Vipras Adz vs Mr. Sundaresan Nagarajan & Anr.

Per: R. VARADHARAJAN, MEMBER (JUDICIAL)

The MA/554/2019 is moved by the Resolution Professional of the Corporate Debtor viz., Mr. Sundaresan Nagarajan under Section 30 (6) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (in short, 'Regulation') seeking the approval of the Resolution Plan submitted by the successful Resolution Applicant viz., M/s. RCC e-Construction Pvt. Ltd.

From the averments made in the Application read with Form-H Compliance Certificate as filed by the Resolution Professional, it is seen that the Corporate Insolvency Resolution Process (CIR Process) was initiated against the Corporate Debtor on 13.07.2018 whereby Mr. T. V. Subramanian was appointed initially as the Interim Resolution Professional who was subsequently replaced by this Authority on 19.07.2018 with one Mr. Premachandran.

Consequent to the public announcement under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulations, 2016, claims from the creditors seem to have been received by the Resolution Professional. After verification of the claims received, the Interim Resolution Professional constituted Committee of Creditors (CoCs) on 18.08.2018.

It is evident from Form H that the 1st meeting of the CoC was held on 23.08.2018 and Mr. Sundaresan Nagarajan had been appointed as Resolution Professional on 20.09.2018. It is also evident on perusal of the Form H that the “Expression of Interests” (in short, “EoI”) were issued thrice with the last one having been issued on 17.04.2019. At the instance of the CoC, on 28.04.2019 the final list of eligible prospective Resolution Applicants were ascertained and the prospective Resolution Applicants were invited to submit the Resolution Plan on 29.04.2019 with cut off date being provided as 15.05.2019 for the submissions of the Resolution Plans.

The Resolution Plan was put for e-voting on 29.05.2019 and 30.05.2019 and consequent thereto the Resolution Plan was filed with this Adjudicating Authority on 03.06.2019. Even though, the CIR Process period had expired on 09.01.2019, however, the same was extended from time to time by this Authority for initial period of 90 days and after exclusion of 49 days of time period lost in legal proceedings, the CIR Process stood extended till 29.05.2019.

For the purpose of ascertaining the fair value and liquidation value of the Corporate Debtor, it is disclosed in Form – H that two registered Valuers were appointed on 19.09.2018 and the Fair Value as computed by the two Valuers is Rs.59.57 Crores / Rs.56.16 Crores, as the case may be and the average works out to be Rs.57.87 Crores. Similarly, in relation to the Liquidation Value, it is disclosed that while one of the Valuers has ascertained the Liquidation value as Rs.44.24 Crores whereas the other Valuer has arrived at the Liquidation Value as Rs.44.46 Crores which works out to be an average of Rs.44.35 Crores.

It is also brought forth that in relation to the CoC at the time of approval of the Resolution Plan, the following members constituted it viz.:-

The pattern of voting in relation to the Resolution Plan has also been disclosed as evident from the above table extracted from Form-H.

Pursuant to the Regulation 35A of the IBBI (IRP for Corporate Persons) Regulations, 2016, it is disclosed in Form-H that the Resolution Professional has determined the transaction of the nature covered under Sections 43, 45, 50 or 66 of I&B Code, 2016 and that suitable Application has also been filed before this Tribunal, which is pending adjudication.

Form H Compliance Certificate as issued by the Resolution Professional in terms of I&B Code, 2016 read with the attendant Regulations discloses that the Resolution Plan complies with all the provisions of the I&B Code, 2016, the CIRP Regulations and does not contravene any of the provisions of the law for the time being in force.

It is also brought forth that an Affidavit as required to be submitted by the Resolution Applicant viz., RCC E-Construct Private Limited has also been duly submitted in relation to the eligibility taking into consideration Section 29A of the I&B Code, 2016.

It is affirmed in terms of the table as given above that the Resolution Plan has been approved by the CoC with 81.39% of voting share of Financial Creditors including Home Buyers have duly approved the Resolution Plan as submitted by the Resolution Applicant and that the voting was exercised in terms of electronic voting system which were kept open for 24 hours as per the Regulation 26 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

From the averments made in the Application as well as in Form-H as filed by the Resolution Professional in relation to the procedural aspects, the same seems to have been duly complied with for which the Resolution Professional has issued a Certificate. It is not necessary for this Tribunal to go into the same.

Since this Adjudicating Authority is required to approve the Resolution Plan in terms of Section 30(6) of I&B Code, 2016, upon the focus in relation to the invitation for “EoI” and filing of the Resolution Plan by the Resolution Applicant, the following facts emerge:-

Based on the Information Memorandum which has been provided, the Resolution Applicant seems to have filed the Resolution Plan. The report of the Resolution Professional mandates eligibility criteria filed in relation to the proposed Resolution Applicants. The CoC has fixed the following eligibility criteria in relation to the invitation for "EoI" from the prospective Resolution Applicants which is as under:-

Based on the Information Memorandum, eligibility criteria and invitation for "EoI", the following Resolution Applicants including the successful Resolution Applicant had evinced interest in resolving the insolvency of the Corporate Debtor by submitting "EoIs" and the following names were found in the provisional list of resolution applicant:-

