TaxTMI 
TaxTMI 
2026 (7) TMI 375
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....ishka Sharma and Ms. Lavanya Pathak, Advocates for Homebuyers. Mr. Krishnendu Dutta, Sr. Advocate with Mr. Prithu Garg, Ms. Alina Merin Mathew, Mr. Ashutosh Arvind Kumar and Mr. Aryan Bhat, Advocates. JUDGMENT INDEVAR PANDEY, MEMBER (T) COMPANY APPEAL (AT) (Ins.) No. 949 OF 2023 This Appeal has been preferred by Assets Care & Reconstruction Enterprise Limited ("ACRE")/Appellant, acting in its capacity as trustee of ACRE-122 Trust and as the sole secured financial creditor of Arena Superstructures Private Limited ("Corporate Debtor"), challenging the order dated 19.07.2023 passed by the Learned National Company Law Tribunal, Principal Bench, New Delhi, (Adjudicating Authority) in C.P. (IB) No. 875 of 2020. By way of the said order, the Learned Adjudicating Authority approved the Resolution Plan of Purvanchal Projects Private Limited (Successful Resolution Applicant") /Respondent No.2 submitted by Resolution Professional/ Respondent No.1 vide I.A. No. 3392 of 2022 and simultaneously rejected the objections raised by the Appellant in I.A. No. 3556 of 2022 against the said Resolution Plan. The Homebuyers who are Financial Creditor in Class have been arrayed as Respondent....
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....porate Insolvency Resolution Process and alleged illegalities in approval of the Resolution Plan. The Appellant, being the original financial creditor at whose instance CIRP against CD was initiated is aggrieved by the dismissal of its objections and approval of the Resolution Plan, has preferred the present Appeal. In this Appeal. RP is the Respondent No.1; SRA is the Respondent No.2; Assets Care and Reconstruction Enterprises (ACRE) is the Respondent No.3; and Creditors in Class (Homebuyers) are Respondent No.4 in this appeal. In addition, two registered valuers have also been arrayed as Respondents, viz. Mr. Ashish Kumar/Respondent No.5 and Mr. Anil Saxena/Respondent No.6. 4. The appellant has made the following prayers in the Appeal: Relief sought: A. Set aside and quash the Impugned Order dated 19.07.2023 passed by the Hon'ble National Company Law Tribunal, Principal Bench in IA No. 3392 of 2021 in C.P. (IB) 875 of 2020. B. Direct the Ld. Adjudicating Authority to adjudicate and dispose of the Restoration Application preferred by the Appellant after giving due consideration to the material facts placed before the Ld. Adjudicating Authority as ....
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....ASE 8. Brief facts of the case relevant to disposal of these three appeals are as follows: (i) The Corporate Debtor - Arena Superstructures Private Limited, is a company engaged in the business of construction, development, purchase and sale of residential and commercial properties. The Corporate Debtor was also the promoter of a residential real estate project known as "Lotus Arena-I", situated at Plot No. SC-01/A2, Sector-79, Noida, Uttar Pradesh. (ii) The Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor commenced pursuant to a petition filed under Section 7 of the Code by Dhankalash Distributors Private Limited, an unsecured financial creditor of the Corporate Debtor. The Ld. Adjudicating Authority, by an order passed on 29.10.2020 in C.P. (IB) No. 875 of 2020, admitted the said petition and initiated CIRP against the Corporate Debtor. Mr. Pawan Kumar Singhal was appointed as the Interim Resolution Professional. (iii) Subsequently, by an order dated 09.06.2021, the Adjudicating Authority replaced the Interim Resolution Professional and appointed Respondent No.1, Mr. Viswanadha Sarma, as the Resolution Professional of the....
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....e homebuyers constituting the financial creditors in class. Later on, PNBHFL by an Assignment Agreement dated 25.04.2022, assigned its debt in favour of the ACRE. Consequently, the Appellant stepped into the shoes of the assignor financial creditor and acquired membership in the Committee of Creditors with a voting share of 28.60%. ACRE also became the sole secured financial creditor of the Corporate Debtor with an admitted debt amounting to Rs. 200,27,42,110/-. (viii) In the 16th meeting of the Committee of Creditors held on 18.05.2022, the Resolution Professional discussed the process for submission of revised resolution plans and proposed 16.06.2022 as the last date for receipt of such revised plans. The said proposal was approved by the Committee of Creditors. (ix) In the 17th meeting of the Committee of Creditors convened on 17.06.2022, the resolution applicants were invited to present their plans before the Committee of Creditors. During these deliberations, ACRE raised concerns regarding the evaluation matrix, treatment of dissenting financial creditors and the necessity of determining compliance with Section 30(2)(b) of the Code before tabling the plans fo....
