2024 (7) TMI 118 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - Sustainability of different eligibility criteria fixed for association of allottees as compared to other Resolution Applicant - eligibility criteria for allottees association being registered prior to 03.01.2020 - locus on Crown Business Park Tower A Association to file appeal - correctness of Resolution plan mentioning unsold area - saleable area available to the Resolution Applicant - sale of car parking area - approval of Resolution Plan while keeping various applications filed by the allottees pending consideration - non- commitment of payment of assured amount by the SRA - denial to Cimco Project equal opportunity to submit a Resolution Plan vitiating the approval of the Resolution Plan submitted by SRA - no opportunity of hearing without passing the order - sufficient material irregularities committed by the Resolution Professional in conduct of the CIRP to justify by interference with the decision of the CoC to approve the Resolution Plan or not. Whether the different eligibility criteria fixed for association of allottees as compared to other Resolution Applicant is unsustainable and violates the provisions of CIRP Regulations 2016? - HELD THAT - The different eligibility criteria fixed for Association of Allottees as compared to other Resolution Applicants, does not violate the provisions of CIRP Regulations 2016 and is sustainable. Whether the eligibility criteria for allottees association being registered prior to 03.01.2020 has no rational basis and was choosen only to oust the Crown Business Park Tower A Association, hence, deserves to be set aside? - HELD THAT - The eligibility criteria for allottees of Association to be registered prior to 03.01.2020 has rational basis and cannot be set aside. More so, the Appellant in Company Appeal (AT) (Insolvency) No.431 of 2023, who claims to be Association of Allottees, neither filed any objections before the RP or filed any Application before the Adjudicating Authority, challenging the criteria or seeking liberty to file a Resolution Plan. They filed the Application before the Adjudicating Authority after one year and 10 months from the approval of the Resolution Plan by the CoC. Whether Crown Business Park Tower A Association has locus to file Company Appeal (AT) (Ins.) No. 434 of 2023? - HELD THAT - Admittedly, there are large number of Members of Association, who are not part of the CoC and the grievance raised is also on claims of large number of Members of the Association have not yet been admitted and kept under verification and further several applications filed by some of the Members, are still pending before the Adjudicating Authority. Looking to the various issues raised by the Appellant in Company Appeal (AT) (Insolvency) No.431 of 2023, it is opined that submission in the Appeal, needs to be considered on merits and the Appeal is not to be thrown out on the ground of locus - Crown Business Park Tower A Buyers Association has locus to file Company Appeal. Whether the Resolution Plan which mentions 1 Lakh sq. ft. as unsold area depicts an incorrect figure since the addendum to Resolution Plan only mentions 83,940 sq. ft. as available area? - Whether no Resolution Plan could have been approved by the Adjudicating Authority without their being certainty regarding saleable area available to the Resolution Applicant which figure not being final the entire resolution plan deserves to be rejected? - HELD THAT - It is SRA, who is responsible to take all loss and gain in the Project. We, thus, are of the view that present is a case where in view of the pending applications before the Adjudicating Authority, the Adjudicating Authority itself has directed the applications to be listed after approval of the Plan, no certainty with regard saleable area, could have been made, nor at the time of submission of Resolution Plan, there could have been certainty with regard to saleable area available to the SRA. The SRA, who is Association of Allottees, took the business decision and submitted a Plan for completing the Project on the basis of funds as delineated in the Plan and on the basis of source of funds as mentioned in the Plan - on the ground that Plan mentions 1,00,000 sq. ft as unsold area, which is not in accord with 83,940 sq. ft area mentioned in addendum, the Plan neither fails nor can be interfered with - the Adjudicating Authority took a conscious decision to consider the various IAs filed for acceptance of their claims, after approval of Resolution Plan, there was no certainty of saleable area, even on the date when Adjudicating Authority approved the Resolution Plan. Hence, no fault can be found with there being no certainty of the saleable area of which the SRA was well aware and took a risk to proceed with the Resolution Plan and implemented the same. Whether there is no certainty with regard to saleable area available to the Resolution Applicant for raising fund in view of the pendency of the large number of applications filed by the allottees before the Adjudicating Authority? - Whether the Resolution Plan ought to have provided receivables from allottee of Rs. 62.95 Cr. as mentioned in the Information memorandum and the figures of Rs.36.66 Cr. only mentioned in Resolution Plan is incorrect figures? - HELD THAT - It is true that there was no certainty with regard to saleable area available to the Resolution Applicant, in view of large number of applications filed by the allottees before the Adjudicating Authority, but that itself is not any ground to find fault with the Resolution Plan, specially, when the Adjudicating Authority itself has decided to decide the applications after approval of Resolution Plan - The Resolution Applicant providing for receivables of Rs.36.66 crores, cannot be said to be incorrect figure, it being calculated on the basis of area for which claims were accepted, i.e. area 4,26,240 sq. ft. Whether Resolution Plan proposing to raise funds