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TMI Blog2022 (1) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... V. P. SINGH, MEMBER (T)] 1. The Appellants have filed the present Appeals under Section 61 of the Insolvency and Bankruptcy Code, 2016 ("Code"), impugning the Order dated June 7, 2021 ("Impugned Order") passed by the AA[1]/National Company Law Tribunal, Mumbai Bench in the Miscellaneous Application No. 415 of 2020 ("MA 415") and MA. No. 416 of 2020 ("M.A. 416") (collectively referred as "UP Applications") in C.P.(IB) No. 4285/MB/2019 ("NCLT Petition"). 2. FACTUAL BACKGROUND: 2.1 The Appellant in CA (AT) (Ins) No. 759 of 2021 is UP State Power Sector Employees Trust which is a General Provident Fund Trust set up for Uttar Pradesh Power Corporation Limited ("UPPCL"). Since March 2017, the said Appellant had invested Rs. 2631.20 crores in the form of 319 Fixed Deposits ("FD ") with DHFL. 2.2 The Appellant in CA 760/AT/INS /2021 is Uttar Pradesh State Power Corporation Contributory Provident Fund Trust, set up for Uttar Pradesh Power Corporation employees Limited ("UPPCL"). Since March 2017, the said Appellant had invested Rs. 1491.50 crores in the form of Fixed Deposits ("FD[2]") with DHFL[3], which in turn, issued fixed deposit receipts thereof. 2.3 On December 3, 2019, the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 415 of 2020 received Rs. 353,57,55,029/- under the approved Resolution Plan against its admitted claim of Rs. 1531,68,36,412/- and the Applicant in Miscellaneous Application 416 of 2020 received Rs. 200,35,36,599/- under the approved Resolution Plan, against its admitted claim of Rs. 867,92,89,737/-. The said amounts were retained by the Appellants/Applicants towards part discharge of the amounts claimed by the Appellants, without prejudice to its rights to receive the entire amount. 3. Appellants Submission 3.1 Monies invested by the FD. Holders are held in Trust by DHFL: (a) Rule 10 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 ("FSP Rules") provides that Rule 5(b) (Moratorium) of the FSP Rules and Section 14 of the Code does not apply to any third-party assets or properties in custody or possession of the Financial Service Provider, including any funds, securities and other assets required to be held in trust for the benefit of third parties. Further, the Explanation appended to Section 18 of the Code categorically provides that assets for the Section would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Code doesn't apply. While ordinarily, the Code is a special statute, in the present case, the special statute governing DHFL and, thereby, the deposit holders' investment is under the NHB Act. The same is evident from a plain reading of the provisions of the NHB Act (Chapter V). (b) It is trite law that is even assuming there was an inconsistency, where a general statute and a specific statute relating to the same subject matter cannot be reconciled, the special or specific statute must prevail. Therefore, the principle is that general law yields to special law provided they operate in the same field, on the same subject, and if there is any inconsistency. In the present case, the subject is deposits made by the FD holders in specifically regulated institutions such as DHFL. In contrast, the subject of the Code is overall debt restructuring, insolvency and bankruptcy for, generally, all corporate persons and individuals, respectively. (Ref: Order dated February 19, 2014, in Commercial Tax Officer, Rajasthan v. M/s Binani Cement Ltd. & Anr. (2014) 8 SCC 3191) (c) It is also pertinent to note that there can be a situation in law where the same statute is treated as a sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to- (a) any company incorporated under the Companies Act, 2013 (18 of 2013) or under any previous company law; (b) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act: ..." (emphasis supplied) 3.3 The Impugned Orders are passed without keeping in mind the going concern status of DHFL (a) The acceptance of public deposits and servicing them when repayments become due is an essential part of a housing finance institution's ordinary course of business. Therefore, for DHFL to maintain its status as a going concern, DHFL needed to discharge its liability towards public depositors like the Appellants as and when it arose. (b) DHFL, in blatant violation of Sections 29 (a)A(6) and 29 A(4)(a) of the NHB Act, is continuing its Lending Business without repaying the public depositors. Section 29 (A) of the NHB Act categorically provides that to continue carrying on its business, a housing finance institution ought to be able to pay its present or future depositors in full as and when their dues arise. This specific requirement also forms part of the licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he FD. Holders ought to have been paid as per the terms of their deposit forms parts of the 'Notes forming part of the consolidated financial statement for the year ended March 31, 2018, of DHFL. (b) In addition, DHFL was required to maintain the entire cover of the FDs under the NHB and RBI Directions. Despite the said cover and the security provided to the FD Holders, they were not extended. Being a public deposit holder, the Appellant has a statutory right to be repaid