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....alash with 0.288% voting rights voted in favour of the Resolution Plan submitted by ACE Infracity. (xiii) Thereafter, the Resolution Professional filed I.A. No. 3392 of 2022 before the Learned Adjudicating Authority under Sections 30(6) and 31 of the IBC seeking approval of the Resolution Plan submitted by Purvanchal Projects Private Limited (SRA). Simultaneously, ACRE filed I.A. No. 3556 of 2022 objecting to approval of the plan on the ground that the same failed to provide the Appellant its minimum statutory entitlement as a dissenting financial creditor and instead sought to compel the Appellant to recover substantial dues from third-party debtors. (xiv) The Insolvency and Bankruptcy Board of India also intervened in the proceedings through I.P. No.4 of 2023 and opposed ACRE's interpretation regarding entitlement of dissenting financial creditors under the Code. (xv) Ultimately, by the Impugned Order dated 19.07.2023, the Ld. Adjudicating Authority approved the Resolution Plan submitted by Purvanchal Projects Private Limited, allowed the Approval Application filed by the Resolution Professional and rejected the objections filed by ACRE, Dhankalash and ....
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....ecured creditors relinquishing their security interest rank immediately after CIRP costs and pari passu with workmen's dues. It is submitted that the Explanation to Section 53 further clarifies that where debts rank equally, either all debts are to be paid in full or, if insufficient funds are available, distribution must occur in equal proportion within the same class. 13. It is submitted that ACRE and the workmen belong to the same class of recipients under Section 53, since ACRE is the sole secured financial creditor of the Corporate Debtor. Consequently, after deduction of CIRP costs, the entire liquidation value ought to have been distributed proportionately between ACRE and the workmen. The liquidation value of the Corporate Debtor, as determined by the Registered Valuers on 29.10.2020, was Rs. 151,00,41,336/-. After deducting estimated CIRP costs of approximately Rs. 6 crores, the remaining liquidation value comes to Rs. 145,00,41,336/-. Out of this amount, the workmen's entitlement is only Rs. 8,49,978.04, whereas ACRE's entitlement works out to Rs. 144,91,91,357.95, which represents 72.36% of its admitted debt. 14. ACRE submits that despite the aforesaid statutory en....
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....s after execution of agreements for sale. However, the provision itself contemplates the possibility of such mortgages being created and merely safeguards the rights of homebuyers by ensuring that such mortgage does not prejudice their interests. The provision nowhere invalidates the mortgage itself or extinguishes the rights of the mortgagee. 19. It is submitted that under the present Resolution Plan, the interests of homebuyers are already protected since the SRA has undertaken to complete the Project and deliver possession of units to allottees. Therefore, no conflict exists between the rights of homebuyers and the statutory entitlement of ACRE as a dissenting secured financial creditor. Furthermore, the valuation reports already factor in the costs of construction and completion of the Project while arriving at the liquidation value. Consequently, payment of ACRE's lawful entitlement would not adversely affect homebuyers in any manner. 20. Without prejudice, ACRE further submits that even assuming that its mortgage rights over 858 sold units stand affected by Section 11(4)(h) of RERA, ACRE nevertheless continues to possess hypothecation rights over receivables from those ....
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.... computes expected receivables from the Project at Rs. 950,15,73,994/-, out of which Rs. 387,21,25,141/- had already been received from homebuyers. After considering construction costs of Rs. 360,23,65,761/-, the fair market value was arrived at Rs. 202,70,83,092/- and the discounted liquidation value at Rs. 141,89,58,164/-. These figures also fully account for completion costs and homebuyers' interests. 25. ACRE submits that the valuation reports fundamentally negate the Respondents' contention that ACRE's security interest is confined to merely 25.64% of the Project. The valuers deducted construction costs for the entire Project while determining liquidation value, rather than restricting such deductions only to unsold units. Therefore, it would be wholly inconsistent and inequitable to burden ACRE's valuation with liabilities relating to the entire Project while simultaneously restricting its security interest to a small fraction thereof. It is further submitted that the RP's subsequent deduction of the 858 sold units amounts to impermissible "double dipping" designed solely to artificially depress the value of ACRE's security interest. 26. The counsel submits that Clause ....
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....ditors ordinarily deserves deference, the same is not absolute and cannot override mandatory statutory protections granted under Section 30(2)(b) of the IBC. Reliance is placed upon the judgment of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, (2020) 8 SCC 531, wherein it was expressly held that judicial review is permissible to ensure that the commercial decision of the CoC remains within the four corners of Section 30(2) of the Code. 31. It is further submitted that the discretion vested in the CoC under Section 30(4) remains subject to compliance with Section 30(2)(b). The Hon'ble Supreme Court in Essar Steel has categorically held that while the CoC enjoys discretion regarding feasibility and viability of plans and distribution mechanisms, such discretion remains subordinate to compliance with statutory safeguards protecting stakeholders. The use of the expression "shall" in Section 30(2)(b) clearly indicates the mandatory nature of the provision, whereas Section 30(4) merely uses the expression "may". Hence, a Resolution Plan that violates the statutory entitlement of a dissenting financial creditor can and ought to ....
