9911796707
TMI Blog2022 (1) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... FL. Thus, Rule 10 of FSP Rules is inapplicable about the amount deposited by FD Holders. It is well-established law that when two special statutes contain a non-obstante clause, the latter will prevail over the earlier statute. In case of any inconsistency between the provision of the Code and any other enactment, the provision of the Code will prevail. Therefore, provisions of the Insolvency and Bankruptcy Code enacted later will have overriding effect over the NHB Act and the RBI Act by the non-obstante clause. In the case of M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. [ 2017 (9) TMI 58 - SUPREME COURT] , the Hon'ble Supreme Court has held that in case of any inconsistency between the provisions of Code and any other law, the provisions of the Code shall prevail. Therefore, Insolvency Bankruptcy Code which was enacted later, will override the NHB Act and RBI Act by the non-obstante clause of Section 238 of the Code. It is clear that the relationship between the customer and the Bank is the creditor and debtor and not a trustee. The Bank is not a trustee of money deposited by customers. In this case, the Corporate Debtor, i.e. DHFL, took a fixed deposit from their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the RBI and NHB act. It is further contended that there is no inconsistency between the provisions of the IBC and other provisions of law requiring repayment to deposit holders as per the terms and conditions of the deposit. The RBI Act and the NHB Act merely provides that the license of an HFC or NBFC may be cancelled if the deposit holders are not paid. Such a decision can be taken only after allowing the concerned Housing Finance Company or NBFC to present its case. None of the legislation provides that FD holders are required to be paid in full. Therefore, it is not the case of the Appellant's that RBI is not empowered to act under the RBI Act or the FSP Rules. Undisputedly the corporate debtor DHFL defaulted in making its payment obligations; therefore, RBI as a regulator itself stepped in and initiated insolvency proceedings of the erstwhile corporate debtor under the IBC read with FSP rules. It is a settled position of law that once a company is admitted into Insolvency, the IBC is a complete and exhaustive code that governs the entire process - The NHB and RBI Act operate in ordinary circumstances when a company is not undergoing Insolvency. As such, creditors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsequently, Adjudicating Authority approved the Resolution Plan. 2.5. By the Impugned Order, Adjudicating Authority suggested Respondent No. 2 reconsider enhancing the percentage of the Payment made to the small investors under the Resolution Plan by approximately 40%, the same as secured Financial Creditors. Adjudicating Authority further requested Respondent No. 2 to reconsider and repay the entire admitted claim of Army Group Insurance Fund without any haircut and consider them as a separate class or sub-class of creditors considering the nature of duties performed by them. 2.6. The NCLT reasoned its observation by stressing that the lakhs of small investors, including senior citizens who had deposited their savings and had to meet various expenses, especially in this Covid 19 pandemic. Further, it was realised by NCLT that a corporate debtor is a financial service provider, which is different nature of Company than any other company under the Corporate Insolvency Resolution Process under IBC. 2.7. The Learned AA/NCLT, in its Order, also suggested making full Payment of the claim of the Army group insurance fund. The reasoned observation considers the nature of their duties, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) The Adjudicating Authority did not consider the terms and conditions of the deposits. g) The Adjudicating Authority did not consider the full Payment of the Appellant's admitted claim under the Resolution Plan. The Appellant had made substantial investments with the Corporate Debtor through fixed deposits. These investments were made considering the deposits with the Corporate Debtor were safe and regulated by the NHB. Further, it was subject to several statutory measures designed to protect public depositors and secure repayment of deposits. h) The Adjudicating Authority did not consider that the relevant statutory provisions under the NHB Act read with regulations and directions, mandate creation of a floating charge over the assets of the Housing Finance Companies such as the Corporate Debtor, to secure deposits received. i) The Adjudicating Authority did not consider that the Corporate Debtor is statutorily obligated to make Payment of the deposits prematurely in case of the death of the insured person. j) The Adjudicating Authority did not consider that the Appellant also had the option of an early withdrawal (as in the case of fixed deposits), subject to the Payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing security to the kith and kin of