BDR Finvest Private Limited vs Ninex Developers Limited

That this Adjudicating Authority vide order dated 25.07.2019 admitted the CP IB 281/PB/2019 and appointed the applicant as Interim Resolution Professional.

The following is the brief process chart of the activities performed in the ongoing CIRP Process

That the members of CoC in its 21^st meeting held on 24.08.2023 resolved for withdrawal of CIRP which has been approved by COC with 92.5% voting share in accordance with the provision of Section 12A of the Code read with Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons Regulations), 2016.

That the Home Buyer(s) constitute around a total of 72.65% of the voting share of COC. The rest of the voting shares are held by the other financial creditor(s). The home buyer(s) having a total 61.99% strength of the voting power & consisting of a total number of 180 Home Buyers had participated in the voting process wherein the proposal of withdrawal of CIRP was considered. Out of which, 174 home buyers constituting 60.16% of the voting share of the home buyers have voted in favour of withdrawal of CIRP. The details of the same are reproduced below: -

That Settlement cum proposal agreement dated 29.07.2023 has been signed between ex director/promotor of the CD and the applicant/RP.

That as per the withdrawal as presented by Ex. Management and later found viable by the members of committee of creditor(s), the allottees will receive their respective units in terms of the original allotment without making any extra payment.

That after withdrawal of CIRP and with an adequate monitoring system in place, the Corporate Debtor will be in a position to complete the remaining construction work of the real estate project "Ninex City" in the fastest way and pass on the ownership of the apartments in favour of the home buyer(s).

That the withdrawal of CIRP will put to an end the ongoing corporate insolvency resolution process which is going on since 2019 by permitting the resolution of the Corporate Debtor through the with-drawl of CIRP wherein the stakeholders of the Corporate Debtor have agreed and considered a with-drawl proposal as submitted by Ex. Management for early completion of the project. In accordance with the withdrawal proposal, the stakeholders have agreed to have a monitoring system in place for observing the due compliance of an inter-se withdrawal proposal as submitted by the Ex. Management and agreed between the stakeholders / financial creditors including home buyer(s)

That the withdrawal of CIRP may put an end to multiple commercial litigations at various forums like RERA, NCRDC. Besides, various intervening applications around 40 in numbers as filed before this Adjudicating Authority. Most of the matters covered under these applications may get resolved through permitting the present proposal for withdrawal of CIRP.

That the Objector is a Secured financial creditor with a Voting Share of 6.3%.

That the Corporate Debtor had availed financial assistance from the Objector vide Application dated 25.12.2015

That the Objector had lodged a claim dated 05.08.2019 of a sum of Rs.25,18,96,136/- along with interest @ 18.05% per annum with the Resolution Professional. Out of the said claim, a sum of Rs.21,93,68,656/-was admitted by the Resolution Professional.

That the present Application is an attempt on the part of the Applicant to have an imprimatur of this Adjudicating Authority on the Withdrawal Plan filed along with the present Application. Whereas, under Section 12A, this Adjudicating Authority. may, at its discretion permit a simpliciter withdrawal of the Application under Sections 7, 9, 10 of IBC, 2016. This ploy is a feeble attempt to sanctify the alleged Withdrawal Plan, which is clearly beyond the scope of Section 12A of IBC, 2016.

That the Withdrawal Plan submitted by the Ex-Management/Promoter of the Corporate Debtor is a sham and bogus document, for the following reasons:

That the mandate of Section 12A of the Code is only with regard to withdrawal of the Application under Section 7 of the IBC, 2016. However, there is nothing in the IB Code or Regulations made thereunder, which permits the ex-Management of the Corporate Debtor to file a Withdrawal Plan, which will be binding on other Members of the CoC including the dissenting Members. Support can be taken from the judgement of Hon’ble Supreme Court in Arun Kumar Jagatramka Versus Jindal Steel and Power Limited and Another, reported in (2021) 7 SCC.

That the amount outstanding and payable by the Corporate Debtor inclusive of interest is a sum of Rs.59,84,65,21 0.12 (Rupees Fifty Nine Crores Eighty Four Lakhs Sixty Five Thousand Two Hundred Ten and Twelve Paisa) as on 18.08.2023. The Objector has chosen not to give its consent to the Withdrawal Plan for the reasons mentioned hereinabove, and thus, being a Secured financial creditor, is entitled in law, if the present Application is allowed, to invoke the proceedings under the SARFAESI Act, 2002, and to auction the mortgaged property to recover its outstanding dues.

