National Company Law Appellate Tribunal
Nishaat Saleem vs M/S Skylark Ithaca Buyers Welfare ... on 9 September, 2022
IN THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
I.A.No. 558 of 2022
in
T.A. No. 102 of 2021
(Company Appeal (AT) (INS) No. 647 of 2020)
In the matter of:
Nishaat Saleem
W/o. Saleem Sheriff
Aged about 55 years
Shareholder of M/s. Skylark Mansions Pvt. Ltd.
No. 37/21, Skylark Chambers,
Yelappa Chetty Layout,
Ulsoor,
Bangalore - 560042 ..... Applicant/Appellant
v.
1. Skylark Ithaca Buyers Welfare Association
Consisting of allegedly 255 homebuyers
Association of Financial Creditors
Incorporated on 04.04.2019 having its
Registered Office at
No. 202, Falcon Nest,
1st Cross, Kaggasandra,
Bengaluru - 560093
Rep. by its Secretary
Mr. Sachin Gangadharswamy ..... Respondent No.1
2. Skylark Mansions Private Limited
A company incorporated under the
Companies Act, 1956, having its
Registered Office at
No.37/21, Skylark Chambers,
Yelappa Chetty Layout,
Ulsoor,
Bangalore - 560042
Rep. by the Insolvency Resolution Professional
Smt. R. Bhuvaneshwari ..... Respondent No.2
I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020)
Page 1 of 31
Present :
For Applicant/ Mr. PH. Arvindh Pandian, Senior Advocate
Appellant : For Mr. Mahesh Thakur, Advocate
For Respondent No. 1 : Mr. Arun Karthik Mohan &
Mr. Vipul Ganda, Advocates
For Respondent No. 2/ : Mr. Rajnish Sinha, Advocate
Resolution Professional
ORDER
(Virtual Mode) Justice M. Venugopal, Member (Judicial):
I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (Ins.) No. 647 of 2020):
Preamble:
The Applicant/Appellant has preferred the instant I.A. No.558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (Ins.) No. 647 of 2020), before this `Tribunal', under Rule 31 of the NCLAT Rules, 2016, praying for issuance of directions by this `Tribunal', to the `Resolution Professional', to communicate the revised `Settlement Proposal' to the `Committee of Creditors'.
Appellant's Submissions:
2. According to the Applicant/Appellant, she is in discussion with the `Home Buyers' and the `Committee of Creditors' for ensuring that, there exist a `Settlement', in order to ensure that the `Home Buyers' are not I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 2 of 31 affected and further that, after taking inputs from the `Home Buyers', the `Settlement Proposal' was prepared, which was a `Revised' one.
3. It is represented by the Learned Senior Counsel for the Applicant/Appellant that the revised `Settlement Plan' will be crucial for the `Home Buyers' and the `Applicant', since it will end all the `Litigations' and even ensure that `Home Buyers' would get their apartments. In this background, according to the `Applicant/Appellant', the `Settlement Plan' is to be approved by the `Committee of Creditors', which will enable the `Applicant/Appellant' to resume the construction.
4. On behalf of the Applicant/Appellant, it is projected before this `Tribunal', that the `Applicant/Appellant', firstly, had communicated the `Settlement Proposal' to the `Resolution Professional' via email on 23.06.2022 and requested the `Resolution Professional' to consider the `Revised Proposal' for conducting e-voting for the approval by the `Committee of Creditors'. But the grievance of the `Applicant/Appellant' is that, the `Resolution Professional' has not taken action in communicating the same to the `Committee of Creditors'.
5. The clear cut stand of the Applicant/Appellant is that everything will depend on the outcome of the decision taken by the `Committee of Creditors' on the `Settlement Proposal' by the `Committee of Creditors'.
I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 3 of 31 In fact, the Respondents will not be prejudiced, in any manner, if the I.A. No. 558 of 2022 in Comp. App (AT) (CH) (INS) 647 of 2020 (TA/102/2021) is allowed by this `Tribunal', because of the fact that the `Applicant/Appellant' acts in a `Bona fide' interest and in the `interest of justice'.
6. The Learned Counsel for the Applicant/Appellant contends that the I & B Code, 2016, is enacted to ensure that the best possible resolution can be arrived at, by maximizing the resources available at hand. As a matter of fact, in the instant case, the `Promoters' of the `Corporate Debtor' have placed before the 2nd Respondent/Resolution Professional a `Settlement Agreement' which envisages a detailed and scientific method of ensuring delivery of Homes / Apartments to the Members of the 1st Respondent/Association and other `Home Buyers', who are a part of the `Committee of Creditors'.