Subsequent thereof, the name of M/s. Sai Trading and Interiors was excluded from the final list of prospective resolution applicant after recording the reasons in the 8^th CoC meeting dated 28.04.2019. Only two Resolution Plan of viz., the successful Resolution Applicant and one M/s. Annai Builders Real Estates (P) Ltd. were taken up and was placed for consideration by the CoC for determining / ascertaining the Resolution Plan filed on the basis by consideration of Evaluation Matrix in relation to the Resolution Plans as submitted by the two Resolution Applicants to the following effect:-

a

Since the Resolution Plan submitted by the successful Resolution Applicant scored more value, the same was placed before the CoC for voting which was ultimately approved by the CoC as stated in earlier paragraph supra and voted with approval of 81.39% of share and now the Resolution Plan is before us for our consideration. The Resolution Plan filed by the successful Resolution Applicant however has been challenged by way of several applications as disclosed in the cause title extracted in the instant order itself and in the circumstances the said applications are also taken up and disposed off by virtue of this common order. At this stage, it is also to be noted that no application has been filed by the unsuccessful Resolution Applicant, viz. M/s. Annai Builders Real Estate (P) Ltd., whose Resolution Plan stood rejected by the CoC.

The objections as raised by the different categories of creditors or by the unsuccessful intended Resolution Applicants viz. Sai Trading & Interiors whose candidature for filing the Resolution Plan itself was rejected at the stage of ascertaining the prospective Resolution Applicant, has been categorised as follows:-

The brief and relevant facts of all the Applications which are categorized above are extracted hereunder;

MA/877/2019 – (Vipraz Adz)

The Applicant is an Operational Creditor who had rendered services of publishing advertisement for the Corporate Debtor and filed their claims with the RP and which have been accepted. As per the Resolution Plan, being the Liquidation value is NIL, the Resolution Applicant proposes to pay the Operational Creditors herein 1.5% of the admitted claim amount. Aggrieved by the said proposal, the applicants have filed the present MA.

MA/878/2019 – (Themes Adz)

The Applicant is an Operational Creditor who had rendered services of publishing advertisement for the Corporate Debtor and filed their claims with the RP and which have been accepted. As per the Resolution Plan, being the Liquidation value is NIL, the Resolution Applicant proposes to pay the Operational Creditors herein 1.5% of the admitted claim amount. Aggrieved by the said proposal, the applicants have filed the present MA.

MA/879/2019 – (S. Rani)

The Applicant is an Operational Creditor who had rendered services of publishing advertisement for the Corporate Debtor and filed their claims with the RP and which have been accepted. As per the Resolution Plan, being the Liquidation value is NIL, the Resolution Applicant proposes to pay the Operational Creditors herein 1.5% of the admitted claim amount. Aggrieved by the said proposal, the applicants have filed the present MA.

MA/625/2019 – (Sai Enterprises)

The Applicant viz. Sai Enterprises, supplied building materials to the CD. Upon initiation of the CIR Process, the Applicant submitted the claim to the RP, which was admitted to the tune of Rs.30,86,266/-. As per the Resolution Plan, being the Liquidation value is NIL, the Resolution Applicant proposes to pay the Operational Creditors herein 1.5% of the admitted claim amount. Aggrieved by the said proposal, the applicants have filed the present MA.

MA/626/2019 – (Sai Trading & Interiors)

The Applicant viz. Sai Trading and Interiors, engaged in the business of civil constructions and dealing with hardware materials and did aluminium, carpentary and painting works. Upon initiation of the CIR Process, the Applicant submitted the claim to the RP, which was admitted to the tune of Rs.9,38,00,000/-. It is the case of the applicant that the CD has availed a loan of Rs.105 Crores from DMI Finance for three projects, viz. "Innova", "Sunshine" and "Matrix" and the Applicant will be given major contract in the above projects and with the money which the Applicant Company is going to gain, the Applicant Company was requested by the CD to complete the other projects at various sites and based on the promise that from the money to be accrued to the CD, the bills will be settled to the Applicant.

After the loan was sanctioned, DMI Finance opened an escrow account, and the funds so released were directly credited to the account of the Applicant and upon the instruction on the Director of the CD, it was transferred by the Applicant to the Director's personal account and CD's account for purchase of 15 flats (11 in Sunshine and 4 in Innova).

Hence prayed not to approve the Resolution Plan.

Same facts as stated in MA/625/2019, and in addition being unsuccessful in filing the Resolution Plan, sought relief to declare the resolution made during the 8th CoC, dropping the applicant from the final list of prospective resolution applicants as illegal, unjust and unconstitutional and to direct the RP to treat the applicant on par with the financial creditor in settlement of the claim.

The Applicant viz. B. Akhilandeswari, is a work contractor and she was engaged by the Corporate Debtor in the project "Dreamz". The RP has admitted the Claim of the Applicant to the tune of Rs.1,54,12,142/-. As per the Resolution Plan, being the Liquidation value is NIL the Resolution Applicant proposes to pay the Operational Creditors 1.5% of the admitted claim amount. Aggrieved by the said proposal, the applicant has filed the present MA.

This application has been filed by the Applicant viz. IJM Concrete Products Private Limited. This Applicant was the one who originally triggered the CIR process against the CD for the debt of Rs.42 Lakhs along with interest. Subsequent thereon, the applicant has submitted their claim to the tune of Rs.78 Lakhs to the RP which was admitted. As per the Resolution Plan, since the Liquidation value is NIL, the Resolution Applicant proposes to pay the Operational Creditors herein 1.75% of the admitted claim amount. Aggrieved by the said proposal, the applicants have filed the present MA.