That in view of the aforementioned facts and circumstances, the Objector prays that the Application may be dismissed with exemplary costs. However, the Objector respectfully states that being a Secured financial creditor, is entitled in law, if the present Application is allowed, to invoke the proceedings under the SARFAESI Act, 2002, and to auction the mortgaged property to recover its outstanding dues.

That section 12A of the IBC is the form of collective settlement between the creditor and the Corporate Debtor. The threshold prescribed by the section 12A is much higher than any other provisions of the IBC as well as the Companies Act 2013. It is important to point out that collective bargaining is a tool where in stakeholders can seek settlement with the Corporate Debtor under the provisions of section 12A of the IBC.

In order to safeguard the interest of the creditors much higher threshold has been prescribed under section 12A of the Code. While allowing the application under 12A of the Code, the Adjudicating authority is supposed to give effect of the will of the commercial wisdom of the committee of the creditors. Any settlement reached between the creditors and the Corporate Debtor are binding between the parties. Section 12A of the Code encourages the settlement between the creditors and the Corporate Debtor and there is no prohibition under section 12A of the Code which prevents the committee of creditors from asking additional commitments from Corporate Debtor and its management as well as giving concession to the Corporate Debtor and its management.

If the hypothesis propounded by the objector is accepted, then the intent and the meaning of the section will be lost. Under section 12A the Adjudicating Authority is supposed to approve any settlement which has been voted upon with more than 90% of the committee of creditors and there is no prohibition or limitation on the type of proposal or negotiations which can take place between the committee of creditors, Corporate Debtor and ex managements. To say that no such settlement can take place between community of creditors and the ex-management goes against the provisions of the IBC and curtains the freedom of taking commercial decision by the committee of creditors.

That neither in the section nor in the regulations any fetters have been placed on the Ex-management or the committee of creditors as to the nature of settlement which can be arrived at between the parties. It is a settled preposition of law that the Hon’ble court cannot read something in the language of the section when it is not expressly provided in the section itself. That reliance in this regard is placed on the Judgment of the Hon'ble Apex Court in Brilliant Alloys Pvt. Ltd. V. S. Rajagopal and Ors., in which it was held that Regn. 30-A has to be read along with the main provision S. 12- A IBC which contains no such stipulation (that withdrawal cannot be permitted after issuance of invitation for expression of interest) -Further, this stipulation can only be construed as directory depending on the facts of each case - Thus, in certain cases, withdrawals from the CIRP under S. 12-A IBC could be permitted even after the invitation for Expression of Interest has been issued.

That there are several issues pending between the Corporate Debtor and the financial creditor who has filed the present objection against section 12A proposal. It is important to point out here that the objector itself is undergoing the CIRP process and has been acquired by another company at a valuation which is significantly less than the amount it has borrowed. The objector has no moral ground to oppose the application filed under section 12A. Authum Investment and Infrastructure on 14 October 2022 acquired debt-ridden Reliance Commercial Finance Limited (RCFL) for hefty discount of over 70%. RCFL, which according to its website has been re-branded as Reliance Money, is a non-banking finance company (NBFC) with assets under management of Rs 11,000 crore which are taken over for a price of approx. 3,000 crores.

That the calculation given by the financial creditor is highly inflated. It is worth stating that there was a restructure of Loan in the Year 2018 and during restructure pending interest / penalties / penal interest till restructure was capitalised by the lender. Various issues pertaining to the claim amount earlier to be adjudicated or decided upon by the competent authority.

That the proposed revival plan of the Corporate Debtor specifically provides for escrow account where entire realisation of the booking and the sale of the residential units is to be deposited. Therefore, the Corporate Debtor as well as the ex-management are fulfilling their original promise with the financial creditors and allottees of the units.

That the charge was created on the assets of the Corporate Debtor and has lost its significance with admission of the company under the insolvency resolution process. The fate of the charge and all other relevant factors are to be considered in accordance with the revival plan of the provisions of the IBC.

