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TMI Blog2023 (8) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by tis 17th CoC Meeting dated 27.02.2023, there are no reason not to consider the said application merely on the ground that PUFE Applications are pending. The Adjudicating Authority is well within jurisdiction to consider both the Resolution Plan Approval Application as well as PUFE Application but the Adjudicating Authority erred in observing that the consideration of Plan Approval Application has to be deferred and can be taken only after PUFE Applications are decided. Hon ble Supreme Court in Arun Kumar Jagatramka [ 2021 (3) TMI 611 - SUPREME COURT ] had occasion to notice the object and purpose of amendment by which Section 29A was sought to be introduced in IBC and held that Section 29A was added to the Code by the Amendment Act. Owing to this provision, persons, who by their misconduct contributed to the defaults of the corporate debtor or are otherwise undesirable, are prevented from gaining or regaining control of the corporate debtor. This provision protects creditors of the company by preventing unscrupulous persons from rewarding themselves at the expense of creditors and undermining the processes laid down in the Code. The Adjudicating Authority shall proceed to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the interests of all the flat buyers who have not got their flats. (iv) Hon'ble Supreme Court vide Order dated 26.02.2021 granted Interim Bail to the Appellant for six months. Hon'ble Supreme Court observed in the Order that in order to facilitate the construction of the remaining flats so that the requirements of the remaining flats buyers can be met, we are inclined to grant interim bail to the petitioner, initially for a period of six months. The Court also directed the Appellant to file progress report in the case. The Appellant filed progress report in the Bail Application and after being released from jail, Appellant met officials of Greater NOIDA Authority. (v) On 06.04.2021, Erstwhile Resolution Professional of the Corporate Debtor filed I.A. No. 1690 of 2021 alleging preferential, undervalued and fraudulent transactions by the Appellant. (vi) The Appellant requesting the erstwhile RP to allow the Appellant to register the Respondent Company as an MSME under the MSME Act, 2006 which was considered by the Committee of Creditors (CoC in short) in its 10th CoC Meeting held on 17.06.2021 and approved by 74.3% vote. The Resolution Professional was permitted to register t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard thereafter. (xi) The Appellant aggrieved by the Order dated 12th April, 2023 has come up in this Appeal. 3. Learned Counsel for the Appellant submits that the Adjudicating Authority ought to have considered the Application I.A. No. 5385 of 2021 filed for approval of Resolution Plan which is pending for more than one and half year. It is submitted that the Committee of Creditors also resolved on 27.02.2023 that Resolution Plan Approval Application should be heard first, the Adjudicating Authority ought not to have postponed the hearing of Plan Approval Application. It is submitted that majority of Financial Creditors are creditors in a class i.e. Home-Buyers who are awaiting that the allotted homes should be handed over to them. It is submitted that the Application I.A. No. 1960 of 2021 has to be heard and prosecuted by Successful Resolution Applicant as per clause itself. It is submitted that as per the provision of the statute, pendency of PUFE Application does not prohibit the insolvency resolution process to proceed and the Adjudicating Authority committed error in directing the consideration of PUFE Application first. 4. Learned Counsel for the Resolution Professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 175/2021 which was filed by the Appellant challenging the denial of bail to the Appellant. The FIRs as noted above which were filed in the State of UP numbering 37 FIRs and 8 FIRs in the State of Delhi arises out of tripartite agreement under which the Corporate Debtor had agreed to handover possession to the home-buyers. The First Information Reports were registered against the Appellant alleging various offences arising out of three tripartite agreements where Hon'ble Supreme Court while hearing SLP (Crl) No. 175 of 2021 in order dated 08.02.2021 noted following: "We would also like to know as to what action is being taken for consideration of the one tower which has given rise to all these FIRs and what is the solution being offered by the petitioner. Learned Counsel further submits that the existing area over which no construction has taken place is capable of construction of approximately five lakh squire feet, which can take care of the interests of all the flats buyers who have not got their flats including any alleged double sale. The valuation of this unconstructed area is stated to be about Rs. 150 crores. The affidavit be filed within two weeks, as prayed for" 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company as a MSME under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act, 2006) and the same was approved by the Committee of Creditors (COC) in the 10th meeting by a 74.3 per cent votes in favour and the company has since been registered as an MSME on 03.07.2021 and would thus, be entitled to certain benefits. According to India Infoline Finance Ltd.