2021 (3) TMI 1143 - SC - Insolvency and Bankruptcy

Approval of Resolution Plan - powers and jurisdiction of the Adjudicating Authority while dealing with the resolution plan approved by the Committee of Creditors - simultaneous voting over two resolution plans in the Committee of Creditors - contingent liability of additional amount of land acquisition compensation - transfer of the concessionaire s rights and obligations under the Concession Agreement with YEIDA, to the SPVs proposed to be incorporated - treatment of dissenting financial creditor like ICICI Bank Limited in the resolution plan, as being not in accord with Section 30(2)(b) of the Code read with Regulation 38(1)(b) of the CIRP Regulations - direction to make provision towards the dues of unclaimed fixed deposit holders also - constitution of a committee to take forward the disinvestment process of Jaypee Healthcare Limited - cancellation of certain agreements/sub-leases - fair treatment to the minority shareholders - dissenting financial creditor or an aggrieved person - extinguishment of security interest of lenders - Interim Monitoring Committee for implementation of the resolution plan. Contours of the jurisdiction of Adjudicating Authority in dealing with a resolution plan - HELD THAT - The Adjudicating Authority has limited jurisdiction in the matter of approval of a resolution plan, which is welldefined and circumscribed by Sections 30(2) and 31 of the Code read with the parameters delineated by this Court in the decisions abovereferred. The jurisdiction of the Appellate Authority is also circumscribed by the limited grounds of appeal provided in Section 61 of the Code. In the adjudicatory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by the CoC. Within its limited jurisdiction, if the Adjudicating Authority or the Appellate Authority, as the case may be, would find any shortcoming in the resolution plan vis- -vis the specified parameters, it would only send the resolution plan back to the Committee of Creditors, for re-submission after satisfying the parameters delineated by Code and exposited by this Court. Simultaneous voting over two resolution plans by CoC - HELD THAT - It is noteworthy that there has not been any prohibition in the scheme of IBC and CIRP Regulations that CoC could not simultaneously consider and vote upon more than one resolution plan at the same time for electing one of the available options. It has rightly been contended on behalf of IRP that in terms of sub-section (3) of Section 30 of the Code, he was obliged to place both the plans before CoC when they were found conforming to the conditions referred to in sub-section (2) of Section 30; and thereafter, it was for the CoC to consider the plans and to vote upon the same. Of course, the CoC could have approved only one resolution plan; and that has precisely been done in the present case. There does not appear any flaw or fault in the process adopted in the present case as regards voting over the resolution plans by the CoC. Matters related with the land providing agency YEIDA - HELD THAT - The stipulations in the resolution plan, as regards dealings with YEIDA and with the terms of Concession Agreement, have rightly not been approved and the stipulations in question, when not being consented to by YEIDA, are required to be disapproved. Further, in the cumulative effect of the stipulations which have not been approved, the only correct course for the Adjudicating Authority was to send the plan back to the Committee of Creditors for reconsideration. Treatment of the debt of dissenting financial creditor ICICI Bank Limited - HELD THAT - Though the Adjudicating Authority has not erred in disapproving the treatment of dissenting financial creditor like ICICI Bank in the resolution plan but, has erred in modifying the terms of the resolution plan and in not sending the matter back to the Committee of Creditors for reconsideration while extending an opportunity to the resolution applicant to make the necessary modifications - there are no reason to enter into the other area of suggestions and disputes concerning the particular parcels of land being offered by the resolution applicant to the objector bank. Matters related with fixed deposit holders - HELD THAT - It has not been the case of anyone that in the process in question, any of the requirements of Sections 13, 15 and 18 had not been complied with. It has also not been anybody s case that any claim made by any fixed deposit holder within the stipulated time was not taken into account by IRP - there are no justification for the directions contained in paragraph 125 of the order passed by NCLT. Those directions are required to be annulled. Objections of the financial creditor of subsidiary of the corporate debtor - HELD THAT - There are no reason to say anything further on this score and would leave the parties to work out a viable solution in the best interest of all the stakeholders; and for that purpose, the parties concerned, if necessary, may seek appropriate orders from NCLT, as regards mode and modalities of the process to be carried out. Grievance of agreement holders - HELD THAT - Looking to the nature of dealings and the propositions advanced by agreement holders, the observations made by the Adjudicating Authority, in addendum to Clause 21 of reliefs and concessions in the resolution plan but, without encroaching upon the commercial wisdom of CoC, only work towards viability of the plan while extending a fair treatment to the agreement holders, by keeping their right to seek remedy in a competent forum intact. The resolution applicant, NBCC, also does not appear to be having any qualms about it - in the overall scheme of the resolution plan, the stipulation in question cannot be