TaxTMI 
TaxTMI 
2026 (10) TMI 315
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....s for SRA. JUDGMENT [Per: Arun Baroka, Member (Technical)] This judgment disposes of a cluster of connected Appeals arising out of the Corporate Insolvency Resolution Process ("CIRP") of M/s Gujarat Hydrocarbons and Power SEZ Limited ("the Corporate Debtor" or "GHPSL"), incorporated on 17.08.2007 to develop, operate and maintain a sector-specific Special Economic Zone ("SEZ") on leasehold land at Vilayat, Bharuch, Gujarat (the "Demised Premises"), taken on lease from the Gujarat Industrial Development Corporation ("GIDC"), a statutory corporation which features in this matter simultaneously as lessor of the land, as an Operational Creditor of the Corporate Debtor, and as the statutory regulator of GIDC-allotted industrial land. The Demised Premises is, on the admitted case of all parties, the sole material asset of the Corporate Debtor. 2. In these two sets of Appeals the subject matters are interconnected and arise from the same insolvency matrix and are heard together and accordingly we are disposing of together by this common judgment. 3. Set 1 - Company Appeal (AT)(Ins) No. 1557 of 2023 (by the suspended director of the Corporate Debtor) and Company Appeal (AT)(I....
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....of the Code against the Corporate Debtor (the principal borrower on the very same 2011 facility), CIRP commenced by order dated 18.11.2020, and the third Respondent was appointed Resolution Professional ("RP"). In this CIRP, SREI filed and the RP admitted a claim of Rs. 1,885.08 crores as a secured Financial Creditor - a figure roughly 7.8 times the Rs. 241.27 crore judicially fixed and finally settled in the ACIL CIRP barely two years earlier, on the very same debt and default. SREI's claim was admitted at Rs. 1,885.08 crore in GHPSL despite the earlier ACIL determination. ACIL was admitted only as an unsecured related-party Financial Creditor, at nil value on liquidation-value logic, notwithstanding its payment of Rs. 38.87 crore to SREI. 8. The resolution plan of Zaveri & Co. Pvt. Ltd. was approved by the CoC (SREI, 100% voting share) on 30.08.2021. The suspended director filed I.A. No. 1764 of 2021 seeking correction of the admitted claim and rectification of the Information Memorandum ("IM"); ACIL filed I.A. No. 596 of 2022 seeking recognition as a secured Financial Creditor to the extent of Rs. 38.87 crore. Both were dismissed by the Adjudicating Authority on 13.09.2023, w....
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....ration & Ors. SCA No. 4937 of 2022, quashed GIDC's termination of the Lease Deed and the consequent eviction proceedings, holding that GIDC, a statutory authority, could not invoke the Gujarat Public Premises Act, 1972 to defeat the moratorium and the overriding scheme of the Code under Section 238; GIDC's Letters Patent Appeal against that judgment has also since been dismissed. CA(AT) (Ins.) No. 1557 of 2023 and CA (AT) (Ins.) No. 1684/2023 12. Set-1 involves CA(AT) (Ins.) No. 1557 of 2023 and CA (AT) (Ins.) No. 1684 of 2023 which arise out of the Corporate Insolvency Resolution Process of M/s Gujarat Hydrocarbons and Power SEZ Limited ("the Corporate Debtor"). Company Appeal (AT) (Ins.) No. 1557 of 2023 is being treated as the lead matter. Submissions of the Appellant/ Suspended Director of GHPSL in Set 1 CA (AT) (Ins.) No. 1557 of 2023 13. Mr. Kanwar Raj Bhagat, the suspended director of the Corporate Debtor, submits that the claim of the Financial Creditor, having been quantified at Rs. 241.27 crore in the Corporate Insolvency Resolution Process of the Corporate Guarantor and judicially affirmed, could not have been admitted at Rs. 1,885.08 crores in the Co....
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....t aside and the Information Memorandum prepared by the Resolution Professional is erroneous and incorrect and waiver of Cost imposed upon the Appellant. Submissions of the Appellant - GIDC in Set 2 - CA (AT) (Ins.) No. 626-628 of 2025 17. In IA No. 4585 of 2021 in CP (IB) No. 571 of 2020 and IA No. 136 of 2022 and IA No. 5224 of 2024 in CP (IB) No. 571 of 2020 the Ld. NCLT has approved the resolution plan which is based on sub plotting the leased premises leased by the appellant to the CD. This plan was approved without any consent /permission from the appellant, where such lease has already come to be terminated and CD is evicted under the provisions and order of the Gujarat Public Premises (Eviction of Unauthorised Occupants) Act, 1972. Such position is accepted by the SRA. Further the resolution plan is not in line with the purpose for which the lease was given to the CD being that of SEZ purpose being that of Energy sector. Also the denotification of the SEZ has never been effected qua the land in question, since the Development Commissioner has never issued certificate no benefits availed certificate and/or refund of benefit received certificate to complete the denotific....