martyred air warriors while they were selflessly defending the nation. Therefore, they should be repaid for the same. 4. WRITTEN SUBMISSIONS ON BEHALF OF THE APPELLANTS 4.1. The present Appeal impugns Order dated 07.06.2021 passed by Hon'ble NCLT, Mumbai Bench, disposing of IA No. 449/2021, on the following grounds: (a) Resolution Plan does not pass muster under Section 30(2)(e) of the Code being in contravention of the provisions of NHB Act, read with the NHB Directions. i) A perusal of the provisions of Section 36A of the NHB Act makes it amply clear that the deposits have to be repaid strictly in accordance with the terms of such deposit. The entire scheme of the NHB Act is aimed at securing the interests of depositors, as evidenced by a perusal of the provisions of Sections 29 B, 29 C, 30A, 31, and 33A. [Relevant excerpts of NHB Act, 1987) ii) Further, the NHB Directions make it incumbent upon every housing finance company to secure repayment of the total amount of public deposits. A reference may be had to the provisions contained in Directions nos. 3, 6, 14, 15, and specifically, Directions 18 and 39, which mandated full cover fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants with banks and financial institutions. The Hon'ble Tribunal proceeded to accord approval to the discriminatory treatment of the FD holders despite suggesting that the FD holders have not been given their fair share of money under the Resolution Plan. [impugned Order Observations Paras 4-7) iv) The treatment of the Appellants under the Resolution Plan runs afoul of Explanation-1 to Section 30 of the IB Code, wherein the legislature's intention has been codified explicitly to state that the distribution should be fair and equitable. The Appellants include ailing, senior citizens who have invested their life savings on the strength of AAA ratings provided by the credit rating agencies. v) Finally, treatment of the Appellants, under the provisions of the NHB Act, read with the Directions, shall also be consistent with the observations of the Hon'ble Supreme Court in the case of Vinay Kumar Mittal v. Dewan Housing Finance (Civil Appeal No. 654-660 of 2020), wherein the Hon'ble Apex Court expressed hopes of redressal of the concerns of the depositors and their rights under the law. In terms of the same, the present claims must be considered under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Appellant is a financial creditor. Moreover, along with other depositors, the Appellant was represented on the CoC through an authorised representative. As such, after approval of the Resolution Plan by the majority of the CoC, wherein the Appellant's Authorised Representative participated in the voting process, the Appellant cannot now maintain an independent challenge to the resolution plan, nor could it be treated as carrying any legal grievance. 5.2. Respondent submits that the present case does not warrant any interference from this Appellate Tribunal because the tribunal does not have the power to modify the terms of the Resolution Plan on its own but can only direct the CoC to reconsider altering the terms of the resolution plan. Consequent to the said directions of the NCLT, the Appellant made a representation before the COC to reconsider paying the Appellant's dues in their entirety as it is placed on a similar footing as that of the Army group. Under the said representation, the COC, in its 20th meeting dated June 17, 2021, put to the vote the resolution to inter-alia consider the full Payment of the dues of the Army group and the Appellant. However, the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he National Housing Bank Act ( NHB Act ) and Reserve Bank of India Act ( RBI Act ) have been given the biggest haircut under the Resolution Plan. 7. SUBMISSIONS ON BEHALF OF COMMITTEE OF CREDITORS OF DHFL A) Only the RBI can decide whether to initiate proceedings under the Code or the RBI Act. (i) The RBI had the discretion to invoke the mechanism under the Code or the RBI Act (Section 45MBA) for inter-alia the insolvency resolution of DHFL and chose the former in its wisdom. Vide notification dated November 20, 2019, the RBI as the expert Regulator of Housing Finance Companies ( HFCs ) and Non-banking Financial Companies ( NBFCs ) chose to supersede the board of DHFL in the exercise of its powers under Section 45-IE of the RBI Act and appoint an Administrator. Further, vide Notification dated November 22, 2019, the RBI appointed an Advisory Committee to assist the Administrator. (ii) The RBI exercised its administrative discretion reasonably and filed the Company Petition (IB) No. 4258 of 2019 to resolve the issues of non-payment and governance concerns of DHFL under the Code, which would ensure maximisation of assets in a time-bound manner. (iii) The mechanism under the Code was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not open for the Appellants to contend that the RBI Act and NHB Act will prevail over the IBC. C. The Code being a subsequent enactment, will override the provisions of the NBH Act and RBI