TaxTMI 
TaxTMI 
2026 (9) TMI 1286
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....s before us i.e. Company Appeal (AT) (INS) No. 184 of 2023 and Company Appeal (AT) (INS) No. 1107 of 2023 filed by the Appellants, Greater Noida Industrial Development Authority and New Okhla Industrial Development Authority, respectively. Company Appeal (AT) (INS) No. 184 of 2023 2. The appeal is filed by the Appellant i.e., Greater Noida Industrial Development Authority (GNIDA) under Section 61 of the Insolvency and Bankruptcy Code, 2016, ("Code") arising out of Impugned Order dated 12.09.2022 passed by National Company Law Tribunal, New Delhi Bench, (Court No. IV) ("Adjudicating Authority"), at New Delhi in C.A. No. 485 of 2018 in in CP No. IB 1059/ND/2018. Mr. Anand Sonbhadra, Resolution Professional of M/s Shubhkamna Buildtech Private Limited, is the Respondent No.1 herein. Committee Of Creditors (CoC) for M/s Shubhkamna Buildtech Private Limited, is the Respondent No.2 herein. The Successful Resolution Applicant (SRA) of M/s Shubhkamna Buildtech Private Limited, is the Respondent No.3 herein. 3. The Appellant submitted that it is a statutory authority constituted under the provisions of the U.P. Industrial Area Development Act, 1976, and is entrusted with th....
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....ch (Court No. IV), at New Delhi in CP No. IB 1059/ND/2018 Mr. Anand Sonbhadra, Resolution Professional of M/s Shubhkamna Buildtech Private Limited, is the Respondent No.1 herein. Surender Kumar Singhal, who is the Successful Resolution Applicant of M/s Shubhkamna Buildtech Private Limited, is the Respondent No.2 herein. Sunil Kumar Agarwal, who is the Successful Resolution Applicant of M/s Shubhkamna Buildtech Private Limited, is the Respondent No.3 herein. 7. The Appellant submitted that it is a statutory authority constituted under Notification dated 17.04.1976 and had allotted Plot No. GH-05/B, Sector-137, NOIDA, measuring 22,565.77 sq. metres, to the Corporate Debtor under a registered 90-year lease deed dated 30.07.2010, pursuant to which possession was handed over. Upon commencement of CIRP against the Corporate Debtor, the Appellant filed its claim on 22.02.2019 for Rs.99,32,55,183/- towards outstanding dues, though inadvertently in Form B instead of Form C. The Appellant contended that while the initial Resolution Plan dated 10.08.2019 proposed payment of Rs.41.40 crore in six half-yearly instalments, the Revised Resolution Plan dated 12.10.2019 arbitrarily redu....
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....ory security and proprietary rights could not be diluted, ignored or extinguished merely because the Corporate Debtor had entered into the Corporate Insolvency Resolution Process (CIRP) and Resolution Plan of SRA has been approved. 12. The Appellants submitted that the Resolution Plan erred in treating the Authority as an ordinary creditor and in failing to recognise the security interest attached to its statutory dues. It was contended that once the respective Authorities are recognised as secured creditors, the consequential treatment and payment available to secured creditors under the Code, must necessarily follow, subject to the applicable provisions of the Code and the settled law declared by the Hon'ble Supreme Court and this Appellate Tribunal. 13. The Appellants further contended that the Resolution Plan could not override the statutory charge or deprive the respective Authorities of the benefit flowing from such securities merely by characterising its dues as statutory or governmental dues. It was submitted that the fact that the respective Authorities might not have participated in the CoC in the same manner as a financial creditor does, not by itself, extinguish o....
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....cluding in Rainbow Papers (Supra), and the subsequent jurisprudence of this Appellate Tribunal in the case of Assets Care & Reconstruction Enterprise Limited vs Mr. Viswanadha Sarma (Resolution Professional of Arena Superstructures Private Limited) (Company Appeal (AT) (Ins) No. 949 of 2023) require the statutory charge and the secured status of the Authority to be duly recognised while considering the distribution or treatment of its claim under the Resolution Plan. The Appellant empathetically pleaded that the present appeals are squarely covered in the ratio of Assets care (supra). It was contended that the Authorities are consequently entitled to the consequential benefits flowing from its status as a secured creditor, and that its claim cannot be dealt with in the same manner as an unsecured statutory claim. 18. The Appellants submitted that, during the course of deliberations, before this Appellate Tribunal in the present Appeals the Counsel appearing for the parties were in agreement that the only issue remaining for adjudication in the present appeals is with regard to the designation or treatment of Noida and Greater Noida as secured creditors and the consequential bene....