(IIFLapplicant), this aspect has been assailed before the National Company Law Tribunal (NCLT). In the Committee of Creditors' 11th and 12th meeting, a new Resolution Plan was allowed to be submitted by the appellant who gave in his expression of interest and in the 13th meeting of Committee of Creditors gave the approval to the appellant to be the Provisional Resolution applicant with 68.95 per cent votes in favour of the same by the home buyers. In fact, he is the only resolution applicant and has now submitted a draft Resolution Plan for consideration of the Resolution Professional for settlement of all disputes with financial creditors, registration of units sold and selling of unsold units in a draft plan on how to finance the construction of the remaining portion of the 11th tower. The dispute wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating Authority on 06.02.2023 where the Adjudicating Authority noticed the Application filed by the Erstwhile RP being I.A. No. 5385 of 2021 for approval of the plan as well as PUFE Application I.A. No. 1690 of 2021, following observations were made by the Adjudicating Authority vide Order dated 06.02.2023: "In the meantime, there is also an application filed by the erstwhile RP in I.A-5385/2021 seeking approval of the resolution plan approved by the CoC. This plan proposed is by the Suspended Management on the basis of MSME Registration Certificate. So, if I.A- 1690/2021 is allowed for one or the other reason then the eligibility of the SRA to defend the plan or support the plan would become irrelevant. As a result, the CoC members also need to be aware of the peculiar circumstances of the present case. At this juncture, Ms. Maini, Ld. Counsel for the RP sought time to get instructions from the CoC members on the implication of the avoidance PUFE transaction application in relation to the plan approval application and thereafter she stated that she will submit before this Tribunal. We granted time as per her request. List the matter on 07.03.2023 for physical hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to Clause 9.16 of the Resolution Plan in paragraph 3(c) of Affidavit of Resolution Professional. Following has been pleaded: "c. The Resolution Plan approved by the CoC specifically contemplates that the SRA would pursue the PUFE Transactions' Application. Hence, the Appellant cannot be permitted to circumvent the provisions of the approved by CoC Resolution Plan by means of the present appeal. Clause 9.16 of the Resolution Plan states as follows: "TREATMENT OF AMOUNT CLAIMED UNDER ONGOING LITIGATIONS i. Any amount realised on account of a transaction application in pursuant to section 43,45, 49, 50, 66 filed with the NCLT will be to the account of the all the creditors of the corporate debtor to be distributed on Prorate basis on their admitted principal amount after adjusting the legal expenses incurred by the Resolution Applicant to recover the said amount. That the resolution applicant after the approval of the Resolution Plan undertakes to pursue all the Avoidance Applications filed by the Resolution Professionals." A true copy of the Resolution Plan as approved by the COC is annexed herewith as Annexure R-1." 18. The Resolution Plan thus clearly contemplat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FE Application together. Apprehension of Intervener that in event plan approval application is decided first, it is the resolution applicant who has to pursue the PUFE Application which can not be pursued since the interest of the Resolution Applicant not to pursue PUFE Application. To allay such apprehension it is always open for the Intervener or Resolution Professional to make an appropriate application to the Adjudicating Authority seeking leave of the Resolution Professional to pursue the PUFE Application in accordance with law. 21. Learned Counsel for the Intervener submitted that ex-promoters are not eligible to submit a Resolution Plan. He has referred to the Judgments of the Hon'ble Supreme Court in "Chitra Sharma & Ors. Vs. Union of India & Ors." (2018) 18 scc 575 and "Arun Kumar Jagatramak Vs. Jindal Steel and Power Ltd. & Anr., (2021 7 SCC 474). 22. In Chitra Sharma, Hon'ble Supreme Court had occasion to consider the object and purpose for introduction of Section 29A in IBC. In paragraph 38 and 39, following was stated: "38 Parliament has introduced Section 29 A into the IBC with a specific purpose. The provisions of Section 29 A are intended to ensure that among ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by 31 the adjudicating authority under the IBC is prohibited from participating. The Court must bear in mind that Section 29 A has been enacted in the larger public interest and to facilitate effective corporate governance. Parliament rectified a loophole in the Act which allowed a back-door entry to erstwhile managements in the CIRP. Section 30 of the IBC, as amended, also clarifies that a resolution plan of a person who is ineligible under Section 29 A will not be considered by the CoC : "30. Submission of resolution plan. … (4) The committee of creditors may approve a resolution plan by a vote of not less than 4[sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors to give a reasonable period to repay overdue amounts and become eligible." 45. During the course of the debate in the Lok Sabha on 29 December 2017, the Finance Minister noted that the IBC had been in operation for about a year. The new legislation had been a "learning experience". The Ordinance was promulgated since a large number of cases were "already pending resolution mechanism itself" and there was a danger that if the amendment was not immediately brought in, persons who were "ineligible" would have started applying as resolution applicants. The Finance Minister in the course of his speech highlighted the reason for the amendments when he observed as follows: "…What do you do with promoters who are themselves responsible for these NPAs, that is clause C. Every creditor takes his haircut and there is an equitable distribution in the case of dissolution. In the case of resolution also, all type of creditors may take some haircut and the man who created the insolvency pays a fraction of the amount and comes back into management. Should we allow that to continue? The overwhelming view, as expressed by the Members, is that it should not be allowed. This was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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