That the Corporate Debtor and the ex-management are undertaking to pay 70% of the claim amount admitted by the resolution professional in a time bound manner. It is submitted that this 70% of amount of the claim takes care of the entire principle and significantly pays interest as well. It is submitted that these loans were advanced by the financial creditor on predatory interest rate. Be that as it may the Corporate Debtor as well as the ex-management are bound by their promises made under the revival plan of the Corporate Debtor which is under consideration before this Adjudicating Authority. It is important to point out that the financial creditor raised multiple objections during the meetings of the committee of creditor and asked for specific timelines for payment schedule and agreeing to his demand specific timelines for provided by amending the revival proposal. By way of the present objections the financial creditor is trying to secure amount over and above what has been provided in the revival proposal and trying to create a class for itself which amounts to discrimination with the other creditors. The Adjudicating Authority should discourage such attempts made by the financial creditor as it will upset the entire commercial rational behind the revival proposal and adversely impact the interest of the allottees who have largely voted in the favour of the revival proposal by reposing trust in the ex-management as well as the Corporate Debtor. It is also important to note that the financial creditor is less than 10% and the revival plan has been approved by more than 90% of the committee of creditors and therefore the objections raised by the financial creditor are unsustainable and liable to be rejected in terms of the judgement passed by the Supreme Court of India in the case of Vallal Rck v. Siva Industries and holdings Ltd & Ors., Civil Appeal Nos. 1811-1812 of 2022, which held that when 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, the Adjudicating authority or the Appellate authority cannot sit in an appeal over the commercial wisdom of CoC, further, 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 dehors the provisions of the statute or the Rules - Also, Supreme Court has, time and again, emphasised the need for minimal judicial interference by NCLAT and NCLT in the framework of IBC.

In reply to the contents of paragraph 9 it is submitted that the financial creditor itself has admitted that its share in the committee of creditors is only 6.3% and since the revival proposal is approved by thumping majority it does not have the necessary legal backing to object the proposal admitted by the committee of creditors.

That the proposal is binding on the ex-management as well as the Corporate Debtor and therefore there is no legal flaw in making the ex-management as well as Corporate Debtor party to the settlement/revival proposal. It is further submitted that the objection taken by the financial creditor is hyper technical and not maintainable.

That the flats in questions have been allotted to the allottees and the objector do not have any right to invoke the proceedings under the SARFAESI Act, 2002. Be that as it may there is no fetter on the parties to invoke any legal remedy permissible in accordance with law and if any such remedy is invoked the competent authority will decide its maintainability when in future such application is being made by the financial creditor before the competent authority and no blanket permission to invoke any particular remedy can be granted to the financial contributor in these proceedings.

That the Applicants are one of the many Homebuyers who had been allotted flats in the project undertaken by Ninex Developers Ltd (Corporate Debtor)

On 16.02.2019 and 18.03.2019, the Corporate Debtor herein executed a Builder Buyer Agreement with Applicant No. 1 for the allotment of the following properties in the project of the Corporate Debtor:

Prior to the signing of the said agreement between Applicant No. 1 and the Corporate Debtor, Applicant No. 1, on 18.12.2018 paid a consideration of Rs. 4,00,000/- (Rs. Four Lakhs) for each property as the booking amount.

On 15.04.2019, the Corporate Debtor also entered into a Builder Buyer Agreement with Applicant No. 2 for the allotment of the following properties in the project of the Corporate Debtor:

On 30.12.2018, Applicant No. 2 had also paid a consideration of Rs. 8,00,000/- (Rs. Eight Lakhs) for each property as the booking amount.

Upon the payment of consideration, the Applicants were allotted the above-mentioned flats by the Corporate Debtor through various allotment letters

On 25.04.2022, the Applicants filed their claim in Form - CA as a financial creditor in a class for acceptance of their claim in the CIRP of the Corporate Debtor

Prior to the submission of claims by the Applicants, the Respondent served upon the Applicants a notice dated 28.03.2022 cancelling the allotment of the above-mentioned properties to the Applicant, the said cancellation notice has been duly replied by the Applicants

The Resolution Professional, published FORM - G dated 21.06.2023 inviting expression of interest from prospective resolution applicants for the purpose of submitting a Resolution Plan in the CIRP of the Corporate Debtor. As per FORM G published by the Resolution Professional, the last date for submission of expression of interest for the purpose of submitting a Resolution Plan was 06.07.2023. It is submitted that till date, no Resolution Plan has been approved by the Committee of Creditors.