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....loan facilities were extended by Punjab National Bank Housing Finance Limited ("PNBHFL") under a Composite Loan Agreement dated 08.03.2017 in favour of the Corporate Debtor, Fest Homes Developers Private Limited and Villa Stone Propbuild Private Limited as borrowers and co-borrowers. On the insolvency commencement date, an amount of Rs. 113,15,56,725.92/- was outstanding under Facility-I and an amount of Rs. 90,84,40,732.48/- was outstanding under Facility-II. The said facilities were secured through various securities including mortgage over the project land of the Corporate Debtor comprising land admeasuring 50,000 sq. meters along with structures thereon situated at Sector-79, Noida, as well as mortgage over land admeasuring 20,863 sq. meters situated at Sector-150, Noida, belonging to the co-borrower i.e. Villa Stone Propbuild Private Limited. Apart from this, hypothecation over project receivables; pledge of shares; personal guarantees; corporate guarantees; and DSRA of Rs. 10 Crores were also created in favour of the lender. Therefore, it is evident that apart from the project land of the Corporate Debtor, additional security in the form of co-borrower's land was also availab....
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.... of the security interest, only the secured portion can rank under Section 53(1)(b), whereas the balance unpaid portion would necessarily fall within the lower priority category contemplated under Section 53(1)(e). 40. He further submitted that Section 53(1)(e)(ii) itself supports the aforesaid interpretation since it specifically refers to "any amount unpaid following the enforcement of security interest". Thus, the statutory framework itself recognizes that the secured creditor may recover only to the extent of realizable security value and the remaining unpaid debt stands relegated to a lower category. The Insolvency Law Committee Report dated 20.02.2020 also recognizes and clarifies this position in clauses 7.1 to 7.4 thereof. 41. Ld. Counsel submitted that the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. has categorically held that Section 30(2)(b) refers to Section 53 only for ensuring minimum payment and does not restrict the Committee of Creditors from classifying creditors as secured or unsecured and distributing amounts on the basis of the value of their security interests. The Hon'ble Supreme Court furthe....
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....al Buildwell Private Limited, wherein it has been held that flats allotted to homebuyers do not form part of the assets of the Corporate Debtor for the purpose of determining liquidation value payable to dissenting secured creditors. 46. He submits that in light of the aforesaid legal position, the Resolution Professional correctly computed the value of ACRE's security interest. The project consisted of 1080 flats/units, out of which 858 flats had already been allotted to homebuyers as on the insolvency commencement date. Since the project was only around 30% complete, conveyance deeds had not yet been executed. However, as on the date of creation of mortgage, 806 units having an area of approximately 15,21,415 sq. ft., representing nearly 74.36% of the total project area, had already been allotted. Therefore, only 25.64% of the project area comprising 274 flats remained unsold as on the date of creation of security interest. Consequently, the value of ACRE's security interest was correctly computed at Rs. 38,71,74,598.55/-, being 25.64% of the total liquidation value of Rs. 151,00,41,336/-. 47. It is submitted that the ACRE cannot seek to independently rely upon project rece....
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..... It is also pertinent to mention that the actual CIRP cost in the present matter is Rs. 13,86,60,438/-. 52. Ld. Counsel finally submits that in view of the aforesaid facts and settled legal position, the Resolution Plan approved by the Learned Adjudicating Authority is fully compliant with the provisions of the Insolvency and Bankruptcy Code, 2016 and ACRE has failed to establish any violation of Section 30(2)(b) or Section 53 of the Code and seeks dismissal of the Appeal. Submissions of Successful Resolution Applicant/ Respondent No. 2 53. Ld. Sr. Counsel Mr. Krishnendu Dutta appearing for SRA submitted that the entire challenge raised by the Appellant/ ACRE proceeds on a fundamentally incorrect assumption that its security interest extends over the whole project including units already allotted to homebuyers. It was submitted that such a contention is directly contrary to the provisions of the Real Estate (Regulation and Development) Act, 2016 ("RERA"), settled judicial precedents, and even the Appellant's own documents. It was contended that Section 11(4)(h) of RERA expressly prohibits a promoter from creating any mortgage or charge over apartments, plots or buildings ....
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....of homebuyers over allotted units are superior to the rights claimed by secured creditors. It was pointed out that the aforesaid judgment has already been affirmed by the Hon'ble Supreme Court in SLP (Civil) No. 1861-1871/2022 vide order dated 14.02.2022. Therefore, according to the Respondent, the Appellant cannot claim any enforceable security interest over units already allotted to homebuyers. 57. Ld. Counsel further submits that even PNBHFL, which was the predecessor-in-interest of ACRE, had itself acknowledged and admitted in the SARFAESI notice issued to the Corporate Debtor that its security interest extended only to "unsold flats". It was argued that the Appellant is therefore estopped from now taking a contrary position before this Tribunal. 58. Ld. Counsel submitted that the project in question consists of a total of 1080 flats/units. It was submitted that as on the Insolvency Commencement Date, out of the total 1080 units, 858 flats had already been allotted to homebuyers. It was further submitted that although conveyance deeds had not yet been executed in favour of homebuyers because the project was only around 30% complete, the absence of registered conveyance de....
