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TMI Blog2024 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ate debtor is being taken over by the SRA, the development of property and all other steps as per the Resolution Plan has to be taken by the SRA - Appellant who was contemplated to extend its co-operation as nominee of the corporate debtor in developing the property is now taken a stand to create obstacles in revival of the corporate debtor to carry out function by the SRA who now takes over the corporate debtor after approval of the Resolution Plan. Hon ble Supreme Court in GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. [ 2021 (3) TMI 340 - SUPREME COURT ] has held that the residuary jurisdiction conferred by statute may extend to matters which are not specifically enumerated under a legislation. When PoA which was given for a particular purpose to the Appellant as nominee of the corporate debtor and Resolution Plan is approved by the CoC of the corporate debtor, the approval of the Resolution Plan is in commercial wisdom of the CoC and in event, the Resolution Plan declare the PoA which was given in favour of the Appellant as nominee of the corporate debtor as cancelled, the said clause of the Resolution Plan cannot be allowed to be challenged by the Appellant no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nivasan, Sr. Advocate with Mr. Shyam Kapadia, Ms. Shikha Ginodia, Mr. Mohit Bangwan, Advocates for RP Mr. Arvind Nayyar, Sr. Advocate with Mr. Tishampati Sen, Ms. Riddhi Sancheti, Mr. Anurag Anand, Mr. Mukul Kulhari, Mr. Akshay Joshi, Advocates for R2 Mr. Arun Kathpalia, Sr. Advocate with Mr. Denzil Arambhan, Mr. Pranaya Goyal, Ms. Ria Nandini, Ms. Apoorva Kaushik, Mr. Himanshu Shembekar , Mr. Omm Mitra , Mr. Yash Sethna , Advocates for CoC JUDGMENT Ashok Bhushan , J. These two Appeals have been filed by the same Appellant challenging two orders passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor- Nirmal Lifestyle Realty Private Limited . Company Appeal (AT) (Insolvency) No.825 of 2024 has been filed challenging the order dated 07.03.2024 passed in IA No.3689 of 2022 filed by the Appellant/ Applicant by which the IA No.3689 of 2022 has been rejected. Company Appeal (AT) (Insolvency) No. 1821 of 2024 has been filed by the Appellant challenging the order dated 09.08.2024 by which order Adjudicating Authority has allowed IA No.2455 of 2022 filed by the Resolution Professional f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e debtor commenced vide order dated 06.12.2021 of the Adjudicating Authority, Respondent No.1- Mr. Jayesh Sanghrajka was appointed as Resolution Professional in the CIRP of the corporate debtor. Respondent No.2- Oberoi Constructions Limited submitted a Resolution Plan on 15.07.2022. After negotiations and deliberations between the CoC and the SRA, a revised Resolution Plan was submitted where SRA sought that the Power of Attorney executed in favour of the Appellant and his wife shall stand cancelled. On 01.09.2022, the Committee of Creditors (CoC) approved the Resolution Plan submitted by the SRA. Waiver sought by the SRA in clause 7.33 of the Resolution Plan was accepted by the Adjudicating Authority. After approval of the Resolution Plan, the Resolution Professional filed an IA No.2455 of 2022 on 01.09.2022 before the Adjudicating Authority for approval of the Resolution Plan. The Appellant who had been suspended Director and shareholder of the corporate debtor filed an IA No.3689 of 2022 seeking rejection of the waiver sought by the SRA in clause 7.33 of the Resolution Plan. The Resolution Professional filed a reply to the IA No.3689 of 2022. SRA also filed a reply to the IA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity committed error in approving the Resolution Plan which was conditional in nature. The Resolution Plan which is entirely depending on the approval and sanction of third parties is a conditional/ contingent plan and could not have been approved. The Adjudicating Authority cannot assume the role of Civil Court and cancel a duly registered instrument conferring valuable rights in favour of the Appellant. A summary proceeding under the IBC does not contemplate cancellation and nullification of duly registered instrument. Clause 8.4 of the Resolution Plan contemplate that the plan be implemented if only permission is obtained from the Competent Authority/ State Government that subject property is not in the Eco-sensitive zone of the Sanjay Gandhi National Park. 5. The submission which has been advanced by Counsel appearing for the Respondents being common, they are referred to as submissions on behalf of the Respondents. Counsel for the Respondents submits that the PoA which was executed in favour of the Appellant and his wife were PoA as nominees of the corporate debtor only for the purpose of facilitating the corporate debtor in carrying out the development, making application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davarman Thirumulpad vs. Union of India Ors. clarifying that 1 km wide Eco-sensitive zone in each protected forest that would not be applicable to Sanjay Gandhi National Park, thus, the condition under clause 8.4 (ii) of the plan stood satisfied. 