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....ebtor. In the case of the real-estate Corporate Debtor, the CoC legitimately prioritised completion and delivery of units to homebuyers, whose admitted claims were approximately Rs. 537 Crores, and such prioritisation falls within the commercial wisdom of the CoC. The Respondent No. 1 submitted that Regulation 37(f) permits reduction or restructuring of debts, including statutory dues, and that judicial review under Sections 30, 31 and 61 of the Code is confined to the statutory parameters and cannot extend to substituting the Tribunal's assessment for the commercial wisdom of the CoC. 24. The Respondent No. 1 contended that the Appellants' grievance essentially seeks recovery of its entire outstanding dues, whereas the Code is a mechanism for insolvency resolution and reorganisation and not a substitute for recovery proceedings. Once the Resolution Plan was approved by the CoC with the requisite majority and thereafter approved by the Adjudicating Authority, it became binding on all stakeholders under Section 31 of the Code. The Respondent No. 1 therefore stated that, in the absence of any demonstrated violation of Section 30(2) or other statutory requirement, this Appellate Tr....
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.... without prejudice, even if the Appellants were subsequently held entitled to an enhanced amount in view of the judgment in Prabhjit Singh Soni (Supra), Clause 8.6, Paragraph 15 of the approved Resolution Plan contains an express mechanism for meeting any additional liability arising pursuant to a subsequent order of the NCLT, NCLAT or any competent Court, with the homebuyers being liable to contribute the excess amount on a pro-rata basis. Consequently, the Respondents SRA contended that the reliance placed by the Appellants upon Assets Care & Reconstruction Enterprise Limited v. Mr. Viswanadha Sarma & Ors. CA (AT)(lns.) No. 949/2023 was misplaced, as the present Resolution Plan itself specifically contemplated and provided for any additional liability arising from a subsequent judicial determination. 30. The Respondents SRA stated that the Monitoring Committee, in its 9th Meeting held on 12.09.2022, had also undertaken to stand by the approved Resolution Plan and to take further action, if any, in accordance with the orders or directions of this Appellate Tribunal. It was submitted that the Resolution Plan thus contains an in-built mechanism safeguarding the interests of all s....
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.... all stakeholders and submitted that any modification at this stage would disturb the integrated commercial arrangement embodied in the Resolution Plan and adversely affect the rights and entitlements of the Homebuyers. 35. The Homebuyers contended that the lease deed does not create any mortgage, charge, proprietary interest or security interest in favour of the Appellant. They submitted that the provision in the lease deed permitting the lessee to mortgage the property in favour of banks or financial institutions, subject to prior approval, merely regulates such transactions and does not confer upon the Appellant the status of a secured creditor. They further stated that the limited contractual rights reserved under the lease deed, including recovery of unearned increase, cannot be equated with a "security interest" within the meaning of Section 5(31) of the Code. Accordingly, the Homebuyers submitted that the Appellants cannot claim the status of a secured creditors or seek alteration of its treatment under the already approved Resolution Plan. 36. The Homebuyers stated that the reliance sought to be placed upon the judgment of the Prabhjit Singh Soni (supra), for treating....
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....oida Industrial Development Authority ("GNIDA") and Company Appeal (AT)(Ins.) No. 1107 of 2023 preferred by the New Okhla Industrial Development Authority ("NOIDA") arise out of the Corporate Insolvency Resolution Process of Shubhkamna Buildtech Private Limited ("Corporate Debtor"), and assail, inter alia, the treatment accorded to the Appellants' respective claims under the Revised Resolution Plan dated 12.10.2019 as approved. 41. We consciously note the amount provided in the Resolution Plan w.r.t. Financial Creditors and Operational Creditor, which reads as under: 42. A perusal of the aforesaid distribution clearly demonstrates that the present CIRP was a homebuyer driven insolvency, wherein the homebuyers themselves have accepted a substantially higher haircut than the haircut proposed for the Appellants. The commercial allocation under the Resolution Plan, therefore, prima facie cannot be said to be arbitrary or discriminatory qua the Appellants. The Appellants seek to contend that it ought to rank pari passu with secured financial creditors in terms of Section 53(1)(b)(ii) of the Code. However, even assuming such contention, the Appellants cannot, in any circumstanc....