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....llant cannot seek double counting of receivables for enhancing its liquidation entitlement. 63. Ld. Counsel fully endorsed the contention of RP regarding applicability of Section 4(2)(l)(D) of RERA in this case. He submitted that under the Uttar Pradesh Real Estate Project (Maintenance and Operation of Separate Bank Account) Directions, 2020, the entire 100% receivables of the project are required to be maintained in a "separate bank account", which is specifically designated as a "no-lien account". It was argued that such statutory protection itself defeats the Appellant's claim that receivables can be separately enforced or appropriated in satisfaction of its debt. It was therefore submitted that the provisions of RERA would override any contractual hypothecation arrangement relied upon by the Appellant. According to the Respondent, the Appellant cannot enforce any alleged charge over receivables in a manner contrary to the statutory mandate of RERA. 64. Ld. Counsel submitted that Section 30(2)(b) of the IBC proceeds on a deeming fiction that the Corporate Debtor stands liquidated on the Insolvency Commencement Date for the purpose of determining liquidation value. It was a....
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....bunal the fact that it is already in possession of substantial third-party securities. It was submitted that PNBHFL, being the predecessor-in-interest of ACRE, had already taken symbolic possession under the SARFAESI Act of the co-borrower's land valued at approximately Rs. 96.90 crores. Therefore, apart from receiving Rs. 70 crores under the Resolution Plan, ACRE also continues to enjoy enforcement rights over additional valuable securities. It was contended that ACRE is thus positioned to substantially recover, if not entirely recover, its outstanding debt. 69. It is submitted that the scheme of Sections 52 and 53 of the IBC clearly demonstrates that a secured creditor is entitled to priority only to the extent of the value of its actual security interest. It was argued that any remaining unpaid debt after exhaustion of the value of the security interest would necessarily rank lower under Section 53(1)(e)(ii). Therefore, ACRE cannot insist that its entire admitted claim must rank equally as secured debt irrespective of the actual value of the underlying security available with it. He submitted that a plain reading of Section 53(1)(e)(ii) itself provides that "any amount unpaid....
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....ch is a beneficial legislation enacted specifically for the protection of homebuyers. The Counsel submitted that the rights of homebuyers stand statutorily protected under Section 11(4)(h) of RERA and any attempt by ACRE to divert the receivables from homebuyers towards satisfaction of its claims would defeat the entire statutory scheme meant for safeguarding allottees. 74. Ld. Counsel supported the contention of RP that the security interest of ACRE could not be more than National Bank Housing Finance Limited ("PNBHFL"), predecessor of ACRE. In this regard, he invited attention to Section 13(2) notice of SARFAESI Act, which clearly stipulates that the secured assets comprised only 171 unsold units and expressly excluded the 909 flats already sold to homebuyers. 75. The Ld. Counsel submitted that under Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), the minimum amount payable to a creditor is required to be computed with reference to the amount receivable under Section 53 "in the event of liquidation" and not on the basis of an assumed or hypothetical liquidation value. It was submitted that the only meaningful asset available with the Corporate Debtor i....
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....n on grounds of inadequate allocation when it had earlier supported another plan offering it substantially lower value. 80. It was further submitted that the Hawelia plan was financially weak and commercially unviable. The Counsel pointed out that Hawelia proposed to spend approximately Rs. 40 crores less towards construction while simultaneously projecting sales approximately Rs. 60 crores higher than those estimated by Purvanchal. This substantial divergence of nearly Rs. 100 crores between lower construction expenditure and significantly inflated projected sales raised serious doubts regarding the viability and feasibility of the Hawelia plan. 81. The Counsel submitted that Purvanchal proposed a construction budget of Rs. 337 crores as against Hawelia's Rs. 299.45 crores, indicating a more robust commitment towards project completion. Purvanchal also projected more realistic sales estimates and proposed completion within 36 months as compared to 48 months proposed by Hawelia. It was further submitted that Purvanchal possessed significantly greater experience, having completed 21 projects including projects in Greater Noida, whereas Hawelia had experience of only two low-co....
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....nd the Appellant in second appeal, has contended that the Ld. Adjudicating Authority proceeded to approve the Plan without adjudicating the Appellant's Restoration Application (RA No.111 of 2023) and without considering the objections raised by the Appellant in IA No. 3986 of 2022. The Appellant's application had been dismissed for non-prosecution on 04.07.2023 solely due to a technical glitch during the virtual hearing, despite the Appellant having diligently appeared on all previous dates. Pursuant to the directions of the Adjudicating Authority, the Appellant filed written submissions on 18.07.2023; however, the Resolution Plan was approved on 19.07.2023 without hearing or deciding the Restoration Application. Consequently, the Appellant was condemned unheard, causing grave prejudice and rendering the Impugned Order liable to be set aside for violation of the principles of natural justice. 86. Ld. Counsel further submits that the approved Resolution Plan is non-compliant with Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016. Being a dissenting Financial Creditor, the Appellant was entitled to receive at least the amount payable under the liquidation waterf....