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....ixed and is unaffected by the quantum of the claim as admitted. It is submitted that the challenge to the approved resolution plan is liable to be rejected. Appraisal [CA AT Ins No. 1557 of 2023 & 1684 of 2023] [By ex-director of the CD & corporate guarantor] 21. Entities involved in the Appeals being dealt in here are noted as follows for better appreciation: Role Entity Significance Appellant (1557/2023) Mr. Kanwar Raj Bhagat Suspended director of GHPSL; Against impugned order dated 13.09.2023 NCLT, New Delhi In IA-1764/ND/2021 in CP (IB) 571 (ND)/2020 Appellant (1684/2023) Assam Company India Ltd. Connected appeal seeks secured-creditor status to extent of Rs. 38.87 Cr by subrogation Against impugned order dated 13.09.2023 NCLT, New Delhi In I.A. Nos. 596/ND/2022 in CP (IB) 571 (ND)/2020; Corporate Debtor (R-1) Gujarat Hydrocarbons & Power SEZ Ltd. (GHPSL) Principal borrower; CIRP under CP(IB) 571(ND)/2020 before NCLT Delhi. Financial Creditor (R-2) SREI Infrastructure Finance Ltd. Original lender of Rs. 100 cr (2011); itself underwent CIRP at NCLT Kolkata (plan approved 11.08.2023). Corporate Guarantor Assam C....
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.... unverified figure is itself a failure of the RP's statutory duty under ^2Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17 and is amenable to correction under ^3Axis Bank Ltd. v. Samruddhi Realty Ltd., (2023) 23 Comp Cas-OL 596, which permits the Adjudicating Authority to look behind an admitted claim. 24. Further relying on Section 140 of the Indian Contract Act, 1872 and on BRS Ventures (supra), that ACIL, having paid Rs. 38.87 crore to SREI in discharge of its guarantee, stands subrogated to SREI's rights as secured Financial Creditor to that extent, and ought to have been so recognised in the Corporate Debtor's CIRP rather than being classified as an unsecured related party entitled to nil. 25. Further, it is claimed that the IM prepared by the RP is vitiated on two counts - the erroneous classification of ACIL and the erroneous, inflated admission of SREI's claim - rendering the entire CIRP arbitrary and non-transparent and requiring the process to be set aside and re-conducted with a corrected IM, relying on ^4Bimalesh Bhardwaj v. Value Infratech India Pvt. Ltd., 2021 SCC OnLine NCLAT 443. It is also claimed that the costs of Rs. 50,000 imposed....
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....der's disposal of its restored objection-IAs by a single paragraph of reference (para 10.2), without discrete findings on the statutory-land and suppression questions, does not meet the standard expected of objections reheard de novo pursuant to this Tribunal's own remand. 28. Brief description of the opposition by the Respondents (SRA/Zaveri & Co.; SREI; Resolution Professional) is that a resolution plan, once approved by the CoC with 100% voting share and sanctioned by the Adjudicating Authority, is binding and its commercial wisdom non-justiciable save on the closed grounds of Section 30(2) and Section 61(3), relying on ^5K. Sashidhar; ^6Essar Steel ; ^7Kalpraj Dharamshi ; ^8Vallal RCK ; and the recent decisions in ^9Independent Sugar Corpn. Ltd., and in ^10Piramal Capital & Housing Finance Ltd. It is submitted that the RP is under no obligation to treat a different Corporate Debtor's claim-computation as binding, that each RP verifies independently, and that the fixed pay-out to SREI (Rs. 125 crore) under the plan is, in absolute terms, materially less than even the Appellants' own reckoning of the correct figure (Rs. 202.40 crore), such that any error in the....
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.... of ACIL took place. 18.11.2020 NCLT admitted the petition being CP (IB) No. 571 of 2020 and the GHPSL was admitted into CIRP 14.12.2020 BRS Ventures Investment Ltd./SRA of ACIL preferred an appeal against the admission order dated 18.11.2020 before the NCLAT being CA(AT) (Ins) 1109 of 2020. 05.04.2021 Being aggrieved, by the acceptance of the RP of the claim of the FC of the sum of Rs. 1885 Crores against the GHPSL, the erstwhile director along with BRS Venture Investment Ltd. filed an application being IA. No. 1764/ND/2021 in CP(IB)571(ND)/ 2020 before the NCLT, New Delhi. 11.05.2021 NCLAT dismissed CA(AT) (Ins) 1109 of 2020 filed by BRS Venture Investment Ltd. This order was challenged before the Hon'ble Supreme Court in Civil Appeal No. 4565 of 2021. 17.09.2021 The Hon'ble Supreme Court passed an order in Civil Appeal No. 4565 of 2021 directing that "any further orders would abide by the final decision of this Court". 13.09.2023 NCLT, New Delhi dismissed the IA. No. 1764/ND/2021 in CP (IB) 571 (ND)/2020 filed by the Appellant. 19.09.2023 NCLT approved the resolution plan submitted by the Zaveri 23.07.2024 Final judgment in....