Act (iv) The provisions of the Code (which is a later enactment) will override the NHB Act and the RBI Act by the non-obstante clause in Section 238 of the Code. It is also well settled that when two special statutes contain non-obstante clauses, the later statute will prevail over the earlier one. [Refer: Innoventive Industries Ltd. v. ICICI Bank and Ors. [(2018) 1 SCC 407] (Paragraphs 13, 59 - 61); Rajendra K. Bhulla v. Maharashtra Housing and Development Authority Ors. [(2020) 13 SCC 208J (paragraphs 25, 27); Principal Commissioner of Income Tax v. Monnet Ispat and Energy Limited, [(2018) 18 SCC 786] (paragraph 2)] (v) The submission of the Appellant, therefore that the Impugned Order is in contravention of Section 30(2)(e) of the Code, is wholly erroneous as the Resolution Plan is compliant with the provisions of the Code. Consequently, the Appellants cannot rely on the NHB Act or the RBI Act to claim any preferential treatment in the CIRP of DHFL, conducted under the purview of the Code. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me might be viewed as preferential treatment of a specific class. [Refer: Pages; 143-144 and 147-171 respectively of CoC's Reply] (viii) In the Sixth CoC Meeting, the AR had requested that FD Holders be paid their dues. The Administrator expressed his inability to do so as no such amendments by the IBBI have come concerning the regulations, and hence, such deviation from the applicable rules and regulations of the Code would result in non-compliance. [Refer: Page 184 of CoC's Reply] (ix) It has been the Administrator's consistent stand that FD Holders claims can only be under the Code's provisions and has reiterated in his letter dated February 13, 2020. [Refer Pg. 194-196 of CoC's Reply] (x) By its Order dated January 31, 2020, the Hon'ble Supreme Court has also categorically held that the rights of FD Holders must be decided in accordance with the law. [Refer Pg. 206 of CoC's Reply] (xi) Preferential treatment is prohibited under the Code; the petitioner's claim is wholly misplaced as Payment to one class or subclass of creditors would amount to preferential disbursement and against the law. (xii) The recovery of amounts will happen within the Code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants seek to agitate are equitable regarding the fact that the monies of FD Holders include that of senior citizens and ailing people. However, it is well settled that equity, no matter how well-founded, cannot override the express provisions of law.[Nasiruddin v. Sita Ram Agarwal [(2003) 2 SCC 577] (paragraph 35, p. 588), Raghunath Rat Bareja v. Punjab National Bank [(2007) 2 SCC 230] (paragraphs 29 to 36), B. Premanand v. Mohan Koikal [(2011) 4 SCC 266] (paragraphs 4, 7), Indian School Certificate Examination v. Isha Mittal and Anr. [(2000) 7 SCC 521] (paragraph 4), P.M. Latha v. State of Kerala [(2003) 3 SCC 541] (paragraph 73), Laxminarayan R. Bhaitad v. State of Maharashtra [(2003) 5 SCC 413] (paragraph 73)]. (iv) As stated above, the concept of fairness and equity has been incorporated into the Code itself under Explanation I of Section 30 of the Code. Therefore, as long as the creditor gets the minimum liquidation value, the same would be equitable. (v) If priority treatment is given to the Appellants on the ground of equity alone, similar treatment would have to be given to other creditors of DHFL, including NCD Holders, public sector banks etc. which would result in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d void. However, the Adjudicating Authority disposed of the said IA under the aforementioned impugned Order. Accordingly, CoC requested to consider and increase their recoveries to the level of the Secured Financial Creditors, i.e. approximately 40%. 9.2. The Appellants herein have alleged that the treatment meted out to them under the Resolution Plan submitted by the Successful Resolution Applicant. The distribution mechanism approved by the CoC in the 18th meeting of members of CoC gave them the biggest haircut despite being the most vulnerable class. As a result, the Appellants have been recognised as Financial Creditors and equated on their risk appetite with Financial Institutions and Banks. 9.3. Respondent No. 1 is the Administrator of DHFL, i.e. the Corporate Debtor. Respondent No. 2 is the Committee of Creditors of the Corporate Debtor, and Respondent no. 3 is Piramal Capital, i.e., the Successful Resolution Applicant. 10. Grounds raised by the Appellants:- 10.1. The Appellants have been recognised as Financial Creditors and equated on their risk appetite with Financial Institutions and Banks arbitrarily. 