7. The Learned Counsel for the Applicant/Appellant points out that as per terms of the `Settlement Agreement', their Apartments / Homes will be delivered in a `time bound fashion', at a stage, where the issue is governed by Part I of the I & B Code, 2016.
8. According to the Applicant/Appellant, a reading of the `Settlement Plan' indicates that a `Monitoring Committee' will be constituted to start I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 4 of 31 the construction with effective financial assistance to an extent of Rs.10 Crore by the `Promoters' and only after satisfaction of `Home Buyers' showing Reserves of Rs.50 Crore, an `Application' under Section 12A of the I & B Code, 2016, will be filed. In fact, the `Promoters' ensured that a `Meeting' was organised between the `Home Buyers' and `Contractors' to restart the `Project' by `September 2022', as per letter dated 19.08.2022 of the Contractors.
9. The grievance of the Learned Counsel for the Applicant/Appellant is that, the `Promoters' made all endeavours to ensure that a `Meeting' is organised between the `Resolution Professional' and the `Investor', on multiple occasions, which was not permitted by the `2nd Respondent/Resolution Professional'. But, the `Promoters', have made all attempts to ensure that update of due diligence process being carried on by the `Investor' was given to the Respondents time to time and also convene a Meeting with the `1st Respondent/Home Buyers Association'.
10. It is represented on behalf of the Applicant/Appellant that the `Promoters' had made several offers to establish their `Bonafides', including the aspect of paying the cost of `Committee of Creditors'. In reality, according to the Applicant/Appellant, the proposal of paying the cost of `Committee of Creditors' arose at Item No.5 in the 18th I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 5 of 31 `Committee of Creditors' from the `Resolution Professional' which was accepted by the `Promoters'. The `2nd Respondent/Resolution Professional', after the `Promoters' gave confirmation for paying the `Corporate Insolvency Resolution Process cost', denied to accept and stated that the same may be collected by anyone `Committee of Creditor's Member', and the same may be transferred to the Resolution Professional.
11. The Learned Counsel for the Applicant/Appellant submits that the `Promoters' had furnished their `Term Sheet' given by the `Investor' to the `Resolution Professional' and the `1st Respondent'/`Association' and that apart, the `Promoters' had informed about the constant conversation of the `Investor' with the `Banks' and any argument doubting, will show that the `Resolution Professional' is resisting the `Settlement' between the `Corporate Debtor' and `Home Buyers'.
12. The Learned Counsel for the Applicant/Appellant urges before this `Tribunal' that there is no `Resolution Applicant' as on to-day, and all the endeavours made by the `2nd Respondent/Resolution Professional' were either rejected by the `Committee of Creditors' (Viz., alleged involvement of Sriram Construction as per the 18th CoC Minutes) or were rejected by the `Adjudicating Authority', Tribunal (Viz. a `Proposed Applicant' I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 6 of 31 named `BNB', who had proposed to charge an exorbitant amount of Rs.1400 per sq. ft.).
13. The prime contention of the Applicant/Appellant is that the `Settlement Agreement' is to be placed before the `Committee of Creditors' and in any event the Appellant is required to abide by the decision taken by the `Members' of the `Committee of Creditors'. In this connection, the plea that the `1st Respondent' constitutes 56% and does not considered the `Proposal' worth considering is without any substance, as every `Home Buyer', has an `individual voting right' and no one can overcome that `Voting Right'.
14. The Learned Counsel for the Applicant/Appellant submits that it is the Appellant's right is to place the `Settlement Plan' before the `Committee of Creditors' (which was vetted by the `Home Buyers') and that the `Resolution Professional' should have considered the same and place before the `Committee of Creditors'.
15. The Learned Counsel for the Applicant/Appellant advances an argument that the duties of the `Resolution Professional' are defined under Section 18 and 25 of the I & B Code, 2016, and the `Constitution of Committee of Creditors' is governed by Section 24 of the Code. I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 7 of 31
16. The Learned Counsel for the Applicant/Appellant points out that the allowing of instant I.A. No. 558 of 2022, filed by the Applicant/Appellant will cause no harm or damage to the `Resolution Professional' or the `Home Buyers'. If the I.A. No. 558 of 2022 is placed before the `Committee of Creditors', a `One Time Resolution' will be arrived at, as the `due diligence' is completed, the execution of `Documentation' with the `Proposed Investor' is the one that remains pending.
17. At this juncture, it is the submission of the Learned Counsel for the Applicant/Appellant that there exists a Rs.10 Crore Credit line, which has been provided by the `Promoter' and in addition, the `Undisputed Receivables' of Rs.145 Crore from the `Home Buyers' with Seven Lakhs sq. ft. of `Inventory', valued at Rs.525 Crore, will enable the completion of the `Project', and the `Promoters' will be able to interact with the `Committee of Creditors Members' and clarify all questions in the subject matter.