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.... respondent financial creditor has been extinguished on the payment of Rs. 38.87 crores. By the involuntary act of the creditor of accepting part of the amount from the surety in the discharge of the entire liability of the surety, even if Section 140 is attracted, it will confer on the guarantor or the appellant the right to recover only the amount mentioned above from the corporate debtor. The subrogation will be only to the extent of the amount recovered by the Creditor from the surety." 32. We observe that the Hon'ble Supreme Court of India has rendered its final judgment in 1BRS Ventures (supra), decided on 23.07.2024, the operative part of which is extracted as below: XXX 28. Hence, we summarize some of our conclusions as under: a. Payment of the sum of Rs. 38.87 crores to the 1st Respondent-financial creditor under the resolution plan of the corporate guarantor-ACIL will not extinguish the liability of the 2nd Respondent- principal borrower/corporate debtor to pay the entire amount payable under the loan transaction after deducting the amount paid on behalf of the corporate guarantor in terms of its resolution plan; b. A holding company i....
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....the Appellant i.e. Rs. 38.87 crores. Thus, we note that the Hon'ble Apex Court has nowhere adjudicated the claim amount of the Respondent No. 2. Similarly, while observing that the subrogation will be to the extent of the amount recovered by the creditor from the surety i.e. Rs. 38.87 crores, the Hon'ble Apex Court does not provide any finding to that effect as the issue of subrogation had never been pressed by the SRA. 35. Thus, we find that the arguments of the Appellant as made in the present appeal have not been decided by the Hon'ble Apex Court, and is thus not barred by the principles of res judicata. Points of determination 36. Having heard the counsels of both sides and also after perusal of the material placed on record, the following points of determination emerge: CA (AT(Ins.) No. 1557 of 2023 & 1684 of 2023 by ex-director of the Corporate Debtor & Corporate Guarantor I. Whether the Adjudicating Authority erred in declining to examine the admitted claim of SREI at Rs. 1,885.08 crore, and whether that claim, and the classification of ACIL as an unsecured related party, vitiate the Information Memorandum; CA (AT(Ins.) No. 626-628 of 2025....
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....olution to be binding on a completely different Resolution Process of a different Corporate Debtor. In the present case, the Applicant has wrongly attempted to seek directions from this Adjudicating Authority. It is well within the ambit of IBC for reducing the claim of the answering Respondent in the CIRP of M/ s. Assam Company India Limited and not to exclude penal interest but to remove calculation mistakes and errors committed by the IRP m calculating and compounding the penal interest in the claim submitted by the answering Respondent. 10. Coming to the factual matrix of the present Application, it is a settled law that once the Resolution Plan has been approved by the CoC, the Adjudicating Authority can't go back to look into the nitty gritties involved in the CIRP of the Corporate Debtor based on facts which were in existence earlier in the CIRP of different Corporate Debtor. Therefore, this Adjudicating Authority cannot entertain the present Application which is devoid of merits and not sustainable. The Applicant has no locus standi to file the present Application and is attempting to derail and delay the present CIRP proceedings of the Corporate Debtor. 41.....
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....e of the RP. Being so, the contention of the respondents that the term "voting share", so used in the Code of 2016, does not contemplate different connotations for different purposes appears to be convincing and same is accordingly accepted. 32. It may be noticed here that the decision of IRP and COC in its first meeting to exclude the penal interest from the claims of the creditors has not been disputed by the applicant although till the time of filing of the present application as many as four other creditors' meetings were conducted during the period between 28/11/2017 and 28/02/2018 but at no point of time, the applicant found it necessary to question such decision, adopted by COC in its first meeting held on 28.11.2016. 33. Such revelation, in the facts and circumstances, firmly serves to show that the applicant had accepted the decision to exclude the penal interest from the claim of the creditors wholeheartedly and that too, even for the purpose of ascertainment of admissible claim of the creditors including the applicant. The fact that none of the other creditors whose penal interests were also so excluded from the claims, they had made against the CD ....
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....hat the applicant herein has capitalized the penal interest. In that view of the matter too, the decision of the IRP to exclude the penal interest in calculating the actual claim of the creditors is found to be well founded. XXX 44. Adjudicating Authority, after noting the above findings, had come to the following conclusion: XXX The above leaves no manner of doubt that penal Interest by whatever name it is called cannot be allowed to be capitalized. On a perusal of the application and other relevant documents, it is found that the applicant herein has capitalized the penal interest. In that view of the matter too, the decision of the IRP to exclude the penal interest in calculating the actual claim of the creditors is found to be well founded. XXX 45. Adjudicating Authority has also gone through the loan agreement and the deed of agreement to find out whether the terms and conditions in these documents override the position as existing in the law and has returned the following findings: XXX 37. I have also noticed that referring to loan agreement 05-01-2011 and deed of guarantee dated 05-01-2011, the appli....