10.2. The fixed deposit holders have not been given a fair share of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants that the treatment of the Appellants, in accordance with the provisions of the NHB Act, read with the NHB directions, shall also be consistent with the observations of the Hon'ble Supreme Court in the case of Vinay Kumar Mittal vs Dewan Housing Finance, wherein the Hon'ble Apex court expressed hopes of redressal of the concerns of the depositors and their rights in accordance with the law. Therefore, the present claims must be considered under the provisions of the NHB Act. 11.4. It is further submitted on behalf of the Appellants that the discriminatory treatment of the Appellants would have been inflicted even if the Appellants had voted in favour of the plan. 11.5. The Appellants also submitted that the Corporate Debtor being an FSP, must be treated differently from a regular Corporate Debtor. In view of the fact that the corporate debtor is an FSP, the Insolvency of which poses systematic risks to the market, the scrutiny entailed in appreciation of the Resolution Plan must be stricter. The commercial wisdom of the COC cannot stretch to cover Regulatory aspects expressly provided under NHB Act. 12. Submission on behalf of Respondent no. 2 (CoC):- 12.1. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstwhile Corporate Debtor's assets and, therefore, could not be alienated throughout CIRP. 13.3. It is also submitted that the supposed terms of the license under the NHB Act and RBI Act do not, and cannot, govern the functioning of the Erstwhile Corporate Debtor during CIRP. 14. Analysis 14.1. We have heard the argument of the learned counsel for the parties and perused the record. Accordingly, the Company Appeal CA(AT)(INS) 552 of 2021 is filed by the Air Force group insurance Society for the limited purpose of challenging the Resolution Plan approved by the Adjudicating Authority. 14.2. The Appellant Air Force group insurance Society contends that while approving the Resolution Plan, the Adjudicating Authority had suggested Respondent No. 2 reconsider enhancing the percentage of the Payment made to the small investors under the Resolution Plan by approximately 40%, the same as secured Financial Creditors. The Adjudicating Authority further requested respondent number 2 to reconsider and repay the entire admitted claim of the Army Group Insurance fund without any haircut and consider them as a separate class or subclass of creditors considering the nature of duties performed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the terms and conditions of the deposit, such amount shall be considered as convertible debentures with interest @ 6%, which would be converted into equity shares within a period of one year. Such a provision is clearly contrary to the mandatory requirements under Section 45-QA(1) which requires that: 45-QA. (1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit. This ingenious effort by the appellants in fact justifies the insertion of the amendment, which has been obviously incorporated with a view to protect the depositors and to avoid exploitation of these hapless and poor depositors from exploitation by the non-banking financial institutions, such as the Appellant. It is for this reason that Chapter III-B clearly provides that the provisions contained therein shall override all other laws, which are inconsistent with the same. This will also be applicable to Sections 391-394 of the Companies Act. 56. We are unable to accept the aforesaid submission. The aforesaid observations reiterate the settled position of law that a scheme duly sanctioned after fulfilling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , are entirely illegal, violative of law, and cannot be sustained. 14.10. Appellants submit that the relevant parts of the Resolution Plan that extinguishes the Resolution Applicant's liability to repay the depositors in full are illegal and liable to be set aside. It was the statutory obligation of the RBI and the NHB to ensure that the deposits of the Appellants were protected. The newly inserted Sections 45-ID, 45-IE and 45-MBA of the RBI Act empowers the RBI to secure the general public interest and take action in the public interest'. Importantly, to secure the public interest, by virtue of Section 45-MBA of RBI Act, the RBI was also empowered to resolve an NBFC, without prejudice to the powers already existing under other laws, including but not limited to the IBC. This power of the RBI under the Finance Act, 2019 was included after the enactment of the IBC in part II-B of the RBI Act, which contains a non-obstante clause. Thus, the statutory power of the RBI was coupled with a duty to protect the small investors, being the Appellants herein, overriding anything to the contrary in IBC. 14.11. Relevant provisions of the RBI Act is given here for ready reference; 45-Q. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law for the time being in force, the Bank may, if it is satisfied, upon an inspection of the Books of a non-banking financial company that it is in the public interest or in the interest of financial stability so to do for enabling the continuance of the activities critical to the functioning of the financial system, frame schemes which may provide for any one or more of the following, namely- (a) amalgamation with any other non-banking institution; (b) reconstruction of the non-banking financial Company; (c) splitting the non-banking financial Company into different units or institutions and vesting viable and non-viable businesses in separate units or institutions to preserve the continuity of the activities of that non-banking financial company that are critical to the functioning of the financial system and for such purpose establish institutions called Bridge Institutions . Explanation.