TaxTMI 
TaxTMI 
2026 (8) TMI 935
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....a, Mr Parikshit Singh Bhati, Ms Lolita Crasta, Advs. for Applicant in CM APPL. 68286/2025. Ms. Ruchi Sindhwani, Ms. Megha Bharara, Adv. for OL. Mr. Nidhi Raman, CGSC with Mr. Arnva Mittal, Adv. for RoC. Mr. Arnav Kumar, Ms. Akanksha Singh, Ms. Preeti Pant, Advs. for Spire Woods Residents Welfare Association. JUDGMENT PER ANIL KSHETARPAL, J.: 1. Vide this common Judgment, six (06) connected Company Appeals, namely, Company Appeal Nos.11/2020, 12/2020, 13/2020, 4/2021, 5/2021 and 7/2021, preferred under Section 483 of the Companies Act, 1956 [hereinafter referred to as 'Companies Act'], challenging the common Judgment dated 17.02.2020 passed by the learned Single Judge in Company Petition No.6/2019, whereby the Scheme of Compromise and Arrangement [hereinafter referred to as 'Revival Scheme'] under Sections 391 to 393 of the Companies Act came to be sanctioned, shall stand decided by this common judgment. 2. The principal question which arises for consideration is whether the learned Single Judge was justified in sanctioning the Revival Scheme, having regard to the objections raised by the Appellants, who are allottees/investors in the projects of Respondent No. 1, A.N. B....
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....ct, the Company had also assured returns @12% per annum on the amounts deposited till completion of the project. The BBAs further stipulated that in the event the project was not completed by the agreed date, the Company would be liable to pay compensation for delay at the rate of Rs.55/- per square foot per month, apart from the assured returns, besides other contractual obligations incorporated therein. The BBAs further provided that, in the event of default by the Company in making payments due to the allottees, interest @1% per month would be payable on the defaulted amount. 8. It is the common case of the Appellants that despite receiving substantial consideration from the allottees, the Company failed to complete the projects within the stipulated timelines envisaged under the respective BBAs. The Appellants allege that possession was either not offered in accordance with the contractual stipulations or was offered without the requisite statutory approvals, including the completion/occupation certificate, resulting in disputes between the Company and the allottees. It is further their case that the Company failed to honour various contractual obligations under the BBAs. ....
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....nts, the Revival Scheme as ultimately sanctioned materially differed from the Scheme which had been placed before the stakeholders for approval and failed to adequately safeguard the interests of certain categories of allottees. 12. In addition to the aforesaid common facts, the Appellant in Company Appeal No. 11/2020 has specifically pleaded that the proposed Revival Scheme was founded on suppression of material facts and incorrect disclosures regarding the status of possession, the rights of certain allottees, and the pendency of civil and criminal proceedings. It is further alleged that the Revival Scheme failed to recognise a separate category of allottees who had not accepted possession on account of the absence of the completion certificate and that several statements made in support of the Revival Scheme were factually incorrect. 13. Besides the common challenge to the sanction of the Revival Scheme, the present Appeals also raise certain distinct questions arising out of the individual facts and contractual rights of the respective Appellants. These include, inter alia, the legality of modifications carried out to the Revival Scheme after obtaining the approval of the....
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....uestioned the manner in which the interests of different categories of allottees were dealt with under the Revival Scheme. In particular, the Appellants have pointed out that the contractual rights flowing from the respective BBAs, including the assured returns, lease commitment charges, compensation for delay, interest on defaulted payments and the obligation to provide lawful and usable possession, could not have been diluted or altered merely by sanctioning a revival arrangement, unless the statutory requirements for such alteration were strictly complied with and the interests of the affected allottees were adequately protected. 19. Learned counsel representing the Appellants have further submitted that material facts concerning the status of the projects, the possession offered to the allottees, the statutory approvals and completion/occupation certificates, the status of the leasehold rights and the pending liabilities of the Company were either not placed before the learned Single Judge in their correct perspective or were not adequately examined while considering the Revival Scheme. It is submitted that the Revival Scheme was premised on representations regarding the fea....
