2023 (11) TMI 266 - AT - Insolvency and Bankruptcy

Rejection of the Resolution Plan approved by the Committee of Creditors (CoC) - HELD THAT - The clauses contained in Resolution Plan referred 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 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 said clauses. 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. 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. There are no substance in any of the submissions raised by the Appellant challenging the approval of the Resolution Plan by the CoC - appeal dismissed.

Summary

Issues Involved:
1. Jurisdiction of RERA for future violations by the Resolution Applicant.
2. Validity of clauses in the Resolution Plan that allegedly circumvent RERA.
3. Fixation of Minimum Sale Price (MSP) for homebuyers.
4. Exercise of commercial wisdom by the Committee of Creditors (CoC).

Summary:

1. Jurisdiction of RERA for Future Violations:
The Appellant argued that the Adjudicating Authority wrongly held that the Real Estate (Regulation and Development) Act, 2016 (RERA) would not have jurisdiction over future violations by the Resolution Applicant. They claimed that the Resolution Plan deprived them of their rights under RERA for future defaults. The Respondents countered that the Resolution Plan only precluded complaints under RERA for past acts and not future claims. The Tribunal agreed with the Respondents, noting that the clauses in the Resolution Plan pertain only to past acts and claims prior to the effective date, and do not create any future embargo on claims for violations by the Resolution Applicant.

2. Validity of Clauses in the Resolution Plan:
The Appellant contended that certain clauses in the Resolution Plan (Clauses 8.6, 9.1.2, and 10.3) violated Section 30(2)(e) of the Insolvency and Bankruptcy Code (IBC) by obstructing lawful rights under RERA. The Tribunal found that these clauses only addressed past acts and claims and did not affect future claims. The Tribunal also upheld the Adjudicating Authority's view that no prejudice was caused to the applicants by forfeiting their remedy under RERA for past defaults, citing the Supreme Court judgment in "Jaypee Kensington Boulevard Apartments Welfare Association & Ors. vs. NBCC (India) Ltd. & Ors."

3. Fixation of Minimum Sale Price (MSP):
The Appellant argued that the Resolution Plan unjustly increased the MSP to Rs.33,000/- per sq. ft., which was higher than the originally agreed rate of Rs.13,500/- to Rs.21,000/- per sq. ft. The Tribunal noted that the CoC had approved the MSP in the exercise of its commercial wisdom, and the fixation of MSP was uniform for all homebuyers. The Tribunal found no fault with the CoC's approval of the Resolution Plan, emphasizing that the IBC allows for new arrangements and clauses for the revival of the Corporate Debtor.

4. Exercise of Commercial Wisdom by the CoC:
The Appellant claimed that the CoC did not exercise its commercial wisdom properly in approving the Resolution Plan. The Tribunal, however, held that the approval of the Resolution Plan by the requisite vote of the CoC should be assumed to be in the exercise of commercial wisdom. The Tribunal further noted that the escalation in prices for the allotment of flats was permissible under the IBC to revive the Corporate Debtor.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the Appellant's submissions challenging the approval of the Resolution Plan by the CoC. The Adjudicating Authority's order rejecting IA No.2953 filed by the Appellant was upheld.