-For the purposes of this sub-section, Bridge Institutions mean temporary institutional arrangement made under the Scheme referred to in this sub-section, to preserve the continuity of the activities of a non-banking financial company that are critical to the functioning of the financial system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o repay the depositors in full and follow its mandate under the RBI Act to protect depositors is contrary to law. The RBI is obligated by its duty coupled with its power to ensure that the depositors are protected. 14.13. The Appellants contends that Section 238 of the Code does not override any requirement that the law governing the actions of FSP must be followed. The CoC seeks to evade repayment to FD Holders, are claiming exemption under the IBC and claiming that in terms of Section 238 of the IBC, the provisions of IBC will override the other provisions of law. However, there is no provision in the IBC that FD Holders are not required to be paid as per the terms complying with the provisions of law. Therefore, there is no inconsistency between the provisions of the IBC and other provisions of law requiring repayment to deposit holders as per the terms and conditions of their deposit. 14.14. As such, the provisions of the NHB Act, 1987 and the RBI Act, 1935 expressly stipulate that every deposit taken by a housing finance institution or a non-banking financial institution has to be repaid according to the terms and conditions of the deposit. There is no provision in the IBC tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation of law with a view to mislead this Hon'ble Tribunal. 14.20. Further, the Banning of Unregulated Deposit Schemes Act, 2019 ( BUDSA ) enacted on July 19, 2019, to protect the interests of the depositors also gives primacy to the Code and clearly states that the rights of the FD Holders will have priority save otherwise as provided under the Code. 14.21. The Learned Senior Counsel for Respondent No. 3 submits that amounts deposited by the F D Holders were not held in trust by DHFL. The F D Holders' legal position with DHFL is not akin to the National Housing Bank. The FD Holders has not taken the said argument before the NCLT. They are agitating an entirely new argument that ought not to be permitted by this Hon'ble Tribunal. 14.22. Rule 10 of the FSP Rules [4] is only applicable in situations where the assets of third parties are held in trust by the Corporate Debtor. The Holders of FD have failed to produce any documentation or law which shows that the funds were deposited by FD. Holders are assets held in trust. Consequently, there is no legal justification whatsoever given by the Appellants/FD Holders. Instead, FD holders failed to show that the money deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2019, shall stand transferred to the Reserve Bank and thereupon the application shall be deemed to have been made under the provisions of this sub-section and shall be dealt with accordingly: Provided further that the provisions of this sub-section shall not apply to the housing finance institution which is a company and having a valid registration certificate granted under sub-section (5) on the date of commencement of the provisions of Part VII of Chapter VI of the Finance (No. 2) Act, 2019, and such housing finance institution shall be deemed to have been granted a certificate of registration under the provision of this Act.] [* * *] (4) The [Reserve Bank], for the purpose of considering the application for registration, may require to be satisfied by an inspection of the books of such housing finance institution or otherwise that the following conditions are fulfilled:- (a) that housing finance institution is or shall be in a position to pay its present or future depositors in full as and when their claims accrue; (b) that the affairs of the housing finance institution are not being or are not likely to be conducted in a manner detrimental to the interest of its present or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been prohibited from accepting deposit by an order made by the National Housing Bank under the provisions of this Chapter and such Order has been in force for a period of not less than three months: Provided that before cancelling a certificate of registration on the ground that the [housing finance institution which is a company] has failed to comply with the provisions of clause (ii) or has failed to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (4), the [Reserve Bank], unless it is of the opinion that the delay in cancelling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the [housing finance institution which is a company], shall give an