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.... the requisite majority of the stakeholders and was consequently binding upon all concerned. It is submitted that the Company was facing liquidation and that the Revival Scheme provided the only realistic mechanism for protecting the interests of the allottees and reviving the projects. 24. It is further submitted on behalf of the Respondents that the majority of the allottees had supported the Revival Scheme and that the Court should not substitute its own view for the commercial wisdom of the stakeholders. Reliance has also been placed upon the progress made after sanction of the Revival Scheme, including infusion of funds by the Propounders, execution of the Joint Development Agreement [hereinafter referred to as 'JDA'] in relation to the Spire Woods project, steps taken for renewal of the requisite licences and permissions and efforts made towards completion and restoration of the projects. 25. In relation to the objections concerning the voting process, it is submitted that the modifications accompanying the ballots were duly noticed and considered by the learned Single Judge and that the substance of the principal objection relating to the continuation of criminal proce....
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....urt is the scheme which was approved by the requisite majority, whether the material placed before the voters was sufficient to enable an informed decision, whether the class acted bona fide and fairly, whether the scheme is just, fair and reasonable to the class as a whole, whether it is contrary to law or public policy, and, in the case of a company under liquidation, whether the arrangement genuinely provides for revival and protection of the interests of the stakeholders rather than merely postponing or circumventing the consequences of liquidation. 31. These principles are not matters of appellate policy but constitute the very parameters within which the jurisdiction under Sections 391 to 393 of the Companies Act is required to be exercised. The decision of the Supreme Court in Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K. Samiti & Ors. (2007) 7 SCC 753, relied upon in the Impugned Judgment itself, recognises that the Court must examine whether the statutory procedure has been complied with, whether the requisite majority has approved the scheme, whether the members or creditors had the relevant material to arrive at an informed decision, whether the decision is just and....
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....391(2) of the Companies Act requires a majority in number representing three-fourths in value of the creditors, or class of creditors, present and voting, to agree to the compromise or arrangement. The statutory requirement is, therefore, not satisfied merely because a numerical majority has been categorised as having voted "for". What is required to be ascertained is whether the requisite majority agreed to the arrangement which the Court was ultimately called upon to sanction. 39. A vote cast "for" the Scheme simpliciter expresses assent to the Scheme as placed before the meeting. A vote cast "for, with modification" is, by its very description, conditional upon the modification accompanying the vote. The two cannot be treated as identical without first examining the nature and effect of the condition attached to the latter vote. 40. This distinction assumes significance where the modifications are substantive and concern the contractual and financial rights of the allottees under the BBAs, including assured returns, lease commitment charges and other obligations relating to the projects. The modifications, therefore, could not be treated as merely clerical or inconsequenti....
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....site statutory assent is established. 47. This Court is, therefore, unable to sustain the finding that the Revival Scheme had obtained the requisite statutory majority merely by aggregating the votes cast "without modification" with those cast "with modification", without first determining the legal effect of the conditions attached to the latter category. Re: Nature of the Modifications and Contractual Rights 48. The Respondents have contended that the modifications sought by the allottees were merely an attempt to secure better terms and that, once the statutory majority had approved the Revival Scheme, individual creditors could not insist upon their preferred terms. There can be no quarrel with the proposition in principle. However, the question in the present case is anterior: whether the votes cast "for, with modification" could be treated as assent to the Revival Scheme in the form ultimately sanctioned. 49. The nature of the modifications assumes significance in this regard. Pursuant to the order dated 11.01.2019, the allottees exercising the option of voting "for, with modifications" were required to attach the proposed modifications to their respective ballot ....
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....th the Projects - i.e. 1) Commercial and IT Project - Spire Edge at Manesar, Gurgaon and 2) Residential Project Spire Woods, 103 Gurugram, simultaneously: a. All conditions of BBA shall prevail, including financial commitments to customers of Spire Edge need to be fulfilled as outlined below in Point 2. b. The rights of all class of creditor shall be superior to and take precedence to those of the Promoters / Share-holders or their associated companies. c. The Revival Scheme shall not sanction any illegal modification of equity and debt instruments like debentures etc, giving rise to any fresh claims by Pro-pounders, Promoters or Shareholders. 2. The Revival Scheme shall be amended to include the following aspects of the BBA specific to customers of Spire Edge, Block BCD, as had been agreed to post the court directed meetings at the office of the OL in October 2017 and contained in the OL's report: a. Payment of 14 months of unpaid assured returns / commitment charges. i. The Pro-pounders and AN Buildwell Pvt. Ltd. had offered possession of the incomplete Block B, C & D of the project Spire Edge to the Allottees on 30/10/201....
