Three C Green Developers Pvt. Ltd. vs Three C Infratech Pvt. Ltd.

ORAL ORDER

“3.

As per the formulated scheme, New Okhla Industrial Development Authority¹ sometime in the year 2011 launched the project of “Sports City” which was to be developed in Sectors 78, 79 and 150 of NOIDA. The scheme was launched on 03.03.2011 and closed on 24.03.2011. As per the scheme, a Sports City was to be developed on a land parcel of 72.75 hectare (7,27,500 sqm) in Sector 78 and 79 and another sports city in Sector 150.

4.

The reserve price for the scheme was set at Rs. 11,500/- per square metre. The developer was supposed to create sports facilities over 70% of the entire land area, which was not marketable, and to set off this expense in developing the sports city, the developer was allowed to construct group housing on 28% and commercial on 2% of the total land with FAR of 1.5. The scheme clearly stated that the population density in this Sports City would be 1650 people per hectare. The open/green area of the recreational component (i.e. sports activities such as Golf course, stadium etc. and open spaces) was to be considered as open green areas for the entire land. The relevant conditions in the Brochure were as follows:—

* The shareholding of the lead member in the consortium shall remain at least 30% till the temporary occupancy/completion certificate of at least one phase of the project is obtained from the Noida.

* SPCs that will subsequently carry out all its responsibilities as the allottee, and will have to construct on their own a minimum of 30% of the total permissible FAR on allotted area.

*The “Lead Member” shall continue to hold at least 30% of the shareholding in the SPC till the temporary occupancy/completion certificate at least one phase of the project is obtained from the NOIDA

*In case of default in depositing the instalments or any payment, interest @ 14% compounded half yearly shall be leviable for defaulted period on the defaulted amount.

*The Lessee shall be required to complete the construction of minimum 15% of the permissible area earmarked for sports, institutional and other facilities within a period of 3 years from the date of execution of Lease Deed and shall complete the project in phases within 5 years. However, the residential and commercial development/construction may be completed in phases within 7 years.

*Further more, the lessee has to develop residential and commercial component in the project in proportion to area earmarked for recreational uses.

* The ‘Completion Certificate’ will be issued by the NOIDA on the completion of the project or part thereof in phases and on the submission of the necessary documents required for certifying the completion of the project or part thereof.

*The lessee shall execute an Indemnity bond Indemnifying the NOIDA against all disputes arising out of non-completion of the project.

* Without obtaining the completion certificate the lessee shall have the right to sub-divide the allotted plot into suitable smaller plot as per the planning norms of the NOIDA only for the area available for residential and commercial use and to transfer the same to the interested parties, if any, with the prior approval of the NOIDA on payment of transfer charges at the rate prevailing on the date of transfer.

*After the written approval of the Lessor/NOIDA Authority, the lessee can implement/develop the project through its multiple subsidiary companies in which the allottee/lessee company shall have minimum 90% equity share holdings Choose an account

* Sub lease of land/built-up area shall be allowed on the basis of approved layout and building plans by NOIDA.

* NOIDA will monitor the implementation of the project. Applicants who do not have a firm commitment to implement the project within the time limits prescribed are advised not to avail the allotment.

(Emphasis supplied)

5.

In response to the application only two companies applied for the allotment of Sports City, first being M/s. Wave Pvt. Ltd., which had applied at the reserve price and the second was a consortium of companies led by one M/s. Xanadu Estates Pvt. Ltd. (being the Lead Member) along with 8 other companies (being the Relevant Members). The bid of the consortium of M/s. Xanadu Estates Pvt. Ltd. being the highest was allotted the sports city project (SC-01 sector 78-79).

6.

The Noida Authority issued an Acceptance Letter on 28.03.2011 and informed the lead member about the allotment, thereafter, Noida Authority issued Allotment-cum-Reservation Letter dated 04.05.2011 and called upon the Consortium to deposit reservation money. It was informed to the Consortium that total land parcel ad-measuring 7,27,500 square metres as Plot No. SC-01, Sector 78 & 79 was reserved in favour of the Consortium as per the terms and conditions of the Scheme.