opportunity to such institution on such terms as the [Reserve Bank] may specify for taking necessary steps to comply with such provision or fulfilment of such condition: Provided further that before making any order of cancellation of certificate of registration, such institution shall be given a reasonable opportunity of being heard. (7) A housing finance institution aggrieved by the Order or rejection of application for registration or cancellation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss renewed, shall be repaid in accordance with the terms and conditions of such deposit. (2) Where a housing finance institution which is a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, such officer of the National Housing Bank, as may be authorised by the Central Government for the purpose of this Section (hereinafter referred to as the authorised officer ) may, if he is satisfied, either on his own motion or on any application of the depositor, that it is necessary so to do to safeguard the interests of the housing finance institution, the depositors or in the public interest, direct, by order, such housing finance institution to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the Order: Provided that the authorised officer may, before making any order under this sub-section, give a reasonable opportunity of being heard to the housing finance institution and the other persons interested in the matter. 14.27. Further, it is necessary to point out that RBI Act and the NHB Act merely provide that the licence of a Housing Finance Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the provisions of the Code shall prevail. Therefore, Insolvency Bankruptcy Code which was enacted later, will override the NHB Act and RBI Act by the non-obstante clause of Section 238 of the Code. 14.33. The Learned Counsel for the Appellant refers to the case of Integrated Finance Company Vs Reserve Bank of India (2015) 13 SCC 772 wherein at para 49, 50 Hon'ble Supreme Court has observed that; 49. In our opinion, Chapter III-B has been given an overriding effect over all other laws including the Companies Act by incorporating Section 45-Q with a clear intention to ensure that in a case of NBFC, a Scheme under Section 391 of the Companies Act cannot be entertained unless it is in conformity with the provisions of Section 45-QA of the RBI Act. 50. We may briefly notice here the judgments relied on by the learned counsel for the Appellant in support of the submission that the non obstante clause in Section 45-Q of the RBI Act will not have an overriding effect over Sections 391-394 of the Companies Act. Reliance was placed on Aswini Kumar Ghose [AIR 1952 SC 369]; Madhav Rao Jivaji Rao Scindia [(1971) 1 SCC 85]; A.G. Varadarajulu [(1998) 4 SCC 231]; ICICI Bank Ltd. [(2006) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes a part of the banker's funds who is under a contractual obligation to pay the sum deposited by a customer to him on demand with the agreed rate of interest. Such a relationship between the customer and the Bank is one of a creditor and a debtor. The Bank is liable to pay money back to the customers when called upon, but until it's called upon to pay it, the Bank is entitled to utilise the money in any manner for earning profit. (emphasis supplied) 14.37. Further, in the case of Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Ltd.., in Paragraphs 56 to 59 Hon'ble Supreme Court has observed that; 56. ICICI Bank Counsel has argued that money is fungible therefore unless money has gone out from JAL for repayment, it can't be said as money deposited by JIL is the money payable to JIL homebuyers. 57. No doubt money is fungible, but obligation to repay is not fungible, therefore when money is deposited or clawed back to repay it to the creditor, the money being fungible and there being an obligation for repayment, it can no more be considered as money owned by the debtor. Though JAL is per se not a debtor to the Homebuyers, when money has co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a creditor and debtor and not of a trustee. The money so deposited becomes a part of the DHFL's funds which is under a contractual obligation to pay the sum deposited by a customer to him and on maturity or as per the terms of the contract they were getting agreed rate of interest. Such a relationship between the DHFL the fixed deposit holders is one of the creditor and debtor and not of a trustee. 