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TMI Blog2020 (9) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of an Operational Creditor, namely Prism Johnson Limited Hyderabad. The other applications are primarily filed opposing the withdrawal as sought for in MA.67 of 2020 from being allowed on the ground that Committee of Creditors (COC) Meeting in which the decision was taken, namely the 2nd COC held on 14.01.2020 was not validly constituted as the applicants, even though in the said applications were treated by the IRP initially as Financial Creditors of the Corporate Debtor and as such recognized as part of the COC however, subsequently were never made privy to the 2nd COC meeting as their names seem to have been omitted as part of the COC and in the circumstances the decision to withdraw under Section 12A of IBC, 2016 had been taken by a COC in effect not validly constituted and held and hence the resolution passed seeking for withdrawal cannot be sustained. 2. The facts in brief as averred in the respective applications are briefly given hereunder for better appreciation of the decision arrived at in conclusion by applying the provisions of IBC, 2016 and also considering the powers of the IRP in adding or revising a claim and thereby altering the constitution of the COC in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Operational Creditor, in the 2nd COC meeting held on 14th January 2020, save their participation in view of the incapacity as aforesaid, after detailed discussions of the 8 members of the COC all of whom had unanimously resolved/approved seeking the withdrawal of the application (main petition), by filing an application under Section 12A of IBC, 2016. d) That the details of the 8 members who had attended the 2nd COC meeting held on 14.01.2020 and who had conveyed their acceptance to the Section 12A withdrawal under IBC, 2016 has been given by the IRP and being material taking into consideration the objections raised by the objectors are extracted from his application as follows: - S. No. Creditor's Name Form Submitted and type of Creditor claimed in the Form Claim Accepted Total Amount No. Of Installments 1 Nuvoco Vistas Corporation Ltd. Mumbai- 400070 Email :[email protected] Form B Operational Creditor 7,53,932 1 2 Utracon Structural Systems Pvt. Ltd. Chennai -600 020 Email: [email protected] Form B Operational Creditor 55,020 1 3 Johnson Lifts Private Limited Chennai-600101 Email: [email protected] Form B Oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principles are required to be applied and in the circumstances an issue had arisen whether it should be considered as an 'Operational Creditor' and thereby part of the COC itself. ii) In relation to the claim of Sree Sankeswara Foundations and Investments, it is averred in the application that its claim was submitted in Form C as a Financial Creditor of the Corporate Debtor, however at the time of disposal of MA No. 1505/2019 (of which reference has already been made in paragraph 3(b) supra of this Order) even though to provide the copy of the order passed by NCLT dated 10.04.2019, since adequate documents were not provided and further the Hon'ble NCLAT in its decision dated 25.11.2019 has held that in any case the claim of the said entity as time barred debt in its own case referred in the earlier paragraph and also the books of the corporate debtor reflecting that sums are payable by the said entity to the Corporate Debtor and the dispute being referred to the Arbitrator appointed by the Hon'ble High Court of Madras, again an issue has arisen in relation to the claim of the said Sree Sankeswara Foundations and Investments and thereby as to its status in the CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit u/s 60(5) of IBC, 2016 that the 3 land owners who entered Joint Development Agreement with M/s. Dugar Housing Ltd. i. M/s. Gurudev Foundations Pvt. Ltd. - Land owner, Joint Promoter and also Partner ii. M/s. Sree Sankeswara Foundations and Investments - Land owner, Joint Promoter and also Partner iii M/s. Kanchanjanga Securities Company Pvt. Ltd. - Land owner, Joint Promoter and also Partner are neither Operational Creditor nor Financial Creditor under the purview of IBC, 2016 4. Now moving on to MA/68/2020, it being an application filed by Sree Sankeswara Foundations and Investments, a partnership firm aggrieved by the action of the COC in seeking for the withdrawal under Section 12A of IBC, 2016 without its consent, its being a part of the COC as a financial creditor and further having been allowed to also attend in the said capacity in the 1st COC held on 19.12.2019, however subsequently the respondent in the application, namely the IRP without any locus, suo motu has removed the name of the applicant, namely Sree Sankeswara Foundations and Investments from the Committee of Creditors and the said unilateral action is not in accordance with the provisions of IBC, 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt about the integrity of the IRP who had initially chosen to admit the claim of the applicant as a Financial Creditor and allowed it to participate in the COC, however subsequently had sought to remove the name of the applicant from the COC itself which makes the applicant believe about the falsification of accounts of the Corporate debtor with the connivance of the IRP and the IRP seems to be ded by the promoters of the corporate debtor instead of acting as an officer of this Tribunal and thereby not acting in an independent manner and in