17.

The petitioner again sought benefit of Zero Period, which was granted vide letter dated 30.12.2026 on 5,50,729.30 square meters of land parcel up to 31-01-2017. The petitioner further submitted that even after the additional land 48,520 square meters was allotted, still there were certain encroachments and the actual physical possession of the plots were not handed over free from all encumbrances.

92.

Since in this case there has been a web of companies incorporated by the same promoters and all of his newly incorporated companies applied as a consortium, and there after the share holdings have changed in certain companies without the permission of the authority, contrary to the provisions of the sports city scheme. Hence it is necessary to pierce the corporate veil and see who are the people/entity responsible for the fraud/scam.

I. INSOLVENCY-LIFTING OF CORPORATE VEIL

93.

In this case the project was allotted to a consortium, surprisingly all the members of the consortium companies were incorporated after the scheme was launched and the promoters of all the companies were same, which goes to show the consortium was not a genuine consortium but was made of a group of companies owned by same set of people, who after getting the allotment, got it sub-divided and a development plan was applied and approved in such a way, that all the assets of the Sports City were kept in by various small companies and the liability of developing the sports facility was kept with two companies.

94.

Few of the companies in this consortium have gone into insolvency. The insolvencies of these companies were designed only to avoid payment to Noida Authority, banks/financial institutions, State of U.P. to find out the actual accused person who was involved in this bungling/fraud, which resulted into the insolvency, it is necessary to lift the corporate veil of the web of these companies. And to see whether they are trying to hide their fraudulent activities and themselves under the mask of the company being a separate juristic personality.

95.

Out of all the companies, who are involved in the development of the Sports City following four companies have gone into insolvency, which are M/s. Sequel Buidcon Pvt. Ltd., M/s. Arena Super Structure Pvt. Ltd., M/s. Kindle Developers Pvt. Ltd. M/s. Three C Green Developers Pvt. Ltd. (petitioner herein). The first three companies named above were assigned the task of developing residential part of sports city. They were the original members of the consortium or their 100% subsidiary companies of the allottees and had only one business of developing the sports city. Surprisingly in all these companies the original promoters were the same (i.e. Niramal Singh, Surpreet Singh Suri and Vidur Bharadwaj). They have collected huge amount of money by selling part of the project to various other entities (by share transfer of various small holding companies). Obviously, this would have been sold at a price. The money would have come in the vendor company/or any other of its concern or in personal accounts of the promoters (i.e. Nirmal Singh, Vidur Bhardwaj and Surpreet Singh Suri). Now the question is where did the sale consideration go. This money was for the land which was to be used for generating the revenue to construct the sports facilities. No such facility has been made. The entire sale proceeds were syphoned off and thereafter allowed the petitioner company to slip into insolvency. Definitely, this insolvency is a tailor-made insolvency just to avoid civil and criminal liabilities and to avoid payment of the dues and completing the obligation of developing the Sports City. This is nothing but just a fraud played on Noida Authority as well as on the State and other stakeholders/creditors.

96.

Due to the occurrence of the above instances of fraud and irregularities, the law has taken change with its earlier exception that, a company is a separate juristic personality and the liability of the company cannot be recovered from the property of directors. In due course of time, certain exceptions have been carved out in the doctrine of separate juristic personality of the company. The doctrine of ‘piercing of corporate veil’ was initially crystallized in In Salomon v. Salomon & Co. Ltd. [Salomon v. Salomon and Co. Ltd., the House of Lords had observed, the company is at law, a different person altogether from the subscriber. However, the courts have come to recognise several exceptions to the said rule. While it is not necessary to refer to all of them, the one relevant to us is ‘when the corporate personality is being blatantly used as a cloak for fraud or improper conduct’.

97.

This doctrine of lifting corporate veil was carved out to be used whenever and wherever the situation so warranted. Lord Denning in Littlewoods Stores v. I.R.C., held:—

“The doctrine laid down in Salomon's case has to be watched very carefully. It has been supposed to cast a veil over the personality of a limited company through which the Courts cannot see. But that is not true. The Courts can, and often do, draw aside the veil. They can, and often do, pull off the mask. The way with group accounts and the rest. And the Courts should follow suit…….”