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....ssible in view of law, laid down in ^11 Central Bank of India (supra), therefore, IRP had committed no wrong whatsoever in excluding the penal interest (which was compounded and capitalised) in computation of claim for the purpose of voting rights in the meeting of the COC or for any other purpose whatsoever. 47. We note that the above decision of the Adjudicating Authority as noted here in earlier was challenged by the Financial Creditor - R2-SREI before this Appellate Tribunal in ^13CA (AT) (Ins.) No. 291/2018 but it was dismissed by this Appellate Tribunal on 01.02.2019. This Appellate Tribunal had noted as below: "So far as the SREI Infrastructure Finance Ltd. who is aggrieved by the decision of the Resolution Professional, it may also take steps under sub-section (6) of Section 60 against the corporate debtor or any other party. In this case, we make it clear that we have not expressed any opinion with regard to the claim made by the SREI Infrastructure Finance Ltd. or the decision as taken by the Resolution Professional." Thus, we find that the initial claim of the Financial Creditor/R2 during the CIRP of the ACIL/Appellant initially stood at an inflated amount....
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....iate. In fact, for this reason alone both the resolution professional and the Adjudicating Authority will have to go into the details. We observe that the determination of the claim of the Financial Creditor in the CIR proceedings of the Corporate Debtor is not dependent on the determination of the RP of the corporate guarantor alone but basis the judicial decision which attained finality. Further because of its interlinkage in the CIR proceedings of the principal borrower, it becomes an important determining factor for the remaining amount of the claim. Therefore, the argument of the Adjudicating Authority that it will not go into the nitty-gritties is unsustainable and deserves to be set aside. 50. Particularly if an exaggerated claim is presented before the resolution professional, it is the duty of the resolution professional to correctly determine the claims and maintain an updated list of claims. This process cannot be construed to be adjudication. This becomes all the more relevant in the present proceedings where in the earlier proceedings the insolvency under Section 7 had been initiated against the corporate guarantor Financial Creditor/SREI. And now for the balance am....
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....ngs under Section 7 against the principal borrower. We observe that the Resolution Plan of BRS Ventures Investment Ltd. for ACIL - the holding company /Corporate guarantor of the CD was approved by the NCLT, Guwahati by an order dated 20th September, 2018, per which Respondent No. 2/ SREI was paid a sum of Rs. 38.87 Crores, which the Appellant claims were in full and final settlement of its dues against the sum of Rs. 241.27 Crores. It is the contention of the Appellant that inspite of receiving the sum of Rs. 38.87 Crores in full and final settlement of its dues in the CIRP of ACIL, the Respondent No. 2/FC/SREI filed an application being CP (IB) No. 571 of 2020 under Section 7 of IBC, 2016 before the Ld. NCLT, New Delhi against the Respondent No. 1/Gujarat Hydro Carbons and Power SEZ Limited and which was admitted by the order dated 18th November, 2020 and the Respondent No. 3 was appointed as the Interim Resolution Professional. During the CIRP of the Respondent No. 1/Gujarat Hydro Carbons and Power SEZ Limited, the Respondent No. 2 filed its claim for an amount of Rs. 1885.08 Crores on the basis of the same set of debt and default for which CIRP of ACIL took place. The Appellant....
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....d. On a perusal of the application and other relevant documents, it is found that the applicant herein has capitalized the penal interest. In that view of the matter too, the decision of the IRP to exclude the penal interest in calculating the actual claim of the creditors is found to be well founded." 57. We observe that had it been a standalone case of insolvency proceedings, then it could have proceeded totally independently. But in this case RP of the Corporate Debtor had to find out the remaining amount for Section 7 proceedings against the Corporate Debtor basis a judgement which had attained finality. Here in this case the RP was bound by the judgment of the NCLT Guwahati, which had attained finality. 58. The argument of the Adjudicating Authority that the RP is not bound by the decision of the RP of another Corporate Debtor is unsustainable. We find that in the conclusion, the observations of the Adjudicating Authority that: "there is no provision under the IBC which allows the computation of claims done by a Resolution Professional for one Corporate Debtor's Resolution to be binding on a completely different Resolution Process of a different Corporate De....
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....L CIRP, consistent with the Hon'ble Supreme Court's holding in BRS Ventures (supra) that payment by the guarantor does not extinguish the principal borrower's liability for the balance but the creditor may recover from the borrower only the sum remaining after such credit. Is ACIL a secured Financial Creditor to the extent of Rs. 38.87 crs paid by ACIL to FC in the CIRP of ACIL or not 62. We observe that ACIL has been shown as an Unsecured Financial Creditor in the CIRP of GHPSL (R1). The argument of ACIL that they are to be treated as a Secured Financial Creditor in the CIRP of R1 to the extent of Rs. 38.87 crores are basis the judgment of the Hon'ble Supreme Court in 1BRS Ventures (supra) wherein the judgment held that: "Under the corporate guarantee, in the facts of this case, the liability of ACIL was to the extent of the entire amount repayable by the 2nd respondent corporate debtor to the corporate creditor. In the CIRP of ACIL, the appellant paid a sum of Rs. 38.87 crores only to the 1st Respondent financial creditor. The amount was paid by the appellant on behalf of ACIL, the corporate guarantor. For the rest of the amount payable as per the guara....