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.... reduction indicate that the valuation exercise was altered to suit the SRA and reduce the minimum liquidation value payable to dissenting Financial Creditors. 91. It is further contended that the RP abused his powers by discarding the existing resolution process and issuing a fresh Form-G after replacing the erstwhile IRP, despite receipt and opening of Resolution Plans from four applicants. The SRA ultimately submitted its Resolution Plan, only after repeated extensions granted at the instance of homebuyers and with the support of the RP. Such conduct demonstrates favoritism and accommodation towards the SRA to the detriment of other Resolution Applicants. 92. Ld. Counsel further alleges collusion between the RP, representatives of the homebuyers and the SRA throughout the CIRP process. Fresh Form-G was issued on the insistence of homebuyers despite objections from other Financial Creditors. Requests by homebuyers for reassessment of valuation and facilitation of the SRA's participation were entertained and acted upon. Objections raised by the Appellant and ACRE were consistently ignored or dismissed without proper consideration. 93. Ld. Counsel submits that exorbita....
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....btor under Section 30(2)(b) read with Section 53 of the Code. According to ACRE, the Resolution Plan provides only Rs. 70 Crores and therefore the Plan is contrary to the provisions of the Code. 99. On the other hand, the Respondents have contended that the entitlement of ACRE cannot exceed the value of its underlying security interest. It has been submitted that the Appellant's security interest was restricted only to the unsold units of the project and certain additional securities and therefore the amount of Rs. 70 Crores provided under the Resolution Plan is substantially higher than the liquidation value attributable to the Appellant's actual security interest. 100. ACRE claims a larger entitlement under the Resolution Plan on the basis that its security interest covered the entire project of the Corporate Debtor. Therefore, before examining the amount payable to the Appellant, it is necessary to first determine the actual extent of the security interest available in its favour. 101. The record shows that ACRE is not the original lender. The loan was originally granted by Punjab National Bank Housing Finance Limited ("PNBHFL") and was subsequently assigned to ACRE. Th....
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.... unsold when the mortgage was created. 105. The project consisted of 1080 units in total. By the Insolvency Commencement Date, 858 units had already been allotted to homebuyers. It is true that conveyance deeds had not been executed, because the project was only about 30% complete. However, the fact remains that a substantial majority of the units had already been allotted before the creation of the security interest and before commencement of CIRP. 106. The value of a secured creditor's security interest can only be determined on the basis of the assets that were actually available as security. Since only 274 flats remained unsold when the mortgage was created, the Resolution Professional rightly proceeded on the basis that only those flats formed part of the Appellant's security interest. 107. In this regard, we also take note of Section 11(4)(h) of RERA which is extracted below: - "11. Functions and duties of promoter- (4) The promoter shall- (h) after he executes and agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, as the case may be, and i....
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....with the date of BBA. Annexure R-1 to the reply contains the details of BBA of Ground Floor and other Floors with the name of allottees and the date of BBA. All the BBA, which have been captured in Annexure R-1 are prior to September 2010. The details of areas sold through Conveyance Deed has also been given, which areas have already taken note by the Valuers. The stand taken by the RP and Resolution Applicant is that liquidation value of the Appellant has been treated as NIL, since on the date, the valuation was done, there was no super area left, which could be monetized for the Corporate Debtor. The Corporate Debtor has sold excess area both by Conveyance Deed and BBA. We are satisfied that by the BBA, executed prior to September 2010, when the charge and mortgage was created by Promoters in the project Universal Business Park, all areas were sold. The Valuers, technically were right in taking a view that those areas, which has been conveyed by Promoters, they do not have ownership, however, the Valuers proceeded to take into consideration the areas with regard to which no Conveyance Deed was executed to be the assets of the Corporate Debtor. 24. When we look into reali....
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....various rights under the agreement as well as under RERA. The agreement entered into at the time of allotment is the basis of the investment in the projects made by homebuyers, it cannot be said to be a scrap of paper. It is their valuable investment which is required to be protected and cannot be permitted to be Company Appeal (AT) (Insolvency) No. 661 of 2021 20 taken away by builder or secured creditors in an illegal manner. The provisions of Section 17 of the Registration Act no doubt provide that a document of title requires compulsory registration, no doubt registered document has to be executed that also has to be taken care of by the Court so as to protect the interest of homebuyers." 26. In the above case before the Hon'ble Supreme Court, the Banks, who had security interest contended that they have agreements with the Promoters. In reference to the claim of the Banks regarding mortgage, Hon'ble Supreme Court had observed that in the facts and circumstances of the case, rights or interest of the allottees are not affected by the mortgage created by the Bankers. In paragraph 136 of the judgment, following has been held: "136. The learned Senior Counsel on ....