98.

On the doctrine of ‘piercing of corporate veil’ the Hon'ble Supreme Court in the matter of State of U.P. v. Renusagar Power Co. has held that, in the expanding horizon of modern jurisprudence, the lifting of the corporate veil is not only permissible, its frontiers are unlimited and ever expanding. It further significantly observed that the lifting of the corporate veil was a changing concept and of expanding horizons.

99.

The Hon'ble Supreme Court in State of Rajasthan v. Gotan Lime Stone Khanij Udyog Private Limited has held as under:—

“The principle of lifting the corporate veil as an exception to the distinct corporate personality of a company or its members is well recognized not only to unravel tax evasion[7] but also where protection of public interest is of paramount importance and the corporate entity is an attempt to evade legal obligations and lifting of veil is necessary to prevent a device to avoid welfare legislation[8]. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc.”

100.

The principle of lifting the veil of corporate personality has been upheld in Subhra Mukharjee v. Bharat Cooking Coal Ltd.; Calcutta Chromotype Ltd. v. Collector of Central Excise Kolkata, New Horizon Ltd. v. Union of India, C.I.T. v. Meenakshi Mills Ltd. Madura; Telco v. State of Bihar; Juggi Lal Kamlapat v. Commissioner of Income Tax, U.P..

101.

Hon'ble Supreme Court in the matter of Delhi Development Authority v. Skipper Construction Company (P) Ltd. has been pleased to hold that lifting the corporate veil of the companies, forfeiture and attachment of property acquired by illegal and corrupt means by the builder behind the corporate veil as also properties of the family members can also be ordered by the Court.

102.

The modus operandi of the promoters of the petitioner company is consistent. They get the plot allotted from Noida, do not pay the dues of Noida Authority, syphon of the money from the company and then push the company, which is to execute the public facilities part of the project into insolvency to avoid implementing the project and to avoid payment to the creditors and also to avoid civil and criminal liabilities. The High Court, in the matter of Nirmal Singh v. State of U.P. bearing Writ C no. 41110 of 2019, had noticed the same trend by the same set of promoters in the judgment and order dated 29.02.2024.

J. ZERO PERIOD

108.

The most surprising thing is that on 70% of the land area sports facility was to be developed and on the remaining 30% residential/commercial activity was permitted. Every builder is seeking benefit of zero period on the ground of encroachment. The question arises, as to how the encroachment were on an area where he was supposed to develop sports facility and there was no encroachment on the area where residential/commercial structure had to come up. When there was an opportunity to collect money by launching residential/commercial tower there was no encroachment or unavailability of infrastructure by Noida Authority, but when it came to develop sports facility, there was an excuse of encroachments. This theory set up by the builder are not at all believable. If there was no infrastructure available or there was encroachment, then they ought not have sold/booked the flats and if they were doing so without informing the homebuyers, then that amounts to committing a fraud on the homebuyers.

109.

Further the affidavit filed by the Noida Authority shows the date on which each of the allottee were given possession and the same was clear of any encroachment only in few cases there were very small encroachments. Had the builders started construction of sports facility on other areas and had they come to the Court with clean hands, this Court would have certainly treated the cases of the builders sympathetically. But, this is not a case here, the builders are raising this ground just to buy further time. Their conduct right from the day one was to deceive the homebuyers, banks, Noida Authority and not to pay them and not to carry out their obligations and for that they are playing every possible tricks.

110.

As per the scheme, three years' time was granted for developing the first phase and five years for the development of the entire sports facility. This delay could not be explained. Even assuming there were some encroachments still major portion of the sports city project land were handed over to the allottees and the allottees, who had bifurcated the land amongst themselves, could have started development of project on the land over which there was no encroachment. However, they chose not to do so and Noida Authority also did not ask them to do so.

K. SCAM

110.