14.39. Hon'ble Supreme Court in the Committee of Creditors of Essar steel v Satish Kumar Gupta and others (2020) 8 SCC 531 has reinforced the position that the COC is the key decision-maker in the rehabilitation of Corporate Debtors. For the approval of the Resolution Plan, the Committee of Creditors is to take a business decision based on ground realities by a majority, which binds all the stakeholders, including dissenting creditors. The Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors. The limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the Corporate Debtor needs to keep going as a going concern during the Insolvency Resolution Process; it needs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t holders as separate classes and providing them preferential treatment. IBC already contains various safeguards for the public deposit holders, including an Authorised Representative who can effectively represent that class of creditors. The Hon'ble Supreme Court has already examined the validity of the provisions relating to the Authorised Representative and upheld the same. The ILC report dated October 4, 2019 (para 17) contains that the depositors in an FSP are to be classified as Financial Creditors and be treated accordingly . 14.44. The Public Deposit Holders stand on an equal footing with other Financial Creditors of DHFL. Suppose relief, as sought by the Appellant, seeking a refund in repayment of fixed deposits, are granted; in that case, similar claims regarding repayment of dues will be made on behalf of NCD holders and other creditors, which would be detrimental to the corporate insolvency process of DHFL. Even otherwise, any monies raised during the Resolution Process is towards keeping the business alive as a going concern and not for out of turn or pre-resolution process claims, that too outside the Scheme of the IBC. Moreover, if payments were to be made to fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age of the process and the obligation to explain to the Adjudicating Authority reasons for any deviations from the timeline while submitting a Resolution Plan, and other such procedural requirements create a mechanism which tightly structures the conduct of all participants in the insolvency process. This process invariably has an impact on the conduct of the Resolution Applicant who participates in the process and consents to be bound by the RFRP and the broader insolvency framework. An analysis of the framework of the statute and regulations provides an insight into the dynamic and comprehensive nature of the statute. Upholding the procedural design and sanctity of the process is critical to its functioning. The interpretative task of the Adjudicating Authority, Appellate Authority, and even this Court, must be cognizant of, and allied with that objective. The UNCITRAL Guide has echoed this position by noting the interplay between the procedural design of the insolvency law and the corresponding institutional infrastructure by observing: 27. While the institutional framework is not discussed in any detail in the Legislative Guide, some of the issues are touched upon below. Notwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liefs may run counter to the timelines and centre to the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged raised by the statute would violate the principles of separation of powers and run the risk of altering the delicate coon designed by the IBC framework. 14.49. It is important to mention that the RBI Act and the NHB Act merely provides that the license of an HFC or NBFC may be cancelled if the deposit holders are not paid. Such a decision can be taken only after allowing the concerned HFC or NBFC to present its case. None of the legislation provides that FD holders are required to be paid in full. Therefore, it is not the case of the Appellant's that RBI is not empowered to act under the RBI Act or the FSP Rules. The Appellants acknowledges that statutory mandate made available to the RBI under the RBI Act and the FSP Rules. However, the Appellant wishes to advise the Regulator as to the course of action that ought to have been followed by the Regulator. This is legally impermissible, misconceived and untenable. 14.50. In the instant case, the RBI, in the exercise of its administrative discretion under Section 45-IE of the RBI Act, supe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, it can not be a condition authorising interference with the commercial wisdom of the CoC. 14.54. Therefore, even if the contribution of hard-earned money by Employees of Air Force is invested in FD's of FSP, i.e. DHFL, and RBI as Regulator had initiated CIRP under the I B Code, then the allocation of recoveries to the creditors shall be as per approved Resolution Plan only. Accordingly, NCLT or NCLAT cannot exercise equity jurisdiction to prevail over the commercial wisdom exercised by the creditors' committee. 14.55. Undisputedly the corporate debtor DHFL defaulted in making its payment obligations; therefore, RBI as a regulator itself stepped in and initiated insolvency proceedings of the erstwhile corporate debtor under the IBC read with FSP rules. It is a settled position of law that once a company is admitted into Insolvency, the IBC is a complete and exhaustive code that governs the entire process. Despite such a statutory mandate under IBC, the Appellant contends that the manner of distribution towards F D holders must uniquely be handled according to the National Housing Bank Act, 1987 and Reserve Bank of India Act 1934. The NHB and RBI Act operate in ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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