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....ebt without the surety's consent. The Court explained that a surety is entitled to the benefit of every security held by the creditor, and any impairment or loss of such security attributable to the creditor proportionately reduces the surety's liability. • ^18Economic Transport Organization v. Charan Spinning Mills, in this the Supreme Court held that the doctrine of subrogation, reflected in Section 140 of the Indian Contract Act, embodies the equitable principle that upon satisfying the guaranteed obligation or indemnifying the assured for the entire loss, the surety or insurer is invested with all the rights and remedies that the creditor or assured could have enforced against the principal debtor or wrongdoer. The Court clarified that subrogation operates by operation of law upon full indemnification, enabling the subrogee to step into the shoes of the original claimant, while the extent and mode of enforcement may be modified by the terms of a written subrogation or subrogation-cum-assignment. 65. The Appellant/ACIL contends that without prejudice to the rights of ACIL and without admitting in any manner, in case the proposition as placed by the ACIL t....
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.... that where a guaranteed debt has become due and the surety has paid or performed "all that he is liable for", the surety is "invested with all the rights which the creditor had against the principal debtor" i.e. 'stepping into the shoes'. We observe that subrogation is not a new right the surety is contending for, but the transfer of the creditor's existing rights, with their incidents. Section 141 gives the surety "a right to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into." 71. We observe that while delivering the judgment of 1BRS Ventures (supra), the Hon'ble Supreme Court articulated the principle but declined to apply it operationally because it was not pressed. The Supreme Court had noted that even if Section 140 is attracted, it will confer on the guarantor or the Appellant the right to recover only the amount mentioned above from the Corporate Debtor. The subrogation will be only to the extent of the amount recovered by the Creditor from the surety. 72. Thus, in the above circumstances we find that RP needs to re-rank ACIL's claims as secured creditor above unsecured related....
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....o that a Resolution Applicant who intends to submit a "Resolution Plan" (RP) is aware of the assets and liabilities of the "Corporate Debtor", including the details about the "Creditors" and the amounts claimed by them. 71. The "Information Memorandum" is required to contain the details of the guarantees that have been given in relation to the debts of the Corporate Debtor by other persons and the details with regard to all material litigation and an ongoing investigation or proceeding initiated by the Government and statutory authorities are also required to be detailed in the information memorandum. So also the details regarding the number of workers and employees and liabilities of the corporate debtor towards them and other Statutory Authorities are required to be contained in the Information Memorandum. 72. Section 29 of the Code is reproduced below:-"29. Preparation of information memorandum. - (1) The resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a resolution plan. (2) The resolution professional shall provide to ....
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....sh in accordance with law. 77. Appellant further argues that even assuming the fact that the total pay-out in terms of the approved Resolution Plan is less than the correct amount due and payable to the Financial Creditor i.e. Rs. 202.40 crores (Rs. 241.27 crores-Rs. 38.87 crores), such proposition cannot be accepted as the law is well laid down that any information memorandum which is faulty and does not comprise of the correct assets and liabilities of the Corporate Debtor should be set aside and the correct information memorandum is once again required to be floated for inviting new applicants for a resolution. 78. Vehemently opposing the argument that erroneous information memorandum vitiates the CIR proceedings, the SRA/R4 contents that such an argument is ex facie contrary to Section 61(3) of the IBC. It is argued that a resolution plan can be challenged only on the exhaustive grounds enumerated in Section 61(3). Alleged discrepancies in the Information Memorandum do not constitute any of the prescribed grounds for challenge. Once a resolution plan is approved by the CoC and sanctioned by the Adjudicating Authority, it is not open to the tribunal to scrutinize the comme....
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....storted voting dynamics and valuation. 82. The Respondents have argued that the commercial wisdom is non-justiciable and therefore cannot be questioned. On the contrary we find that Commercial wisdom cannot validate a plan founded upon incorrect material information. The CoC's commercial wisdom cannot be insulated where the commercial decision itself proceeded on incorrect foundational facts. We observe that Judicial review would be available where Information Memorandum is materially defective; mandatory provisions of the Code have been violated; feasibility rests upon assumptions contrary to statutory records; the decision-making process is fundamentally flawed. Thus, we overrule the argument of the commercial wisdom of the committee of creditors (COC). 83. In the above facts and circumstances, we find that the IM is vitiated and therefore we find sufficient justification to set aside the resolution plan and go for a fresh information memorandum and also a re-invitation of expression of interest. Findings in CA (AT) (Ins.) No. 1557 of 2023 & 1684 of 2023 84. We find that the Information Memorandum was fundamentally incorrect as SREI's claim of about Rs. 1,885 ....