This is a case where every action of the Noida Authority smacks of corruption and scam in collusion with the builders since inception of the Sports City Project. The entire process of development of the Sports City including conceiving the scheme, allotment, execution of the lease deed, sanction of map/plan, and implementation of just one part of the sports city was all an outcome of malafide intentions. The allottees/builder in connivance with the NOIDA official had played a huge fraud and victims are Noida Authority, State of U.P. and the Home buyers.

111.

The most shocking part is the entire scam and fraud were carried under the aegis of the Noida Authority and, one after another, the officials kept mum and allowed the scam to continue. The allotment was made in the year 2011 and for the first time it was unearthed sometime in the year 2020, when the CAG carried out an audit. Shockingly for the last 9 years, the senior officials of the Noida Authority and the State were well aware of the scam and fraud and they allowed the affairs to continue and no action has been taken against them. They failed to see that the allottees were doing nothing towards the development of the sports facility, whereby the group company of the petitioner kept on selling to the subsidiary companies, which made huge amount by way of sale of land (by transferring the shareholdings of the subsidiary companies), but did not pay the dues of the Noida authority.

112.

Even after the Master Plan was sanctioned on 16.06.2014, neither there was development of any sports facility over the project land nor the officers of Noida Authority even bothered to insist for the same from the allottees/builders. When the entire land was given, then why the allottee did not complete the sports facility within the stipulated time. Nothing has been done for development of sports facilities and the officers of Noida Authority kept their eyes closed and none of them ever made any serious and sincere effort to get the sports facilities developed. At the same time they chose to be mute spectators and allowed the builders/sub-lessees to start construction of ancillary part of the project (residential). Construction of multi-storey buildings commenced right under their nose and still they did not make any effort to ensure development of the sports facilities which was the main part of the project.

L. FRAUD

113.

The corporate frauds specially in the insolvency case happens when the management/individuals within or associated with the company are engaged in illegal practices and had failed to fulfil their fiduciary duty, which ultimately leads to insolvency and in such a case the stakeholders affected by such fraud including creditors and consumers become the victim of such fraud. Addressing this issue requires multifaceted approach.

114.

It is apparent from the scheme that when it was formulated and allotment was made it was pre meditated design, wherein allottee wanted to get the land allotted only by paying 10% then get the benefit of zero period, in the meanwhile collect money from various financial institutions and without even developing the project go into insolvency. The officers of Noida Authority were completely hand in glove to this sinister design. They were part of fraud. They had approved the first consolidated lay out Plan wherein they have individually recognized the role of different companies and knowingly kept the development of all sports facilities in two companies, never followed on the development of the sports facilities in the sports city, never asked the allottees to pay their dues, and allowed the haphazard constructions which were completely contrary to the scheme, brochure conditions, and the conditions of the allotment and lease deed.

115.

Fraus Omnia Vitiat-Fraud vitiates everything:—The corporate fraud, which includes malpractices, breach of financial duty, financial manipulation, asset diversion siphoning off funds and the government failure, which results into undue advantage and illegal gains to the people calling the sort in the company would come under the ambit of corporate fraud.”

“64.

The bottom line is that the petitioner is espousing her personal cause and, in doing so, has also espoused the cause of the similarly placed investors/claimants/homebuyers, who form a distinct class and whose long-promised dream of owning residential flats remains unfulfilled, as construction has been stalled for over thirteen years now. Their contributions towards construction, amounting to more than nearly Rs. 1500 crores, have been evidently siphoned off by adopting various dubious means by the unscrupulous promoters and directors of respondent No. 3/TCSPL, viz., respondent No. 6/Mr. Nirmal Singh, respondent No.7/Mr. Vidur Bhardwaj and respondent No.8/Mr. Surpreet Suri, respondent No.9/Mr. Rajeev Bisoya and respondent No.10/Mr. Girish Chander Joshi, who have since abandoned the project and roaming around Scot free. The modus operandi adopted by them in defrauding the homebuyers has been exposed even in the above referred directions by the Allahabad High Court, the foot prints of which are evidently visible in the instant matter too.

