Mr. Vijay Pitamber Lulla vs M/s. Umesh Suppliers Private Limited & Ors.

Per: Suchitra Kanuparthi, Member (J)

The present application is filed u/s. 30 (6) and 31 of the Insolvency and Bankruptcy Code, read with Rule 39 of the Insolvency and Bankruptcy Board of India (Insolvency resolution Process for Corporate Persons) Regulations, 2016 by the Resolution Applicant Mr. Vijay Pitamber Lulla.

The Corporate Debtor was admitted into CIRP on 04.11.2019 and the IRP was appointed.

After receiving the order on 09.11.2019, the IRP made public announcement in Form A on 13.11.2019 in two newspapers namely in “Free Press Journal” in English language and “Navshakti” in Marathi language. The last date of receiving claim was 25.11.2019.

The applicant filed an MA No. 3884 of 2019 u/s. 21 (6A) (b) of Insolvency and Bankruptcy Code, 2016 for appointment of Mr. Shailesh Buta as the Authorized representative of a class of financial Creditor of Corporate Debtor-Home Buyers. The Adjudicating Authority appointed Mr. Shailesh Buta as the Authorized representative of a class of financial Creditor on 12.12.2019.

The Corporate Debtor is a subsidiary of “Orbit Corporation Limited”, the holding company Orbit Corporation Limited is under liquidation by an order dated 12.04.2018 passed by the Hon’ble Bombay High Court and official liquidator has taken charge over the said corporation.

Pursuant to the public announcement the applicant received the following claim:

The First meeting of CoC was held on 31st December 2019 and the IRP was confirmed as RP. 75.30 % of flat buyers voted in favour of resolution and the remaining did not cast their vote.

In the 2nd CoC meeting held on 29.01.2020, the valuer Aashima Narula and Mr. Vinod Somani and Mr. Pinakin Shah and Mr. Vishnu Upadhyay were appointed to value the assets and Land and Building of Corporate Debtor. Further, it was also resolved that application u/s. 19 (2) is filed against Mr. Pujit Aggarwal for non-cooperation. In the same meeting the RP-applicant tabled updated list of claims received from 225 claimants (254 flats/ shops). The summary of claim for approval of RP is as follows:

In the 3rd CoC meeting on 28.02.2020 the Applicant filed Form G before CoC member, the CoC member agreed to publish in “Free Press Journal” and “Navshakti” for inviting prospective Resolution Applicant. The last date of receipt of EOI was 17.03.2020 and the last date of submission of RP was 17.04.2020.

In the 4^th meeting of CoC held on 06.05.2020, the RP informed that on 3rd March 2020 inviting for EOI Was published in “Free Press Journal” and Navshakti and RP received 6 EOI. Further, due to lockdown in the entire country last date of submission of RP was extended till 30 days after lockdown declared in Mumbai. With regard to claim of LIC HFL, LIC HFL were supposed to clarify whether it is a Financial Creditor or Secured Creditor based on Judgment of Hon’ble Supreme Court in Jaypee Infratech Ltd v. Axis Bank Ltd and Ors. (Civil Appeal Nos. 8512-8527 of 2019 with Civil Appeal Nos. 6777-6797 of 2019) (“Jaypee Infratech”)

The Applicant further submitted that total number of flat /shops to be constructed in the project Orbit Residency Park is 288 out of which applicant have admitted 259 flats/ shops and rejects 7 flats/ shops. No claims have been received for 15 flats/ shops. the claim of 27 flats by Umesh Suppliers Pvt Ltd was accepted by the RP as unsecured FC. the table given below summarizes below:

In the 5^th CoC meeting held on 28.10.2020, the RP informed the CoC that the CoC is reconstituted and the claim of LIC HFL is reduced as a financial creditor and consider the claim of other creditor and their voting percentage was reduced to 20.88%. The reconstitution of CoC was strongly objected to by the LIC HFL and the flat buyer representative.

The applicant pointed out that on 21.09.2020, in the application pending for non-cooperation, NCLT had directed official liquidator to provide documents which are in his custody. The last date for receipt of resolution plan was extended to 30.11.2020 and two new valuers were appointed namely Mr. Dinesh Warade and Mr. Sunil Apte.

The Applicant filed an application for extension and exclusion of CIRP period u/s. 12 (2) vide MA No 2198.

In the 6th CoC meeting held on 04.12.2020, Resolution Professional informed that he has received the Resolution Plan of Monica Shah in consortium with Shree Krishna Structure Pvt Ltd and Vipul Sanghvi along with the bid bond amount and no other Resolution Plan was received by him. It was decided not to open a Resolution Plan but give more time to another Resolution Applicant to submit their Resolution Plan. Accordingly, the last date of receipt of the plan was fixed on 18.12.2020. Mrs. Monica Shah in consortium with Shree Krishna Structure Pvt Ltd and Vipul Sanghvi were asked to take back their plan and give a revised plan if they so desire.