The Applicant viz. Sanchit Sales Private Limited invested in the project of the Corporate Debtor by way of advancement of loans to the projects viz. "Flora" and "Panchavarna". The Applicant submitted a claim to the tune of Rs.4,58,03,649 with principal amount of Rs.1,41,00,000. On 04.04.2019, the Resolution Professional accepted the claim of the Applicant. Upon perusal of the Resolution Plan, the Applicant came to know that the Resolution Plan has proposed 100% haircut to the Applicant. Hence sought for a direction to the RP to reconsider and admit the entire claim of the Applicant and to give the Applicant a status of a Financial Creditor and to allow the Resolution Plan after crystallization of all the claims submitted to the Resolution Professional.

This application has been filed by the Applicant who paid a sum of Rs.11,50,000/- to the Corporate Debtor for the project "Innova". Since, there was substantial delay in the project, the applicant requested to cancel the allotment and requested for a refund. The CD insisted on deducting 1% as cancellation charges, for which the Applicant didn't agree. In the meanwhile, the CD offered the applicant a completed apartment in Munnar, however it never fructified. Applicant has sent a mail to the RP and requested him to consider the said mail as a claim. Thereafter, the Applicant came to know that since he has requested for a refund earlier, his flat was sold to a third party, who has also lodged a claim. Aggrieved by the same, the present MA has been filed.

The applicant is a land broker and arranged land to the Corporate Debtor for construction of flats and entered into three different agreements with the Corporate Debtor for payment of land Brokerage Commission. The applicant claims to be a Financial Creditor, submitted a claim to the tune of Rs.60,87,045 to the RP on 14.12.2018, however it was rejected. Aggrieved by the same, the present MA has been filed.

The applicant is a home buyer in one of the projects of the Corporate Debtor viz. “Innova”. The Applicant submitted a claim to the Resolution Professional for a sum of Rs.21,15,915/- and the Resolution Professional admitted the claim only to the extent of Rs.3,85,608/-. Aggrieved by the same, the present MA has been filed.

The applicant is a home buyer in one of the projects of the Corporate Debtor viz. "Innova". The Applicant submitted a claim to the Resolution Professional for a sum of Rs.19,03,780/- and the Resolution Professional admitted the claim only to the extent of Rs.11,26,113/-. Aggrieved by the same, the present MA has been filed.

It is an application filed by 8 applicants, who are Home Buyers of the Corporate Debtor in respect of the projects viz. "Innova", "Sunshine" and "Icon", wherein their claims were initially accepted by the RP. Thereafter, from the records of Corporate Debtor it was found that the Flats in respect of which the applicants herein have booked had already been allotted to other Home Buyers and thereby the claims of the applicants have been tagged as "Duplicate Claim". As per the Resolution Plan, the Resolution Applicant proposes to pay the applicants herein 20% of the principal claim amount. Aggrieved by the said proposal, the applicants have filed the present MA.

It is an application filed by 7 applicants, who are Home Buyers of the Corporate Debtor in respect of the project "Matrix", wherein their claims were initially accepted by the RP. Thereafter, from the records of Corporate Debtor it was found that the Flats in respect of which the applicants herein have booked had already been allotted to other Home Buyers and thereby the claims of the applicants have been tagged as "Duplicate Claim". As per the Resolution Plan, the Resolution Applicant proposes to pay the applicants herein 20% of the principal claim amount. Aggrieved by the said proposal, the applicants have filed the present MA.

It is an application filed by an applicant viz. V. Selvakumar who claims to be Home Buyer of the Corporate Debtor in respect of the project "Icon", wherein his claim was initially accepted by the RP. Thereafter, from the records of Corporate Debtor it was found that the Flat in respect of which the applicant herein have booked had already been allotted to some other Home Buyer and thereby the claim of the applicant was tagged as "Duplicate Claim". As per the Resolution Plan, the Resolution Applicant proposes to pay the applicant herein 20% of the principal claim amount. Aggrieved by the said proposal, the applicant has filed the present MA.

Before we venture into the consideration of the objections as raised above by way of Application or otherwise, it would be appropriate to consider the Resolution Plan per se to which the approval is sought for.

This Tribunal is duty bound to examine the Resolution Plan within the contours of Section 30(2) of the IBC, 2016. A comparison vis-à-vis with the Mandatory compliance under the IBC and the Compliance made under the Resolution Plan is captured hereunder;

This Tribunal has made a broad analysis of the Resolution Plan and for the sake of brevity, the important features which find place in the Resolution Plan are captured herewith;

The detailed list of Concessions and Reliefs as sought by the Resolution Applicant are found in Chapter 7 of the Resolution Plan. However, for the sake of brevity, only certain points are extracted hereunder:

The Operational Creditors have filed 8 Applications viz. MA/877/2019, MA/878/2019, MA/879/2019, MA/625/2019, MA/626/2019, MA/629/2019, MA/630/2019 and MA/798/2019 objecting to the approval of the Resolution Plan. Except MA/626/2019 and MA/629/2019, the facts and the relief sought for in other MA's are similar. Hence the other 6 MA's viz. MA/877/2019, MA/878/2019, MA/879/2019, MA/625/2019, MA/630/2019 and MA/798/2019, filed by the Operational Creditors are first taken up for consideration.

In relation to the 6 MA's filed by the Operational Creditors, the main contention raised by them is that the claim which they have filed before the Resolution Professional has been accepted in toto, however, the Resolution Applicant, in the Resolution Plan has proposed to pay only 1.5% of their admitted claim. It has been further contended by the Ld. Counsels for the Applicants that they are also liable for its creditors for the goods supplied / services rendered to it and if such a haircut is approved then it would cause an irreparable loss not only to the Applicant but also to its creditors. In support of their contention, reliance was placed upon the Judgment rendered by the Hon'ble NCLAT in Binani Industries, SREI Equipment Finance Limited in Company Appeal (AT)(Insolvency)No. 82 of 2018.