X X X

75.

In view of the foregoing discussion, in modification of earlier order dated 02.02.2024, the following directions are passed:

(i)

CM APPL. 10599/2024 moved on behalf of the applicant/respondent No.7, Mr. Vidur Bhardwaj, for recalling of order dated 02.02.2024 is hereby dismissed;

(ii)

The Central Government is hereby directed that the investigation be conducted into the affairs of the respondent No.3/Three C Shelters Pvt. Ltd. besides its Ex-Promoters and Directors/Management viz. respondent No.6/Mr. Nirmal Singh, respondent No.7/Mr. Vidur Bhardwaj, respondent No.8/Mr. Surpreet Suri and respondent No.9/Mr. Rajeev Bisoya besides respondent No.10/Mr. Girish Chander Joshi through the SFIO to unearth the manner in which the funds generated from the petitioner and other homebuyers have been siphoned off to the detriment of its secured and unsecured creditors including the homebuyers;

(iii)

In so far as respondent No.11/Orris, as well as ACE Group of Companies represented by applicants/respondents No. 12 and 13 are concerned, the said companies shall be outside the purview of investigation by the SFIO;

(iv)

However, respondents No.1 & 2 shall continue to investigate the matter with regard to ascertaining the genuineness of the transactions between respondent No. 11/Orris and respondent No. 3/TCSPL in accordance Sections 206, 209, 216, 217, 219 and 224 of the Companies Act, 2013, and take the matter to its logical end;

(v)

As regards respondent No. 11/Orris, respondent Nos. 1 & 2 while conducting investigation shall have due deference to various judgments/orders/directions passed on the judicial side as well by the quasi-judicial authorities;

(vi)

As regards ACE Group of Companies too, respondent Nos. 1 & 2 shall have due deference to various judgments/orders/directions passed on the judicial side as well by the quasi-judicial authorities

(vii)

Respondent Nos. 1 & 2 shall investigate the matter against the ACE Group of Companies uninfluenced by the findings in the report of the IRP dated 09.08.2023 in accordance with Sections 206, 209, 216, 217 and 224 of the Companies Act, 2013;

(viii)

In case the Investigating Officer appointed by respondent Nos. 1 & 2 finds that there has been any connection between the Management of respondent No3/TCSPL as well as ACE Group of Companies with regard to M/s. Bright Buildtech Pvt. Ltd.; M/s. Mega Town Planners Pvt. Ltd.; Three C Residency Pvt. Ltd; Three C City Developers Pvt. Ltd., he shall be empowered to inquire into the same and examine and satisfy himself about the genuineness of such acquisitions in accordance with law, except for those companies where recourse could be taken under section 65 & 66 of the IBC before the NCLT.”

“32.

We, therefore, pass the following orders:-

a)

The entire transaction as narrated in the Section 7 application is plainly imaginary, concocted and fraudulent. The CD does not appear to have had any genuine liability towards the alleged FC and the entire documentation has evidently been prepared by the alleged FC in collusion with Videocon Group entities. The alleged documents disclosed in the Supplementary Affidavit of the alleged FC, far from helping its case, further demonstrate the fraudulent nature of the documents.

b)

In the circumstances, the alleged FC is guilty of practicing and committing fraud on this Tribunal and therefore, as per Section 65 of the Code, penalty of Rs.50 lakh is imposed on the alleged FC and the CIRP stands vitiated and terminated due to the fraud committed. In any event, even apart from the aspect of fraud as discussed above, the Section 7 petition was not maintainable due to the prohibition in Section 10A of the Code.

c)

There is no question of allowing any "settlement" to take place based on the alleged documents disclosed in the Supplementary Affidavit of the alleged Financial Creditor, since the same is evidently a sham and a mala fide ruse to avoid adverse scrutiny by this Tribunal on the wholly fraudulent action of the alleged FC in instituting the section 7 petition and initiation of CIRP based thereon by practicing fraud on the Tribunal. The story of settlement also clearly appears to be an afterthought.

d)

Apart from the consequences under Section 65 of the Code, by reason of which the CIRP stands vitiated and terminated and penalty imposed on the alleged Financial Creditor as stated above, in view of the glaringly fraudulent actions of the alleged Financial Creditor as discussed above, it appears that the same would have far reaching implications going even beyond this case and therefore, it would be proper for a full investigation to be conducted into the transaction set up by the alleged Financial Creditor in the Section 7 petition. In view of the same, the Registry of this Tribunal is directed to send a copy of this order to the Secretary, Ministry of Corporate Affairs, Central Government for further action at their end.”