18. The Learned Counsel for the Applicant/Appellant refers to the Judgment of the Hon'ble Supreme Court of India in Civil Appeal Nos. 1811-1812 of 2022 between Vallal RCK v. M/s. Siva Industries and I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 8 of 31 Holdings Limited and Ors., dated 03.06.2022, wherein at paragraph 21, it is observed as under:
21. ``This Court has consistently held that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be made to the judgments of this Court in the cases of K. Sashidhar v. Indian Overseas Bank and Others (2019 12 SCC 150), Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others (2020 8 SCC 531), Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others (2020 11 SCC 467), Kalpraj Dharamshi and Another v.
Kotak Investment Advisors Limited and Another (2021 10 SCC
401), and Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others (2022 1 SCC 401).'' 1st Respondent's Pleas:
19. The Learned Counsel for the `1st Respondent/Association' contends that the `invocation of inherent powers' (As per Rule 31 of the NCLT Rules, 2016) by the `Applicant/Appellant' in preferring I.A. No. 558 of 2022 in TA (AT) No. 102/2021 (Comp. App (AT) (INS) No. 647 of 2020) is impermissible, because of the fact that the I & B Code, 2016, is a self-contained and complete Code itself. Apart from the fact, that the I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 9 of 31 `Adjudicating Authority' and the `Appellate Authority', being the creatures of `Statute', their `Powers' and `Functions', are strictly governed by the `Provisions' thereof and `Regulations' made thereunder.
20. The Learned Counsel for the `1st Respondent/Association' takes a stand that there is no `residual jurisdiction' vested upon the `Authorities' prescribed under the I & B Code, 2016, and places reliance on the Judgment of the Hon'ble Supreme Court in Pratap Technocrats (P) Ltd. v.
Monitoring Committee of Reliance Infratel Limited & Anr. dated 10.08.2021 (vide Civil Appeal No. 676 of 2021), wherein at paragraphs 39 and 41, it is observed as under;
39. ``These decisions have laid down that the jurisdiction of the Adjudicating Authority and the Appellate Authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Nor is there a residual equity based jurisdiction in the Adjudicating Authority or the Appellate Authority to interfere in this decision, so long as it is otherwise in conformity with the provisions of the IBC and the Regulations under the enactment.
41. An effort was made by Mr Dushyant Dave, learned Senior Counsel, to persuade this Court to read the guarantees of fair procedure and non-arbitrariness as emanating from the decision of this Court in Maneka Gandhi vs Union of India (1978) 1 SCC 248 into the provisions of the IBC. The IBC, in our view, is a complete code in itself. It defines what is fair and equitable treatment by constituting a comprehensive framework within which the actors partake in the insolvency process. The process envisaged by the IBC is a direct representation of certain economic goals of the Indian economy. It is enacted after due deliberation in Parliament I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 10 of 31 and accords rights and obligations that are strictly regulated and coordinated by the statute and its regulations. To argue that a residuary jurisdiction must be exercised to alter the delicate economic coordination that is envisaged by the statute would do violence on its purpose and would be an impermissible exercise of the Adjudicating Authority's power of judicial review. The UNCITRAL, in its Legislative Guide on Insolvency Law, has succinctly prefaced its recommendations in the following terms:
``C. 15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defining the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. Insolvency laws achieve that balance by reapportioning the risks of insolvency in a way that suits a State's economic, social and political goals. As such, an insolvency law can have widespread effects in the broader economy.'' Hence, once the requirements of the IBC have been fulfilled, the Adjudicating Authority and the Appellate Authority are duty bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the Adjudicating Authority nor the Appellate Authority have an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.''
21. The Learned Counsel for the `1st Respondent/Association' urges that under the ingredients of I & B Code, 2016, a `Settlement' in regard to the `Corporate Insolvency Resolution Process' can be effected only as per Section 12A of the Code, read with Regulation 30-A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 11 of 31
22. The Learned Counsel for the `1st Respondent/Association' comes out with a plea that a mere perusal of Section 12A of the Code r/w. Regulation 30-A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, makes it clear that the very initiation of any such `Settlement Process' is premised upon an `Application' for `Withdrawal' being filed by the `Party', on whose Petition, `CIRP' was initiated (in the present case, the `1st Respondent/Association'), it is only such an `Application'/`Proposal' that qualifies to be placed for consideration before the `Committee of Creditors'.