In the 7th meeting of CoC held on 20.01.2021, the Applicant informed the CoC member that the claim of some M/s. Umesh Suppliers Private Limited (hereinafter USPL) was received, it was found the documents were not complete and proper and that the applicant is raising queries and seeking clarification from M/s. Umesh Suppliers Private Limited. The RP then pointed out that M/s. Umesh Suppliers Private Limited is the creditor of the company, but whether he is a flat buyer for a financial creditor is a question that can be resolved only on the basis of evidence confirming allotment of flats and after he receives further information from Mr. Pujit Aggarwal. The CoC ratified and approved an extension of a large portion of the resolution plan to 21^st January 2021 which was done on the request of PRA. Further after discussion, the CoC decided to extend the last date of submission of Resolution Plan as 25^th January,2021, and it was decided to hold CoC meeting on 25.01.2021 to open the plans and requested the Members to be physically present in the RP’s office for the same.

In the 8th CoC meeting held on 25.01.2021, RP informed the CoC that he has received 3 Resolution Plan from Resolution Applicants namely Ms. Monica Shah consortium, Kabra and Associates and Marttcon Consortium and their plans were opened.

In the 9th CoC meeting held on 20.02.2021, the RP stated that he has received a letter from USPL wherein he has attached a few documents along with his name which are allotted and a reply was sent to him.

In the 10th CoC meeting held on 03.03.2021, process advisor Mr. Rajendra Ganatra was appointed and RP was requested to appoint a forensic auditor. RP appointed Thar and Company to conduct the forensic audit and determine the true nature of the transaction between M/s. Umesh Suppliers Private Limited.

In the 11th meeting of CoC held on 13.04.2021, the CoC members discussed Resolution Plan and RP tabled the Forensic Audit Report of Thar and company and the terms of report was that the M/s. Umesh Suppliers Private Limited was a related party to Mr. Punit Agarwal and hence should be considered as such related party of Mr. Pujit Aggarwal. Mr. Agarwal objected and denied that they were related party.

In the 12th meeting of CoC held on 04.05.2021, there was a further discussion on the revised plan and CoC members raised concern of low working capital and other issues and PRA agreed to give a revised plan within a week.

In the 13th meeting of CoC held on 20.05.2021, the CoC member discussed Section 29A compliance with all PRA and it was decided that Ms. Monica Shah consortium have failed to give clarification u/s. 29A and their Resolution Plan not feasible and viable and hence their plan was rejected.

The applicant informed the COC that M/s. Kabra and Associates LLP looked clean with regard to Section 29A compliant and the consortium of M/s. Martt Con India Private Limited have also clarified queries on Section 29A compliance. The CoC member requested RP and Mr. Ganatra to present a report on two PRA's showing comparison between the two with their merit and demerit of their respective plans.

In the 14th CoC meeting held on 05.06.2021, RP informed CoC that Ms. Monica Shah consortium were informed about rejection of the plan and their earnest money and bid bond money were returned. Mr. Ganatra briefed the salient features of the M/s. Martt Con India Private Limited consortium resolution plan. Mr. Gopalan highlighted the figures of M/s. Martt Con India Private Limited and stated that the amount now agreed to the secured Financial Creditor has been increased to Rs. 16 crs.

In the 15th CoC Meeting held on 17.07.2021, the discussion regarding the status of claim of M/s. Umesh Suppliers Private Limited took place and that they had received a forensic report from M/s. Thar and company. They have also received response from Mr. Pujit Aggarwal and M/s. Umesh Suppliers Private Limited. The forensic audit report concluded that M/s. Umesh Suppliers Private Limited is a related party and can only be treated as “other debt” and not as flat owner. A legal opinion was sought from Mr. Rajan Agarwal wherein he stated there is a need to approach NCLT to take a prior decision on the matter. Based on the advice, the RP was authorized to file an application before NCLT.

The applicant has filed an IA no 1729 of 2021 to determine the status of USPL.

The CoC in its 16th meeting held on 07.08.2021, discussed the tie breaking formula to resolve the tie between both the plans. The breaker formula is as follows:

In the 17th CoC meeting held on 14.08.2021, further discussion took place on the resolution plan between the CoC members. The CoC meeting was adjourned and held on 16th and 17th August 2021 wherein the discussion on the resolution plan was continued and the PRA's was requested to give clarification addendum to the plan. COC according to the revised timeline as under:

In the 18th CoC meeting held on 23rd august 2021, the discussion regarding addendum to resolution plan took place. The RP then briefed the CoC members on points covered in an addendum submitted by PRA M/s. Kabra and Associates LLP, addendum of M/s. Martt Con India Private Limited was presented along with an excel sheet prepared by M/s. Martt Con India Private Limited to explain the exit plan clause to CoC members. The meeting was adjourned to 27th August, 2021 with a request to seek addendum to those PRA's. On 27th August 2021, the RP discussed the clauses mentioned addendum to both the PRA's and the plan was put to vote.

Key voting result as is as follows:

Form H is also as below:

The overview of Resolution Application:

The Objector LIC HFL is part of CoC having 20.88% of voting share has dissented from voting for the Resolution Plan and will get only the claim as per Section 53 of the Code.