“2A. Record or evidence of default by financial creditor.— For

the purposes of clause (a) of sub-section (3) of section 7 of the Code, the financial creditor may furnish any of the following record or evidence of default, namely:-

(a)

certified copy of entries in the relevant account in the bankers’ book as defined in clause (3) of section 2 of the Bankers’ Books Evidence Act, 1891 (18 of 1891);

(b)

an order of a court or tribunal that has adjudicated upon the non-payment of a debt, where the period of appeal against such order has expired.”

7. Initiation of corporate insolvency resolution process by financial creditor.—

(3)

The financial creditor shall, along with the application furnish—

(a)

record of the default recorded with the information utility or such other record or evidence of default as may be specified;

“104.

More importantly and while dealing with the question which arises for determination in this case, the court would have to bear in mind the undisputed fact that while the Prevention of Money-Laundering Act was originally promulgated on July 1, 2005, the Insolvency and Bankruptcy Code came to be enforced with effect from May 28, 2016 and on subsequent dates when its various provisions were separately enforced. Section 238 of the Insolvency and Bankruptcy Code came to be energised in terms of the notification dated November 30, 2016 and was ordained to come into effect from December 1, 2016. Section 32A of the Insolvency and Bankruptcy Code on the other was introduced by Amending Act No. 1 of 2020 with retrospective effect from December 28, 2019.

105.

The introduction of section 32A constitutes an event of vital import since it embodies a provision which effectively shut out criminal proceedings including those under the Prevention of Money-Laundering Act upon the corporate insolvency resolution process reaching the defining moment specified therein. However, when the Legislature introduced the said provision, it was conscious and aware of the fact that the provisions of the Prevention of Money-Laundering Act could be enforced against the properties of a corporate debtor notwithstanding the pendency of the corporate insolvency resolution process. This the court notes in light of the extent to which section 14 could be recognised to legally operate under the statutory scheme and as has been explained hereinabove. Notwithstanding the above, the Legislature chose to structure that provision in a manner that the authorities under the Prevention of Money-Laundering Act would cease to have the power to attach or confiscate only when a resolution plan had been approved or where a measure towards liquidation had been adopted. The statutory injunct against the invocation or utilisation of the powers available under the Prevention of Money-Laundering Act was thus ordained to come into effect only once the trigger events envisaged under section 32A came into effect. The Legislature thus in its wisdom chose to place an embargo upon the continuance of criminal proceedings including action of attachment under the Prevention of Money-Laundering Act only once a resolution plan were approved or a measure in aid of liquidation had been adopted.”

“60.

In sum and substance, the SRA/CD would be entitled to no other relief/concession/waiver except those, which are available to it as per the provisions of Section 31(1) and 32A of IBC, 2016. Nevertheless, the properties which are already attached by ED, under PMLA would not be released and it would be for the SRA to resort to the appropriate proceedings to seek remedy in this regard. In any case, the changed management covered under Sec. 32A(1)(a) & (2)(i) of IBC, 2016, would not be entitled for any criminal consequences for the offences committed by the ex-management of the CD prior to commencement of the CIRP. It is also noticed that though in the certificate furnished by the RP in Form-H prescribed under Regulation 39(4) of IBBI (CIRP) Regulations, 2016, as also in the Affidavit filed by him, the RP has authenticated that the SRA does not suffer any ineligibility under Sec. 29A of IBC, 2016, but in terms of provisions of Sec. 30(1) of the Code, a Resolution Applicant should submit the Resolution Plan along with an affidavit stating that he is eligible under Sec. 29A to submit a Resolution Plan, to the Resolution Applicant. We could not find any such affidavit filed by SRA on record. Nevertheless, in the interest of justice we deem it appropriate to give an opportunity to SRA to file the affidavit required in terms of provisions of Sec. 29A read with Sec. 30(1) of the IBC, 2016.”