That in terms of Section 7 of the Code, any amount raised from an allottee under a real estate project shall be considered as a Financial Debt. Hence, the claim of the Applicant, being allottees under the project of the Corporate Debtor will be considered as Financial Debt under Section 5(7) of the Code

That in terms of FORM - A published by the Resolution Professional of the Corporate Debtor, the last date for submission of claims was 10.08.2019. However, the Applicants herein were not aware about the pending CIRP against the Corporate Debtor and hence, failed to submit their claims in the stipulated time as mentioned in the public, announcement. However, upon gaining knowledge of the same and without any further delay, submitted its claim against the Corporate Debtor

The claim of the applicants was rejected by the RP.

That the period of 90 days provided for submission of proof of claims in Regulation 12 of the CIRP Rules is directory in nature and not mandatory. The Principal Bench vide order dated 06.06.2019 in the matter of Edelweiss Asset Reconstruction Co. Pvt. Ltd. v. Adel Landmarks Ltd has made it clear that claims cannot be rejected on the ground of delay as the provision has been held to be directory

That the alleged cancellation of apartments / flats of the Applicants is illegal and contrary to the terms of the Builder Buyer Agreement. The Resolution Professional has failed to show any letter / demand raised by the Corporate Debtor to the Applicants and not honoured by the Applicants.

That the Resolution Professional in the cancellation letters has mentioned that the cancellation is in terms of the Builder Buyer Agreement, whereas, it is clearly mentioned in the Builder Buyer Agreement that a period of 30 days is required to be given the Homebuyer to cure the default if any, thus, the cancellation notices being not in accordance with the Builder Buyer Agreement are liable to be set aside by this Adjudicating Authority.

The withdrawal plan offers only the refund of the principal amount to the Applicants. Whereas, other homebuyers are being offered their respective flats / apartments. It is submitted that the homebuyers who all fall under same class shall be treated equally. There is a clear discrimination between the treatment offered to Applicants and other homebuyers.

That the withdrawal plan has been approved by more than 90 percent of the Creditors in Class. The claim of the Applicants was not admitted and hence the Applicant does not fall under the class. Even otherwise, the homebuyers who have approved the Resolution Plan are getting their respective apartments / flats under the Withdrawal Plan. Whereas, the Applicants apartments / flats are cancelled and he is being offered only the refund.

The fact that the Resolution Professional has issued cancellation notices, itself establishes that the details of the Applicants is in the record of the Corporate Debtor and still the Resolution Professional did not accept their claim, thus, it is evident that the Resolution Professional is not acting in the best interest of the Applicants who are homebuyers of the Corporate Debtor.

That this Adjudicating Authority is duly empowered to test the settlement and withdrawal of the CIRP of the Corporate Debtor on merits, if the decision of the Committee of Creditors to withdraw the CIRP is completely arbitrary in nature.

The CIRP of CD was initiated vide order dated 25.07.2019

The Applicant(s) have filed their claim to the Respondent on 25.04.2022 by claiming to be Home Buyer(s) in respect of 7(Seven) Apartments having Apartment No. B-801, F-210, B-404, E-604, F-901, A-503 & B-204 after a period of 1005 days as against the requirements of filing of claim within a period of 90 days from the date of public announcement by the Applicant / resolution professional. The fact of delay in filing of claim becomes more concerning in view of the fact that the Applicants have submitted their claim after receipt of the notice of cancellation of the allotted unit by CD from the Respondent on 28.03.2022.

The Applicants had the knowledge of commencement of CIRP. This fact is clearly evidenced from the Legal Notice(s) dated 13.04.2022 as sent by the Applicants in which the Applicants have taken an excuse to the commencement of Corporate Insolvency Resolution Process in relation to Corporate Debtor behind not making the payments which were due from their side to the Corporate Debtor in terms of the allotment letter / builders buyers’ agreement.

In addition to this, the Applicant(s) have again filed the present application challenging the decision of the Respondent for not accepting their claim before this Adjudicating Authority on 29.08.2023 after a period of 16 months from the date of receipt of the information of rejection of the claim from the resolution professional i.e. 02.05.2022.

That the actions of the Applicant(s) in the present matter are clearly convenience based and ill motived.

The Applicant have only made the payment of miniscule amount which is even significantly less than the booking amount proposed as part of the allotment letter, builder buyer agreement as executed by and between Applicant and CD. This may be understood from the following given table.

The Corporate Debtor shall remain bound to comply with the statutory requirements in accordance with the law.

The Corporate Debtor shall be responsible to pay all the statutory dues including Income Tax dues, as per law.

This order shall not be construed as waiver to any statutory obligations/liabilities of the Corporate Debtor and the same shall be dealt by the appropriate authorities concerned as per relevant laws.