2023 (10) TMI 1001 - AT - Insolvency and Bankruptcy

Challenge to resolution plan as approved by the CoC - Reduction of the claim of the home buyers / creditors - to be ranked at the top in terms of the waterfall mechanism or not - HELD THAT - In the present facts of the case, it is found that the Appellants were given a chance to raise their objections before the RP as well as the Authorized Representative of the Home Buyers. The RP did not falter in accepting their claims in spite of expressing some reservations initially. The RP had also facilitated the Appellants in routing their objections to the Authorized Representative and the latter had provided them the window of opportunity of taking up their issues with the resolution applicants. The RP and the Authorized Representative did not fail in the discharge of their responsibilities and no cause of action survives on this count. Once the CoC has approved the resolution plan by requisite majority and the same is in consonance with applicable provisions of law the same cannot be a subject matter of judicial review and modification - the plea raised by the Appellants that the Adjudicating Authority had committed an error in rejecting their IA without having considered the main petition seeking approval of the resolution plan, is not impressing. Merely because there is a reduction in the claim of any creditor does not make the resolution plan fall foul of law. We quite agree with the Adjudicating Authority that resolution plan providing a lesser amount than admitted does not make it illegal . Any clause in the resolution plan which requires creditors to take a hair-cut cannot be construed as being violative of Section 30(2)(e) of the IBC. There is nothing to show that there has been transgression of the bounds of rules and regulations which have caused any serious miscarriage of justice to the Appellants - the Adjudicating Authority did not commit any error in dismissing Application. There are no good grounds to entertain this appeal. Appeal is dismissed.

Summary

Issues Involved:

1. Admissibility of the Appellants' claims under CIRP.
2. Validity of the Resolution Plan approved by the CoC.
3. Alleged discrimination against the Appellants in the Resolution Plan.
4. Judicial review scope of the Adjudicating Authority over the Resolution Plan.

Summary:

1. Admissibility of the Appellants' claims under CIRP:

The Appellants, 25 allottees of residential flats in the Canary Greens project, filed claims after the Corporate Debtor was admitted into CIRP. The Resolution Professional (RP) initially raised concerns about the calculation of the claims but later admitted them in full, rendering the related IAs infructuous. The claims pertained only to the principal amount yet to be recovered from the Corporate Debtor.

2. Validity of the Resolution Plan approved by the CoC:

The RP invited resolution plans, and the CoC approved one with a 96.93% vote share. The Appellants challenged the resolution plan, claiming it was not in consonance with Section 30(2) of the IBC and Regulation 38 of the CIRP Regulations. They argued that Clause 9.2.2B(iii) of the plan treated the compensation amount received as a refund towards the principal sum, which was discriminatory. The Adjudicating Authority dismissed their IA, stating that a resolution plan providing a lesser amount than admitted does not make it illegal and upheld the commercial wisdom of the CoC.

3. Alleged discrimination against the Appellants in the Resolution Plan:

The Appellants contended that they were treated differently from other homebuyers who continued to hold allotments, thus violating Section 30(2)(e) of the IBC. They also argued that as dissenting financial creditors, they should be paid in priority over those who voted in favor of the plan. The Respondent countered that all homebuyers were treated equally as financial creditors and allowed to file claims in Form-CA. The Adjudicating Authority noted that the Appellants' objections were considered, and the resolution plan made adequate provisions for their claims.

4. Judicial review scope of the Adjudicating Authority over the Resolution Plan:

The Adjudicating Authority emphasized the limited scope of judicial review over the commercial decisions of the CoC, as reaffirmed by the Supreme Court in the Jaypee case. It held that once a resolution plan is approved by the requisite majority of the CoC, individual dissenting homebuyers cannot challenge it. The Authority found no transgression of rules or regulations causing serious miscarriage of justice to the Appellants and dismissed the appeal.

Conclusion:

The appeal was dismissed, upholding the commercial wisdom of the CoC and the resolution plan approved by a significant majority. The Adjudicating Authority found no merit in the Appellants' claims of discrimination or procedural lapses.