Rajendra Surana & Anr vs Jayesh Sangharjka & Ors on 2 November, 2023

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National Company Law Appellate Tribunal

Rajendra Surana & Anr vs Jayesh Sangharjka & Ors on 2 November, 2023

1. This Appeal has been filed against the order dated 02.05.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench IV rejecting IA No.2953 of 2021 filed by the Appellant praying for rejection of the Resolution Plan approved by the Committee of Creditors (CoC).

2. Brief facts of the case necessary to be noticed for deciding this Appeal are:-

2.1. Appellants are homebuyers of the project 'The Grove Towers'. Appellant No.1 and the Corporate Debtor entered into an Agreement for Sale dated 18.08.2018 for Unit No.1907 admeasuring 2050 sq. ft. on the 19th Floor for a total consideration of Rs.4,69,64,883/-. The Adjudicating Authority by order dated 29.06.2020 admitted Section 7 Application against the Corporate Debtor- 'Ornate Spaces Private Limited' which was financed by 'IDBI Trusteeship Services Limited', the Financial Creditor. Appellant submitted its claim vide Form CA on 11.07.2020. IRP invited Expression of Interest for Corporate Debtor. The Resolution Plan submitted by 'Ashdan Properties Private Limited' (Respondent No.2) was approved by 80.86% voting share. All the homebuyers including the Appellant having voting share of 18.34% voted against the Resolution Plan. On 16.12.2021, Appellant filed an IA No.2953 of 2021 before the Adjudicating Authority seeking rejection of the Resolution Plan submitted by Respondent No.3. The Adjudicating Authority heard the Appellant as well as Resolution Professional and vide order impugned partly allowed IA No.2953 of 2021. Appellant aggrieved by the said order has come up in this Appeal.

3. We have heard Shri Neeraj Malhotra, Learned Senior Counsel appearing for the Appellant, Shri Abhijeet Sinha, Learned Counsel appearing for Respondent No.2- Successful Resolution Applicant and Mr. Tishampati Sen, Learned Counsel appearing for Respondent No.1.

4. Shri Neeraj Malhotra, Learned Senior Counsel challenging the impugned order submits that the Adjudicating Authority has wrongly held that Comp. App. (AT) (Ins.) No. 795 of 2023 3 the Real Estate (Regulation and Development) Act, 2016 will not have jurisdiction for future violation by the Resolution Applicant. It is submitted that the Appellants are deprived of exercising their rights under RERA for the future violations/ default by the Resolution Applicant. The Resolution Plan deserves to be rejected on account of various clauses seeking to circumvent RERA to the detriment of the homebuyers and in particular of violation of Section 30(2)(e) of the IBC. It is submitted that the Adjudicating Authority has failed to appreciate that the Corporate Debtor had agreed to sell flats to each of the homebuyers at the rate of Rs.13,500/- to Rs.21,000/- per sq. ft. whereas as per the revised Resolution Plan, the homebuyers are required to pay an additional consideration which is more than the contractually agreed consideration. The Successful Resolution Applicant has fixed the MSP for the Residential premises as Rs.33,000/- per sq. ft. It is submitted that the Resolution Plan contains clauses designed to circumvent RERA. Learned Counsel for the Appellant has referred to various clauses in the Resolution Plan including Clauses 8.6, 9.1.2 and 10.3 which as per the submission of the Appellant are in violation of Section 34(f),(g)&(h), Sections 37 and 38 of the RERA. It is submitted that there are further clauses in the plan which violates Section 14 of the RERA. Resolution Applicant has never provided any means or clarity with regard to per sq. ft. rate that the homebuyers of the sold unit shall need to pay. No details for determination of MSP as Rs. 33000/- per sq. ft. has been given. CoC has not exercised its commercial wisdom in approving the plan.

Comp. App. (AT) (Ins.) No. 795 of 2023 4

5. Learned Counsel for the Respondent No.2 refuting the submissions of the Counsel for the Appellant submits that the submissions of the Appellant that there is violation of the provisions of RERA insofar as future claims and defaults are concerned is not correct. It is submitted that the Resolution Plan only precludes filing complaints under RERA with regard to past act i.e. the claim and breaches up to the date of approval of the Resolution Plan. The Resolution Plan deals with the claims prior to effective date as per the Resolution Plan and the plan does not deal with future claim or default. It is submitted that the Resolution Professional has already given a clarification to the above effect before the Adjudicating Authority. It is submitted that the Adjudicating Authority itself in the impugned order has observed that the remedy under RERA in relation to past default of the Corporate Debtor has been forfeited. It is further submitted that during pendency of this Appeal Adjudicating Authority by an order dated 06.10.2023 has already approved the Resolution Plan allowing the IA No.2772 of 2023 filed by the Resolution Professional. The order dated 06.10.2023 has also been brought on record along with an application and in view of the order approving the Resolution Plan which has been passed after rejecting objection raised to the Resolution Plan, it is submitted that nothing survives in the appeal to be decided. The order approving the Resolution Plan having not been challenged by the Appellant, no relief can be granted to the Appellant.

