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2023 (11) TMI 173 - AT - Insolvency and BankruptcyRejection of Resolution plan - no related party - Non-inclusion of the Appellant in the Committee of Creditors - entitlement to vote in the Committee of Creditors - categorization of the homebuyers in class as Affected and Unaffected homebuyers - violation of Section 30(2)(e) of IBC. Non-inclusion of the Appellant in the Committee of Creditors - Whether the Appellant is not a related party and was entitled to vote in the Committee of Creditors? - HELD THAT - In the financial statement of the Corporate Debtor, Appellant has been reflected as shareholder on the date of commencement of the CIRP. The Registrar of Companies has not recorded transfer of shares as per the Share Purchase Agreement. Share Purchase Agreement dated 31.10.2018 after the Settlement Agreement between the parties could not be implemented, which is a fact on record. The Appellant itself has filed application for contempt against the Vira Group before the Hon ble Supreme Court alleging the violation of order of Hon ble Supreme Court which contempt was permitted to be withdrawn with liberty to the Appellant to take such proceedings as may be advised. Filing of contempt itself recognises that Memorandum of Settlement dated 31.10.2018 was breached - The Resolution Professional proceeded to classify the Appellant as related party on account of declaration of the Appellant itself in the claim form that it is a related party. The shareholding of the Appellant still continues in the Corporate Debtor which is not yet been transferred as per the Settlement Agreement - there are no error in the decision of the Resolution Professional classifying the Appellant as related party and not giving the Appellant a seat and voting share in the Committee of Creditors. Whether the Vira Group being related party consequently Respondent No.3 was also related party and as Director of Kalpataru Advisory Services Pvt. Ltd. could not be member of the Committee of Creditors or voted in the Committee of Creditors? - HELD THAT - There is no material on record that resignation of Respondent No.3 was with intend to be member of the Committee of Creditors. There being no material or pleading to come to the conclusion that KASPL still continues to be related party by virtue of Section 5(24)(d) whereas after 19.02.2019, Mr. Pratik Jayesh Vira does not continue as Director of the Corporate Debtor and CIRP against the Corporate Debtor commenced on 11.08.2020, more than a year after such resignation. With regard to 16% shareholding of KASPL, learned counsel for the Respondent No.3 has submitted that to attract Section 5(24)(j), the KASPL had to control more than 20% of voting rights in the corporate debtor on account of ownership or a voting agreement. It has only 16% shareholding in the Corporate Debtor, hence, cannot be held as related party as per Section 5(24)(j) - The submission of the Appellant objecting participation of KASPL on the basis of its shareholding which in view of the definition clause 5(24)(j) does not fulfils it to be related party, hence, participation of KASPL in voting cannot be faulted. As noted above, transfer of shareholding in favour of the Vira Group could not materialise. Whether the Appellant is entitled to challenge the Resolution Plan which was approved by majority of creditors in class i.e. homebuyers? - HELD THAT - From the facts which have been brought on the record, it is clear that homebuyer as a class have approved the Resolution Plan. Voting results on the plan have been brought on the record which clearly shows that the homebuyers as a class had approved the Resolution Plan. Appellant, who is a dissatisfied minority, a single homebuyer has to sail alongwith the view of the majority in terms of the scheme of IBC - the Adjudicating Authority is agreed upon that Appellant as a class of homebuyers cannot be allowed to challenge the Resolution Plan which has received approval of class of homebuyers on the basis of majority of votes of homebuyers. Whether the categorization of the homebuyers in class as Affected and Unaffected homebuyers is violative of Section 30(2)(e) and the Resolution Plan deserve to be set aside on this ground alone? - HELD THAT - The different treatment of two sets of homebuyers in view of the allotment to the homebuyer with/without NOC of the Mortgagee has rational for separate treatment and the submission of the Appellant cannot be accepted that all homebuyers should be treated in the same manner in the Resolution Plan - This Tribunal noticing that there was discrimination in payment to the Operational Creditors inter se, has directed that Operational Creditors be paid the same amount. In the above case, the Adjudicating Authority has rejected the Resolution Plan on the ground that there is differentiation in payment of Operational Creditors inter se. The commercial wisdom of the Committee of Creditors, which has approved the Resolution Plan under which different treatment has been given to Affected Homebuyers and Unaffected Homebuyers , cannot be faulted - there are no grounds made out to challenge the approval of the Resolution Plan. Thus, no error has been committed by the Adjudicating Authority in rejecting the application - Register of the Corporate Debtor cannot be rectified on application filed by the Appellant and Appellant in fact by the application prayed for specific performance of Memorandum of Settlement which admittedly could not be implemented due to various reasons which are not necessary to be noted for the purposes of this case - appeal dismissed.
Issues Involved:
1. Whether the Appellant is not a related party and was entitled to vote in the Committee of Creditors? 2. Whether the Vira Group being related party consequently Respondent No.3 was also related party and as Director of Kalpataru Advisory Services Pvt. Ltd. could not be member of the Committee of Creditors or voted in the Committee of Creditors? 3. Whether the Appellant is entitled to challenge the Resolution Plan which was approved by majority of creditors in class i.e. homebuyers? 4. Whether the categorization of the homebuyers in class as "˜Affected' and "˜Unaffected' homebuyers is violative of Section 30(2)(e) and the Resolution Plan deserve to be set aside on this ground alone? Summary: Issue No. 1: The Appellant holds 11.31% shareholding of the Corporate Debtor and declared itself as a related party in the claim form filed during the CIRP. The shareholding transfer as per the Share Purchase Agreement could not be implemented, resulting in the Appellant being classified as a related party. Consequently, the Appellant was not given a seat or voting share in the Committee of Creditors. The decision of the Resolution Professional to classify the Appellant as a related party was upheld. Issue No. 2: Kalpatru Advisory Services Pvt. Ltd. (KASPL), holding 16% shareholding of the Corporate Debtor, was contested as a related party by the Appellant. However, since Mr. Pratik Jayesh Vira, who was a Director of both the Corporate Debtor and KASPL, resigned on 19.02.2019, more than a year before the commencement of CIRP, KASPL could not be considered a related party under Section 5(24)(d) or 5(24)(j). Thus, KASPL's participation in voting was not faulted. Issue No. 3: The Appellant, being part of the class of homebuyers who approved the Resolution Plan, cannot challenge the Resolution Plan individually. The Adjudicating Authority relied on the Supreme Court's judgment in "Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Versus NBCC (India) Ltd. & Ors., (2022) 1 SCC 401," which held that individual homebuyers or associations cannot challenge a Resolution Plan approved by the homebuyers as a class. Issue No. 4: The Resolution Plan categorized homebuyers into "˜Affected' and "˜Unaffected' based on whether the allotment was made with or without the NOC from LIC Housing Finance Ltd. The distinction was justified as allotments without NOC were in breach of the mortgage conditions. The Resolution Plan provided for allotment to affected homebuyers, albeit of reduced area, and treated them differently due to the lack of NOC. This classification was found rational and not violative of Section 30(2)(e) of the I&B Code. Conclusion: The appeals challenging the orders dated 19.07.2023 approving the Resolution Plan and rejecting I.A. No. 533 of 2022 and I.A. No. 933 of 2022 were dismissed. The categorization of homebuyers and the classification of the Appellant as a related party were upheld.
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