said to be unfair; and the observations of the Adjudicating Authority in paragraphs 132 and 133 of the impugned order dated 03.03.2020 remain just and proper. No further orders are required in this regard. Grievance of minority shareholders - HELD THAT - Reference to Section 230 of the Companies Act, 2013, which deals with power to compromise or make arrangements with creditors and members is entirely inapt in the context of the present case because no such proceedings for compromise or arrangements are in contemplation. On the contrary, in the present case, the proceedings of CIRP under the Code have reached an advanced stage with approval of resolution plan by the CoC and the Adjudicating Authority - it cannot be said that the resolution plan does not adequately deal with the interests of minority shareholders. The grievances as suggested by these shareholders cannot be recognised as legal grievances; and do not provide them any cause of action to maintain their objections. The objections by the minority shareholders stand rejected. Matters related with dissatisfied homebuyers of JIL - HELD THAT - The homebuyers as a class having assented to the resolution plan of NBCC, any individual homebuyer or any association of homebuyers cannot maintain a challenge to the resolution plan and cannot be treated as a dissenting financial creditor or an aggrieved person; the question of violation of the provisions of the Real Estate (Regulation and Development) Act, 2016 does not arise; the resolution plan in question is not violative of the mandatory requirements of the CIRP Regulations; and when the resolution plan comprehensively deals with all the assets and liabilities of the corporate debtor, no housing project could be segregated merely for the reason that the same has been completed or is nearing completion. INR 750 crores and accounting between JAL and JIL - HELD THAT - We are unable to find any logic in the submission of this nature against JAL by its homebuyers having been made in these proceedings. It goes without saying that the dealing between JAL and its homebuyers is not the subject matter of the present proceedings. Similarly, the submission by some of the dissatisfied homebuyers of JIL, that NBCC is aiming at profiteering by getting hold of this money but without making corresponding provision in the resolution plan for the appropriate use of this money for the benefit of homebuyers, also remains baseless and redundant in view of what has already been discussed hereinbefore. Another block of submissions on behalf of some of the homebuyers of JIL, like seeking directions against NBCC that it shall not withdraw and should expedite construction as also seeking audit over the quality of construction, have gone far too beyond the real issues requiring determination in the present litigation. In regard to these and other submissions of similar nature, we would only leave the parties to take recourse to appropriate remedies in accordance with law, in case of any legal grievance existing or arising in future. Security interest of the lenders of JAL and effect of judgment dated 26.02.2020 - HELD THAT - It cannot be denied that the claim of ICICI Bank pertaining to the said mortgage over 100 acres of land was not reckoned in the CIRP of JIL and without any specific provision in that regard, the resolution applicant merely suggested by way of the Clause 23 of Schedule 3 as if such mortgage shall stand annulled and the land shall vest in the corporate debtor free from any encumbrances. To say the least, the said Clause 23 does not appear to be standing in conformity with any principal of law for discharge of a security interest, particularly of a third party who is not included in the insolvency resolution process of a corporate debtor. We would hasten to make it clear that the capacity of ICICI Bank in relation to the said mortgage of 100 acres of land of Tappal Property 1 is entirely different than its status as the dissenting financial creditor of JIL, to the extent JIL directly owed a financial debt to it - neither the said Clause 23 of Schedule 3 of the resolution plan relating to reliefs and concessions could be approved nor the order of the Adjudicating Authority in this regard. Other issues requiring clarification/directions - HELD THAT - When the resolution plan with all its reliefs and concessions was approved by CoC and the plan was otherwise being approved by the Adjudicating Authority (albeit with modifications), the aforesaid observations in regard to Clause 7 of reliefs and concessions cannot be said to be of apt dealing with the relief sought. Be that as it may, having regard to the purport and purpose of the said Clause 7 and its approval by CoC, we find no reason as to why the same may not be approved. Hence, the impugned order of the Adjudicating Authority dated 03.03.2020 shall be read as modified and in approval of the said Clause 7 of reliefs and concessions . Modified mechanism for implementation by the Appellate Authority 357 - HELD THAT - The Code lays down detailed procedure for corporate insolvency resolution process and such a proposition, for constitution of any Interim Monitoring Committee during the pendency of appeal before the Appellate Authority (NCLAT) is neither envisaged by law nor appears justified. It is apparent on a bare perusal of sub-section (3) of Section 61 of the Code that any challenge to the order approving a resolution plan under Section 31 could be maintained only on the grounds specified therein. Obviously, while dealing with such appeals, the Appellate Authority is required to remain within the confines of the boundaries delineated by the Code rather than seeking to provide for a mechanism, for implementation of the plan. Application disposed off.