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....49 that since the units have already been sold, are no longer the asset of the Corporate Debtor, hence, the liquidation value of the Universal Business Park project is NIL. The Adjudicating Authority has rightly come to the above conclusion after considering the facts and circumstances of the present case. We fully concur with the observations made by the Adjudicating Authority in paragraph 49." 112. The judgment of this Appellate Tribunal in Kotak Mahindra Bank (supra) takes into consideration the judgment of Hon'ble Supreme Court in Bikram Chatterji and clearly lays down that security interest of any lender in housing projects would be limited to unallotted units/ area. The allotments made by Builder-Buyer Agreement (BBA) would be outside the purview of security interest of the lender. The judgment also notes the effect of Section 11(4)(h) of the RERA Act on the relative rights of Homebuyers, Builders and Financial Institutions having mortgage on such properties. We are of the view that the ratio laid down by these judgements squarely applies to the facts of the present case. 113. The record before us shows that out of 1080 units in the project, 806 units had already been a....
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....im is approximately Rs. 200.27 Crores, and since it is the sole secured financial creditor of the Corporate Debtor, it should receive the entire liquidation value of the Corporate Debtor after subtracting the CIRP costs. 117. However, the amount of debt and the value of the security interest are two different concepts. A secured creditor can claim priority only to the extent of the security actually available in its favour. Merely because the admitted debt is larger than the liquidation value does not automatically entitle the creditor to the entire liquidation value irrespective of the extent of its security. In this regard we take notice of Section 52(9) of the code, which is extracted below: 52. Secured creditor in liquidation proceedings. - .....(9) Where the proceeds of the realisation of the secured assets are not adequate to repay debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquidator in the manner specified in clause (e) of sub-section (1) of section 53. Section 52(9) clearly lays down that in liquidation proceedings, where the secured creditor decides to enforce its security interest outside liq....
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....k governing real estate projects. Receivables generated from homebuyers are connected with the completion of the project and cannot be appropriated in a manner contrary to the regulatory framework applicable to such projects under RERA. Therefore, the alleged charge over receivables cannot be viewed in isolation from the obligations attached to those funds. 122. The actual treatment provided to the Appellant under the approved Resolution Plan is also relevant. Clause 7.3(iii)(A)(a) to (d) records the debt and security interest of ACRE. Clause 7.3(iii)(A)(e) provides for payment of Rs. 70 Crores to ACRE in four instalments commencing from the 33rd month and ending in the 42nd month from the Transfer Date. Further, Clause 7.3(iii)(A)(f) preserves ACRE's right to independently proceed against co-borrowers and other securities available under the transaction documents. Thus, apart from receiving Rs. 70 Crores under the Resolution Plan, ACRE continues to retain its rights against co-borrowers, guarantees and other available securities. 123. The record also shows that valuable third-party securities were available in connection with the loan transaction. Therefore, the recovery....
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....Supreme Court held that the Adjudicating Authority can exercise judicial review to ensure that a resolution plan complies with Section 30(2) of the Code. In the present case, the Adjudicating Authority has in fact examined the objections raised by the ACRE concerning its security interest; liquidation entitlement; and treatment under the Resolution Plan, before recording its findings. Therefore, the principle laid down in Essar Steel stands fully satisfied in the present case. The judgment does not support the proposition that merely because a dissenting financial creditor disagrees with the findings recorded by the Adjudicating Authority, the approved Resolution Plan must be interfered with. 128. In these circumstances, we find no legal or factual infirmity in the Impugned Order. The findings recorded by the Adjudicating Authority are based on the material available on record and do not call for any interference. 129. We now examine the second issue, which has been raised by Unsecured Financial Creditor Dhankalash in the second appeal, wherein it has argued that it has not been provided opportunity of being heard, as its restoration application was not decided by the Adjudic....
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....eral competing plans and, after considering their respective merits, it chose to approve the plan submitted by the Successful Resolution Applicant, which was the most beneficial to majority members of CoC viz. Homebuyers. We cannot substitute our own view for the commercial decision taken by the CoC after due deliberation. 133. It is the submission of Dhankalash that they have been provided only Rs. 50 lakhs in the Resolution Plan, against an admitted claim for Rs. 2.02 Crore. We note that Dhankalash is an unsecured Financial Creditor with no security interest on the assets of the CD. Accordingly, its claim under the waterfall mechanism would be governed by section 53(1)(d) of the code. Dhankalsh is claiming parity with ACRE, which is also a Dissenting Finanncial Creditor, however, we note that ACRE is a secured financial creditor and its claim would be dealt according to Section 53(1)(b)(ii) of the code, which is higher in priority than that of the Dhankalsh. The resolution Plan provides Rs. 70 Cr to ACRE against an admitted claim of Rs. 200.27 Cr, which in percentage terms comes to 34.95%. The claim satisfaction percentage of Dhankalash on the other hand comes to 24.75%, as it....