“23.

In result, we allow the Appeal, set aside the findings recorded in the impugned order in paragraph 60 and observations made in the judgment, denying the benefit of Section 32-A to the SRA. The SRA is entitled to relief of extension of benefit of protection of Section 32-A to lift the attachment by Enforcement Directorate over the assets of the Corporate Debtor. We allow the reliefs as prayed in the Appeal and set aside the findings in paragraph 60 of the judgment and the observations in the judgment, denying the protection of Section 32-A of the IBC. The Appeal is allowed accordingly. There shall beno order as to costs.

X X X

16.

We, thus, are of the view that ends of justice will be served in recalling judgment dated 13.08.2024 and giving an opportunity to the Applicant to be heard before the Appeal is decided afresh. We, however, make it clear that in the Appeal, there was no challenge to the approval of the Resolution Plan., which was approved by the Adjudicating Authority vide order dated 04.07.2024 allowing IA No.01 of 2024. The Company Appeal (AT) (Ins.) No.1495 of 2024 was filed on limited issue as noted above. We, thus, make it clear that the recall of the judgment dated 13.08.2024, shall have no bearing on the implementation of the Resolution Plan as approved on 04.07.2024 and the recall of judgment dated 13.08.2024 is only with respect to limited issue raised in the Appeal regarding withdrawal of the attachment by the ED on the assets of the CD.

17.

In result, IA No.6625 of 2024 is allowed. The judgment dated 13.08.2024 is recalled. We make it clear that recall of judgment dated 13.08.2024, shall have no effect on the order dated 04.07.2024 passed by Adjudicating Authority approving the Resolution Plan and the Resolution Plan shall be implemented as approved on 04.07.2024 and the recall of this judgment is only for consideration of limited issue as noted above. IA No.7235 of 2024 is accordingly disposed of.”

“5. Transfer of pending proceedings of Winding up on the

ground of inability to pay debts.—(1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code:

Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from date of this notification, failing which the petition shall abate.

(2)

All cases where opinion has been forwarded by Board for Industrial and Financial Reconstruction, for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the Act, pursuant to section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall continue to be dealt with by such High Court in accordance with the provisions of the Act.”

“150.

On the basis of analysis of law made in the foregoing paragraphs, we consider it appropriate to lay down the following recommendations in response to the question framed in Para 148:-

“(a)

As a measure of first recourse, the IRP shall communicate to the company and the Authority for seeking Company’s willingness to continue to perform its functions/ obligations in the contract awarded to the consortium of which the said company is a member. This would be in furtherance of the functions of the IRP under Section 20 of the IBC. This communication shall be done within a maximum period of 4 weeks of commencement of CIRP and shall be independent of the constitution of CoC. If no such intention is communicated within the said period, it will be presumed that the company is unwilling to participate in the subject project.

(b)

If the IRP, on an assessment of the capabilities of the Company (consortium member facing CIRP), is of the opinion that the said company cannot usefully or meaningfully participate in the business of the consortium, he shall so communicate to the other consortium members and the Authority (for the said project) within the period provided in para (a) above. The other consortium members (jointly or severally) shall then have an option to undertake the remaining project on their own and complete the same. The exercise of the option by the consortium members to complete the project shall be done within a period of 4 weeks, which shall commence either from the expiry of the 4 week period mentioned in para (a) above (in the event no communication is received from the IRP) or within 4 weeks from the communication of the IRP to the effect that the said company is not in a position to participate in the business of the consortium.

(c)

If the consortium members fail to communicate their willingness to complete the project on their own and without the participation of the member facing CIRP or express their inability to complete the said project, the Authority shall make alternate arrangements to ensure timely completion of the project.”