaxTMI 
2024 (9) TMI 329
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....erties Private Limited, KGK Reality (India) Pvt. Ltd., LICHFL Trustee Company Private Limited [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. A.N. Ray, Sr. Advocate with Mr. Gaurav H. Sethi, Advocates For the Respondents : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Nicholas Choudhury, Mr. Kartik Bhatnagar and Mr. Akash Chatterjee, Advocates for LICHFL/CoC. Mr. Tishampati Sen, Ms. Riddhi Sancheti, Mr. Ashish Parwani, Mr. Dikshat Mehra, Mr. Anurag Anand, Mr. Mukul Kulhari and Ms. Geetika Mahajan, Advocates for R-3 For the Appellant : Mr. Gaurav H. Sethi, Mr. Deeptanshu Chandra and Mr. Rahul Pawar, Advocates For the Respondents : Mr. Dhaval Deshpande, Advocates for R-1/CoC. Mr. Tishampati Sen, Ms. Riddhi Sancheti, Mr. Ashish Parwani, Mr. Dikshat Mehra, Mr. Anurag Anand, Mr. Mukul Kulhari and Ms. Geetika Mahajan, Advocates for R-2. Mr. Abhijeet Sinha, Sr. Advocate with Mr. Nicholas Choudhury, Mr. Kartik Bhatnagar and Mr. Akash Chatterjee, Advocates for R3/(LICHFL) JUDGMENT ( Hybrid Mode ) Per: Barun Mitra, Member (Technical) The present two appeals have been filed under Section 61 of Insolvency and Bankrup....
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.... 1575 of 2022 before the Adjudicating Authority for its approval. The Appellants had also moved IA No. 1569 of 2022; IA No. 2055 of 2022 and IA No. 2214 of 2022 objecting to the approval of the resolution plan by the CoC. The Adjudicating Authority allowed IA No. 1575 of 2022 and approved the resolution plan. Aggrieved with the approval of the resolution plan by the Adjudicating Authority, the present appeals have been preferred by the Appellants. Since the pleadings and facts in CA(AT)(Ins) No. 751 of 2023 and CA(AT)(Ins) No. 717 of 2023 largely overlap, we shall refer to the pleadings and facts in CA(AT)(Ins) No. 751 of 2023 for deciding these two appeals. However, in respect of certain specific pleadings made in CA(AT)(Ins) No. 717 of 2023, the same would also be taken into consideration and dealt appropriately. 3. Making his submissions, the Ld. Sr. Counsel for the Appellants submitted that the Adjudicating Authority had erred in considering the I.A. 1575 submitted by the RP seeking approval of the resolution plan of Respondent No.3 without deciding IA No. 1569 of 2022; IA No. 2055 of 2022 and IA No. 2214 of 2022 filed by them in which they had raised objections to the resol....
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....as vehemently contended that the decision of the CoC in this case was not a collective and consultative decision but more of a unilateral decision of Respondent No.2 thrusted upon the CoC to recover its dues without regard for the revival of the Corporate Debtor. While admitting that the Hon'ble Apex Court in a catena of judgements has upheld the supremacy of the commercial wisdom of the CoC, it was pressed hard that the hands-off approach to the exercise of commercial wisdom of CoC was premised in all cases where the CoC comprised of more than one member and had many other heads to deliberate upon the matter. It was contended that the present is a case of oppression of minority stakeholders by the dominant member of the CoC. Hence, despite commercial wisdom of CoC being paramount, in the present case, interference was warranted as CoC overstepped its mandate but the Adjudicating Authority failed to discharge its obligations. In support of their contention, reliance was placed on the judgment of the Hon'ble Supreme Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd. (1997) 1 SCC 579 wherein it was held that where the Company Court is called upon to sanction a scheme of compromi....
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....A provided that all homebuyers alongwith rehab tenants are to receive their flats within the stipulated time. On the issue of increase in TDR and additional FSI availability, it was contended that all the PRAs had the opportunity to factor in this increase while formulating their plans and there was no deliberate ploy to deny the passing on of these benefits to the home-buyers. 8. It has also been contended that the business decision of CoC has been given primacy in the statutory construct of IBC. There is an intrinsic assumption that the financial creditors take an informed decision on the viability of the Corporate Debtor and act on the basis of a thorough examination of the proposed resolution plan and its feasibility for the revival of the Corporate Debtor and hence not justiciable. As long as the mandatory, statutory requirements have been met and duly complied with, the Adjudicating Authority is not empowered to verify whether the CoC has exercised its commercial wisdom in a prudent manner or whether the CoC has acted in a just and fair manner. The Adjudicating Authority cannot substitute its views in place of the commercial wisdom of the CoC as it goes against the legal p....
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.... are protected before placing the resolution plan of the SRA to the CoC for its approval. The RP also failed to make the CoC aware that the resolution plan submitted by SRA-Respondent No. 3 did not pass on the benefit of FSI and TDR to the home buyers. It was also contended that the resolution plan of the SRA only maximised their own benefits while putting the burden of additional payments on the home-buyers. Since the plan of the Aanya was more beneficial to both the home buyers and Respondent No.2, the Appellants had approached Respondent No. 2 by way of letter dated 28.04.2022 to vote in favour of Aanya. However, Respondent No. 2 being the dominant of CoC not only did not reply to the letter but instead voted in favour of the SRA. The 17th CoC meeting which approved the resolution plan is also silent about the representation dated 28.04.2022 and does not mention about other CoC members who voted against the resolution plan of the SRA. It is also their contention that RP and Respondent No. 2 had colluded trying to unduly benefit the SRA at the cost of the minority homebuyers. It has been vehemently contended that the CoC ignored the plea of the home-buyers that the plan of Aanya ....