23. The Learned Counsel for the `1st Respondent/Association' submits that what is enclosed along with the `Application' filed by the `Applicant'/`Appellant' is only a `Draft Settlement Agreement' with the `Home Buyers', which has not received the `Approval'/`Consent' of the `Home Buyers' and in particular, those forming part of the `1st Respondent/Association', who hold approximately 56% of voting share in the `Committee of Creditors'.
24. The Learned Counsel for the `1st Respondent/Association' refers to the Judgment of the Hon'ble Supreme Court of India dated 03.06.2022 in Vallal RCK v. M/s. Siva Industries and Holdings Limited and Ors. (vide I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 12 of 31 Civil Appeal Nos. 1811-1812 of 2022, wherein at paragraphs 16 to 18, it is observed as under:
16. ``It could thus be seen that Section 12A of the IBC was brought in the statute book on the basis of the said Committee's Report. It could be noticed that though by the Amendment Act No. 26 of 2018, the voting share of 75% of CoC for approval of the Resolution Plan was brought down to 66%, Section 12A of the IBC which was brought in the statute book by the same amendment, requires the voting share of 90% of CoC for approval of withdrawal of CIRP. It could thus clearly be seen that a more stringent provision has been made insofar as withdrawal of CIRP is concerned.
17. It is further to be noted that after Section 12A of the IBC was brought in the statute book, Regulation 30A of the 2016 Regulations came to be inserted vide notification dated 3rd July 2018. The same came to be substituted vide notification dated 25th July 2019. Regulation 30A of the 2016 Regulations reads thus:
``30−A. Withdrawal of application.(1) An application for withdrawal under Section 12−A may be made to the Adjudicating Authority__
(a)before the constitution of the committee, by the applicant through the interim resolution professional;
(b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be:
Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under Regulation 36−A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.
(2) The application under sub−regulation (1) shall be made in Form FA of the Schedule accompanied by a bank guarantee__ I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 13 of 31
(a) towards estimated expenses incurred on or by the interim resolution professional for purposes of Regulation 33, till the date of filing of the application under clause (a) of sub− regulation (1); or
(b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of Regulation 31, till the date of filing of the application under clause (b) of sub−regulation (1).
(3) Where an application for withdrawal is under clause (a) of sub−regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt.
(4) Where an application for withdrawal is under clause (b) of sub−regulation (1), the committee shall consider the application, within seven days of its receipt.
(5) Where the application referred to in sub−regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval. (6) The Adjudicating Authority may, by order, approve the application submitted under sub− regulation (3) or (5).
(7) Where the application is approved under sub−regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub−regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub−regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code.'' 18. A perusal of the said Regulation would reveal that where an application for withdrawal under Section 12A of the IBC is made after the constitution of the I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 14 of 31 Committee, the same has to be made through the interim resolution professional or the resolution professional, as the case may be. The application has to be made in Form−FA. It further provides that when an application is made after the issue of invitation for expression of interest under Regulation 36A, the applicant is required to state the reasons justifying withdrawal of the same. The RP is required to place such an application for consideration before the Committee. Only after such an application is approved by the Committee with 90% voting share, the RP shall submit the same along with the approval of the Committee to the adjudicating authority. It could thus be seen that a detailed procedure is prescribed under Regulation 30A of the 2016 Regulations as well.
18. A perusal of the said Regulation would reveal that where an application for withdrawal under Section 12A of the IBC is made after the constitution of the Committee, the same has to be made through the interim resolution professional or the resolution professional, as the case may be. The application has to be made in Form−FA. It further provides that when an application is made after the issue of invitation for expression of interest under Regulation 36A, the applicant is required to state the reasons justifying withdrawal of the same. The RP is required to place such an application for consideration before the Committee. Only after such an application is approved by the Committee with 90% voting share, the RP shall submit the same along with the approval of the Committee to the adjudicating authority. It could thus be seen that a detailed procedure is prescribed under Regulation 30A of the 2016 Regulations as well.''
25. The Learned Counsel for the `1st Respondent/Association' points out that the `Draft Settlement Agreement' attached to the I.A. No. 558 of 2022 does not `Qualify' as a `Settlement Proposal' in as much as it neither aims to create any `enforceable rights' in favour of the `Home I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 15 of 31 Buyers' nor any `enforceable obligations' against the `Promoters' of the `Corporate Debtor'.
26. The Learned Counsel for the `1st Respondent/Association' by referring to the `Draft Settlement Agreement' submits that in the `Description of Parties' to the `Draft Agreement' (Page 9 of the I.A. No. 558 of 2022 in TA (AT) No. 102/2021 (Comp. App (AT) (INS) No. 647 of 2020), `M/s. Skylark Mansions Private Limited' (`SMPL') has opposed to its `Promoters', is proposed as `Party' to the `Settlement Agreement', along with `Home Buyers'.