from sale of car parking @ of Rs.4 lacs is impermissible and the above source of funds was not available to the Resolution Applicants? - HELD THAT - The RERA Act, 2016 covers under common areas, only the open parking area and in the present case, the SRA was dealing with covered parking, which is on different levels, was constructed on the expenditure of Rs.40 crores and Information Memorandum, clearly mentioned that open parking area was Zero - it is clear that the amount, which was mentioned in the Proposed Funding Plan for allocation of car parking slot, cannot be said to be wrongly included in the Funding Plan - Resolution Plan proposing to raise Rs.54.50 crores from sell of car parking space @ Rs.4,00,000/- was clearly permissible and the above source of fund was available to the Resolution Applicant. Whether Adjudicating Authority erred in approving the Resolution Plan by the impugned order dated 21.02.2023 while keeping various applications filed by the allottees pending consideration? - HELD THAT - The Adjudicating Authority consciously directed the applications to be listed after the approval of the Resolution Plan with clear undertaking by the SRA that SRA shall abide by all liabilities and claims, which are accepted by the Adjudicating Authority and bear the consequences. The course adopted by the Adjudicating Authority in the present case, looking into the enormous number of applications, cannot be said to be impermissible. When the SRA came forward with an undertaking that in event the Plan is approved, it shall abide by all subsequent orders, accepting any claim of the allottees, there are no error in approving the Resolution Plan and direction for listing of the applications subsequently. Whether non- commitment of payment of assured amount of Rs.52.50 Cr. by the SRA is modification of the Resolution Plan? - HELD THAT - The SRA has clearly contemplated under Clause 8.18.10, if there is any deficit/ shortfall, with regard to amount proposed in the Resolution Plan towards assured returns shall stand modified accordingly. Thus, payment of assured returns of Rs.52.50 crores was itself contemplated in the Plan to be modified in event of any deficit or shortfall. Thus, in event, in the implementation of Plan, the SRA is not able to pay the assured return of Rs.52.50 crores, due to any deficit or shortfall, there can be no modification of the Plan, rather to cover the deficit and shortfall from assured returns payable to the allottees, is part of the Resolution Plan - Non-commitment of payment of assured returns of Rs.52.50 crores by the SRA is not a modification of Resolution Plan. Whether Cimco Project was denied equal opportunity to submit a Resolution Plan vitiating the approval of the Resolution Plan submitted by SRA? - HELD THAT - Cimco Projects was well aware about refusal of its request for extension of time. Cimco Projects has filed the Writ Petition in Delhi High Court, which was ultimately dismissed as withdrawn. Despite extension of time granted to the Cimco Projects, on its request, no Resolution Plan was filed. Cimco Projects, having not filed any Resolution Plan despite extension of time, cannot be heard in complaining that it was not given ample opportunity to file the Resolution Plan. Cimco Projects is also party to preferential transaction application filed by the RP - Cimco Projects was granted equal opportunity to submit a Resolution Plan. It having sent its Expression of Interest, it was open for Cimco Projects to file the Plan in which it failed - Cimco Projects having been granted ample opportunity to submit a Resolution Plan, hence, the approval of Resolution Plan is not vitiated on the above ground. Whether the Appellant- Amarjit Singh, Suspended Director was not given any opportunity in passing the order dated 23.02.2023 and his objection by IA No.5006 of 2021 was rejected without hearing the Appellant? - HELD THAT - Application filed by the Appellant Amarjit Singh, raising objection to the Resolution Plan was considered and was rejected. Hence, the submission that he was not given any opportunity/hearing or that his objections were not considered, cannot be accepted. Whether there were sufficient material irregularities committed by the Resolution Professional in conduct of the CIRP to justify by interference with the decision of the CoC to approve the Resolution Plan? - Whether in these appeals sufficient grounds have been made out to interfere with the approval of the Resolution Plan? - HELD THAT - The mere fact that in the funding of Plan certain saleable area was according to the Appellant, in excess was taken, hence, the entire area of 1,00,000/- sq. ft. was not available and the funding as contemplated was deficient, is not a sufficient ground to find any violation of provisions of Section 30, subsection (2). Further, it is noticed Clause 7.1 and 7.2 of the Resolution Plan, where the SRA has had made provisions for any deficiency and shortfall in the funds available. Thus, the SRA was conscious that even if there is shortfall in funding, there was backup Plan. Hence, on the ground that there was no certainty regarding saleable area available to the SRA and there was certain discrepancy regarding saleable area in the addendum to Informaton Memorandum and the Resolution Plan, is not a ground on which the approval of Resolution Plan can be interfered with by the Adjudicating Authority - approval of Resolution Plan by the CoC, being compliant of Section 30, sub-section (2), has rightly been approved by the Adjudicating Authority and no grounds have been made out in these Appeal(s) to interfere with the approval of Resolution Plan. Whether, the Applicants who filed IAs in Company Appeal (AT) (Insolvency) NO.431 of 2023 are entitled for any relief in their Applications? - HELD THAT - No reliefs can be granted in the IAs, which have been filed by the Applicant(s) as noted above except to pursue the Applications before the Adjudicating Authority. Appeal disposed off.

