Rajendran P R vs Mr. Rajendran PR & Anr.

PER CORAM

These Applications involve a common set of facts and questions of law; hence the applications have been heard together and a common order is passed.

The IA(IBC)/492/KOB/2023 is filed by Mr. Rajendran PR, Resolution Professional of M/s Asten Realtors Private Limited, under section 30(6) and 31(2) of the IBC, 2016 (‘the Code’), read with Regulation 37(m) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 (‘CIRP Regulations’) to approve a project wise Resolution Plan submitted by Asten Nautica Buyers Welfare Association, the successful resolution applicant, and approved by the Committee of Creditor (‘CoC’) in its 8^th meeting held on 16.10.2023 with 78.39 % voting shares. IA(IBC)/79/KOB/2024 seeks to reject the present resolution plan and to invite a fresh holistic Resolution Plan for the entire assets of the Corporate Debtor and IA(IBC)/15/KOB/2024 seeks to reject or amend the resolution plan with the approval of CoC to address the short-falls in applicants claim in the said Resolution plan respectively.

This Tribunal admitted Asten Realtors Private Limited, the corporate debtor (CD) into CIRP on 25.01.2023 and appointed Mr. Rajendran P R as the Interim Resolution Professional (IRP) who was confirmed as the Resolution Professional (RP) on 25.03.2023. The CIRP ended on 21.12.2023 after due extensions. This application was filed on 13.11.2023. The RP admitted the claims till 15.08.2023, and the Final list of Claims of CD as on 10.10.2023 is as follows:

The COC consists of 3 unsecured financial creditors as follows: -

Corporate Debtor is in the business of real estate development and currently has three ongoing projects and one completed project. The Resolution Professional received 299 claims totalling Rs.121.39 Crores for "Rajagiri Campus Court", 22 claims for Rs. 59.68 Crores for "Asten Nautica", and 3 claims for Rs.5.99 Crores for "Aurum Woods" which are the ongoing projects. "Asten Viveria" the completed project, has pending registrations for a few already handed-over units.

The RP Invited Expressions of Interest (EOI) for the Resolution Plan on March 28, 2023, which was extended till July 11, 2023, following a request from the Home Buyers Association. The RP received two prospective Resolution Plans from Rajagiri Campus Court Home Buyers Welfare Association for Project Asten Campus Court, and Asten Nautica Home Buyers Welfare Association for Project Austen Nautica within time. No resolution plan was received for Project Austen Arum Woods and its remaining assets. Prospective Resolution Applicants corrected the plan's deficiencies and submitted revised plans on 09.10.2023. The 8^th COC on 16.10.2023 approved the plans with 78.39% voting rights.

These applications are concerned with the resolution plan for the project “Project Austen Nautica". The Resolution Professional received claims from 22 home buyers in the project produced in Annexure A/14. The resolution plan was submitted by the home buyer’s association of the project consisting of 20 members, represented by its Secretary Mr. Dileep Mohan.

The brief background of the project is that the land consists of 205.142 cents in Kumbalam Village, Cochin where two towers totalling 24,687.67 m² are to be constructed. Tower 1 is 70% complete and Tower 2 construction has not commenced yet. The building permit expired on February 16, 2022. As per the joint venture agreement dated 01.06.2013 entered between the CD and landowner Dr. Xavier Mathew for the project, the CD advanced a refundable deposit of ₹1 crore to the landowner and further agreed on the landowner 25% of the built area in the project. The main issue with this project is the pending litigation regarding Coastal Regulation Zone (CRZ) norm violations. The Panchayat denied the building permit renewal due to non-compliance. The Corporate Debtor challenged this with Writ Petition No. 20293/2020, which the Hon’ble High Court of Kerala ruled in favour of the Corporate Debtor on 21.12.2020. Subsequently, the CRZ Authority appealed, leading to Writ Appeal No. 676/2021, which remained unresolved during the CIRP. On 18.10.2023, the court directed the Committee to assess CRZ compliance and ordered the Panchayat to renew the permit if the project meets permissible limits. The court's order is produced as Annexure A/15.

The salient features of the resolution plan are: -

The Resolution Professional has submitted the details of various compliances as envisaged by the Code and the CIRP Regulations which a Resolution Plan is required to adhere to, as follows:

It is submitted that the Resolution Professional filed applications under Sections 66, 43, and 44 of the Code, to appropriate action taken under fraudulent transactions. The Resolution Plan states that any benefits from these applications shall be apportioned towards admitted claims other than present allottees of the project as per section 53 waterfall mechanism.

The Resolution Professional has filed the Compliance Certificate in Form 'H' as per Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) regulations 2016 produced as Annexure A/2. The Resolution Applicant produced as Annexure A/3 confirmed eligibility under Section 29A of the Code in their Declaration and Undertaking dated 10.07.2023 and meets Prospective Resolution Applicants criteria per the COC meeting on 27.03.2023. The performance security of Rs.25 Lakhs was deposited in the bank account of the CD.