The Ld. Counsel for the Resolution Professional contended that the liquidation value, taking into consideration the water fall process under section 53 of the IBC, 2016, due to the Operational Creditors is NIL and therefore the allocation of amount to the extent of 1.5% of the claim is therefore fully in accordance with Sec. 30(2) of the Code. The allocation of 1.5% of the admitted sum payable to Operational Creditor has been made taking into account, the claims of the priority stakeholders, particularly Home Buyers, whose protection of interest, has repeatedly been affirmed and reiterated by both the Hon'ble NCLAT and Hon'ble Supreme Court. It has been further contended by the Ld. Counsel for the Resolution Professional that the Operational Creditors cannot challenge the approval of the Resolution Plan before this Authority and also there is no provision in the code by which Operational Creditors can seek parity with the Financial Creditors.

As to the objections raised by the Operational Creditors in approval of the Resolution Plan, a perusal of Form H filed by the Resolution Professional manifest the fact that the Liquidation value of the Corporate Debtor is arrived at Rs.44.25 Crores. Further, from the documents filed, it is evident that the claim amount admitted for the Financial Creditors itself comes to the tune of Rs.116.93 Crores and the Financial Creditor being a priority creditor in the category, the liquidation value due to the Operational Creditors would be NIL. Therefore, the payment of 1.5% of the admitted amount to be paid to the Operational Creditor by the Resolution Applicant cannot be termed as "discriminatory". Further the Hon'ble Supreme Court in its recent decision Committee of Creditors of Essar Steel India Limited –Vs- Satish Kumar Gupta & Ors. in Civil Appeal No. 8766 – 67 of 2019 dated 15.11.2019 in para 54 has held as follows;

Again in para 56 and 57, it was held as follows;

Thus, it is a settled law that the Financial Creditors and the Operational Creditors cannot be treated on the same footing and moreover, the principle of equality cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code. It is time and again reiterated by the Hon'ble Supreme Court that so long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors and hence the objections made by the Applicants are not sustainable in view of the decision in Essar Steel India Ltd. (supra) and hence they are overruled and as a consequence thereof the above stated 6 MA's stands dismissed.

In relation to the objections filed by the Operational Creditor in MA/626/2019, the Ld. Counsel for the Operational Creditors contended that one Mr. Manoj Dassani, participated as representative of the DMI Finance, all of sudden during the meeting held on 06.04.2019 shown as a representative of the Resolution Applicant. Further it was contended that the Eligibility Criteria for Resolution Applicants was fixed as Rs.10 Crores and how the present Resolution Applicant with a turnover of Rs.1,65,00,000/- was permitted to submit a plan and as already stated the payment of 1.5% of the admitted amount of claim as full and final settlement is against the principle as laid down by Hon'ble NCLAT in Binani (supra). The Ld. Counsel for the Operational Creditor has further contended that the profit to be earned by the Resolution Applicant is 89 Crores, whereby only 1.5% of the dues of OC's are being settled, which is nothing but unjust enrichment and under these circumstances, it was prayed not to approve the Resolution Plan.

In relation to the MA/629/2019, it was contended by the Ld. Counsel for the Applicant that they had submitted a Resolution Plan before the Committee of Creditors and suddenly during the 8th CoC, the Applicant was dropped from the final list of prospective resolution applicants and being unsuccessful in filing the Resolution Plan, the Applicant has sought relief to declare the resolution made during the 8th CoC, dropping the applicant from the final list of prospective resolution applicants as illegal, unjust and unconstitutional and to direct the RP to treat the applicant on par with the financial creditor in settlement of the claim.

The Ld. Counsel for the Resolution Professional in reply contended that it is the Committee of Creditors who refused to consider the proposal of dropping the Applicant from the prospective list of Resolution Applicant and such decision was made with the reasons and voted overwhelmingly vide the Minutes of the 8th Meeting held on 28.04.2019 and also the Resolution Professional has filed an Affidavit on 15.07.2019 to this effect. In order to buttress his arguments, the Ld. Counsel for the Resolution Professional relied upon the Judgment of the Principal Bench of Hon'ble NCLT in Punjab National Bank -Vs- Bhushan Power and Steel Ltd. in CA 254 of 2019 dated 05.09.2019, wherein in para 112 it was held that the "CoC does not need to record reasons for acceptance or rejection of Resolution Plans".

A little elucidation on the legal matrix in the facts and circumstances of the cases is also necessary in order to surmount the contentions raised by the intended prospective Resolution Applicant viz. Sai Trading and Interiors (P) Ltd. (MA/629/2019) and in relation to the same it is necessary to extract Sec. 25(2)(h) of IBC, 2016;

In this context, it is also relevant to refer to Regulation 36A (10) to (12) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016;

Thus, a conjoint reading of Section 25(2)(h) of the IBC, 2016 with Regulation 36A (10), (11) and (12) would posit the fact that objections to inclusion or exclusion of a prospective resolution applicant in the provisional list referred to in sub-regulation (10) can be made with supporting documents within five days from the date of issue of the provisional list. In the present case, the intended prospective resolution applicant viz. Sai Trading and Interiors has expressed their interest by way of an email to the Resolution Professional on 17.04.2019 and his name was included in the provisional list of resolution applicant released by the Resolution Professional on 23.04.2019, however his name was left out from the final list of prospective resolution applicant released by the Resolution Professional on 28.04.2019. The reason for the exclusion of M/s. Sai Trading and Interiors from the provisional list of resolution applicant is recorded in the 8th CoC meeting held on 28.04.2019 and the relevant minutes is extracted hereunder;