6. Counsel for the parties in support of their submissions has relied on various precedents which shall be referred to while considering the submissions in detail. 7. In Company Appeal (AT) (Insolvency) No.825 of 2024, the order passed by the Adjudicating Authority dated 07.03.2024 in IA No.3689 of 2022 has been challenged. IA No.3689 of 2022 was filed by the Appellant, the suspended director of the corporate debtor where Appellant prayed for following reliefs which has been extracted by the Adjudicating Authority in paragraph 1 of the judgment. Paragraph 1 of the judgment is as follows:- a. Reject the waiver sought by the Respondent No.2 in Clause 7.33 of the Resolution Plan for cancellation of the General Power of Attorney dated 06.08.2005 bearing Registration No. BDR/14/4844/2005 ( POA ) granted by Ralliwolf Ltd. In favour of the Applicant; b. Without Prejudice and in the alternative to prayer Clause (i) hereinabove, this Tribunal be pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows:- 3. Relying on the declarations and representations made by the owner hereinabove, the Developers have agreed to acquire from the Owner the development rights in respect of the said Property, on the terms and conditions herein appearing. 4. From the date hereof, the Developers shall be entitled to carry out development work on the said Property to the maximum extent permissible and by utilization of TDR generated from the said property or procured from third parties as per the plans sanctioned / may be sanctioned / as may be amended - by the MCGM and in accordance with the D. C. Regulations in force from time to time and in compliance with the terms and conditions imposed by the Regulatory Authorities and thereafter, to obtain Occupation Certificate and Completion Certificate and shall be entitled to avail of all benefits that may arise from time to time from the said Property, including all benefits arising out of such Scheme of Government, local body or public authorities / authority which may now be in force or may hereafter be formulated by the Government, local body or public authority. 10. Clause 6 of the Development Agreement enumerated rights and obligations of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir own account. The Owner shall also not be liable or responsible to any such persons so far as the said moneys are concerned either for the refund thereof or for any misapplication or non-application thereon part thereof. 12. It is in pursuance of clause 6(ii) that General Power of Attorney was executed by Ralliwolf in favour of Dharmesh Jain and Anju Jain. General PoA dated 06.08.2005 refers to MoU dated 01.10.2024 and 04.08.2005. Clause (iv) of PoA refers to the purpose and object for execution of the PoA in favour of Mr. Dharmesh Jain and Mrs. Anju Jain. Clause (iv) is as follows:- (iv) To enable the Developers to develop the said Property, we are executing the present Power of Attorney in favour of Mr. Dharmesh Jain and Mrs. Anju Jain to act for and on our behalf and in our names to do all acts, deeds, matters and things solely and absolutely at the costs, charges, expenses and consequences of the Attorney relating to the said Property in the manner hereinafter appearing. 13. From clause 6(ii) of the registered Development Agreement, it is clear that the Ralliwolf undertook to execute PoA in favour of the nominee/s of the developers and further with a view to enable the devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor can legally deal with the property and go ahead with the construction activity. As per Clause 6 (ii) of the development agreement the principal namely RALLIWOLF LIMITED shall execute and handover to the developers, viz. Corporate Debtor forthwith a Power of Attorney in favour of the nominees of the developers with a view to enable the developers to expeditiously make and submit the applications plans etc. and to otherwise obtain all building permissions and all powers instantly thereto. Therefore, it is very clear from the above recital that the Power of Attorney in the name of the applicant and his wife was executed only in the capacity of nominees of the Corporate Debtor for taking up the construction activity immediately. 