by DHFL and such right overrides any other right, contractual, or otherwise. (c) Section 36 of the NHB Act provides for a non-obstante clause that states that the NHB Act provisions have an overriding effect on any other inconsistent law or instruments. Further, Section 36A of the NHB Act provides that every deposit by a housing finance company is required to be repaid by the terms and conditions thereof. Thus, as per the provisions of the NHB Act, the interest of the deposit holders is paramount, and the financial service provider is obligated to repay the public deposits under the NHB Act, notwithstanding any other law. (d) Thus, it is the statutory obligation of DHFL to continue repaying its deposit h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted aggregate claim of Rs. Five thousand three hundred seventy-five crores constitute merely 23% to 26% of their claim amount. The said payment is only marginally higher than the liquidation value that the public holders would be entitled to in the event of liquidation of DHFL. (c) Without prejudice to the rights and contentions of the Appellants that the Appellants ought to have been paid 100% of its claimed amount, the Appellants submit that the Respondents submitted that the public deposit holders were nothing but financial creditors of DHFL. However, despite the admission that the public deposit holders were financial Creditors of DHFL, the public depositors were given the same treatment as the other financial creditors', including the debenture holders. The unjust ill-treatment of Respondent No. 2 towards the public deposit holders is evident from the fact that, under the approved Resolution Plan, the other financial creditors were allotted around 40% to 45% of their claim, and the public depositors were allotted merely 23% to 26% of their claim. This ill-treatment is also clear that even the NCLT had requested the CoC to treat the public deposit holders at par with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y obligations under the NHB Act, which arose due to the failure of the Corporate Debtor, did not apply to SRA' PCHF'. (b) The Appellants submit that the said argument is flawed and untenable as admittedly, by way of a reverse merger, the Successful Resolution Applicant merged into the Corporate Debtor; thus, the Corporate Debtor is till date in existence and thus, the obligations of the Corporate Debtor to comply with the provisions of the NHB Act exist. Furthermore, the Appellants Applications were filed before the reverse merger and before the approved Resolution Plan was placed before the CoC. Thus, any steps taken by the Respondents despite the pendency of the UP Applications were subject to the orders of the Tribunal. 3.9 Prejudice caused to the Appellant: (a) The Appellants are bona fide investors, and these investments were made on behalf of the employees of UPPCL while keeping their best interests in mind. The non-release of the payments due to the Appellants will severely impact the employees' financial well-being and the public at large since UPPCL is a public utility. (b) For most of the employees of UPPCL, the investment made through the Appellants a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by 89% (approx.) of the voting members of the CoC. 4.3 Notably, the Appellants participated in the Corporate Insolvency Resolution Process ("CIRP") in the Capacity of Financial Creditors and were treated as such. They were represented as a class of Financial Creditors through an authorised representative of their choice. Contrarily, they now approach this Appellate Tribunal seeking untenable reliefs in law and militate against their actions since the admission of the Erstwhile CD into insolvency. 5. The Appellants do not possess the locus-standi to file the Appeals 5.1 The Appellants are admittedly trusts registered under the Indian Trusts Act, 1882, filed the Appeals in their name. It is settled that trust, not being a legal person, is not entitled to sue in its name (Case 1: Kishorelal Asera v. Haji Essa Abba Salt Endowments & Ors., 2003 SCC OnLine Mad 443 [Para 14]). Only trustees of a trust are legally entitled to sue on its behalf. In this case, the Appellants' trusts are not even a party to the present Appeals. 6. The claims of the Appellants are governed by the IBC alone. 6.1 Due to significant mismanagement of the Erstwhile CD, the Reserve Bank of India ("RBI") ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire insolvency process, irrespective of obligations that may exist between debtors and creditors under any other statute, contract or otherwise. On the other hand, the RBI Act and the NHB Act have not dedicated statutes meant for the rights of depositors but rather constitute the institutions, i.e., the RBI and the NHB. In any event, this same issue on the interplay between IBC and another statute was considered by the Hon'ble Supreme Court in the case of Pioneer Urban Land & Infrastructure Limited & Anr. v. Union of India, (2019) 8 SCC 416 [Para 29-30]. In this judgment, the Hon'ble Supreme Court considered whether provisions of the Real Estate (Regulation and Development) Act, 2016 ("RERA") prevail over provisions of the IBC. It was held therein that the provisions of RERA and IBC can co-exist, but in the event of a clash, RERA must give way to the IBC. In this regard, the Hon'ble Supreme Court further held that RERA operates in the realm of protecting the interests of individual investors in real estate projects. 