Thus, a second perusal of the minutes of the 8th CoC reveals the fact that exclusion of M/s. Sai Trading and Interiors from the prospective list of resolution applicant was deliberated upon by the CoC in its 8th CoC meeting dated 28.04.2019 and the CoC and the Home buyers had serious doubts as to the capability, competence, quality, bonafide and financial soundness of M/s. Sai Trading and Interiors and upon detailed discussions made thereunder, it was finally resolved to exclude M/s. Sai Trading and Interiors from the prospective list of resolution applicant and moreover, as per Regulation 36A (11) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the CoC is empowered to include or exclude any person from the prospective resolution applicant as discussed supra.

In this context, it is also relevant to refer to the Judgment of the Hon'ble Supreme Court in ArcelorMittal India Private Limited –Vs– Satish Kumar Gupta (2019) 2 SCC 1, wherein the Supreme Court in para 75 and 76 has held as follows;

In the facts and circumstances of the case, it is evident that the person challenging the Resolution Plan is not even an unsuccessful Resolution Applicant but only an intended prospective resolution applicant, whose name has been left out from the final list of resolution applicants and as per the dictum laid down by the Hon'ble Supreme Court in the ArcelorMittal (supra), M/s. Sai Traders and Interiors has no vested right that his resolution plan ought to have been considered by the CoC and no challenge can be preferred thereof before this Adjudicating Authority. Hence, in view of the discussions made supra, the objections raised by the Applicant are overruled and as a consequence the MA/626/2019 and MA/629/2019 stand dismissed.

The MA/641/2019 has been filed by the sole Dissenting Financial Creditor viz. Sanchit Sales Private Limited. It is submitted by the Ld. Counsel for the Dissenting Financial Creditor that the Applicant invested in the project of the Corporate Debtor by way of advancement of loans to the projects viz. "Flora" and "Panchavarna". The Applicant along with M/s. SSP Industries Private Limited jointly invested by way of loan to the tune of ₹5 Crores, wherein it was agreed pursuant to the investment the CD will allot flats and vacant land which were to be held as collaterals by the Applicant. After the initiation of the CIR Process, the Applicant on 03.12.2018 submitted claim to the tune of Rs.4,58,03,649/- with principal amount of Rs.1,41,00,000/-. There was no reply from the Resolution Professional inspite of reminded mails from the Applicant. However, the Resolution Professional has requested the Applicant to attend the 5th CoC meeting. In the said CoC an agenda to reconstitute the CoC was taken up, but the members of the CoC vehemently opposed to the inclusion of the Applicant in the CoC and the Resolution Professional requested the Applicant to abstain from attending further proceedings. On 04.04.2019, an official e-mail from RP was sent to the Applicant and the SSP Industries that their claim was accepted. Thereafter, the Resolution Applicant has submitted the Resolution Plan and upon perusal of the said plan, the Applicant came to know that the Resolution Plan has proposed 100% haircut to the Applicant. The claim of the Applicant has been admitted to the tune of Rs.1,33,00,000/-. Hence the Applicant has sought for direction to the Resolution Professional to reconsider and admit the entire claim of the Applicant and to give the Applicant a status of a Financial Creditor and to allow the Resolution Plan after crystallization of all the claims submitted to the Resolution Professional.

The Ld. Counsel for the Resolution Professional contended that the rationale employed by the Resolution Applicant in sub - categorizing the Financial Creditors is based upon the Security Interest as held between different classes of Financial Creditors. In order to bolster his arguments, the Ld. Counsel relied upon a tabulation on how the Financial Creditors are being sub - classified according to their Security interest and the same is reproduced hereunder;

Upon the rationale adopted by the Resolution Applicant, the Ld. Counsel for the Resolution Professional contended that "Security Interest" as defined under the IBC, 2016 is of the widest amplitude and given the special situation of the Corporate Debtor being in the field of Real Estate development, a broader definition of Secured Creditor and Security Interest as defined under Section 3(30) and 3(31) of the IBC, 2016 has been adopted to differentiate amongst the Financial Creditors under the Plan. It was further submitted that based on the nature of the "Security Interest", the above table differentiated the Financial Creditors into three classes and based on such differentiation, pay – outs have been made to the Financial Creditors and such classification is rational, practical, intelligible and cannot be termed as arbitrary or discriminatory.

The Ld. Counsel for the Resolution Professional contended that due to such rationale adopted, the Resolution Applicant have come to the conclusion that the dissenting financial creditors have no "Security Interest" in the assets of the Corporate Debtor thereby provided a 100% haircut to the dissenting financial Creditor and we find credence in the submissions made by the Ld. Counsel for the Resolution Professional and further as the projection over which the above said Financial Creditor claims to have been secured has already been completed and handed over to the respective allottees and therefore it is not presently in the realm of projects handled by the Corporate Debtor and covered in the Resolution Plan and the objection raised by the dissenting financial creditor is thereby overruled and a consequence thereof, the MA/641/2019 stands dismissed.

OBJECTIONS FILED BY THE APPLICANTS AGAINST REJECTION OF CLAIM BY THE RESOLUTION PROFESSIONAL

MA/659/2019, MA/819/2019, MA/627/2019 and MA/436/2019 are filed by the Applicants against the rejection of the claim by the Resolution Professional.