the circumstances the above application in MA-68/2020 opposing the premature withdrawal as well to take cognizance of the acts of the IRP and suitably deal with the same. 5. MA 82 of 2020 in MA No. 67 of 2020 is an application filed by M/s. Gurudev Foundations Pvt. Ltd., again, aggrieved by the actions of the IRP almost based on similar set of facts as that of the applicant in MA-68 of 2020 as noted above and thereby seeking to get itself impleaded in the application seeking for withdrawal as filed by IRP under Section 12A of IBC, 2016. It is averred in the impleading application that the applicant is having an arbitration award given in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in by Gurudev Foundations Pvt. Ltd. as mentioned in MA 82 of 2020 being prior in time to the filing of the said application and as mentioned therein based on identical set of facts and aggrieved by the actions of the IRP in effect excluding the applicant from the COC and in the circumstances seeking for constituting the COC including all the financial creditors of the Corporate Debtor as reflected in the latest financial records and also direct the respondent IRP to clarify on the status of the claim filed by the applicant in Form B dated 23.11.2019. 7. Coming to MA/1428/2019 in IBA/222/2019 it is an application filed by one of the home buyers of the Corporate Debtor, namely an individual by the name of Mr P. Velmurugan on the basis that the Corporate Debtor being primarily engaged in real estate development and alleging that the claim arises out of debt to be paid by the corporate debtor incurred due to non-completion of the project in time in "SKY DUGAR", based on the strength of documents annexed along with the claim filed in Form C with the respondent IRP for a sum of Rs. 1,01,31,511/- and also seeking for declaration that the applicant is eligible to join the COC taking into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny letter reference in this regards in the Claim Form C submitted. This clearly indicates that there is a malicious intention in hiding the facts in the Form C, submitted by Mr. P. Velmurugan. c. In the S.No. 10 of the Claim Form C "LIST OF DOCUMENTS ATTACHED TO THIS CLAIM IN ORDER TO APPROVE THE EXISTENCE AND NON PAYMENT OF CLAIM DUE TO THE FINANCIAL CREDITOR" there is no reference of letter/correspondence for the Claim amount of Rs. 1,01,31,511/-made by him officially to M/s. Dugar Housing Limited which awaits justification from the Applicant Mr. P Velmurugan failing which his claim Form C submitted on 01.12.2019 is a false claim and not tenable as mentioned in the above paragraphs as per Sections 5(8) and 5(7) of IBC 2016. Thus, in view of the completion of flat which became ready for occupation but not taken up, it is the contention of the IRP that the application filed in MA No. 1428 of 2019 is liable to be dismissed as the claim filed in Form C is not tenable and being against the provisions of Section 5(8) and 5(7) of IBC, 2016. 9. From the applications filed by the IRP, as well as other applicants, it is quite evident that while the IRP is seeking for withdrawal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter of Swiss Ribbons (P) Ltd. and another v. Union of India and others vide paragraph 53 of the judgement rendered on 25.01.2019 which threshold limit has not been in any way disturbed, even after the amendment made to IBC, 2016 by way of Insolvency and Bankruptcy Code (Amendment) Act, 2019 in relation to dealing with exercise of voting rights by the financial creditors through their Authorized Representatives and more particularly by insertion of sub section 3A and proviso thereunder to Section 25A, to overcome the impasse, in view of the peculiar situation which arose in Jaypee Infratech Ltd. matter and those matters similarly placed due to large scale absentations in voting on the part of Home Buyers or to give voting instructions to their Authorized Representative, all of which had already been dealt with in detail by one of us (namely R. Varadharajan) while sitting in the Reference Bench in the matter of IDBI Bank Ltd. vs. Jaypee Infratech Ltd. in CA No. 223/ALD/2018 dated 24.05.2019 which went up to the highest court of the land and not disturbed. Be that as it may, the decision of the Hon'ble Supreme Court laid down in Swiss Ribbon's case and followed in Jaypee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the proviso to Section 21(2), in case the financial creditor happened to be a related party of the corporate debtor it shall not have any right of representation, participation or voting in a meeting of COC. In the absence of any financial creditor(s) in relation to a corporate debtor, proviso to Section 24(8) of the Code contemplates the COC to be constituted in such manner as may be specified. IBBI, being the Regulator has framed regulations to meet such an eventuality in terms of Regulation 16 of Insolvency and Bankruptcy Board of India(Insolvency Resolution Process of Corporate Persons) Regulations, 2016 for brevity hereinafter called as IRCP Regulations which reads as follows: 16. Committee with only operational creditors. (1) Where the corporate debtor has no financial debt or where all financial creditors are related parties of the corporate debtor, the committee shall be set up in accordance with this Regulation. (2) The committee formed under this Regulation shall consist of members as under - (a) eighteen largest operational creditors by value: Provided that if the number of operational creditors is less than eighteen, the committee shall include all such ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of the application, whichever is later. (4) Where the application is approved by the committee with ninety percent voting share, the resolution professional shall submit the application under sub-regulation (1) to the Adjudicating Authority on behalf of the applicant, within three days of such approval. (5) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (4).] 