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.... GIDC's objections to the Resolution Plan Dismissed IA 5224/2024 GIDC's application to defer plan hearing pending the Gujarat High Court Dismissed 86. We briefly recapitulate that the Corporate Debtor is Gujarat Hydrocarbons and Power SEZ Limited-GHPSL, incorporated on 17.08.2007 to develop, operate and maintain a sector-specific Special Economic Zone (SEZ) on land at Vilayat, Bharuch, Gujarat. Its principal - effectively sole - asset is that leasehold land (the "Demised Premises"), taken from the Appellant, Gujarat Industrial Development Corporation ("GIDC" or "the Appellant"), a statutory corporation acting in this matter as lessor, as an Operational Creditor, and as regulator of the land. The Successful Resolution Applicant (SRA) is Zaveri & Co. Pvt. Ltd. The sole Financial Creditor and sole member of the Committee of Creditors (CoC) was SREI Infrastructure Finance Limited (SREI), itself admitted to insolvency during this CIR proceedings. 87. Per Appellant/GIDC the resolution plan is based on sub plotting the leased premises leased by the Appellant to the CD without any consent /permission from the Appellant, where such lease has already come to be te....
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....grievance is really that it wants better than class treatment, which is more of a monetary grievance cloaked as objections. Appellant/GIDC contends that it has objected on the grounds of contravention of law, within section 30(2)(e) and also within section 61(3)(ii)/(iii). It further claims that they are not a collateral attack on commercial wisdom but on the legality and the feasibility of the plan. We are not in agreement with the line of argument presented by the Respondent and concur with the argument of the appellant and we cannot question the locus of the Appellant. 92. The Respondent also contends that Appellant/GIDC has no locus on the issue of the de-notification/SEZ status and only the SEZ authorities could raise it, and none has raised it. The appellant/GIDC, on the other hand, contends that GIDC is not an ordinary Operational Creditor. Since the resolution plan deploys the land which it owns and also regulates and therefore the Appellant/GIDC definitely has the locus. We also note that the denotification of the SEZ status has not reached finality. In such a situation the claim of the Respondent that since the land is almost de-notified (as noted by us here in the ear....
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.... (a) it is feasible and viable; and (b) it has provisions for approvals required and the timeline for the same. In the instant case, the plan conceived utilisation of land owned by the appellant. Ordinarily, feasibility and viability of a plan are economic decisions best left to the commercial wisdom of the CoC. However, where the plan envisages use of land not owned by the CD but by a third party, such as the appellant, which is a statutory body, bound by its own rules and regulations having statutory flavour, there has to be a closer examination of the plan's feasibility. Here, on the part of the CD there were defaults in payment of instalments which, allegedly, resulted in raising of demand and issuance of pre-cancellation notice. In these circumstances, whether the resolution plan envisages necessary approvals of the statutory authority is an important aspect on which feasibility of the plan depends. Unfortunately, the order of approval does not envisage such approvals. But neither NCLT nor NCLAT dealt with those aspects." 97. Applying the above principles in the facts and circumstances of this case we find that the Appellant is a statutory body, who ....
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....ts sole asset is in question, whether the plan can be feasible. A related sub-question is the effect of the Gujarat High Court's judgment dated 01.12.2025 quashing the termination, and outcome of the LPA against it (which has been decided by the Gujarat High Court at the time of pronouncement of this judgement). 101. Respondents claims that the termination during the moratorium is per se illegal and in the teeth of Section 14 of the court and the Adjudicating Authority rightly so held. The Respondents bring to our notice that the Gujarat High Court on 01-12-2025 quashed the termination and eviction and this ground does not survive. The Appellant/GIDC cannot seek to profit from their own wrong by terminating in breach of the code and then pleading infeasibility from that termination. SRA contends that they are ready and willing to implement the resolution plan regardless of the outcome of the termination of the lease deed and claim that the Corporate Debtor continues to exist. 102. The Appellant claims that the termination question is not for the NCLT/NCLAT. Appellant also brings to our notice that RP chose to litigate it before the Gujarat High Court in SCA 4937/2022. In ....
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....ils. Is the Affidavit filed by the SRA undertaking to pay GIDC's "legitimate claim" binds it to make payment of entire dues 105. Now we delve into another issue which has been agitated by the Appellant, which is that whether the SRA's letter (03.05.2022) and affidavit (20.05.2022) - offering to pay GIDC's "legitimate" claim over and above the plan - bind the SRA to pay GIDC's entire dues, or whether that offer lapsed with the collapse of the contemplated withdrawal of objections; and whether GIDC, having accepted plan payment, is bound by it. 106. The Appellant/GIDC contends that the affidavit binds the SRA to pay the entire dues and GIDC's demand of 18.10.2023 for full payment shows it never accepted Rs. 6.14 crore as full and final. 107. The case for the Respondents (SRA/SREI) is that the offer was made in view of a withdrawal of objections that never happened. Once GIDC refused to withdraw and the NCLAT issued remand order dated 08.08.2024 [CA (AT) (Ins.) No. 1648-1649/2023) and which was upheld by Honourable Supreme Court, on 20.08.2024 (in SRA's Civil Appeals Nos. 8777-8778/2024), the 03.05.2022 letter and 20.05.2022 affidavit have no signif....