6. Learned Counsel for the Resolution Professional also adopted the submissions raised by the Respondent No.2.

Comp. App. (AT) (Ins.) No. 795 of 2023 5

7. We have considered the submissions of the Counsel for the parties and perused the record.

8. From the fact which has been brought on record, it does appear that the Appellants are homebuyers who although voted against the plan but the plan stood approved by the requisite votes. Adjudicating Authority in the impugned order has referred to the judgment of the Hon'ble Supreme Court in "Jaypee Kensington Boulevard Apartments Welfare Association & Ors. vs. NBCC (India) Ltd. & Ors.- Civil Appeal No.3395 of 2020" for holding that Appellant has no right to challenge the approval of the Resolution Plan however, the Adjudicating Authority having proceeded to consider the submission advanced before the Adjudicating Authority on merits, we proceed to examine the submissions raised by the Counsel for the parties in this Appeal.

9. The first submission which has been raised by the Appellant challenging the approval of the plan by the CoC is that the Resolution Plan violates the provisions of RERA Act, thus, leads to non-compliance of Section 30(2)(e) of the IBC. It is submitted that the Resolution Plan illegally debars the homebuyers including the Appellant from enforcing any of their rights and future claims by filing a complaint under the RERA Act which is not permissible. Resolution Plan, thus, clearly obstruct the lawful and statutory prerogatives of a statutorily authorized body. Learned Counsel for the Appellant has in support of his submissions referred to Clauses 8.6, 9.1.2 and 10.3 of the Resolution Plan. It is relevant to notice the Clauses 8.6, 9.1.2 and Comp. App. (AT) (Ins.) No. 795 of 2023 6 10.3 of the Resolution Plan which according to the Appellant violates the future rights or claims of the homebuyers. Clauses 8.6, 9.1.2 and 10.3 of the Resolution Plan as follows:-

"8.6. The Home Buyers shall accept the new delivery dates and shall also not make any claims towards interest or compensation for past acts and shall make claims only to the extent of breaches if any committed in respect of the terms contained for new projects. The Home Buyers shall be entitled to similar built-up areas in the new project on the commercial terms contained herein. The Home Buyers shall not raise any objection or reach out to RERA objecting to any future development of the Properties or any part thereof."

"9.1.2. That the Hon'ble NCLT be pleased to give or issue necessary directions, instructions to the Home Buyers to accept the new delivery dates of the Projects and not to make any claims towards interest or compensation for past acts and not to raise any objection or approach RERA objecting to any future development of the Properties or any part thereof."

"10.3. The RERA authority shall dispose off and extinguish all claims, cases and order against the Corporate Debtor prior to the Approval date. The RERA authority shall further not admit any new claims or cases pertaining to the project under the control and management of Resolution Applicant/ Comp. App. (AT) (Ins.) No. 795 of 2023 7 Corporate Debtor pertaining to claims prior to the Effective Date as per this Resolution Plan."

10. When we look into the aforesaid clauses, in clauses 8.6 and 9.1.2 the words 'for past acts' has been specifically mentioned. Thus, the plan clearly prohibits any claim under the RERA only with regard to past acts. Coming to clause 10.3, Clause 10.3 reads the RERA authority shall dispose off and extinguish all claims, cases and order against the Corporate Debtor prior to the Approval date and further RERA authority shall further not admit any new claims or cases pertaining to the project under the control and management of Resolution Applicant/ Corporate Debtor pertaining to claims prior to the Effective Date as per the Resolution Plan. Thus, the above clauses clearly contemplate provisions with regard to past acts and past claims prior to effective date. These clauses cannot be read for creating any future embargo with regard to future claims for violation by the Resolution Applicant. The past claims under RERA does not survive and have to give way to the provisions of the Resolution Plan, hence, we do not find any infirmity in the aforesaid clauses and the aforesaid clauses clearly does not relate to any claims or violation subsequent to effective date which are not subject matter of the Resolution Plan. The above submission was also pressed before the Adjudicating Authority and the Adjudicating Authority has also observed that no prejudice is caused to the applicant in case their remedy under RERA in relation to past defaults stands forfeited. In paragraph 7.4 of the impugned order, following observed has been made:-

Comp. App. (AT) (Ins.) No. 795 of 2023 8 "7.4. As regards clause 11.1 seeking immunity from payment of any compensation for delay in delivery and bar on filing fresh claims before RERA authority, this Bench finds that the Hon'ble Supreme Court in the case of Jaypee Kensington Boulevard Apartments Welfare Association (Supra) held that the provisions of the Code would override those in the RERA. Consequently, contentions relating to the claims under RERA that do not conform with the resolution plan would be rejected and this Bench does not find that any prejudice is caused to the applicants in case their remedy under RERA in relation to past defaults of the Corporate Debtor stands forfeited. Further, it was also held by the Hon'ble Supreme Court that the CoC would have full powers to decide the treatment of the agreement that the resolution plan would propose with financial creditors such as homebuyers, accordingly proposed delivery of the flats after 4.5 years and supersession of the existing flat buyers agreement by the clause(s) of the Resolution plan, to the extent such agreement is in contradiction with the proposed Resolution Plan, cannot be objected so long as the plan is found viable and feasible in the commercial wisdom of the CoC."