5.8 The plain reading of the development agreement also makes it very clear that RALLIWOLF LIMITED had absolutely conveyed the property in the name of Corporate Debtor with all absolute rights including the right of alienation, mortgage, sale, etc. and RALLIWOLF LIMITED has no right, title, possession or interest over the property. It is not the case of the applicant that he has performed any of the acts like obtaining plans or part constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torney. Thus, this Bench is of the considered opinion that the above application is filed by the Applicant taking the mere advantage of its non-cancellation of the registration. 16. The Adjudicating Authority after returning the aforesaid findings has also held that the application is nothing but a vexatious and dishonest attempt made by the Appellant. In paragraph 6 of the judgment, following has been observed:- 6. For the forgoing reasons, this Bench is of the considered opinion that the above application is nothing but a vexatious and dishonest attempt made by the Applicant who is none other than the Member of a Suspended Board of the Corporate Debtor having 95% stake in the Corporate Debtor and encouraging this kind of application would certainly amount to extending helping hand to the people like the Applicant which may ultimately prevent revival of viable companies and defeat the very object of the Code. Therefore, this Bench feels this is a fit case to impose costs on the applicant. 17. We having noticed the relevant clauses of the Development Agreement and the Power of Attorney executed in favour of the Appellant, it is amply clear that the Appellant in the PoA was nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 81. The findings of NCLT are extracted below : (Astonfield Solar case [Astonified Solar (Gujarat) (P) Ltd. Resolution Professional v. Gujarat Urja Vikas Nigam Ltd., 2019 SCC OnLine NCLT 7878] , SCC OnLine NCLT paras 19-27) 19. That from the plain reading of Section 238, it is evident that the aforesaid section is applicable to an instrument too. However, we find that the term instrument has not been defined anywhere under IBC 2016. 20. To know, whether the power purchase agreement (PPA) is an instrument or not, we referred to the provisions of Section 3(37) of the Code, which is reproduced as below: 3. (37) words and expressions used but not defined in this Code but defined in the Indian Contract Act, 1872, the Indian Partnership Act, 1932, the Securities Contract (Regulation) Act, 1956, the Securities Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Limited Liability Partnership Act, 2008 and the Companies Act, 2013, shall have the meanings respectively assigned to them in those Acts. 21. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of any such law. In other words, the instrument need not be a creation of a statute; it becomes enforceable by virtue of a law. Therefore, we are inclined to agree with the view taken by NCLT. Section 238 is prefaced by a non obstante clause. NCLT's jurisdiction could be invoked in the present case because the termination of PPA was sought solely on the ground that the corporate debtor had become subject to an insolvency resolution process under IBC. 19. The Hon ble Supreme Court has further considered the jurisdiction of the NCLAT under Section 60(5)(c) from paragraphs 84 to 91. Hon ble Supreme Court in the above judgment has held that the residuary jurisdiction conferred by statute may extend to matters which are not specifically enumerated under a legislation. In paragraphs 87, 88, 90 and 91, following has been held:- 87. Hence, the residuary jurisdiction conferred by statute may extend to matters which are not specifically enumerated under a legislation. While a residuary jurisdiction of a court confers it wide powers, its jurisdiction cannot be in contravention of the provisions of the statute concerned. In A. Devendran v. State of T.N. [A. Devendran v. State of T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been taken out of consideration as that evidence of the so-called approver has been held by us to be not a legal evidence since pardon had been tendered by a court of incompetent jurisdiction. In our opinion, to such a situation the provisions of Section 465 cannot be attracted at all. It is true, that procedures are intended to subserve the ends of justice and undue emphasis on mere technicalities which are not vital or important may frustrate the ends of justice. The courts, therefore, are required to consider the gravity of irregularity and whether the same has caused a failure of justice. To tender pardon by a Chief Judicial Magistrate cannot be held to be a mere case of irregularity nor can it be said that there has been no failure of justice. It is a case of total lack of jurisdiction, and consequently the follow-up action on account of such an order of a Magistrate without jurisdiction cannot be taken into consideration at all. In this view of the matter the contention of Mr Mohan, learned counsel appearing for the State, in this regard has to be rejected. (emphasis supplied) 88. In Johri Lal Soni v. Bhanwari Bai [Johri Lal Soni v. Bhanwari Bai, (1977) 4 SCC 