7.4 In contrast, IBC contemplates rehabilitation of the Corporate Debtor, and in the event of a conflict, the IBC will prevail. Similarly, it is submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Urban Land and Infrastructure Ltd. & Anr. v. Union of India & Ors. (2019) 8 SCC 416 [Para 43); Orator Marketing Pvt. Ltd. v. Samtex Desinz Pvt. Ltd., AIR 2021 SC 4040 (Para 14); Insolvency Law Committee for Notification of FSP Sub-Committee Report dated 04.10.2019 [Para 17]). Moreover, Appellants themselves filed a claim before the Administrator in the capacity of Financial Creditors. 8.4 An amount held by a person cannot be classified as being a "debt" and being held in "trust" simultaneously. Furthermore, it is settled law that a depositor and bank relationship is not equivalent to one between a beneficiary and trustee. Instead, it is a relationship of a creditor and debtor. ; Commissioner of Income Tax v. Hindusthan Welfare Trust, 1991 SCC OnLine Cal 361 [Para 12-15, 19); Shanti Prasad Jain & Anr. v. Director of Enforcement, FERA & Anr., AIR 1962 1764 [Para 37]) Further, the Appellants have failed to provide a single factual or legal basis for stating that their deposits were like a trust. 8.5 Secondly, in furtherance of the argument that the deposits are like trust, the Appellants attempted to argue that since FDs with the Erstwhile CD are governed by the NHB Act and the RBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016. However, at the outset, it is clarified that none of these provisions contemplates survival of the terms of the license where the Company is undergoing CIRP as per IBC. 8.8 The provisions referenced by the Appellants are myopic. They do not contemplate that a company undergoing CIRP may not fulfil the conditions of the license to keep afloat as a going concern. For instance, Section 29 A of the NHB Act requires a housing finance company to have "adequate capital structure and earning prospects". In consideration of such terms and conditions of a license that an FSP (such as the Erstwhile CD) may be unable to fulfil, the FSP Rules specifically state in Rule 5(b)(ii), that "the license or registration which authorises the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled during the interim-moratorium and the corporate insolvency resolution process." The only reason for including such a provision within the FSP Rules is in contemplation of a scenario where the terms of the original license cannot be fulfilled, and yet, the FSP must carry on as a going concern. 8.9 Given those above, it is stated that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured liabilities (except the floating charge created under Section 29 B of the NHB Act) repayment of deposits is guaranteed by RBI or NHB. 10. The instant case does not warrant any interference of the Appellate Tribunal in law or equity. 10.1 Under the framework of the IBC, the commercial wisdom of the CoC reigns supreme. In view of this, the Hon'ble Supreme Court held that the Ld. NCLT does not have the power to modify the terms of the Resolution Plan but can direct the CoC to reconsider the terms of the Resolution Plan. (Jaypee Kensington Boulevard Apartments v. NBCC India Ltd. & Ors., 2021 SCC OnLine SC 253). Vide the Plan Approval Order, the Ld. NCLT has already acted in line with the decision of the Hon'ble Supreme Court and directed the CoC to reconsider repayment in full. However, the Coc, in its commercial wisdom, was not inclined to do so. Without prejudice to the preceding, even if there appear to be equitable considerations in the instant case, it is well settled that neither the Ld. NCLT, nor this Appellate Tribunal ought to act as a court of equity. This is more so where there has been a resounding decision of the CoC, as in the instant case. ( K. Sashidha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uires 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 all the legal formalities would be binding on all the shareholders. In the present case, the Scheme is in the teeth of Section 45-Q and it has rightly not been approved by the High Court. This apart, the Scheme has been rightly held to be lacking bona fides, as well as being contrary to public poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the RBI and the National Housing Bank 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 ensure the public interest, by Section 45-MBA of the RBI Act, the RBI was also empowered to resolve an NBFC without prejudice to the powers already existing other laws, including 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. 12.8 Relevant provisions of the RBI Act is given here for ready reference; "45-Q. Chapter III-B to override other laws[6].- The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. [45-QA. Power of Company Law Board to orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nonviable businesses in separate units or institutions to preserve the continuity of the activities of that nonbanking 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. (2) Without prejudice to the generality of the foregoing provisions, the Scheme referred to in sub-section (1) may provide for- (a) reduction of the pay and allowances of the chief executive officer, managing director, chairman or any officer in the senior mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants contends that Section 238 does not override any requirement that the law governing the actions of DHFL 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. 