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....vernment dues etc. 3. The Revival Scheme shall be under the supervision of the Hon'ble High Court until successful completion of both projects and settlement of creditor dues. a. The Chairman of the Board shall be a retired High Court Judge. b. Four elected Customers Representatives (2 Spire Edge and 1 Spire Woods) shall be mandatory and allowed as observers at all meetings of AN Buildwell. 4. All ongoing Criminal Matters filed by Customers shall continue till the successful completion of both Projects and honoring of all commitments made. a. The Pro-pounders shall not make any filing based on this Revival Scheme without the specific approval of SELFC Board and Customer Associations in writing. b. However, the customers will not press the same in the interim period, and have no objection to an interim stay on ongoing investigations and cases. Name of Original Allottee Name of the Proxy / Authorised Representative Registration No. / File No. Signature of the Allottee/Proxy /Authorised Representative 51. The modifications also cannot be viewed entirely divorced from the co....
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....he individual allottees, including those concerning their contractual rights and the effect of the proposed Revival Scheme thereon, do not appear to have been independently examined. Their objections could not have been rejected merely by treating them as an attempt to secure better terms under the Scheme. The Court was required to consider the nature of those objections and determine whether they raised any issue bearing upon the validity, fairness or statutory approval of the Revival Scheme. 56. This omission assumes significance in the present case because the modifications attached to the ballot papers were not unrelated or collateral demands. They concerned matters capable of materially affecting the rights and obligations of the allottees under the BBAs. The learned Single Judge was, therefore, required to examine those objections and the modifications sought before treating the votes cast subject to such modifications as assent to the Revival Scheme as sanctioned. The absence of such an examination cannot be treated as a mere matter of commercial judgment. Re: Informed Decision and Material Disclosure 57. Section 393 of the Companies Act requires that the creditors ....
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....the Scheme proposes to have upon their existing rights. Numerical superiority, by itself, cannot dispense with such an enquiry. 63. At the same time, the mere fact that some stakeholders oppose the Revival Scheme cannot, by itself, justify its rejection. Where the statutory requirements have been complied with, the requisite majority has approved the Scheme and the Scheme is otherwise just, fair and reasonable, the Court cannot interfere merely because some stakeholders may consider an alternative arrangement more beneficial. 64. In the present case, however, the enquiry into fairness cannot be divorced from the manner in which the approval itself was recorded. The substantial number of votes cast with modifications, coupled with the objections raised by the allottees, required the Court to ascertain whether the Scheme, in the form sanctioned, fairly represented the arrangement to which the class had assented. That enquiry was material to the exercise of jurisdiction under Sections 391 to 393 of the Companies Act. Re: Commercial Wisdom 65. This Court may now examine the principal submission advanced on behalf of the Respondents that the Revival Scheme should not be inte....
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....after sanction of the Revival Scheme, including infusion of funds, appointment of consultants and contractors, supervision by the Court Appointed Commissioner and efforts towards obtaining requisite permissions and renewals. Such subsequent developments are relevant circumstances, but cannot retrospectively validate an order of sanction if the statutory requirements were not satisfied when the order was passed. This Court, therefore, does not interfere on account of any subsequent difficulty in implementation or delay in revival. The subsequent developments cannot, however, cure any defect in the statutory process preceding sanction. 72. The Appellants had further objected to clauses of the Revival Scheme which contemplated, inter alia, restriction upon proceedings by statutory authorities and stay or vacation of pending civil and criminal proceedings. The learned Single Judge, relying upon J.I.K. Industries Ltd. & Ors. v. Amarlala V. Jumani & Anr. (2012) 3 SCC 255, and Krishna Texport Industries Ltd. v. DCM Ltd. (2008) 104 DRJ 101 (DB) had already declined to approve the portions which purported to interfere with criminal proceedings. This Court finds no occasion to differ from....