59] ( Johri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary transfer. Any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent on a petition presented within two years after the date of the transfer, be voidable as against the receiver and may be annulled by the Court. (emphasis supplied) It is relevant to note that unlike Section 4 of the PIA, Section 60(5)(c) of IBC is not subject to other provisions of the statute. Hence, Section 60(5)(c) of IBC has been worded more expansively than Section 4 of the PIA. 89. In respect of the interplay between Sections 53 and 4 of the PIA, in Johri Lal Soni [Johri Lal Soni v. Bhanwari Bai, (1977) 4 SCC 59] , this Court further held : (SCC p. 62, para 4) 4. It was submitted that the effect of Section 53 of the Act clearly is that it bars the jurisdiction of the Insolvency Court to determine the validity of any transfer made beyond two years of the transferor being adjudged insolvent. It is no doubt true that the words within two years after the date of the transfer being voidable as against the receiver does fix a time- limit wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court's decision was premised on the finding that Section 53 of the PIA only dealt with voidable transfers. This Court noted that the jurisdiction of an insolvency court will be restricted in matters where a voidable transfer has taken place beyond the time-limit stipulated under Section 53 within which the transfer could be annulled by the court. Hence, in the name of exercising a residuary jurisdiction, a court cannot cloak itself with jurisdiction which is contrary to the provisions of a statute. However, at the same time, as held by this Court in Johri Lal Soni [Johri Lal Soni v. Bhanwari Bai, (1977) 4 SCC 59] , an interpretation which renders the objective of a residuary jurisdiction nugatory cannot be upheld by this Court. A fine line has to be drawn between ensuring that a residuary jurisdiction is not rendered otiose due to an excessively restrictive interpretation, as well as, guarding against usurpation of power by a court or a tribunal not vested in it. 91. The residuary jurisdiction of NCLT under Section 60(5)(c) of IBC provides it a wide discretion to adjudicate questions of law or fact arising from or in relation to the insolvency resolution proceedings. If th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt rights to develop the property on consideration of Rs.7 Crores. It is no more res- integra that the development rights can be claimed by the corporate debtor. The basis of the application filed by the Appellant was PoA dated 06.08.2005 and whether on the basis of the said PoA, clause of the Resolution Plan can be impugned by the Appellant was the question to be answered. As held by us, the PoA was executed in favour of the Appellant who was a nominee of the corporate debtor, only to facilitate the developers in carrying out the development and no rights were given to the Appellant in their individual capacity on the property. None of the rights of the Appellant, thus, can be said to be affected by approval of the Resolution Plan. PoA has out lived its purpose and has rightly held to be cancelled in the clause 7.33. We thus, do not find any error in the order of the Adjudicating Authority rejecting IA No.3689 of 2022. 22. Now we come to the order approving the Resolution Plan dated 09.08.2024. Counsel for the Appellant referring to Clause 8.4 of the Resolution Plan sought to contend that the Resolution Plan was conditional and contingent which could not have been approved. He has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove cited email. 25. Counsel appearing for the Respondents has also referred to the order of the Hon ble Supreme Court dated 23.09.2022 in T.N. Godavarman Thirumulpad (supra) where the Hon ble Supreme Court has already issued necessary clarification on application seeking clarification, the Hon ble Supreme Court in its order dated 23.09.2022 directed as follows:- I.A. No.110348/2022 along with I.A. No.110338/2022, 137123/2022, 141500/2022 This application is filed for seeking clarification of the Judgment dated 03.06.2022 passed by this Court in I.A. No.1000 of 2003 etc. It is submitted by the applicant that the eco-sensitive zone (ESZs) around Sanjay Gandhi National Park has already been notified vide Final Notification No.SO 3645(E) dated 05.12.2016. It is further submitted that the eco-sensitive zone around Thane Flamingo Creek Sanctuary has already been notified vide final notification being S.O. 4293(E) dated 14.10.2021. It is therefore submitted that the judgment and order dated 03.06.2022 which directs that each protected forest, that is a National Park or Wildlife Sanctuary must have eco-sensitive zone of minimum one kilometre wide, would not be applicable to the Sanjay Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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