It is relevant to refer to the Judgement of Hon’ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association & ors vs. NBCC (india) ltd. & ors., wherein the Hon’ble Supreme Court held that the dissenting financial creditor is bound by the Resolution Plan and shall be entitled to receive his claim u/s. 53 of the Code. The Findings of the Hon’ble Supreme Court at Para 46 is reproduced below:

This Bench notes that in view of the above judgement of the Hon’ble Supreme Court, the objections of dissenting creditors namely Respondent No. 3 – LIC HFL are untenable. Further, the objections with regard to the compliance of the regulations for approval of Resolution Plan are untenable and that the mandatory contents of the Resolution plan in compliance with Regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, has been enclosed at clauses 5 of the Resolution Plan.

The approval of Resolution Plan has been sought u/s 31 of the Code. We have carefully considered the submission of counsel for RP and pursued the records. The conditions provided u/s. 31 (1) are that the Resolution Plan is approved u/s. 30 (4) of the Code and that the Resolution Plan so approved is in compliance of Section 30(2). However, the Resolution Plan has provisions for its effective implementation. The Resolution Plan was approved by 81.36% majority of CoC and therefore the conditions of section 30 (2) are satisfied. The provisions of Section 30 (2) is as follows:

The Resolution Plan provides that the estimated CIRP cost of Rs. 1 crore from the upfront Equity infusion, within 45 days of the effective date.

The fair value is Rs. 21.70 crores and the liquidation value is Rs. 16.27 crores. However, Resolution Plan provides the payment of Rs. 17.52 crores, the flat buyers are being paid Rs. 8.5 crores, the Financial Creditor namely LIC Housing Finance Limited will be paid Rs. 16.30 crores and although the claim of LIC Housing Finance Limited is secured financial creditor and other creditor, however, they have dissented the plan and hence they will be getting only the liquidation value u/s. 53 of the Code. The plan also provide that the unsecured financial creditor would be paid an amount of Rs. 1.23 crores, subject to the outcome of IA 1729 of 2021. IA has given a performance Bank Guarantee of Rs. 7 crores (Rs. 1 crore paid in form of one deposit, Rs. 1.5 crores to be paid within 4 days of issuance of LOI, Rs. 4.5 crores to be paid within 10 days of approval of Resolution Plan). The Resolution Applicant has accepted the LOI given by the RP and given the performance guarantee of Rs. 2.50 Crores in the form of Bank Guarantee by Canara Bank, Kolshet Branch, Thane for a period of 3 years. The plan also provides for the payment of other creditors to the tune of Rs. 7.80 crores and payment to Operational Creditor of Rs. 90,000/-. Further, the plan provides for escalation of flat buyers at the rate of Rs. 4,999/- per sq. ft.

In terms of Section 30 (2) (c) (d), the Resolution Plan also provides that the monitoring agency shall comprise of one representative of Resolution Applicant, one representative of Insolvency Professional, one representative of Financial Creditor (including the class of creditors) which should be treated as one creditor.

In CoC of Essar Steel (Civil Appeal No. 8766-67 of 2019 decided on 15.11.2019) the Hon’ble Apex Court clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved. In para 42, the Hon’ble Court has observed as under:

We further rely on the judgement of the Hon’ble Supreme Court in case of K. Shashidhar Vs IOB, wherein it was held inter alia that no corresponding provision has been envisage by the legislature to empower the Resolution Professional, Adjudicating Authority, of that matter NCLAT to reverse the commercial decision of the CoC. It is also held that the commercial decision of Financial Creditor are not open for judicial review by Adjudicating authority and by Appellate Authority. Therefore, in view of the above discussion, the decision taken by the Financial Creditor/CoC Members falls within the ambit of its commercial and banking wisdom and is therefore not being interfered with.

Therefore, subject to the observation made in this order, we hereby accord our approval to the Resolution Plan. The Resolution Plan shall form part of this order.

Any relief sought in the Resolution Plan, where any contract, agreement understanding, Proceeding, action, notice etc. not specifically identified, or is for a future contingency, is, at this point of time, rejected.

The Resolution Plan as approved is binding on the Corporate Debtor and other stakeholders involved so that the revival of the Corporate Debtor can come into force with immediate effect.

The Moratorium imposed under Section 14 shall cease to have effect from the date of this order.

The Resolution Professional shall stand discharged from his duties with effect from the date of this Order. However, he shall perform his duties in terms of the Resolution Plan as approved by this Adjudicating Authority.

The Resolution Professional is further directed to handover all records, and properties to the Resolution Applicant to finalize the further line of action required for starting of the operation. The Resolution Applicant shall have access to all the records and premises of the corporate debtor through the Resolution Professional to finalize the further line of action required for starting of the operation.

In case of non-compliance of this order or withdrawal of Resolution Plan, the performance security amount already paid by the Resolution Applicant shall be liable to be forfeited.

Liberty is hereby granted for moving any Application if required in connection with implementation of this Resolution Plan.

The Applicant shall supervise the implementation of the Resolution Plan and file status of its implementation before this Authority from time to time, preferably every quarter.

The Applicant shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the IBBI along with copy of this order for information.

The Applicant shall forthwith send a certified copy of this order to the CoC and the Resolution Applicant, respectively for necessary compliance.

The application bearing no IA No. 2230 of 2021 is stand disposed of.