2024 (11) TMI 1186 - AT - IBC

Seeking equitable treatment with that of other creditors in class - seeking amendment of the Information Memorandum (IM) reflecting the units of the Appellants as cancelled - seeking refund of the amount paid - HELD THAT - It is to be noted that it is the duty of the RP to collate all the claims filed before him and verify the same from the books of the Corporate Debtor. The submission of the RP agreed upon that it lacks adjudicatory powers on the claims filed before him. The RP could not have reversed the action of cancellation taken by the Corporate Debtor prior to the initiation of CIRP. Even though the allotment were cancelled by erstwhile management of the Corporate Debtor, the Resolution Plan had provided treatment to the said cancelled allottees. And this Resolution Plan was approved by the CoC with 100% majority in their 12th CoC meeting held on 03.08.2023 - Resolution Plan was prepared and filed by the Resolution Applicant in compliance with Section 30 of the Code and later it has been duly approved by the CoC in its commercial wisdom. It is well settled position of law that the Resolution Plan, duly approved by the COC as per their commercial wisdom has a very limited scope of judicial review and which is circumscribed by the provisions contained in Section 31 of the Code. In the instant case, the Appellants had already approached UPRERA, seeking refund of their entire amount, along with the interest which was decreed in their favour. The Applicant had accepted partial amount paid to them from the erstwhile management. The conduct of the allottees in accepting the refund towards their allotment, indicates that allottees have accepted the cancellation of the allotments. In this conspectus, the submissions of the Respondent that the refund, which was initiated by the erstwhile management at the instance of the Appellants, cannot be given a colour of unilateral cancellation of allotment, agreed upon. It is to be noted that the Appellants did not challenge their cancellation of allotment, which was pre-CIRP. It is also clear from records that they have accepted the partial payments basis the decretal amount of UPRERA. Now their primary grievance is qua the cancellation of their respective units. Since earlier they had accepted the money and while filing their claims they misrepresented and filed full claim and are now seeking the revocation of the cancellation of the units - The CoC, RP could not have revoked the cancellation as it was beyond their jurisdiction. In fact, they had gone ahead as per the information collated from the records of the Corporate Debtor. Therefore, the contention of the Appellant that there is a failure to comply with the UPRERA Decree cannot be accepted. The cancellation of the units was based on the UPRERA s Order which was not challenged. The Information Memorandum contained this information and CoC could not have revoked the cancellation and acted within its commercial wisdom approving the Resolution Plan - there are no fault in the due process which was followed by AA - appeal dismissed.

Summary

Issues Involved:

1. Equitable treatment of the appellants compared to other creditors in class.
2. Amendment of the Information Memorandum to reflect the status of the appellants' units.
3. Restoration of the appellants' units and treatment under the Resolution Plan.
4. Compliance with UPRERA decrees and implications of partial payments.
5. Validity of the cancellation of units by the Corporate Debtor prior to CIRP initiation.
6. Application of judicial precedents and principles of natural justice.

Issue-wise Detailed Analysis:

1. Equitable Treatment of the Appellants:

The appellants sought equitable treatment with other creditors, claiming their units were unjustly cancelled without their knowledge, unlike other unit holders who retained their units despite receiving refunds. The tribunal noted that the appellants were treated as financial creditors in class until the resolution plan was received. However, the tribunal found that the appellants had accepted partial refunds, which implied acceptance of unit cancellation. The tribunal concluded that the appellants could not be treated at par with other homebuyers due to the acceptance of partial refunds and the subsequent cancellation of their units.

2. Amendment of the Information Memorandum:

The appellants requested the amendment of the Information Memorandum to include their units under the same category as other unit holders. The tribunal observed that the Information Memorandum was prepared based on the records of the Corporate Debtor, which showed the units as cancelled prior to CIRP initiation. The tribunal held that the RP had no adjudicatory power to reverse the cancellation and found no merit in the appellants' claim for amendment, as the Information Memorandum accurately reflected the status of the units.

3. Restoration of Units and Treatment under the Resolution Plan:

The appellants sought restoration of their units and equal treatment under the Resolution Plan. The tribunal noted that the Resolution Plan, approved by the CoC with 100% majority, provided specific treatment for cancelled units, allowing appellants to choose new units at a base selling price or receive a partial refund. The tribunal upheld the CoC's commercial wisdom in approving the plan and found no grounds to restore the units or alter the plan's provisions.

4. Compliance with UPRERA Decrees and Partial Payments:

The appellants argued that partial payments under UPRERA decrees were insufficient, and the Corporate Debtor failed to comply fully. The tribunal acknowledged the decrees but noted that the appellants accepted partial payments, indicating acceptance of cancellation. The tribunal agreed with the respondents that the decrees did not override cancellation or prevent actions under the Insolvency and Bankruptcy Code, 2016.

5. Validity of Unit Cancellation Prior to CIRP:

The tribunal examined the cancellation of units by the Corporate Debtor before CIRP initiation. It concluded that the RP could not reverse pre-CIRP cancellations, as they were based on records and partial refunds accepted by appellants. The tribunal found that the appellants did not challenge cancellations promptly and participated in CIRP without raising objections, undermining their claims.

6. Application of Judicial Precedents and Principles of Natural Justice:

The appellants contended that the AA wrongly relied on certain judgments and violated principles of natural justice. The tribunal distinguished the cited cases based on factual differences, noting that the appellants' units were cancelled before CIRP, unlike cases where cancellations were informed. The tribunal found that the appellants had opportunities to raise objections during CIRP and CoC meetings but failed to do so. It concluded that the process followed was fair and dismissed claims of natural justice violations.

Conclusion and Order:

The tribunal concluded that the cancellation of units was based on UPRERA's order, which was not challenged, and the Information Memorandum accurately reflected this status. The CoC acted within its commercial wisdom in approving the Resolution Plan, and the tribunal found no fault in the process followed by the AA. Consequently, the appeal was dismissed for lack of merit, with no orders as to costs.