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....fore the CoC and thereafter approved. GNIDA's claim was classified in the Plan as an unsecured "Statutory/Government Operational Due" and allocated approximately Rs. 18.5 Crores. NOIDA's admitted claim of Rs. 41.53 Crores was, under the Revised Plan, reduced to approximately Rs. 25 Crores. Aggrieved, both Authorities preferred the present appeals in 2023. 45. Both Authorities contend, in substance, that this treatment is contrary to law inasmuch as their dues, being secured by a first charge over the leased plots, ought to have been computed and satisfied as secured debt under Section 30(2)(b) read with Section 53(1)(b) of the Code rather than as unsecured statutory/operational dues falling under Section 53(1)(e)/(f) of the Code. 46. We also note that the relevant paragraph of the judgement passed by the Hon'ble Supreme Court in case of Greater Noida Industrial Development Authority V. Prabhjit Singh Soni & Ors. (2024) 2 S.C.R. 258 54. In our view the resolution plan did not meet the requirements of Section 30(2) of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016 for the following reasons:............................. b. The res....
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....d includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee; Explanation. For the removal of doubts, it is hereby clarified that the security interest shall exist only if it creates a right, title or interest or a claim to a property pursuant to an agreement or arrangement, by the act of two or more parties, and shall not include a security interest created merely by operation of any law for the time being in force;" (Emphasis supplied) 48. In this connection, we will refer to the judgement of Hon'ble High Court of Madras in the case of Avenue Realty v. Assistant Commissioner Srirangam (GST Circle) and Ors. (2026) ibclaw.in 2350 HC, which support the view that amendment of this nature i.e. clarificatory amendment, will have retrospective applicability. The relevant portion of the said judgement reads as under: 38. Section 2 of the Amendment Act amends Section 3(31) of the Insolvency and Bankruptcy Code, thereby clarifying the nature of "security interest", which re....
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....stance it is prohibitory in nature and seeks to destroy the rights of the real owner qua properties held benami and in this connection it has taken away the right of the real owner both for filing a suit or for taking such a defence in a suit by benamidar. Such an Act which prohibits benami transactions and destroys rights flowing from such transactions as existing earlier is really not a declaratory enactment. With respect, we disagree with the line of reasoning which commanded to the Division Bench. In this connection, we may refer to the following observations in 'Principles of Statutory Interpretation', 5th Edition 1992, by Shri G.P. Singh, at page 315 under the caption 'Declaratory statutes' : The presumption against retrospective operation is not applicable to declaratory statutes. As states in CRAIES and approved by the Supreme Court : "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error whether in th....
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....itors: a) Class of Financial Creditors: As per information Memorandum the financial creditors have been broadly classified into: i) Home Buyers ii) Non Home Buyers iii). Unsecured Financial Creditors b. Treatment of Financial Creditors / Contribution Commitment [Home Buyers): RA will Infuse the amount in the CD and the amount towards Balance Consideration together with Enhanced Amount will be called from the investors/allottees/ Financial Creditors as specified in detail in Chapter VII hereinabove to complete the Project and deliver the possession to the respective unit holders / Financial Creditors. The allotted units will be delivered to them upon payment of Balance Consideration together with Enhanced Amount as envisaged in the plan subject to the conditions mentioned below: ................................................................... 15. The RA/CD shall only be liable to pay the Financial Creditors and Operational Creditors to the extent specifically provided for in the Plan. If at any later date, the Resolution Applicant/ Corporate Debtor is required to pay any amount over and above the amount provi....