In relation to MA/659/2019, the Ld. Counsel for the Applicant submitted that the Applicant paid a sum of Rs.11,50,000/- to the Corporate Debtor for the project "Innova" and since there was substantial delay in the project, the applicant requested to cancel the allotment and requested for a refund. The Corporate Debtor insisted on deducting 1% as cancellation charges, for which the Applicant didn't agree and in the meanwhile, the Corporate Debtor offered the applicant a completed apartment in a different project of the Corporate Debtor at Munnar, however it never fructified. Thereafter, the Applicant has sent a mail to the RP and requested him to consider the said mail as a claim. The Applicant came to know that, since he has requested for a refund earlier, his flat was sold to a third party, who has also lodged a claim.

The Ld. Counsel for the Resolution Professional contended that Applicant has not filed the claim within the period stipulated and the period provided for submission of claim and verification is already over and hence the Resolution Professional could not entertain his claim. However, the Ld. Counsel for the Resolution Professional referred to Clause 4.4 (xv) of the Resolution Plan, wherein a 60 days window has been provided after approval of the Resolution Plan, so that similar home buyers who had failed to file their claim could do so and they will be considered by the Resolution Applicant.

Taking into consideration the said representation and also in view of the fact that the Applicant has failed to lodge his claim before the Resolution Professional within the prescribed time period and also no proper claim form was being lodged before the Resolution Professional even after the prescribed time limit, we are constrained to dismiss MA/659/2019. Eventhough, the Supreme Court in Essar Steels (supra) has held that a successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty of amounts payable by a prospective resolution applicant who successfully takes over the business of the corporate debtor, the Clause 4.4 (xv) of the Resolution Plan, provides for a 60 days window, after approval of the Resolution Plan, so that similar home buyers who had failed to file their claim could do so and they will be considered by the Resolution Applicant. In view of the same, the Applicant is at liberty to approach the Resolution Applicant under Clause 4.4 (xv) of the Resolution Plan.

In relation to MA/819/2019, it was submitted by the Ld. Counsel that the Applicant is a land broker and arranged land to the Corporate Debtor for construction of flats and entered into three different agreements with the Corporate Debtor for payment of land Brokerage Commission. The applicant claiming to be a Financial Creditor, submitted a claim to the tune of Rs.60,87,045 to the Resolution Profession on 14.12.2018, however it was rejected.

The Ld. Counsel for the Resolution Professional submitted that the Applicant is an Operational Creditor and not a Home Buyer and the Claim filed in Form CA is non est. Further, no "agreement to render service" has been entered into between the Applicant and the Corporate Debtor and a perusal of Sale agreement eventhough discloses that the consideration has been received in full but the said agreement has not disclosed the flats which are being allotted to the Applicant and based upon the said factual position, the Resolution Professional has rejected the claim of the Resolution Professional and we also find credence in the submissions made by the Ld. Counsel for the Resolution Professional and hence the MA/819/2019 stands dismissed.

In relation to MA/627/2019 and MA/436/2019 it was submitted by the Ld. Counsel for the applicants that the applicants are home buyer in one of the projects of the Corporate Debtor viz. "Innova" and the Applicants submitted a claim to the Resolution Professional and the Resolution Professional have admitted only a part of their claim. In relation to MA/627/2019, against the claim lodged for a sum of Rs.21,15,915/- only a sum of Rs.3,85,608/- was admitted. In relation to MA/436/2019, against the claim lodged for a sum of Rs.19,03,780/- only a sum of Rs.11,26,113/- was admitted. The Ld. Counsel for the Applicants contended that the claims of the Applicants ought to have been admitted in full by the Resolution Professional since they have obtained "No - due certificate" from the Corporate Debtor and the decision of the Resolution Professional in rejecting the claim of the Applicants is not justifiable.

The Ld. Counsel for the Resolution Professional submitted that the applicant as a part of the claim had provided proofs which were mutually inconsistent and not in accordance with law and further the applicant had failed to furnish proper and complete proof for the entire claim amount in accordance with Regulation 8A and therefore the claim of the applicant has been accepted only to an extent wherein the market value as mentioned in the Registered Sale Deed together with the notional compensation amount thereupon. It has also been contended by the Ld. Counsel for the Resolution Professional that a document styled as "No dues Certificate" has been provided by the Corporate Debtor to the Applicant, stating that a specified sum has been provided and no further amount is due from the Applicant. It was further contended that the full consideration had been purportedly paid in full on the date of "No due Certificate", however the Construction Agreement was entered into between the parties on a subsequent date records that a particular sum was purportedly paid and as such there are mutual inconsistency with the documents produced by the Applicants and only under these circumstances, the Resolution Professional had partly admitted the claim of the Applicants.

The conclusion arrived at by the Resolution Professional and the reasoning adopted by the Resolution Professional, in the facts and circumstances of the cases, appears to be fair and reasonable and hence no interference is called for in the decision taken by the Resolution Professional and hence the MA/627/2019 and MA/436/2019 stands dismissed.

In relation to the objections raised by the Home Buyers in MA/710/2019, MA/874/2019 and MA/876/2019, the fulcrum of their challenge is with regard to the classification of their claim as "Duplicate Claim" by the Resolution Professional in and by which, as per the Resolution Plan, the Resolution Applicant proposes to pay 20% of their admitted claim amount to these category of Home Buyers. The Ld. Counsel for the Resolution Professional contended that during the CIR Process, it came to its notice that some of the flats promoted by the Corporate Debtor had been allotted to two persons / allottees and that both the allottees as Home Buyers came to file a claim against the said flat and since only one home buyer claimant can be tagged to an apartment, the RP adopted the following rationale:

It is submitted that, if the said categorization was not made, then the Home Buyer allottees who meet the laid down criteria would be disadvantaged making it inequitable and contrary to the perfect legal title they had acquired.