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....sed on the documents on record, they should have been treated as Secured Creditor. So, the only issue to be determined in this appeal is whether the claim of NOIDA is that of a Secured Creditor. 139. Ld. Counsel Mr. Rachit Mittal appearing on behalf of the Appellant/New Okhla Industrial Development Authority ("NOIDA") submitted that the Appellant is a statutory authority constituted under the provisions of the Uttar Pradesh Industrial Area Development Act, 1976, and is the lawful owner of the project land in question. The Corporate Debtor was merely a lessee under a registered Sub-Lease Deed dated 19.10.2012 and was under a continuing obligation to pay lease premium, annual rent, extension charges and other dues arising from the said lease arrangement. It was submitted that the Appellant had duly filed its claim in Form-C for an amount of Rs. 84.19 Crores, out of which only Rs. 68.90 Crores was admitted. However, despite the statutory nature of the dues and the existence of a charge in favour of the Appellant, the Resolution Professional illegally classified the Appellant as an "Operational Creditor" and denied it the status of a secured creditor, thereby causing grave prejudice....
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....he Sub-lessee". By virtue of the said arrangement, the Appellant became entitled to receive lease premium, annual ground rent and all other dues payable under the lease documents. The sub-lease also provides that the lessor shall have the first charge on the plot towards payment of all dues of Lessor. 144. He submits that Sections 13 and 13-A of the Uttar Pradesh Industrial Area Development Act, 1976 expressly create a statutory charge in favour of the Authority with respect to all amounts payable on account of transfer of site, building or rent due in respect of the lease. Therefore, according to the Appellant, the dues in question are not ordinary contractual claims but statutory dues backed by a statutory charge created by operation of law. 145. It is further submitted that the Ld. Adjudicating Authority failed to appreciate that the aforesaid statutory charge squarely falls within the ambit of "security interest" as defined under Section 3(31) of the IBC, thereby making the Appellant a "Secured Creditor" within the meaning of Section 3(30) of the Code. The Resolution Plan, however, completely ignored the statutory charge and illegally treated the Appellant as an ordinary ....
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....n of statutory dues payable to a public authority undermines public revenue and is wholly contrary to Section 30(2)(b) of the IBC. It was submitted that the Resolution Plan stands vitiated on this ground alone and deserves to be set aside in entirety. 150. Summing up, Ld. Counsel prayed that appropriate directions be issued to the Resolution Professional to recognize the Appellant as a Secured Creditor, and further remand the Resolution Plan for proper and lawful treatment of the Appellant's claim in accordance with the provisions of law. Submissions of Resolution Professional 151. Mr. Palash Singhai, Ld. Counsel for RP submitted that the present Appeal was nothing, but an attempt by the Appellant, despite being a statutory authority, to take a completely contradictory stand from the one adopted during the Corporate Insolvency Resolution Process ("CIRP"). It was submitted that the Appellant had itself submitted its claim before Respondent No. 1 in Form C dated 12.05.2021, wherein the Appellant had categorically admitted that it did not possess any "security interest" over any asset or property of the Corporate Debtor. He further submitted that subsequent to filing Form C, ....
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....ment or arrangement entered into between parties. It was argued that any right or encumbrance arising unilaterally merely by operation of statute, without any written agreement or arrangement between the creditor and the Corporate Debtor, cannot qualify as a "security interest" within the meaning of the Code. 156. It was further submitted that the above position becomes even more apparent when contrasted with Section 100 of the Transfer of Property Act, 1882, which expressly recognizes charges created either "by act of parties or operation of law." The Learned Counsel argued that while framing Section 3(31) of the IBC, the legislature consciously omitted the words "or operation of law," thereby making a deliberate departure from the broader language contained in Section 100 of the Transfer of Property Act. Such omission clearly reflected legislative intent to exclude statutory charges from the category of "security interests" entitled to priority under the insolvency waterfall mechanism. 157. The Ld. Counsel also submitted that the aforesaid interpretation is fully consistent with Section 77(3) of the Companies Act, 2013, which provides that no charge created by a company sha....
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....e original provision rather than introducing a new legal principle. 161. It was further submitted that even if the Amendment Act had not yet been brought into force through a commencement notification, the same still possessed significant persuasive value while interpreting Section 3(31) of the Code because clarificatory amendments are retrospective in operation and are deemed to have always formed part of the original enactment. Reliance in this regard was placed upon the judgments of the Hon'ble Supreme Court in J.K. Lakshmi Cement Ltd. v. Commercial Tax Officer and Zile Singh v. State of Haryana. It was argued that the Explanation merely reiterated what was already implicit in the original statutory language of Section 3(31). 162. He submitted that the 2026 Amendment explicitly clarifies that a security interest shall not include any right created merely by operation of law. According to the Learned Counsel, this clarification directly defeats the Appellant's claim that any alleged statutory rights under the UPIADA could amount to a "security interest" under the IBC. 163. Ld. Counsel submitted that the Appellant had heavily relied upon the judgment of the Hon'ble Suprem....