27. The clear cut stand of the `1st Respondent/Association' is that, since `CIRP' is going on in respect of `Skylark Mansions Private Limited' (`SMPL'), the `ex-promoters' of `Skylark Mansions Private Limited' are not permitted to act on behalf of `SMPL', as it is only the `Resolution Professional' who can represent the `Skylark Mansions Private Limited'. Therefore, a plea is taken on behalf of the `1st Respondent' that in effect, `no binding' or `enforceable obligations' are undertaken by the `Skylark Mansions Private Limited' / `Promoters' under the `Draft Settlement Agreement'.
I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 16 of 31
28. The other contention on behalf of the 1st Respondent is that, as per Clause 2.3 (b) of the `Draft Settlement Agreement', the completion of the `Project' under the `Proposed Settlement Plan' is premised upon the `Developer' ensuring mobilisation of a fund of Rs.50 Crore, from an `Investor' defined under Clause 1.1.4. as one `FOSUN' (vide Page 13 of IA 558 of 2022 in Comp. App (AT) (INS) No. 647 of 2020 (TA No.102/2021), but there is no timeline provided within which such `Investment' is to be mobilised.
29. Likewise, the Learned Counsel for the 1st Respondent by referring to Clause 7 of the `Draft Agreement' (Page 23 of I.A. No. 558 of 2022), points out that the said Clause purports to subject the `Investor' to certain `obligations', among other things to invest Rs.50 Crore as `Working Capital' for the `Project', such an `Investor' is not made a `Signatory'/`Party' to the `Draft Settlement Agreement'.
30. In effect, the Learned Counsel for the 1st Respondent submits that the `Draft Settlement Agreement' clearly demonstrates the absence of any `bonafide' and `genuine' proposal for `Settlement' on the part of the Applicant/Appellant. Indeed, the `1st Respondent/Association' had communicated its concerns / feedback on the `Draft Settlement Plan' to the `Promoters', who indicated that they would discuss the same with I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 17 of 31 their Advocate and revert back. But, no further response was received from the `Promoters' and instead, I.A. No. 558 of 2022 (came to be filed by the Applicant/Appellant before this `Tribunal), without addressing any of the concerns raised by the `Home Buyers'.
31. The Learned Counsel for the `1st Respondent/Association' while summing up, points out that I.A. No. 558 of 2022 in TA/102/2021 (Comp. App (AT) (INS) No. 647 of 2020), filed by the `Applicant/Appellant' to delay and frustrayed the rights of the `Home Buyers', which is to be dismissed with an `exemplary costs'.
2nd Respondent/Resolution Professional Contentions:
32. The Learned Counsel for the 2nd Respondent/Resolution Professional submits that the `Non-binding Term Sheet', as annexed in the `Application' dated 29.12.2021 contains Clause 18, where it was mentioned that `Fosun' would complete the due diligence within 90 days of the signing of the `Term Sheet' and even after more than 240 days from the date of execution of the `Term Sheet', there is no information about the status of the due diligence, upon which the entire `Investment Proposal' of `Fosun' rested.
I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 18 of 31
33. The Learned Counsel for the 2nd Respondent/Resolution Professional contends that the `Term Sheet' dated 29.12.2021 was signed by one Mr. Wei Jia, in the capacity of `Chairman' of `Ahuja Hive Private Limited' for `Fosun Property Holding Limited' and there is no word in the `Term Sheet' or any subsequent correspondence to demonstrate the relationship between the `Ahuja Hive Private Limited' and `Fosun Property Holding Limited'. Moreover, there is no categorical information about the status and the completion of the due diligence, which was claimed to have commenced in the month of Jan-Feb of 2022.
34. The Learned Counsel for the `2nd Respondent/Resolution Professional' forcefully raises an argument that as `Fosun Property Holding Limited' and / or its `Group Entities' are Hong Kong based Entities, `Foreign Direct Investment' (`FDI') Approval is a necessary pre- condition and the said `Term Sheet' was subject to the `Foreign Direct Investment' (`FDI') Approval'. Besides this, ever since the signing of the `Non-binding Term Sheet' as on 29.12.2021, there is no communication of approval of `Foreign Direct Investment's Approval', on which, the entire transaction is rested.