14. Now looking into the pleadings and averments made by the respective parties it is evident that in relation to the constitution of the COC and the report filed by the IRP before this Tribunal with a view to ascertain the compliance by the IRP with respect to the CIRP process after initiation of the CIRP on 13.11.2019 as provided under IBC, 2016 read with IRCP Regulations, 2016. S. No. Creditor's Name Form Submitted and type of Creditor claimed in the Form Claim Form Received Total Claim amount (Rs.) Principle/Invoice (Rs.) Interest Others Date of receipt of claim Remarks 1 Gurudev Foundations Pvt. Ltd. Chennai -600 079 Form - B Operational Creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invariably the IRP is not even being handed over with the books of accounts and records of a corporate debtor by its management and personnel, leave alone taking possession of the assets, which leads the IRP to classify the claims in accordance with documents filed in support of the claim by the creditors and of his best estimate. A combined reading of Regulation 7 to Regulation 14 falling under Chapter IV of IRCP Regulations, 2016 dealing with proof of claims makes this position clear, particularly in relation to the role of IRPs and the claimants Regulation 10, 12 and Regulation 14 of the IRCP Regulations, 2016 which for ready reference are extracted below:- 10. Substantiation of claims. The interim resolution professional or the resolution professional, as the case may be, may call for such other evidence or clarification as he deems fit from a creditor for substantiating the whole or part of its claim. **** 12. Submission of proof of claims. (1) Subject to sub-regulation (2), a creditor shall submit [claim with proof] on or before the last date mentioned in the public announcement. [(2) A creditor, who fails to submit claim with proof within the time stipulated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), but is also available to claims admitted even other wise as well, as the term which has been used in Regulation 14(2) is to the effect that "shall revise the amounts, including the estimates of claim made under sub-regulation(1)" Thus from the above regulations it is seen that the IRP is having a power to re-constitute the COC based on his decisions, including by way of addition of claims as well as by revision of claims admitted previously based on additional information thereby connoting that he has the power to revise the claimant from one class to another class for e.g.) from a financial creditor as originally admitted to an Operational creditor or vice versa or even based on bona-fide additional information thereby resulting in complete exclusion of a claim previously admitted and the claim forming part of the COC, be it as a financial creditor or as an operational creditor. 17. Thus from the combined reading of the Regulations contained in Part IV of IRCP Regulations, 2016 as well as the forms prescribed thereunder, it is seen that while the onus is placed upon the claimants, irrespective of the category under which their claim may fall, a full and complete disclosure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a claim against the developer falling within the purview of "operational credit", hence forth we are of the considered view that no debt payable to the applicant is in existence. 5. Another supplementary point is, this Joint Development Agreement was executed in the year 2012, ever since no acknowledgement from the developer side disclosing that the developer is under obligation to pay to the applicant until before 04.05.2018, since there is no acknowledgement within three years from the date of agreement, this claim is otherwise also barred by limitation whereby this Company Application is hereby dismissed as misconceived. Aggrieved by the above said findings by this Tribunal, an appeal it is seen as had been preferred by the said entity in Company Appeal (AT) (Insolvency) No. 515 of 2019 which also came to be dismissed by the Hon'ble NCLAT and while rejecting the appeal with the following findings, i.e., 6. Having gone through the records and stand taken by the Appellant, we hold that the Appellant along with Respondent ('Corporate Debtor') had executed Joint Development Agreement in the year 2012 for construction of structure and allotment to allottees. Both of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ph 14 supra filed by the IRP before this Tribunal, the IRP had made an observation as reflected in the 'remarks' column of the said report had remarked that Gurudev Foundations Limited is required to be considered as a 'Financial Creditor'. Following it up with it is the averment of the said entity that the IRP directed it to file as a 'financial creditor' which was also complied with. Be that as it may, in view of the decision rendered by the Hon'ble NCLAT that transactions in relation to joint venture development agreement cannot be considered as an 'operational debt', and hence the claim as preferred by Gurudev Foundations Ltd. will not form part of the COC