Further, it has been submitted that the "Duplicate Claims" arising out of the said "double booking" the category into which this Applicants fell, is a distinct and separate category and given the unsecured nature of the financial claim, the claimants herein forming this category cannot be equated to Home Buyers having a proper right, title and interest.

The allocation of 20% of the admitted sum payable to this category of claimants to which the Applicants belong, has been made taking into account, the claims of the priority stakeholders, particularly Home Buyers, whose protection of interest, has consistently been affirmed and reiterated by both the Hon'ble NCLAT and Hon'ble Supreme Court, including the one in Pioneer Urban Land & Infrastructure & Anr -Vs- Union of India & Ors. in W.P. (Civil) No. 43 of 2019.

Thus, the rationale adopted by the Resolution Professional is reasonable, just and fair and we find no fault with the decision of the Resolution Professional in categorizing the claims of these Home Buyers as "Duplicate Claims". However, during the course of arguments, the successful Resolution Applicant, upon considering the genuinity of these category of Home Buyers, has proposed to increase the payout to 30% of the admitted claim as compared to the 20% presently provided and the Resolution Applicant has also filed an affidavit on 29.10.2019 vide SR. No. 5422.

In the circumstances, the objections raised by the Home buyers in MA/710/2019, MA/874/2019 and MA/876/2019 are overruled and stand dismissed. However, as per the Affidavit filed by the Resolution Applicant, upon approval of the Resolution Plan, the Resolution Applicant shall pay 30% of the admitted claims to the Home Buyers whose claims are classified as "Duplicate Claims".

The Deputy Commissioner of Income Tax, Corporate Ward - 5(2), Chennai, upon notice being issued, has filed its memo of objections to the Resolution Plan, wherein, it has been stated that the Corporate Debtor has outstanding demands for 5 years amounting to nearly 2 Crores as provided below;

It was further submitted by the Ld. Counsel for the Income Tax that the Resolution Applicant has sought for waiver of tax or interest dues in para 6.1, 6.5, 7.4 and 7.6 of the Resolution Plan, and as there are tax arrears that have been unpaid over several years, such violation cannot be overlooked by this Authority and hence prayed for not to grant any relief with respect to the same.

The Ld. Counsel for the Income Tax further submitted that, the Corporate Debtor has failed to file the Income Tax returns for the Financial Year 2016 – 17 and 2017 – 18 in accordance with section 139 of the Income Tax Act, 1961 and in para 7.13 of the Resolution Plan it has sought to carry forward the loss for set off in the subsequent years. The Ld. Counsel for the Income Tax strenuously contended that as per Section 119 of the Income Tax, Act, 1961, any waiver, relief or condonation of delay in filing of returns should be sought before the concerned Income Tax Authority by way of a proper Application and by stating reasons for seeking such waiver.

The Ld. Counsel for the Resolution Professional in reply submitted that in so far as the failure to file income tax returns by the Corporate Debtor for all prior periods is beyond the scope and control of the Resolution Applicant. It was further submitted by the Ld. Counsel for the Resolution Professional that the Resolution Applicant undertook to file the returns upon approval of the Resolution Plan.

The Resolution Applicant has filed a reply to the objections filed by the Income Tax, wherein it was pertinently stated that the present Resolution Plan had been prepared by the Resolution Applicant considering that the relief / waiver sought under the relevant provisions of the Income Tax, 1961 will be granted to the Resolution Applicant.

As regards the Relief and Concession in the Resolution Plan, it is relevant to refer to the recent decision of the Supreme Court in Embassay Property Limited –Vs– State of Karnataka in Civil Appeal No.9170 of 2019 dated 03.12.2019, wherein, the powers and jurisdiction of this Tribunal have been clearly delineated and it has been held wherever the Corporate Debtor has to exercise a right, that falls outside the purview of IBC, 2016, especially in the realm of the public law, this Tribunal does not have any jurisdiction to pass any orders. Also, the Hon’ble NCLAT in JSW Steels Ltd. – Vs- Ashok Kumar Gulla & Ors in Company Appeal (AT) (Insolvency) No.467 of 2019 has held that if a Successful Resolution Applicant is entitled to 'carry forward losses' under Section 79 of the Income Tax Act, it may claim such benefit before the appropriate Authority, who will pass appropriate order in accordance with Section 79 of the Income Tax Act, 1961 and the Rules and Regulations framed thereunder.

ARGUMENTS MADE IN SUPPORT OF RESOLUTION PLAN AND THE OBSERVATION OF THIS ADJUDICATING AUTHORITY

The Ld. Counsel for the Resolution Professional submitted that the Resolution Plan has been approved by 81.39% by total vote share and 83.5% present and voting and the percentage of Home buyers who have approved the plan in 82% by vote share and 86% of those present and voting and this decision is a 'commercial decision' by an amorphous group of individuals based on proper procedure laid down by following an evaluation matrix which cannot be assailed by any stakeholders even the dissenting financial creditors or the operational creditors. Further, it was contended that a candidate claiming to be a Resolution Applicant also cannot challenge the decision of the CoC citing that he has not been duly considered and in order to fortify his submissions, reliance was placed upon the Judgment of the Hon'ble Supreme Court in K. Sashidhar -Vs- Indian Overseas Bank 2019 SCC Online SC 257, wherein in para 19 and 62 it was held as follows;