35. The Learned Counsel for the 2nd Respondent/Resolution Professional contends that as on 01.09.2022, there was no call or a mail I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 19 of 31 from `Fosun' assuring that the `Fosun' is a firm on the `deal' and there was no assurance given by `Fosun', in regard to the deposit of any `Bank Guarantee'. Moreover, no `Definitive Agreement' is signed between the `Applicant/Appellant' and `Fosun'. Although, more than eight months elapsed, after signing of the `Non-binding Term Sheet'.
36. Continuing further, it is represented on behalf of the 2nd Respondent/Resolution Professional, till date, the date of filing of I.A. No. 558 of 2022 by the `Applicant/Appellant' in TA/102/2021 (Comp. App (AT) (INS) No. 647 of 2020), there is no direct correspondence by `Fosun' reaching out to the `2nd Respondent/Resolution Professional'.
37. The Learned Counsel for the 2nd Respondent/Resolution Professional points out that the `Applicant/Appellant' has failed to ensure the participation of `Fosun', to inspire and instill any confidence about the `Proposal' although, numerous requests in various `Committee of Creditors Meeting' were made, for participation of `Fosun' for any commitment.
38. Yet another stand taken on behalf of the 2nd Respondent/Resolution Professional is that even the `Draft Settlement Agreement', annexed with the I.A. No. 558 of 2022 in TA/102/2021 (Comp. App (AT) (INS) No. I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 20 of 31 647 of 2020) has no affirmative consent of the `Fosun', either a `Confirming Party' or otherwise in any form. Also that, there is no provision in the I & B Code, 2016, for the ex-promoters to submit the `Settlement Plan' directly to the `Resolution Professional' and it is the `Applicant/Petitioner' (who filed the Section 7 Application under the I & B Code, 2016), is to make a request for withdrawal of an `Application', as per Section 12A of the I & B Code, 2016.
Evaluation:
39. It transpires from the I.A. No. 558 of 2022 in TA/102/2021 (Comp.
App (AT) (INS) No. 647 of 2020), filed by the `Applicant/Appellant', a relief is sought, praying for passing of an `Order' by this `Tribunal' in directing the `Resolution Professional' (2nd Respondent in the `Application') to communicate the `Settlement Proposal' to the `Committee of Creditors', and place the same for e-voting'.
40. According to the Applicant/Appellant, the `Settlement Proposal' after taking inputs from the `Home Buyers' was prepared, and the same was also revised. The grievance of the `Applicant/Appellant' is that the `2nd Respondent/Resolution Professional' had not taken any action to communicate the `Settlement Proposal' to the `Committee of Creditors'. In fact, the `Settlement Plan' is to be approved by the `Committee of I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 21 of 31 Creditors', which will enable the `Applicant/Appellant' to resume the construction. Furthermore, the `Application' is a `Bonafide one'.
41. The plea of the `Applicant/Appellant' is repelled by the `1st Respondent/Association', on the footing that in I.A. No. 558 of 2022 (filed under Rule 31 of the NCLAT Rules, 2016), the `Applicant/Appellant' has failed even to plead, leave alone to demonstrate any provision of the I & B Code, 2016 or Regulations made thereunder, in and by which, a prayer sought for, can be entertained by this `Tribunal'.
42. It is represented on behalf of the 1st Respondent/Association that the Section 7 Application in CP(IB) No.389/BB/2019 was filed by the `1st Respondent / M/s. Skylark Ithaca Buyers Welfare Association, Bengaluru (under Section 7 of the I & B Code r/w. Rule 4 of I & B (AAA) Rules, 2016), before the `Adjudicating Authority', (National Company Law Tribunal, Bengaluru Bench) as `Petitioners'/`Financial Creditors' against M/s. Skylark Mansions Private Limited (Holding company of ITHACA Estates Private Limited), Ulsoor, Bengaluru-42, and the same came to be admitted on 07.02.2020, by initiating `CIRP' against the `Corporate Debtor', an `Interim Resolution Professional' was appointed and `Moratorium' was declared, etc. I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 22 of 31
43. The `Applicant'/`Corporate Debtor' (`M/s. Skylark Mansions Private Limited'), Bengaluru-42, preferred a Review Application No. 02 of 2020 in CP(IB) No. 389/BB/2019, before the `Adjudicating Authority', and the same came to be rejected on 23.04.2020.
44. The plea of the 1st Respondent/Association is that the `Settlement Proposal' of the `Applicant'/`Appellant' does not aim to create any `enforceable rights' in favour of the `Home Buyers' nor any `enforceable obligations' against the `Promoters' of the `Corporate Debtor', as seen from the contents of the purported `Draft Settlement Agreement'/`Proposal'.