As per the valuation report, the RP states that the fair value of CD is Rs 1,48,16,17,725/- and liquidation value of CD is Rs. 1,14,05,45,270/- and the fair value of Project Asten Nautica of the CD is Rs 25,45,52,931/- and liquidation value of Project Asten Nautica is Rs. 19,79,85,613/-

The resolution plan proposes no contingency but the time frame for obtaining the relevant licenses for the completion of the project is 6 months.

IA(IBC)/79/KOB/2024 is filed by Piramal Capital and Housing Finance Limited under section 60(5) and Section 31(2) of the Code for rejection of the resolution plan.

The Resolution Professional admitted the claim of Piramal Capital and Housing Finance Limited to the tune of Rs. 65,62,60,800.34/- and rejected the claim of Rs. 2,53,39,206/-.

The Resolution Professional classified the Piramal Capital and Housing Finance Limited as an unsecured creditor, but the same was challenged in IA No. 346/KOB/2023 wherein this Tribunal on November 10, 2023, affirmed the Piramal Capital and Housing Finance Limited as a secured creditor.

It is submitted that the Resolution Applicant’s Resolution Plan aimed to complete its project but completely failed to make any payments to creditors according to their eligibility, thereby neglecting their financial obligations in the process.

The objection of calling for a Resolution Plan for a specific project was raised by the Piramal Capital and Housing Finance Limited, however, the Resolution Professional without providing any clarification proceeded to accept the asset-wise Resolution Plan and put the same for the vote. They have pointed out the legal observation and raised objections to the resolution plan put forth for voting.

It is submitted that the various parts of the resolution plan violate principles of natural justice and unfairly treat Project Asten Nautica Allottees.

It is further submitted that the homebuyers of Nautica Tower 1 are getting 100% of the amount admitted by way of completing the apartment, however for Nautica Tower 2, it is 50% repayment of the amount, and the rest of the creditors are not considered in the Resolution plan including the amount to Employee Provident Fund Organisation.

Piramal Capital and Housing Finance Limited submitted that the dissenting financial creditor should receive the same amount in liquidation as their admitted claim. As the secured creditor, Piramal Capital and Housing Finance Limited is entitled to its full claim, prioritized over unsecured Homebuyers under Section 53(1)(b) of the IBC.

Piramal Capital and Housing Finance Limited relying upon Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (2022) 1 SCC 401, the Hon'ble Supreme Court of India ruled that Section 30(2)(b)(ii) of the Code guarantees dissenting creditors will receive equivalent monetary compensation to liquidation proceedings.

IA(IBC)/15/KOB/2024 is filed by the homebuyer of the present project, who has entered into a flat purchase agreement with the Corporate Debtor seeking relief against the action of the Resolution Professional by admitting his claim to only Rs.23504318/- against the claim of Rs.37795393/- thereby rejecting the claim to tune of Rs.14291075/-.

It contends that the instances of CD exemplify corporate fraud, mismanagement, or negligence and the ex-management of the CD must be held accountable for its liabilities and should not maintain control over assets via proxies or a COC, especially if key members have ties to the Corporate Debtor's Directors.

Further submitted that the plan needs to include comprehensive details on a feasible execution strategy, focusing on monetization and technical implementation moving forward.

It is stated that the Resolution Applicant is a welfare association focused on maintaining flats and common activities, not on profit-driven construction projects. It lacks incorporation details, bye-laws, and a supporting resolution, indicating it does not have the mandate to submit a resolution plan for such activities.

Heard the submissions made by the Ld. Counsel for the Resolution Professional, and perused the records. We find that the Resolution Plan for project-wise resolution of the Asten Nautica project of the CD has been approved with a 78.39% voting share which is the requisite majority required for approval. As per the CoC, the Plan meets the requirement of being viable and feasible for the revival of the project- Asten Nautica of the Corporate Debtor by settlement of the entire claims of the Homebuyers. By and large, the compliances have been done by the RP and the Resolution Applicant for making the Plan effective after approval by this Bench.

The main contentions of the opposing party- Piramal Capital & Housing Finance Pvt Ltd to this resolution plan is that vide order dated 10.11.2023, they have been classified as the secured creditor by this Tribunal and by virtue of the same, the claims of them have to be prioritized over other unsecured financial creditor class of homebuyers under Section 53(1)(b) of the IBC in which case, their claim is to be settled in full. That section 30(2)(b) as well as section 30(4) compliance with distribution mechanism u/s 53 IBC and rights of dissenting financial creditors are not complied.