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....ble and therefore the argument canvassed by the Appellant that approval of the plan by a CoC whose sole member (SREI) was itself admitted to CIRP on 08.10.2021 cannot be considered to be vitiated. 111. Thus, we find that the ground that approval by a CoC whose sole member (SREI) was itself under CIRP from 08.10.2021 is vitiated was not specifically pleaded in I.A. 136/2022, and the record shows that decisions were thereafter taken through and ratified by SREI's Administrator. In the absence of any authority establishing that approval by a sole CoC member in insolvency is per se vitiated, and given the ratification on record, we do not find this a sustainable independent ground for disturbing the plan. Thus, this ground raised by the Appellant also fails. De-notification premise, feasibility, and the fraud allegation 112. In this section we deal with the issue whether the resolution plan, premised on the demised premises standing or becoming de-notified from SEZ to non-SEZ industrial use, and on GIDC's consent to change of use and sub-plotting being assumed rather than obtained, is feasible and viable within the meaning of Section 30(2) of the Code. 113. This is ....
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.... notified SEZ in the country wherein the name of the Corporate Debtor is not appearing in the list. The Development Commissioner, SEZ has also not filed any claim(s) for any of their dues pertaining to the Corporate Debtor with the Resolution Professional. So. the Resolution Applicant have all the good reasons to believe that the SEZ de-notification is approved and all the dues between the Corporate Debtor and Development Commissioner. SEZ might have been settled at the time of de-notification. With the de-notification of the SEZ, now the only business activity that can be carried out by the Corporate Debtor is the development of the Demised Premises by building the necessary infrastructure within the Demised Premises as the anchor tenant, on-boarding the entrepreneurial units by sub-leasing the industrial plots created & developed within the Demised Premises as per the customized requirement for the proposed entrepreneurs who would be occupying the units." [page 306 APB: page 58-Res Plan] 119. We find that on the basis of these presumptions, the SRA has come to its own conclusion that, with the denotification of the SEZ, the only business activity that can be carrie....
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....e CIR Proceedings with the Resolution Professional. It is worth noting that the Information Memorandum did not disclose that the Corporate Debtor is trying and likely to get permission for use other than SEZ purpose. The exchange of correspondence between the Corporate Debtor, GIDC and Development Commissioner was not public information. When we peruse the contents of the resolution plan of the successful resolution applicant, inference can be drawn that it had detailed information relating to the correspondence which was going on between the Corporate Debtor and the GIDC and also the development commissioner's office. 122. Such a level playing field was not available to the other prospective resolution applicants. If the other resolution applicants had known that a conditional resolution plan could be submitted, which allows the conversion from SEZ to non-SEZ purposes also, then probably more people would have applied and value maximization could have happened. 123. A perusal of the resolution plan also indicates that the information contained in the resolution plan is much more than what was available in the information memorandum and also in the public domain, as a lot....
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.... the land from SEZ to any other industrial purpose. Therefore, reliance on this regulation is misplaced and we reject such a contention. 127. It is also brought to our notice by the Appellant that the Resolution Plan seeks reliefs and concessions which are re-writing the lease Deed. GIDC further claims that a plan cannot rewrite the lease. Presumptions by SRA of change of use to non SEZ along with the approvals for reliefs and conclusions all the more conditional. 128. From the materials placed on record we find an important fact that SEZ denotification was only granted in principle, subject to certain conditions. Does this mean that the non-issuance of the formal notification vitiates a plan which is premised on the land being available for non-SEZ use? Is there any suppression/fraud on the Adjudicating Authority as GIDC alleges? Briefly speaking Clause 2.1 of the Lease Deed records that the Demised Premises was allotted "on an 'as is where is' basis for the purpose of setting up an SEZ." Clause 293.3(v) permits the Lessee to "seek a change of the nature of use of the Demised Premises from an SEZ to any other industrial use duly sanctioned under the applicable statutory ....
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.... all prospective resolution applicants and the granular knowledge of the de-notification correspondence reflected in the SRA's own resolution plan. The IM placed before us contains no disclosure of the pendency, or incompleteness, of the de-notification process, nor of the correspondence exchanged between the Corporate Debtor, GIDC and the Development Commissioner. Yet the resolution plan submitted by the SRA demonstrates a level of familiarity with that very correspondence that goes well beyond what was available in the IM or in the public domain. If conversion from SEZ to non-SEZ use, and the sub-plotting/sub-leasing that the SRA's plan is built upon, were genuinely open possibilities, that fact - and the existence and status of the correspondence bearing upon it - ought to have been disclosed in the IM to all resolution applicants alike, so that a level playing field existed for the formulation of competing plans and so that the CoC's commercial wisdom was exercised on complete and accurate information, consistent with the object of value maximisation. Its omission from the IM, coupled with its evident availability to the SRA, is sufficient by itself to vitiate the i....
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.... contends that the objection-IAs were disposed of without engaging the specific grounds. The reasoning is by reference and not by any finding, which was the basis for remand. On the other hand, the Respondent (SRA/SREI) brings to our notice that the order does deal with feasibility/viability and it holds it to be within COC's commercial wisdom. For better appreciation of the contention of the Appellant, we extract the contents of Para 10.2 in the impugned order dated 19.02.2025: "We have taken a view in IA-136/2022 In (IB) - 571(ND) / 2020 filed by Gujarat Industrial Development Corporation, Applicant under the provision of Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 and IA-5224/2024 In (IB)-571(ND)/2020 filed by Gujarat Industrial Development Corporation, Applicant under the provision of Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016 that there is no infirmity in the decision of the CoC and find no reason to interfere in the decision on the Resolution Plan taken by the CoC in their Commercial Wisdom and dismissed both the IAs (IA-136/2022 and IA-5224/2024). Therefore, the....