11. Counsel for the Appellant has raised exception to the provision of Clause 8.7 which according to the Appellant violates Section 14 of the RERA. Clauses 8.7, 8.9 and 8.20 which have been referred by the Resolution Applicant are as follows:-

Comp. App. (AT) (Ins.) No. 795 of 2023 9 "8.7 The Resolution Applicant/ Corporate Debtor may alter the layout and/ or the building plans including the height and location of the buildings and the common areas. The carpet area, in respect of Home Buyers whose claims have been admitted by the Resolution Professional, shall not exceed the area admitted by the Resolution Professional. In case the carpet area to be given the Home Buyer is reduced then the Sales Value as per the allotment letter shall be proportionately reduced and in the event the carpet area is increased then the consideration payable by the Home Buyer on such increased Carpet Area will be equivalent to the Project launch price."

"8.9. The Resolution Applicant shall have the right to reconfigure with revised specifications the said unit/project on the best judgment of the Resolution Applicant and the prevailing market conditions. The Resolution Applicant shall also have the right to remove/modify any amenities promised to the Home Buyer in the project. By approving this Resolution Plan, the Home Buyers expressly consent to the same and agree not to raise any objection regarding the modification in the amenities and the revised specifications of the unit/project and RERA and other authorities shall rely on this Resolution Plan as consent granted therefor."

8.20. With effect from the NCLT Approval Date and upon the payment of the Upfront Cash by the Resolution Applicant, the Resolution Applicant/ Corporate Debtor shall apply for the necessary Comp. App. (AT) (Ins.) No. 795 of 2023 10 approvals for constructing two towers, however, in case the Resolution Applicant/ Corporate Debtor is unable to construct two towers then the Resolution Applicant/ Corporate Debtor shall construct only one tower."

12. When we look into the aforesaid clauses, the clauses only empower the Resolution Applicant/ Corporate Debtor to alter the layout and the building plan including the height, location and common area. It goes without saying that the said alteration and modification has to be taken after obtaining necessary approval from the Competent Authority which fact is clearly mentioned in Clause 8.20. The aforesaid clauses cannot be read to mean that the Resolution Plan empowers the Resolution Applicant to alter the layout and modifying the building plan on its own. No exception can be taken to the aforesaid clauses.

13. Learned Counsel for the Appellant has next contended that the agreement with the Corporate Debtor was for receiving the flats at the rate of Rs.13,500/- to Rs.21,000/- per sq. ft. which now stands modified to Rs.33,000/- per sq. ft. which rewrites the contract between the Corporate Debtor and no justification has been committed by the Resolution Applicant for fixing MSP at the rate of Rs.33,000/- per sq. ft. The determination of MSP Rs.33,000/- per sq. ft. has received the approval of the CoC which clauses have been approved in exercise of the commercial wisdom of the CoC. The fixation of the MSP of Rs.33,000/- is uniform for all homebuyers in a class. The fixation of MSP depends on various factors including the cost of Comp. App. (AT) (Ins.) No. 795 of 2023 11 construction which has now to be undertaken by the Resolution Applicant and to complete the project.

14. We, thus, are of the view that the approval of the CoC of the Resolution Plan cannot be faulted on the ground that MSP has been fixed @ Rs.33,000/- per sq. ft. which is different from the amount at the rate of Rs.13,500/- to Rs.21,000/- per sq. ft. which was initially promised by the Corporate Debtor. The clause in the Resolution Plan effectively modify all earlier contract between the parties and under the Scheme of the IBC, it is fully permissible to provide for new arrangement and clauses for revival of the Corporate Debtor which is the object of the IBC.

15. The submission of the Appellant is that CoC has not exercised its commercial wisdom and has not looked into the relevant cost for construction and fixation of the MSP of Rs.33,000 per sq. ft. When the plan is approved with requisite vote, it has to be assumed that the said approval is in the commercial wisdom. More so, fixation of MSP for allotment of flats to homebuyers is a commercial decision. Further, escalation for prices of allotment of flats can very well be undertaken to revive the Corporate Debtor and Appellant cannot insist that the Resolution Applicant should also make the allotment of flats on the same price on which the Corporate Debtor has promised to make. It is further relevant to notice that by a subsequent order passed by the Adjudicating Authority on 06.10.2023, the Resolution Plan now stands approved, we, however, have proceeded to examine the submissions of the Appellants on merits which were pressed in the appeal in reference to the Comp. App. (AT) (Ins.) No. 795 of 2023 12 rejection of the Application IA No.2953 filed by the Appellant. We, thus, do not find any substance in any of the submissions raised by the Appellant challenging the approval of the Resolution Plan by the CoC.

16. The Adjudicating Authority in the impugned order has not committed any error in rejecting IA No.2953 filed by the Appellant. We, thus, do not find any merit in the appeal. The appeal is dismissed subject to observations and clarifications as made above.

[Justice Ashok Bhushan] Chairperson [Barun Mitra] Member (Technical) Anjali/nn Comp. App. (AT) (Ins.) No. 795 of 2023

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National Company Law Appellate Tribunal