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....yers deserved paramount consideration. 167. Lastly, he submitted that the Sub-Lease Deed executed between the Appellant and the Corporate Debtor on 19.12.2012 continued to remain a valid and subsisting instrument. It was pointed out that the Appellant itself had participated in the CIRP proceedings on the basis of dues arising from the said Sub-Lease Deed and had never terminated the lease agreement. It was therefore argued that once the Resolution Plan stands approved, the same becomes binding upon all stakeholders in terms of Section 31 of the Code read with Section 238 thereof, which overrides all inconsistent contractual provisions to the extent necessary for implementation of the approved Resolution Plan. Submissions of Vishwanath Sharma, Intervener on behalf of Homebuyers 168. Mr. Utkarsh Joshi, Ld. Counsel for the Homebuyer supported the submissions of RP. He submitted that NOIDA had itself approved the layout plans of the project in the year 2014. However, after approval of the resolution plan and after the order dated 25.07.2023 passed by this Hon'ble Appellate Tribunal permitting implementation of the plan, NOIDA deliberately obstructed implementation by refusing....
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....guided by public interest and should facilitate timely completion and delivery of homes to innocent purchasers who have suffered for years. Analysis & Findings 174. The only issue in this appeal is whether the Appellant/NOIDA is entitled to a treatment different from that of an ordinary Operational Creditor in view of the rights arising from the registered Sub-Lease Deed dated 19.10.2012 and the statutory framework governing the project land, and whether the Resolution Plan approved by the Adjudicating Authority adequately considered those rights in accordance with law? 175. The land on which the project of the Corporate Debtor is being implemented is owned by NOIDA and it has been sub-lease to the Corporate Debtor for a period of 90 years against payment of lease premium. NOIDA filed its claim in the CIRP for an amount of Rs. 84.19 Crores out of which the RP admitted Rs. 68.90 Crores. The Resolution Plan proposes a payment of only about Rs. 8 Crores to NOIDA. The main contention of the NOIDA Authority is, that it's the lawful owner of the project land and that the Corporate Debtor derived its rights over the land only through the registered Sub-Lease Deed dated 19.10.2012....
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....derived its entitlement to occupy and develop the project land. 179. In this case NOIDA Authority has relied on a Clause in Sub-lease Deed made on 19.10.2012 between the "New Okhla Industrial Development Authority- the Lessor" AND "M/s Sequel Buildcon Pvt. Ltd.- a Relevant Member of M/s Xanadu Estates Pvt. Ltd. (Consortium) Company which is the "Lessee" AND "M/s Arena Superstructures Pvt. Ltd.,(100% owned subsidiary of M/s Sequel Buildcon Pvt. Ltd.) called as - the "Sub-lessee". Citation portion of the Deed reads as follows: "And whereas the Lessor approved the sub division of Sports City Plot No. SC-01/A Sector-79 measuring 1,00,000 Sqm. Into 2 parts numbering as SC-01/A1 Sector-79 measuring 50,000 Sqm. And SC-01/A2 Sector-79 measuring 50,000 Sqm. To be developed by (1) M/s Sequel Buildcon Pvt. Ltd. and (2) M/s Arena Superstructures Pvt. Ltd. (100% owned subsidiary company of M/s Sequel Buildcon Pvt. Ltd.), respectively and allowed the Lessee to sub lease as per the terms and conditions of the Brochure for the development of Sports City for recreational, commercial and residential including group housing of the scheme vide letter No. Noida/Commercial/2012/1187 dated 3r....
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.... a statute. We also note that the rights asserted by NOIDA are based on this agreement and the its reliance on the statutory charge under Sections 13 and 13-A of the Uttar Pradesh Industrial Area Development Act, 1976 is only to further strengthen its case. 185. We also note that the Parliament has inserted an Explanation to Section 3(31) of the IBC through Section 2 of the Insolvency and Bankruptcy Code (Amendment) Act, 2026, and the same has been brought into force through Gazette Notification S.O. 2625(E) dated 22.05.2026. The Explanation clarifies that a security interest created merely by operation of law would not qualify as a security interest under the Code. However, in our considered view, in this case the reliance is upon a registered lease deed and not upon creation of statutory charge by operation of law. 186. It is to be noted that the RP in its submission has stated that two elements are essential to constitute a security interest under Section 3(31) of the Code: (i) the right, title, interest or claim must be created by a transaction; and (ii) such transaction must secure payment or performance of an obligation. Further the word 'transaction' is itself defines ....