Summary

Issues Involved:
1. Treatment of dissenting financial creditor ICICI Bank.
2. Objections by YEIDA regarding compliance with the Concession Agreement.
3. Provisions for fixed deposit holders.
4. Objections by some homebuyers.
5. Objections by YES Bank.
6. Rights of agreement holders.
7. General reliefs and concessions in the resolution plan.
8. Interim arrangement by NCLAT.

Issue-Wise Analysis:

1. Treatment of Dissenting Financial Creditor ICICI Bank:
The Adjudicating Authority held that payment to the dissenting financial creditor ICICI Bank should be made in cash, as per the amount it would be entitled to under Section 53 of the Code. The payment was to be made in twelve monthly instalments with interest accruing six months post the order. The Authority asserted its jurisdiction to modify the resolution plan to ensure compliance with Section 30(2) of the Code without altering its basic structure.

2. Objections by YEIDA:
The Adjudicating Authority allowed YEIDA to collect the acquisition cost through the SPVs proposed in the resolution plan, aligning it with the terms of the Concession Agreement. However, the Authority refrained from adjudicating the issue of additional compensation for the land under the Expressway, leaving it for future action by the parties. The Authority mandated the execution of necessary documents for transferring rights and obligations to the SPVs, involving JIL, YEIDA, and the concerned SPV.

3. Provisions for Fixed Deposit Holders:
The Adjudicating Authority directed the resolution applicant to make provisions to clear the dues of even those fixed deposit holders who had not made claims, modifying the resolution plan to satisfy the dues of unclaimed fixed deposit holders.

4. Objections by Some Homebuyers:
The Adjudicating Authority dismissed the objections of some aggrieved homebuyers, stating that they could not be categorized or treated as dissenting financial creditors.

5. Objections by YES Bank:
The Adjudicating Authority noted that no intervention was required as YES Bank had agreed to settle its objections with NBCC by forming a Committee.

6. Rights of Agreement Holders:
The Adjudicating Authority observed that if an agreement was invalid in law and lacked consideration, it could be canceled by the concerned party. However, the agreement holders retained the right to seek remedy in a competent forum even if such a clause was mentioned in the resolution plan.

7. General Reliefs and Concessions:
The Adjudicating Authority addressed the clauses relating to 'reliefs and concessions' in Schedule 3 of the resolution plan and various other applications filed by different stakeholders. Some reliefs and concessions sought by the resolution applicant were not granted or were declined for specified reasons. Other applications/objections were disposed of with a few comments.

8. Interim Arrangement by NCLAT:
The NCLAT, while issuing notice to unrepresented parties, directed that the approved resolution plan may be implemented subject to the outcome of the appeal. An Interim Monitoring Committee was constituted, comprising the successful resolution applicant (NBCC) and three major institutional financial creditors, who were members of the Committee of Creditors (CoC). This interim order was issued to manage the affairs of the corporate debtor until the appeal was resolved.