Admittedly this plan has the effect of the Resolution Applicant taking the position of the Joint venture partner in the shoes of CD and directly executing the project Asten Nautica without providing any payment to other creditors be it secured or unsecured or operational or others and is intended to complete the project by bringing additional investments through the homebuyers and enable their resolution. The liquidation value of the project is also not sufficient for settling any creditors other than the unsecured financial creditor class as per the section 53 mechanism as there is seen no workmen/employee dues to be settled in priority other than CIRP costs. If one is to go by the section 53 mechanism also, the opposing party Piramal cannot have a valid claim with respect to this particular project because their loan is not pooled into the construction directly as per the records. Being so, the charge cannot operate in favour of the creditor in this particular project. Therefore, the claim of Piramal as the secured creditor is not a valid objection to reject this Plan.

With regard to the second opposing party, i.e., a claimant in the project whose full claim is not admitted, it is seen that the plan is intended for complete resolution of the project -Asten Nautica which is made at the behest of the homebuyers. Isolated claims at this belated stage and also seeing that the resolution plan presupposes the homebuyer’s resolution which includes this opposing party, these objections cannot be deemed reasonable enough to reject the plan for it affects the homebuyers in its entirety. Any action to admit this claim will be arbitrary at the least.

Now we do find that situation being as stated supra, this plan is the only feasible and viable solution to the resolution of the project otherwise the end of this will be liquidation, which will hinder high detriment to the homebuyer class. It has also been expressly undertaken that the homebuyer class in this project does not take any claim in CD or its business and their rights are only limited to this project, the JV, and its execution. The other creditors are well within their rights to get their settlement out of the residual proceedings. Since this is a project-wise plan, we also rely on Hon’ble NCLAT in Flat Buyers Association Winter Hills-77, Gurgaon vs Umang Realtech Pvt Ltd that each project is to be considered separately and handed over the project will not be part of CIRP, and Hon’ble Supreme Court in Bikram Chatterjee and Ors. V. UOI & Ors. where it is held that CD cannot be pushed into liquidation without transferring assets to homebuyers. Hence in the interest of justice and noting that provisions under IBC, particularly sections 30 and 31 of the Code and regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 have been largely complied with, we find that this plan needs to be approved. No other circumstances exist that militate against the grant of approval for the Resolution Plan.

As far as the question of granting time to comply with the statutory obligations/seeking sanctions from governmental authorities is concerned, the Resolution Applicant is directed to do the same within one year as prescribed under section 31(4) of the Code.

Therefore, subject to the observations made in this Order, the Resolution Plan in question is hereby approved by this Bench. The Resolution Plan shall form part of this Order.

The Resolution Applicant requests, proposes, and prays for the following reliefs and concessions to be granted to the Corporate Debtor and/or the Resolution Applicant, as the case may be, on the Approval Date.

Regarding the reliefs/waivers pertaining to the domain of various departments/governmental authorities, it is further clarified that this Adjudicating Authority has no power to sanction these waivers, etc. and the Successful Resolution Applicant is at liberty to approach the competent authorities/courts/legal forums/office(s) Government or Semi-Government/State or Central Government for appropriate relief(s) sought in the plan. Approval of the Resolution Plan does not mean automatic waivers.

It is directed that any relief sought in the resolution plan, where the contract/agreement/understanding/proceedings/ actions/ notice etc. is not specifically identified or is for future and contingent liability, is at this moment not acceded to.

The Resolution Plan is binding on the Corporate Debtor, its employees, members, and all its creditors including but not limited to secured, unsecured, financial, and operational creditors, guarantors, government and statutory and local authorities, and other stakeholders involved so that revival of the project- Asten Nautica 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 Monitoring Committee shall take charge of the implementation of the Resolution Plan of the Asten Nautica Project of the Corporate Debtor with effect from the date of this Order.

The Monitoring Committee shall endeavour to complete the plan implementation within 18 months from the date of this Order.

The Resolution Applicant shall have access to all the Corporate Debtor's records, documents, assets, and premises with respect to the Asten Nautica Project with effect from the date of this order.

The Resolution Professional is further directed to hand over all records, documents, and properties of the Corporate Debtor Asten Nautica Project to the Resolution Applicant to enable the Resolution Applicant to finalize the further line of action required for starting the operations.

As the performance security amount already paid by the Resolution Applicant is to be utilized towards the revival of the Asten Nautica Project, any case of non-compliance with this order or withdrawal of the Resolution Plan cannot have an effect of forfeiture of the performance security.

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

IA(IBC)/492/KOB/2023 stands allowed and disposed of. IA(IBC)/79/KOB/2024 and IA (IBC)/15/KOB/2024 shall stand dismissed. The main Company Petition i.e., C.P. (IB) No. 54/KOB/2022 shall stand ordered accordingly.

Certified copy of this Order be issued on demand to the concerned parties, upon due compliance with requisite formalities.

A copy of this Order is to be submitted by the Resolution Applicant in the Office of the Registrar of Companies, Kerala.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel / Authorized Representatives for information and for taking necessary steps.

File be consigned to records.