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....serve that this has been dealt with by the Adjudicating Authority at para 10.8, which is extracted as below for better appreciation: "The reliefs, concessions and waivers sought by the Successful Resolution Applicant will be dealt with strictly as per law" 137. We observe that the Adjudicating Authority has given a very broad waiver with respect to the treatment of the SRA's reliefs, concessions, and waivers when it states that it to be dealt with strictly as per law. It could be appropriate in a normal situation but in this situation, wherein the main asset of the Corporate Debtor is land which is leased by the appellant and the Appellant is also the regulator, it is appropriate that the objections raised by the Appellant, particularly citing the judgment of Greater Noida Industrial Development Authority v. Prabhjit Singh Soni (supra) should have been dealt with appropriately. 138. The most important issue which was raised by the Appellant was with respect to the presumption of the Respondent/SRA that denotification has already happened and that concession will be granted. If such notification has to be dealt with as per law and it has to be decided by the Appel....
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.... of the resolution plan of Zaveri & Co. Pvt. Ltd. in I.A. No. 4585 of 2021 and the dismissal of I.A. No. 136 of 2022; I.A. No. 5224 of 2024 having been rendered academic by the decision of the Gujarat High Court, no further orders are required thereon. 143. Company Appeal (AT)(Ins) No. 1557 of 2023 is allowed in part. The order dated 13.09.2023 in I.A. No. 1764 of 2021 is set aside. i.e. setting aside admission of claim of Rs. 1885.05 crores. 144. The costs of Rs. 50,000 imposed on the Appellant are set aside. 145. Company Appeal (AT)(Ins) No. 1684 of 2023 is allowed in part. The order dated 13.09.2023 in I.A. No. 596 of 2022 is set aside to the extent it classifies Assam Company India Limited as an unsecured related-party Financial Creditor. It is declared and directed that Assam Company India Limited stands subrogated to, and shall be recognised and ranked as, a secured Financial Creditor of the Corporate Debtor to the extent of Rs. 38.87 crore paid by it (through its resolution applicant, BRS Ventures Investments Ltd.) to SREI Infrastructure Finance Limited in the Corporate Insolvency Resolution Process of Assam Company India Limited. 146. The resolution plan of Zave....
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....ted from the date of this order. 150. Status quo with respect to title, possession and use of the Demised Premises, as it stood immediately prior to the resolution plan's implementation, shall be maintained until the Committee of Creditors is reconstituted and appropriate directions are obtained from the Adjudicating Authority. 151. It is clarified, for the avoidance of doubt, that our findings on the lease termination, the SRA's affidavit dated 20.05.2022, and the sole-CoC-member ground are affirmed against GIDC and do not survive as independent grounds; they are recorded here only for completeness and do not detract from the relief granted on the grounds set out at above. 152. All IAs stand disposed of as per this order. Parties shall bear their own costs. FOOTNOTES 1 BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. & Anr., 2024 INSC 548: (2025) 1 SCC 456 decided on 23.07.2024 2 Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17 paras 88-91 (holding that the Resolution Professional is statutorily entrusted with receiving, collating and verifying creditors' claims, and may require such information, documents or evidence as are nece....
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....f assets and liabilities of the Corporate Debtor. The RP also did not pursue his application u/s 19(2). As a result the CoC decided to abandon the step of inviting of EOI for Resolution Plan. Thereafter in undue haste, the CoC decided to go for liquidation of the Corporate Debtor. Since the CoC consisted of two members - Capri Global and homebuyers - with Respondent No. 4 being given inflated voting share, the decisions by CoC was completely swayed by the Respondent No. 4 and its selfish interests. The decisions of CoC was a blotted one, since it was taken in the CoC, in which Respondent No. 4 was given voting right much in excess of its real and correct share." 5 K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150; 6 Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531; 7 Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401; 8 Vallal RCK v. Siva Industries and Holdings Ltd., (2022) 9 SCC 803; 9 Independent Sugar Corporation Ltd. v. Hindustan National Gas & Industries Ltd. (Resolution Professional) (2025) SCC OnLine SC 181 10 Piramal Capital & Housing Finance Ltd v. 63 v. 63 Moons Technologies Ltd., reported i....
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....insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned. the parameters of such review having been clearly laid down in K. Sashidhar." 24 K. Sashidhar v. Indian Overseas Bank K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150; "55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and s....
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....enge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority and that the decision of CoC's "commercial wisdom" is made non-justiciable. " 26 Vallal RCK v. Siva Industries & Holdings Ltd., (2022) 9 SCC 803 Para 24. "When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stake-holders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules." 27 Greater Noida v. Prabhjit Singh Soni Para 26 and 27. "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 learn....