45. The prime contention of the 1st Respondent/Association is that, in as much as `CIRP' is going on, in respect of `SMPL', the ex-promoters of the `SMPL' are not permitted to act on behalf of `SMPL' as it is the `Resolution Professional' who can represent `SMPL'. Also that, no `enforceable' or `binding obligations' are undertaken by the `SMPL' or its `Promoters' under the `Draft Proposal' / `Agreement'.
46. It is the stand of the `1st Respondent/Association' is that the `Settlement Agreement' of the `Applicant/Appellant' clearly exhibits the absence of any `Bonafide' and `Genuine' Proposal for `Settlement' on its part, and that the effective date as per Clause 1.11 of the `Draft I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 23 of 31 Agreement' is premised on `Orders under Section 12A of the Code', attaining `finality'.
47. Be it noted, that filing of an `Application', as per Section 12A of the Code by the `Home Buyers' is based on the completion of process of investments by the `Investor' as per Clause 6.1 (f) of the `Draft Agreement' (vide Page 22 of the `Application'). Apart from that, in terms of Clause 2.3 (b) of the `Draft Agreement', the completion of the Project under the `Draft Settlement Plan' is based upon the `Developer' ensuring mobilisation of a `Fund' of Rs.50 Crore from an `Investor', defined as per Clause 1.14 as one `Fosun' and in the absence of any `timeline' in regard to the `Investment', the `obligations' and `timelines' to complete the `Project' are an `illusory one' and a `mere farce'.
48. In fact, the `Investor' is not even shown as a `Party Signatory' to the `Draft Agreement' and also that when the `1st Respondent / Association' communicated its feedback / concerns on the `Draft Settlement Plan' to the `Promoters', they indicated that they will discuss with the Advocate and revert back, but there was no response received from the `Promoters' and that I.A. No. 558 of 2022 is a `futile one', to delay and frustrate the `rights' of the `Home Buyers'. I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 24 of 31
49. The stand of the 2nd Respondent/Resolution Professional is that, till the date of filing of I.A. No. 558 of 2022, there is no direct correspondence by `Fosun' to reach out the `2nd Respondent/Resolution Professional'. In fact, the `Fosun Property Holding Limited' and / or its `Group Entities' or `Hong Kong based Entities', `Foreign Direct Investment (`FDI') Approval', is a pre-requisite condition and ever since the signing of `Non-binding Term Sheet', as on 29.12.2021, there is no communication of the `Approval of Foreign Direct Investment Approval', on which, the entire transaction is rested.
50. Proceeding further, there is no word in the `Term Sheet' or any later correspondence to exhibit the relationship between `Ahuja Hive Private Limited' and `Fosun Property Holding Limited'. One Mr. Wei Jia in the capacity of `Chairman' of `Ahuja Hive Private Limited' for `Fosun Property Holding Limited' had signed the `Term Sheet' dated 29.12.2021. Even after more than 240 days from the date of execution of the `Term Sheet', according to the `2nd Respondent/Resolution Professional', there is no information about the status of the due diligence based on which, the whole `Investment Proposal' of `Fosun' rested.
51. The other vital plea of the 2nd Respondent/Resolution Professional is that, there is no provision under the I & B Code, 2016, for submitting I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 25 of 31 `Settlement Proposal' as prayed for the Applicant/Appellant in IA 558 of 2022, except for approaching the `Resolution Professional' with the `Settlement Plan', as per Section 12A of the Code, along with `Form FA' for `Withdrawal', to be placed by the `Resolution Professional', for `Voting' before the `Committee of Creditors'.
52. In substance, the contentions of the `2nd Respondent/Resolution Professional' is that there is no `Credibility' / `Sanctity' attached to the `Settlement Plan', to be placed for `Voting' by the `Resolution Professional', before the `Committee of Creditors'. Hence, I.A. No. 558 of 2022, filed by the `Applicant/Appellant' is liable to dismissed in the interest of justice.
53. It cannot be gainsaid that an `inherent power' of a `Tribunal'/`Court of Law', cannot be exercised in violation or in conflict with or upon ignoring express and specific provision of `Law'.
54. At this juncture, this `Tribunal' worth recalls and recollects the decision of the Hon'ble Supreme Court of India in Nawabganj Sugar Mills Company Limited v. Union of India, reported in AIR 1976 SC Page 1152, wherein at paragraph 6, a passage from Benjamin Cardozo's nature of judicial process (Yale University Press 1921), is quoted with an `Approval' and the same, runs as under:
I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 26 of 31
6.`` The judge" even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from consecrated principles. He is not to yield to spasmodic santiment, to value and unregulated benevolence. He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to 'the primordial necessity of order in social life.' Wide enough in all conscience is the field of discretion that remains."
