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2023 (3) TMI 448 - AT - Insolvency and BankruptcyDirection to Resolution Professional (RP) to exclude 205 Flats from the pool of the Assets of the Corporate Debtor - lifting of Corporate Veil - whether the Adjudicating Authority was justified in excluding 205 Flats from the pool of the Assets of the Corporate Debtor? HELD THAT - Having regard to the nature of transactions involved herein and the contention of the Corporate Debtor that the amount involved is a Sale Consideration and not a loan and the argument of M/s. Nisus Finance and Beacon Trusteeship Limited that right, title and interest of 268 Flats rests with them, we are of the considered view that this is a fit case for the Corporate Veil to be lifted, to the extent to see the Nature of Transaction whether loan or Sale Consideration as contended by the Appellant as laid down by the Hon ble Supreme Court in ARCELORMITTAL INDIA PRIVATE LIMITED VERSUS SATISH KUMAR GUPTA ORS. 2018 (10) TMI 312 - SUPREME COURT . The Homebuyers and the effected parties are not estopped from approving that a Transaction is a Loan Transaction . Contractual interpretation must ascertain the real intention of the parties. The genesis of an Agreement and the context is to be seen as a whole and the intent of a Transaction cannot be at variance with the actual objective. Clauses 7.1 and 7.2 of Part II of the DTD were amended which provide that the Principle Amount was to be paid by the Issuer Company in four instalments namely 31.03.2019, 30.06.2019, 30.09.2019 31.12.2019 meaning thereby that the Issuer Company and the Corporate Debtor were under legal obligation to pay the 1st instalment by March 2019 - This Tribunal is of the earnest view that the Corporate Debtor had failed to fulfil the obligations under the DTD and other documents executed to guarantee/secure the repayment of the amount disbursed by the Financial Creditors towards issuance of the Non-Convertible Debentures. In the instant case, keeping in view the flow of funds, the nature of transactions, the amended DTD, the Term Sheets and the entire material on hand, this Tribunal is of the earnest view that the amount received from the Issuer company is a Loan and not a Sale Consideration and the BBAs executed are secured documents - Once the Resolution Plan is approved by the CoC, the Financial Creditors are estopped from seeking any Amendments/Modifications in the Information Memorandum. In the instant case, the Information Memorandum was prepared on 14.01.2021 and the Resolution Plan was approved in the 8th CoC Meeting which concluded on 03.05.2021. There are no substantial reasons given for the Creditor not having raised this issue or filed an Application in the Interim Period between 14.01.2021 and 03.05.2021. The Order of the Adjudicating Authority excluding the 205 Flats from the pool of the Assets of the Corporate Debtor, is set aside - Appeal allowed.
Issues Involved:
1. Exclusion of 205 Flats from the pool of assets of the Corporate Debtor. 2. Relationship between the Corporate Debtor and the Issuer Company. 3. Validity of Builder Buyers Agreement (BBA) and its registration. 4. Nature of the transaction: Loan or Sale Consideration. 5. Rights of Homebuyers and other stakeholders. 6. Voting rights of Nisus Finance in the Committee of Creditors (CoC). 7. Adherence to the Information Memorandum and Resolution Plan. Issue-wise Detailed Analysis: 1. Exclusion of 205 Flats from the pool of assets of the Corporate Debtor: The National Company Law Appellate Tribunal (NCLAT) was tasked with determining whether the Adjudicating Authority was justified in excluding 205 flats from the pool of assets of the Corporate Debtor. The Adjudicating Authority had previously directed the Resolution Professional (RP) to exclude these flats based on the documents executed, namely the Debenture Trust Deed (DTD), Builder Buyers Agreement (BBA), and Offer Purchase Agreement (OPA). The NCLAT found that the exclusion of these flats would give preference to one creditor over another, which is against the principles of the Insolvency and Bankruptcy Code (IBC). 2. Relationship between the Corporate Debtor and the Issuer Company: The relationship between the Corporate Debtor and the Issuer Company was a key issue. Nisus Finance and Beacon Trusteeship Limited contended that the relationship was that of a buyer and seller, and the amount paid was a sale consideration. However, the RP argued that the amount involved was a loan. The NCLAT concluded that the amount received from the Issuer Company was a loan and not a sale consideration, based on the flow of funds, the nature of transactions, and the amended DTD. 3. Validity of BBA and its registration: The validity and registration of the BBAs were scrutinized. The NCLAT noted that the BBAs were not registered, which is mandatory as per Section 13 of UP RERA, Transfer of Property Act, 1882, and Registration Act, 1908, as amended by the State of UP. The Tribunal emphasized that a contract for sale does not create any interest in or charge on the property unless it is registered. 4. Nature of the transaction: Loan or Sale Consideration: The nature of the transaction was a central issue. The NCLAT found that the transaction was a loan rather than a sale consideration. The Tribunal referred to the Transactional Audit Report, which indicated that the Corporate Debtor failed to fulfill its obligations under the DTD and other documents executed to guarantee/secure the repayment of the amount disbursed by the Financial Creditors towards issuance of the Non-Convertible Debentures. 5. Rights of Homebuyers and other stakeholders: The rights of Homebuyers and other stakeholders were considered. The NCLAT noted that most Homebuyers had valid BBAs executed with the Corporate Debtor and were in possession of their flats. The Tribunal emphasized that the exclusion of these units from the Information Memorandum would give preference to one similarly placed creditor over another, which is against the principles of the IBC. 6. Voting rights of Nisus Finance in the CoC: The reduction of voting rights of Nisus Finance in the CoC was examined. The NCLAT found that once the Resolution Plan is approved by the CoC, the Financial Creditors are estopped from seeking any amendments or modifications in the Information Memorandum. The Tribunal noted that Nisus Finance had participated in the CoC meetings and voted in favor of the Resolution Plan based on the Information Memorandum, which included the 268 flats. 7. Adherence to the Information Memorandum and Resolution Plan: The adherence to the Information Memorandum and the Resolution Plan was a significant issue. The NCLAT stressed that the Information Memorandum must be prepared and circulated to the members of the CoC prior to the issuance of Form-G. The Tribunal highlighted the importance of timelines and the binding nature of the Resolution Plan once approved by the CoC, as laid down by the Hon'ble Supreme Court in various judgments. Conclusion: The NCLAT allowed the appeals filed by the Homebuyers and other stakeholders, setting aside the order of the Adjudicating Authority that excluded the 205 flats from the pool of assets of the Corporate Debtor. The Tribunal dismissed the appeal filed by Nisus Finance and Beacon Trusteeship Limited, which sought the exclusion of the remaining 63 flats and the reduction of their voting rights. The NCLAT emphasized the importance of adhering to the Information Memorandum and the Resolution Plan approved by the CoC, and the need to avoid giving preference to one creditor over another.
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