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....common and identical cause of Lease Deeds of NOIDA and GNIDA in the present appeal. 54. From both lease deeds as available in the appeals we note that Clause F ("MORTGAGE") of the GNIDA Lease Deed dated 04.04.2011, and the correspondingly placed clause of the NOIDA Lease Deed dated 30.07.2010 (materially identical in terms, and so extracted once), reads, as under: "The Lessee may, with prior permission of the Lessor, mortgage the land to any Financial Institution(s) / Bank(s) for raising loan for the purpose of financing his investment in the project ... Provided that in the event of sale or foreclosure of the mortgaged/charged property the LESSOR shall be entitled to claim and recover such percentage, as decided by the LESSOR, of the unearned increase in values of properties in respect of the market value of the said land as first charge, having priority over the said mortgage charge, the decision of the LESSOR in respect of the market value of the said land shall be final and binding on all the parties concerned. The LESSOR's right to the recovery of the unearned increase and the pre-emptive right to purchase the property as mentioned herein before shall ....
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....d NOIDA principally rely is that a statutory charge of this kind, created under Sections 13, 13-A and 14 of the UPIDA, constitutes a "security interest" for the purposes of the Code which was settled in their favour by the Supreme Court in Prabhjit Singh Soni (supra), tracing its lineage to Rainbow Papers Ltd. (supra). 57. We further observe that this position no longer holds without qualification. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026), which received Presidential assent on 06.04.2026, inserts an Explanation to Section 3(31) of the Code providing, in substance, that a "security interest" does not include any interest, lien or charge created purely by operation of law including a statutory charge and that a security interest, to so qualify, must arise from an agreement or arrangement between two or more parties. A corresponding Explanation to Section 53(1)(e)(i) of the code further amplify that amounts due to the Central or State Government are not to be accorded secured-creditor priority by reason only of a charge created by operation of law. These provisions, along with Sections 8 to 33 of the 2026 Act generally, were brought into for....
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....d by NOIDA in 2 plots having equal area of 50,000Sqm each, and the second plot no. SC-01/A2 Sector 79 having an area of 50,000Sqm was further sub-Leased to Arena Superstructures (CD). 184. We note from the above that the aforesaid sub-lease deed creates the first charge in favour of NOIDA to secure payment of its dues from the corporate debtor. The charge is created by an agreement and not by operation of 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 ....
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....f the Impugned Order intact. 61. On examination, however, we hold that the ratio in Assets Care (supra) rests on a factual foundation materially different from that established by the Lease Deeds now before us, discussed above in detail and does not, in our considered view, compel a like conclusion here. 62. From facts of Assets Care (supra), we note that NOIDA's claim in that case was founded, as its own pleadings record, on a registered, tripartite Sub-Lease Deed dated 19.10.2012 between NOIDA and the Lessor, "M/s Sequel Buildcon Pvt. Ltd., the Lessee," and "M/s Arena Superstructures Pvt. Ltd., the Sub-lessee" (the corporate debtor in that case). As recorded at paragraph 143 of that judgment, NOIDA's case which the Coordinate Bench of this Appellate Tribunal, accepted, reads as follows: "... The sub-lease also provides that the lessor shall have the first charge on the plot towards payment of all dues of Lessor." (Emphasis supplied) 63. Thus, we find above clause in Assets care (supra) is a general, unconditional, standing charge, created by the express agreement by all concerned parties to that Sub-Lease Deed, extending to the whole of the sums payab....
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....le as arrears of land revenue is a statutory recovery mechanism and not a charge created by agreement of parties. We observe that to the extent it cannot be treated as founding a security interest at all and rather, falls within the category of charge "created purely by operation of law" that the Explanation to Section 3(31) of the Code, inserted by the IBC (Amendment) Act, 2026 (in force from 26.05.2026), now excludes from "security interest." We would reiterate that Assets Care (supra) being founded on a materially different, general first-charge clause in a bespoke tripartite Sub-Lease Deed, is clearly factually distinguishable and does not require us to hold GNIDA and NOIDA to be secured creditors of the Corporate Debtor on the Lease Deeds before us. The consequences follow that the classification of GNIDA's and NOIDA's claims as unsecured statutory/operational dues under the Revised Resolution Plan dated 12.10.2019 and their consequent treatment cannot be faulted on the ground urged, namely, the existence of a security interest under the two Lease Deeds. 66. Based on above detailed discussion, we do not find any merit in either of two appeals. The Appeals fail and s....