Intent of I & B Code, 2016:
55. It is pertinently pointed out that the `Object of the I & B Code, 2016', is to reorganised and evolve `Insolvency Process of Corporate Persons' in a time bound manner for maximisation of such Persons. If there is a delay, in regard to the maximisation of `value of assets' of the `Corporate Debtor', it will debilitate the `value of realisation' of `Potential Creditors', in the considered opinion of this `Tribunal'. No wonder, `Time' is the essence of the I & B Code, 2016. Without any simmering doubt, `Speed' is the `gist' of the Code. A timely `Liquidation' is preferred over endless `Resolution Proceedings', as opined by this `Tribunal'.
Hon'ble Supreme Court's Judgments:
56. It is pointed out that in the Judgment dated 25.01.2019 (vide Writ Petition (Civil) No. 99 of 2018) of the Hon'ble Supreme Court of India in I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 27 of 31 Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors., at paragraphs 52 & 53, wherein it is observed as under:
52. ``It is clear that once the Code gets triggered by admission of a creditors petition under Sections 7 to 9, the proceeding that is before the Adjudicating Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the committee of creditors is not yet constituted, a party can approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case.
53. The main thrust against the provision of Section 12A is the fact that ninety per cent of the committee of creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the committee of creditors do not have the last word on the subject. If the committee of creditors arbitrarily rejects a just settlement and/or withdrawal claim, the NCLT, and thereafter, the NCLAT can always set aside such decision under I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 28 of 31 Section 60 of the Code. For all these reasons, we are of the view that Section 12A also passes constitutional muster.''
57. Further, in the decision of Hon'ble Supreme Court of India between Arun Kumar Jagatramka V. Jindal Steel Power Limited, 2021 7 SCC at Page 474, wherein at paragraph 95, it is observed as under:
95 ..... ``However, we do take this opportunity to offer a note of caution for the NCLT and NCLAT, functioning as the Adjudicatory Authority and Appellate Authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India.
As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from the NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC.''
58. It cannot be gainsaid in the Judgment of the Hon'ble Supreme Court of India dated 14.12.2021 (vide Civil Appeal No. 3325 of 2020) in E S Krishnamoorthy & Ors. Vs Bharat Hi Tech Builders Private Limited, wherein at paragraph 29, it is observed as under:
29. `` The IBC is a complete code in itself. The Adjudicating Authority and the Appellate Authority are creatures of the statute.
Their jurisdiction is statutorily conferred. The statute which confers jurisdiction also structures, channelizes and circumscribes the ambit of such jurisdiction. Thus, while the Adjudicating Authority I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 29 of 31 and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.''
59. Be that as it may, on a careful consideration of the divergent contentions advanced on the respective sides, this `Tribunal', taking note of the `primordial' fact, that there is no provision under the I & B Code, 2016, authorising this `Tribunal', to grant the `relief' of `issuance of direction' to the `Resolution Professional', in communicating the `Settlement Proposal' of the `Applicant/Appellant' in I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) to the `Committee of Creditors' and to place the same for `e-voting' and since I.A. No.558 of 2022 in the instant `Appeal' is not filed by the `1st Respondent/Association' at whose behest, the `Corporate Insolvency Resolution Process' was initiated, added further, the said I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) is not accompanied with the mandatory `Form FA' (Application for withdrawal of `CIRP' under 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, as prescribed, all the more, the `Draft Settlement Agreement'/`Proposal' has not received the `ascent' / `consent' / `approval' of the `Home Buyers', especially, forming part of the `1st Respondent/Association' who hold approximately `56% voting share' in I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 30 of 31 the `Committee of Creditors', and considering the `whole gamut of the matter' in a holistic fashion, comes to an `irresistible', `inevitable' and `inescapable' conclusion that I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020), filed by the `Applicant/Appellant' (under Rule 31 of NCLAT Rules, 2016), is not a `Bonafide one', and the present I.A. No. 558 of 2022, filed by the `Applicant/Appellant' in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020), is only to procrastinate the `Hearing of main T.A. No. 102 of 2021' in (Comp. App (AT) (INS) No. 647 of 2020, pending on the file of this `Tribunal'. Viewed in that perspective, the I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020), filed by the `Applicant/Appellant' fails.
Conclusion:
In fine, I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020), filed by the `Applicant/Appellant' is dismissed to prevent an `aberration of justice' and in furtherance of `substantial cause of justice'. No Costs.
[Justice M. Venugopal] Member (Judicial) [Naresh Salecha] Member (Technical) 09/09/2022 SR/TM I.A.No. 558 of 2022 in T.A. (AT) No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) Page 31 of 31