Summary

Issues Involved:
1. Eligibility criteria for Association of Allottees.
2. Rational basis for cut-off date 03.01.2020.
3. Locus of Crown Business Park Tower A Buyers Association.
4. Discrepancy in unsold area in the Resolution Plan.
5. Certainty regarding saleable area.
6. Certainty of saleable area due to pending applications.
7. Receivables from allottees.
8. Sale of car parking slots.
9. Approval of Resolution Plan while keeping applications pending.
10. Non-commitment of assured returns of Rs.52.50 crores.
11. Opportunity to Cimco Projects to submit a Resolution Plan.
12. Opportunity to Suspended Director Amarjit Singh.
13. Material irregularities by Resolution Professional.
14. Grounds to interfere with the approval of the Resolution Plan.
15. Reliefs for Applicants who filed IAs.

Detailed Analysis:

1. Eligibility Criteria for Association of Allottees:
The Tribunal found that the different eligibility criteria for Association of Allottees as compared to other Resolution Applicants do not violate the provisions of CIRP Regulations 2016 and are sustainable. The criteria were justified due to the significant financial involvement of the homebuyers and their majority share in the CoC.

2. Rational Basis for Cut-off Date 03.01.2020:
The cut-off date of 03.01.2020 for the registration of the Association of Allottees was found to have a rational basis, as it coincided with the date of the constitution of the CoC. The Tribunal did not find any error in this criterion.

3. Locus of Crown Business Park Tower A Buyers Association:
The Tribunal held that Crown Business Park Tower A Buyers Association has the locus to file the appeal. Despite the majority of its members being part of the CoC and having voted in favor of the Resolution Plan, the issues raised by the Association warranted consideration on merits.

4. Discrepancy in Unsold Area in the Resolution Plan:
The discrepancy between the 1,00,000 sq. ft. mentioned in the Resolution Plan and the 83,940 sq. ft. in the addendum to the Information Memorandum was explained. The Tribunal found that the mention of 1,00,000 sq. ft. was not incorrect due to the calculation of available saleable area and future contingencies.

5. Certainty Regarding Saleable Area:
The Tribunal concluded that the Resolution Plan could be approved without certainty regarding the saleable area due to the pending applications and the conscious decision of the Adjudicating Authority to hear these applications post-approval of the Resolution Plan.

6. Certainty of Saleable Area Due to Pending Applications:
The Tribunal noted that the uncertainty of the saleable area due to pending applications was not a sufficient ground to find fault with the Resolution Plan, especially when the Adjudicating Authority had decided to address these applications after the approval of the Resolution Plan.

7. Receivables from Allottees:
The Tribunal found that the figure of Rs.36.66 crores mentioned in the Resolution Plan for receivables from allottees was correct, as it was based on the area for which claims were accepted.

8. Sale of Car Parking Slots:
The Tribunal held that the Resolution Plan proposing to raise Rs.54.50 crores from the sale of car parking spaces was permissible. The covered parking slots were not considered part of the 'common area' under the RERA Act, 2016.

9. Approval of Resolution Plan While Keeping Applications Pending:
The Tribunal found no error in the Adjudicating Authority's decision to approve the Resolution Plan while keeping various applications pending, given the undertaking by the SRA to honor all claims admitted by the Adjudicating Authority.

10. Non-commitment of Assured Returns of Rs.52.50 Crores:
The Tribunal concluded that the non-commitment of payment of assured returns of Rs.52.50 crores by the SRA was not a modification of the Resolution Plan, as the Plan itself contemplated adjustments in case of any deficit or shortfall.

11. Opportunity to Cimco Projects to Submit a Resolution Plan:
The Tribunal held that Cimco Projects was given ample opportunity to submit a Resolution Plan. Despite the extension of time, Cimco Projects did not submit a Plan, and thus, the approval of the Resolution Plan was not vitiated on this ground.

12. Opportunity to Suspended Director Amarjit Singh:
The Tribunal found that the Suspended Director Amarjit Singh was given an opportunity to be heard, and his objections were considered before the order dated 21.02.2023 was passed.

13. Material Irregularities by Resolution Professional:
The Tribunal concluded that there were no material irregularities committed by the Resolution Professional in the conduct of the CIRP that would justify interference with the decision of the CoC to approve the Resolution Plan.

14. Grounds to Interfere with the Approval of the Resolution Plan:
The Tribunal found no sufficient grounds in the appeals to interfere with the decision of the CoC in approving the Resolution Plan. The Adjudicating Authority did not commit any error in this regard.

15. Reliefs for Applicants Who Filed IAs:
The Tribunal decided that no reliefs could be granted in the IAs filed by the Applicants except to pursue their applications before the Adjudicating Authority. The SRA's undertaking to honor claims admitted by the Adjudicating Authority was noted.

Conclusion:
The appeals were decided as follows:
1. Company Appeal (AT) (Insolvency) Nos. 432, 433, and 434 of 2023 were dismissed, and interim orders were vacated.
2. Company Appeal (AT) (Insolvency) No. 431 of 2023 was upheld with directions for the SRA to honor claims admitted by the Adjudicating Authority and for the Adjudicating Authority to dispose of pending applications expeditiously.