12.11 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 that provides to the contrary, and therefore, there is no overlap in the requirements for section 238 of the IBC to kick in. In any case, the Court would first endeavour to give a harmonious construction to the seemingly inconsistent provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019, to protect the interests of the depositors also gives primacy to the Code and clearly states that that the rights of the FD Holders will have priority save otherwise as provided under the Code. 12.18 The Learned Senior Counsel for Respondent No. 3 submits that amounts deposited by the FD Holders were not held in trust by DHFL. The legal position of the FD Holders with DHFL are 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 Tribunal. 12.19 Rule 10 of the FSP Rules[9] 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 FD Holders deposited the funds are assets held in trust. Consequently, there is no legal justification whatsoever given by the Appellants / FD Holders. Instead, holders failed to show that the money deposited by them was held in trust by DHFL or that the amounts held by DHFL were not assets of DHFL. Thus Rule 10 of the 'FSP Rules' is inapplicable about the amounts deposited by FD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 future depositors; (c) that the general character of the management or the proposed management of the housing finance instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsection (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 of certificate of registration may prefer an appeal, within a period of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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." 12.24 Further, it is necessary to point out that RBI Act and the NHB Act merely provide that the licence of a Housing Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 nonobstante clause of Section 238 of the Code. 12.30 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 Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in a bank is not held by the latter on trust for him. It becomes 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) 12.34 Further, in the case of Jaypee Kensington Boulevard Apartments Welfare Association v NBCC(India) Ltd ..., 2021 SCC OnLine SC 253 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 mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted in fixed deposits. Therefore, the relationship of the DHFL with the fixed deposit holders is that 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." 12.36 Hon'ble Supreme Court in the Committee of Creditors of Essar steel v Satish Kumar Gupta and others reported in (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 dissentient 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant during the moratorium regarding fixed deposits or interest would violate Section 14 of IBC. 12.40 Further, there is no rationale for treating the deposit 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". 12.41 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedure produces substantive rights and obligations. For instance, the composition of the CoC, the method and percentage of its voting, the timelines for CIRP, the obligation on the RP to file specific forms after every stage 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the IBC or Rule 11 of NCLT Rules, powers are limited to the extent relating to the border compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms that have and must be cautious in granting reliefs 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. 12.46 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that NCLT or NCLAT have been endowed with limited jurisdiction as specified under the Code and cannot act as a court of equity or exercise plenary powers. Therefore, the fixed deposits of the Appellant's made from the lifetime earnings of the employees invested by the Provident Fund Trust with the Corporate Debtor, i.e. Financial Service Providers, is of no consequence. Accordingly, it can not be a condition authorising interference with the commercial wisdom of the CoC. 12.51 Therefore, even if the contribution of hard-earned money by Employees and further its investment by 'Provident Fund Trust' in FD's is there, it will have no impact on the resolution approved by the requisite majority under the Code. Accordingly, NCLT or NCLAT cannot exercise equity jurisdiction to prevail over the commercial wisdom exercised by the creditors' committee. 12.52 It is pertinent to mention that the Appellant in civil appeal 759 of 2021 in Uttar Pradesh State Power Sector Employees Trust, and Appellant in civil Appeal 760 2021 is Uttar Pradesh Power Corporation Contributory Provident Fund Trust which had invested money in the Financial Service Provider DHFL as fix ..... X X X X Extracts X X X X X X X X Extracts X X X X
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