exclusively constituted with the operational creditors when the resolution was passed in the 2nd COC held on 14.01.2020. iii) Kanchanjanga Securities Company Pvt. Ltd.:- In relation to the above said entity the claim seems to have been filed only in Form F before the IRP. However the IRP while filing the report about the constitution of the COC has chosen to remark the above said entity as a financial creditor. The name of Kanchanjanga Securities Company Pvt. Ltd., even though does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one Mr P. Velmurugan. In his case it is the submission of the Ld. IRP that the claim is yet to be admitted inter alia as additional documents have been sought for and lack of disclosures in the claim form submitted and in the circumstances cannot be treated as a part of the COC. From the facts disclosed in the application filed by Mr. P. Velmurugan in MA No. 1428 of 2019 along with the response of the IRP, in totality it is seen that there has been a squabbling going on between him and the corporate debtor and it is the contention of the corporate debtor that despite possession being offered the same is not being taken up. Further counter claims are also being raised against the said applicant. In view of summary jurisdiction we are not in a position to deal with the claim based on limited disclosure. In any case the claim is pending admission by the IRP, the applicant-home buyer cannot seek to thwart the withdrawal of an application filed under Section 12A of IBC, 2016. The applicant is always at liberty to approach this Tribunal with his claim independently if required or to seek recourse elsewhere. In any case by virtue of a claim in relation to a particular project of the Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en place of Corporate Insolvency Resolution Process. If the same real estate company (Corporate Debtor herein) has any other project in another town such as Delhi or Kerala or Mumbai, they cannot be clubbed together nor the asset of the Corporate Debtor (Company) for such other projects can be maximised. 22. Further, a 'Secured Creditor' such as 'financial institutions/banks', cannot be provided with the asset (flat/apartment) by preference over the allottees (Unsecured Financial Creditors) for whom the project has been approved. Their claims are to be satisfied by providing the fiat/apartment. While satisfying the allottees, one or other allottee may agree to opt for another flat/apartment or one tower or other tower if not allotted to any other. In such case their agreements can be modified by the Interim Resolution Professional/Resolution Professional with the counter signature of the Promoter and the allottees, so that the allottees (financial creditors), who are on rent or paying interest to banks may like to get earlier possession and are relieved from paying rent or interest to banks. 23. There may be some allottees who may ask for refund. But that prayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention that a wholly one-sided and futile hearing will take place before the NCLT by trigger-happy allottees who would be able to ignite the process of removal of the management of the real estate project and/or lead the corporate debtor to its death." Thus, in relation to an yet to be admitted and as yet not being part of the COC, the applicant-claimant cannot seek to oppose the resolution of withdrawal as passed by the COC unanimously seeking for withdrawal under Section 12A of IBC, 2016. 19. Ignoring all of the above objections as raised by the objectors, it is required to be noted that even before the constitution of the COC an application in M.A. 1505 of 2019 had been filed before this Tribunal at the instance of a compromise arrived at between the operational creditor who in the first instance initiated the main C.P. and based on which the CIRP was initiated in relation to the Corporate Debtor. However, at the said stage of the withdrawal it was not permitted in view of the reasons stated in the order passed by this Tribunal on 11.12.2019 based on the order of this Tribunal rendered on the even date in MA/1325/2019 in IBA/229 of 2019. In hind sight as the said order dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in M.A. No. 1505 of 2019. In the circumstances in the fitness of things and also taking into consideration the decision of the COC in its 2nd meeting held on 14.01.2020 wherein the resolution was passed unanimously by the reconstituted members of the COC and after the IRP had rightly excluded exercising his power of revision as contained in Chapter IV of IRCP Regulations, 2016 after due intimation to the parties concerned about his objections in they being included in the COC, application in MA/67/2020 had been moved and in view of the detailed reasoning given above in the earlier paragraphs, the MA/67/2020 stands allowed, while all the other applications, namely MA/82/2020, MA/68/2020, MA/09/2020 and MA/1428/2028 are dismissed however without costs. 21. From the facts as disclosed in the application, it can be discerned that the IRP being not sure about the classification as required to be done under the provisions of IBC, 2016 read with attendant regulations, had been vacillating without understanding the provisions of IBC, 2016 with regard to classification of creditors as disclosed in the constitution of Committee of Creditors filed by the IRP itself allowing different types ..... X X X X Extracts X X X X X X X X Extracts X X X X
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