The Ld. Counsel for the Resolution Professional stated that the Resolution Plan has been submitted by the Resolution Applicant keeping in view that the Corporate Debtor is into the business of Real Estate and that there arises a special situation which demands special dispensation and in support of his submissions relied upon the Judgment of the Hon'ble NCLAT in IDBI Bank -Vs- Anuj Jain (Jaypee Infratech Ltd.) in I.A.No.1857 of 2019 in Company Appeal (AT) (Insolvency) No.536 of 2019 dated 02.07.2019 wherein it is held as follows;

It was further contended by the Ld. Counsel for the Resolution Professional that the Resolution Plan as structured by the Resolution Applicant is akin to the same approved by the Hon'ble Supreme Court in Bikram Chatterji & Ors. -Vs- Union of India & Ors. in W.P. No. 940/2017, wherein the Hon'ble Supreme Court has taken into consideration the fate of real estate business in India, the hard earned money invested by the Home buyers in the Real Estate and the Public Trust doctrine, which are all taken into consideration by the Resolution Applicant and to accord treatment to the Home Buyers. For the sake of convenience, para 72, 73 and 98 of the Bikram Chatterji (supra) judgment is extracted hereunder;

This Tribunal has done an extensive analysis of the Resolution Plan and upon a question put forth by the Tribunal in relation to the Liquidation Value being Rs.44.25 Crores, the Resolution Applicant proposes to infuse only a sum of Rs.30.48 Crores, which does not even meet the liquidation value, for which, the Ld. Counsel for the Resolution Professional replied that the said sum of Rs.30.48 Crores are discharged against the dues of the Financial Creditors (Unsecured and Secured), and the Operational Creditor, however, it does not include the Home Buyers, as in this case, the Home Buyers are being given the Home / Apartment upon the payment of their balance dues to the Corporate Debtor and further the Home buyers are required to contribute by making additional payment per sq.ft. separately for each project which amounts to 29% on the average sale price of the projects and in order to substantiate this increase, the Ld. Counsel for the Resolution Professional relied upon the Bikram Chatterji (supra) wherein under para 152 (iv) the Supreme Court appointed NBCC to complete the various projects and hand over the possession to the buyers and the percentage of commission of NBCC was being fixed at 8%. However in the present case, due to the increase of costs in the building materials, and also taking into consideration the percentage of profit, the Resolution Applicant increase the price per sq. ft. and moreover the Home Buyers have voted in favour of the Resolution Plan by accepting such increase in the price and thereby the Home Buyers have taken a 'commercial decision' in and by which they are eager to take possession of their flats. Further, the Division Bench – II of this Tribunal in the matter of Orchid Pharma Limited in MA/579/2019 dated 27.06.2019 has held in para 7 that there is no mandate under the Code saying that the Resolution Plan value shall always be more than the liquidation value of the Corporate Debtor.

The Hon'ble Supreme Court in Pioneer Urban Land & Infrastructure & Anr –Vs– Union of India & Ors. in W.P. (Civil) No. 43 of 2019 has also discussed about the paramount importance of the Home Buyers in the Real Estate business and how their interest have to be safeguarded;

As to the Relief and Concessions sought for in the Resolution Plan, taking into consideration the Judgments of the Hon'ble Supreme Court and Hon'ble NCLAT, we direct the Resolution Applicant to file necessary application before the necessary forum / authority in order to avail the necessary Relief and Concessions, if it is in accordance with law.

As to the 'Monitoring Committee', is concerned, the Resolution professional has made a prayer in MA/554/2019 to appoint a Monitoring Committee consisting of a representative each from Successful Resolution Applicant, the Home Buyers represented by one each from seven associations and other Financial Creditors and chaired by the Resolution Professional for a period of 3 months from date of approval of the Resolution Plan by this Adjudicating Authority. In relation to the same, this Adjudicating Authority hereby appoints the following person in the Monitoring Committee;

Thus the Resolution Plan is hereby approved and is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the "Moratorium" imposed under section 14 of IBC, 2016 shall not have any effect henceforth. The Resolution Professional shall submit the records collected during the commencement of the Proceedings to the Insolvency & Bankruptcy Board of India for their record and also return to the Resolution Applicant or New Promoters. Certified copy of this Order be issued on demand to the concerned parties, upon due compliance. Liberty is hereby granted for moving any Miscellaneous Application if required in connection with implementation of this Resolution Plan. That in respect of stepping by the New Promoters/Resolution Applicant into the shoes of the erstwhile Company and taking over the business, the provisions of Companies Act, 2013 shall be applicable and because of this reason a copy of this Order is to be submitted in the Office of the Registrar of Companies, Chennai.

The Resolution Professional is further directed to handover all records, premises / project sites / documents to Resolution Applicant to finalise the further line of action required for starting of the operation as contemplated under the Resolution Plan. The Resolution Applicant shall have access to all the records premises / project sites / documents through Resolution Professional to finalise the further line of action required for starting of the operation.

In relation to the Applications filed by the Resolution Professional under Section 43, 45, 50 and 66 of the IBC, 2016 as disclosed in Form H filed by the Resolution Professional, seeking to bring to the notice of this Authority, the transactions covered thereunder, the said Applications shall be taken up by this Authority on 12.02.2020.

Accordingly, all Applications stand disposed of as above.

-SD- (ANIL KUMAR B) MEMBER (TECHNICAL)

-SD- (R.VARADHARAJAN) MEMBER (JUDICIAL)