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....n of the RP that the parameters of additional FSI and TDR was equally known to all PRAs and it was clearly the business decision of the PRAs on how they wished to pass on these additional benefits in their resolution plans. It is, therefore, misconceived on the part of the Appellant to blame the RP on this score. 15. This brings us to the contention of the Appellants that RP and Respondent No. 2 had colluded so as to unduly benefit the SRA at the cost of the minority home-buyers. The Appellants to buttress their contention, mentioned that the Appellants had sent a letter dated 28.04.2022 to the Respondent No.2 to vote in favour of Aanya since their plan was beneficial to both the Home-buyers as well as Respondent No. 2. On close scrutiny, it becomes clear that the representation sent by the home-buyers on 28.04.2022 urging Respondent No. 2 to cast their vote in favour of Aanya was submitted after the cut-of date fixed for voting on the resolution plan which happened to be on 24.04.2022. It is also pertinent to note that the Appellants till the stage of voting also did not make a murmur of mention in respect of any such written representation. Hence, submission of any representat....
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....nts was necessary to ensure the project viability besides creating parity among all purchasers, requiring those who paid less initially to contribute more to align with market rate. It has been emphatically asserted that the resolution plan of the SRA was therefore reasonable and fair. While on the one hand, it ensured that the home buyers were finally able to take possession of the units promised to be allotted to them on the other hand it also provided for an exit option for home buyers who wished to withdraw from the project on receipt of due refunds. The resolution plan of the SRA gave the home buyers two options which was either to accept possession according to the resolution plan or opt for refund of the principal amount in 24 monthly instalments. The SRA has therefore contended that this clearly demonstrates the fairness of the resolution plan and the viability of the plan in addressing the interest of all the stakeholder while reviving the project. 18. This now brings us to the role played the CoC in the exercise of its commercial wisdom in the scrutiny of the plans in the light of the contentions raised by the Appellants that it was 'commercial folly' and not display o....
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....KGK Realty (India) Private Limited: Revised Resolution Plan dated April 22, 2022 along with the addendum dated April 24, 2022 received through email. b. Ashdan Properties Private Limited' and 'NNP Buildcon Private Limited': Resolution Plan dated April 22, 2022 along with the addendum dated April 24, 2022 received through email. c. Aanya Real Estate Private Limited: Resolution Plan dated April 22, 2022 along with the addendum dated April 24, 2022 received through email. Further, the RP received the Evaluation Matrix from the members of the CoC with their scoring on all three Resolution Plans. ..... ( Emphasis supplied ) 19. The above minutes of the 17th CoC meeting clearly shows that all the three PRAs were given equal opportunity by the CoC to present their respective resolution plans. The Authorized Representative of the creditors in class were also present in the deliberations. Furthermore, we notice from the above minutes, that the decision of the CoC to approve the plan of the SRA was preceded by extensive negotiations with all PRAs; holding of thorough and comparative analysis of all plans of the PRAs against a structured evaluat....
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....court of law. No court of law would ever countenance any scheme of compromise or arrangement arrived at between the parties and which might be supported by the requisite majority if the Court finds that it is an unconscionable or an illegal scheme or is otherwise unfair or unjust to the class of shareholders or creditors for whom it is meant. Consequently, it cannot be said that a Company Court before whom an application is moved for sanctioning such a scheme which might have got the requisite majority support of the creditors or members or any class of them for whom the scheme is mooted by the company concerned, has to act merely as a rubber stamp and must almost automatically put its seal of approval on such a scheme. It is trite to sav that once the scheme acts sanctioned by the Court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the Company Court while putting its seal of approval on the scheme concerned placed for its sanction...." 29. However further question remains whether the Court has jurisdiction like an appellate authority to minutely scrutinise the scheme and ....
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....ow. The Hon'ble Supreme Court in K. Sashidhar v. Indian Overseas Bank & Ors. 2019 SCC Online SC 257 has observed the following: "5.2. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensur....
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....t the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code." The Hon'ble Supreme Court in Civil Appeal Nos. 1811-1812 of 2022 titled as Vallal RCK v. M/s Siva Industries and Holdings Ltd. and Ors. has held as follows: "26. It is thus clear that the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. We are therefore of the considered view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC." 24. It is, however, the contention of the Appellants that the above judgments of the Hon'ble Supreme Court which the Respondents have relied upon to assert the supremacy of the commercial wisdom of the CoC are not applicable in the present matter since in the present case the CoC was a single member CoC. We are not in a position to agree with this misplaced interpretation of the Appellants sinc....
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....Resolution Process for Corporate Persons) Regulations, 2016. When we look at the impugned order at para 3.3 and para 5 we find that this aspect has been fleshed out therein which is as reproduced below: "Para 3.3 ............... d. The Resolution Plan provides for - i. The payment to the operational creditors; ii. The payment to the financial creditors who did not vote in favour of the resolution plan; iii. The management of the affairs of the corporate debtor; iv. The implementation and supervision of the resolution plan; e. The Resolution Plan does not contravene any of the provisions of the law for the time being in force; f. The Resolution Plan is feasible and viable, according to the CoC and approved by 76.35% vote; g. The Resolution Professional made a determination if the Corporate Debtor has been subjected to any transaction of the nature covered under sections 43, 45, 50 or 66, before the one hundred and fifteenth day of the Insolvency Commencement date, under intimation to the Board; h. The amount due to the operational creditors under the Resolution Plan has been given prio....