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2023 (4) TMI 414 - AT - Insolvency and BankruptcyResolution Process - determination of liquidation value - Power of RP and CoC to reject the value determined by the Valuer - liquidation value of security interest of the Appellant in project Universal Business Park - HELD THAT - From the materials brought on record, it is clear that area which is covered by Conveyance Deed was 89,706 sq. ft., whereas total saleable area of the Universal Business Park was 2,15,915 sq. ft. Pleadings of RP was categorical that by BBA, area of 165,115.53 sq. ft. was allocated, which facts have not been disputed by the Appellants. The Appellants case rather is that execution of BBA does not amount to transfer/ sale under the provisions of the Transfer of Property Act, which plea has been specifically taken in paragraph 14 as extracted above. There can be no doubt about legal position that title is conveyed when Conveyance Deed is executed, but certain rights accrue to homebuyers under the BBA, which rights have been recognized by law Courts including the Hon ble Supreme Court. Promoter, who has entered into a BBA with allottee and allotted a particular flat and received the payment has no right to transfer the same. It is apparent from the materials on record, it is clear that with regard to Universal Business Park, entire area was sold by Conveyance Deed and by BBA to the allottees and the Promoters have received the money through the Conveyance Deed and BBA and after execution of the BBA, the allottees acquired the right to receive possession of the units for which payments have been made. It is clear that the entire super area of Universal Business Pak was conveyed by Sale Deeds and by BBA, rather, the facts indicate that total area conveyed/ allotted was more than total area of Ground Floor and all the Floors. When area has been allotted to homebuyers, who have also paid the amount as per the agreement, homebuyers get an interest to receive the possession of the unit - The Valuers did not enter into issue of encumbrance over the assets. The finding has been recorded by the Adjudicating Authority in paragraph 49 that since the units have already been sold, are no longer the asset of the Corporate Debtor, hence, the liquidation value of the Universal Business Park project is NIL. The Adjudicating Authority has rightly come to the above conclusion after considering the facts and circumstances of the present case. The liquidation value fixed by the Valuers cannot be ignored in the resolution process. It is true that CoC on any valid reason can take a call to ask for any fresh valuation due to any relevant circumstances, but the valuation done by the Registered Valuers and average of liquidation value taken up by the Valuers serves the specific purpose and cannot be allowed to be disregarded by the CoC. In event, it is accepted that the CoC can change the liquidation value on its own, that may lead to unsatisfactory results - the liquidation value found by the Registered Valuers cannot be allowed to be changed by the CoC. We, thus, are satisfied that direction by Adjudicating Authority to CoC to re-examine the issue of significant differences between liquidation value submitted by two Valuers was uncalled for. We may however, hasten to add that in the present case, liquidation value, which was to be ascribed to the Appellant was an issue, which cannot be said to have determined by the Valuers in their Valuation Report. Valuers in their Valuation Report has added a caveat, which we have already noticed, which clearly left the issue to be determined while allocating the amounts to be paid to the dissenting Financial Creditors. Appeal dismissed.
Issues Involved:
1. Liquidation value of security interest in the Universal Business Park project. 2. Directions issued by the Adjudicating Authority in paragraphs 49 and 50 of the impugned order. Summary: Issue 1: Liquidation Value of Security Interest in Universal Business Park Project The Corporate Debtor, Universal Buildwell Pvt. Ltd., was admitted into insolvency on 03.07.2018. The Appellants submitted claims which were admitted, and voting shares were allocated to them in the Committee of Creditors (CoC). The Resolution Professional (RP) appointed two valuers who shared the Valuation Report with the Appellants. The Resolution Plan for the Corporate Debtor, approved by the CoC, earmarked Rs. 3 crores for the Appellants concerning Universal Business Park, assigning a NIL liquidation value to their security interest in the project. The Appellants objected, arguing that the liquidation value assessed by the Registered Valuers for Universal Business Park was INR 51,32,34,718/-, and their security interest should be valued at INR 23.09 crores. They asserted that the RP and Resolution Applicant wrongly treated their liquidation value as NIL, contrary to the Insolvency and Bankruptcy Code (IBC) and the Insolvency Resolution Process for Corporate Persons Regulations (CIRP Regulations). The RP and Respondents countered that the entire super area of Universal Business Park was sold through Conveyance Deeds and Builder Buyer Agreements (BBA) before the mortgage was created, leaving no unsold inventory to be monetized. The Appellants' claim that execution of BBAs does not amount to transfer/sale under the Transfer of Property Act was rejected, as the rights of homebuyers under BBAs are recognized by law, and the project had no remaining assets for liquidation. Issue 2: Directions Issued in Paragraphs 49 and 50 The Adjudicating Authority, in paragraphs 49 and 50, directed the CoC to re-examine the significant differences between the liquidation values submitted by the two valuers. The Appellants contended that the CoC does not have the power to alter the liquidation value determined by Registered Valuers. The Tribunal concurred with the Adjudicating Authority's observation that since the units sold are no longer assets of the Corporate Debtor, their liquidation value is NIL. However, it held that the CoC cannot change the liquidation value determined by Registered Valuers, as it serves a specific purpose in the resolution process. Thus, the direction to the CoC to re-examine the liquidation value differences was deemed uncalled for and deleted. Conclusion: The Tribunal affirmed the observations and directions in paragraph 49 of the impugned order but deleted paragraph 50. The appeal was dismissed, and the reliefs claimed by the Appellants were not granted.
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