National Company Law Tribunal: In a Company Petition filed by the Interim Resolution Professional (‘IRP’) for approval of Resolution Plan in Corporate Debtor – Jaypee Infratech Limited’s case, the Bench presided by Ramalingam Sudhakar, J. with L.N. Gupta as Technical Member approved the said Resolution Plan and directed the authorities to address the grievances of the homebuyers.

The present petition was filed by IRP following the directions of the Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd., (2021) 5 SCC 624 preferred under Section 30(6) r/w Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (‘IBC 2016’) and Regulation 39(4) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP regulations’) for approval of resolution plan.

The main petition under Section 7 of IBC 2016 was admitted by NCLT Allahabad Bench. Corporate Insolvency Resolution Process (‘CIRP’) was initiated, and IRP was appointed who took over the management and corporate debtor’s affairs according to IBC Code 2016 on 12-08-2017. The homebuyers filed a writ petition challenging the provisions of IBC and order passed by NCLT Allahabad Bench in Chitra Sharma v. Union of India, (2018) 18 SCC 575 wherein, the Court ordered restart of CIR process. The IRP made a public announcement in terms of Regulation 6(1) of CIRP Regulations, 2016 and constituted a Committee of Creditors.

The NCLT Allahabad order approving resolution plan was challenged before the National Company Law Appellate Tribunal (‘NCLAT’) who in turn directed the IRP to constitute an Interim Monitoring Committee (IMC) to implement the approved Resolution Plan, which was subjected to the outcome of appeal. The Court in Jaypee Kensington(supra) through order dated 22-04-2020 directed an ad-interim stay on the operation of NCLAT order, IRP to manage affairs of the Corporate Debtor and to transfer all pending appeals before NCLAT to this Tribunal.

The Supreme Court in Jaypee Kensington (supra) set aside the NCLT order dated 3-3-2020 and remanded the matter back to CoC directing the same to complete the CIRP within 45 days. The Supreme Court only permitted two parties to submit Resolution Plans.

Considering the Resolution Plan of “Suraksha Realty” approved by majority of CoC and the Successful Resolution Applicants not being barred under Section 29-A of IBC 2016, the Tribunal proceeded with examining the other aspects of Resolution Plan under consideration.

The said resolution plan of Successful Resolution Applicant (‘SRA’) proposes limiting and resolving the debt obligations of the Corporate Debtor, infusing additional working capital, controlling all business activities, financial planning and transparency in management and utilization of funds, and good corporate governance, also proposing to construct the homes of homebuyers according to specific timelines.

The Tribunal scrutinized the various submissions of SRA in the Resolution Plan, Compliance Certificate under Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Compliance Chart, etc. averring compliance in all respects. However, Yamuna Expressway Industrial Development Authority (hereinafter referred to as “YEIDA”), ICICI Bank, Ex-Promoter of JIL raised certain objections to approval of resolution plan through separate Interlocutory Applications (‘IA’). Thus, the Tribunal visited the objections raised though several IAs regarding specific claims, vote shares, Dissenting Financial Creditor’s (‘DFC’) liquidation value, additional entitlement under Section 53 of IBC Code and Regulations, security interest, etc..

The Tribunal noted that ICICI Bank failed to exercise the right to choose land as provided by SRA under the Resolution Plan, as against its’ grievance of not getting the opportunity of choice for enforcing Security Interest. The Court also took note of DFC to be paid in terms of “money” or in terms of “money recovery with enforcement of security interest”.

The Tribunal referred to India Resurgence ARC Private Limited v. Amit Metaliks Limited, 2021 SCC OnLine SC 409 wherein, the Court held that as per the need of the situation, the enforcement of security interest can be conditioned. Further, referring to Ram Kishun v. State of U.P., (2012) 11 SCC 511, the Tribunal restricted the behavior of financial institutions as property dealers for disposing of secured assets in arbitrary manner.The Tribunal viewed that “as long as the minimum Liquidation Value is paid by the Resolution Applicant to the DFCs, the latter cannot seek any replacement or ask for an alternate property, as a matter of right, for enforcing its Security Interest.” Thus, in the absence of any provision under IBC 2016 entitling the Creditor to choose the security interest, the Tribunal did not find any fault in the said Resolution Plan.

The Tribunal also observed that the SRA made sufficient arrangements for enabling the DFC/ICICI Bank to achieve its Liquidation value and cover expenses of enforcing security interest, thus, rejected their objection against cost of enforcing security interest.

The Tribunal examined Section 30(2) for objection against the amount of liquidation received by ICICI Bank and observed that there is a need to treat DFC under Section 53(1)(b)(ii) of the IBC, 2016. The Tribunal also observed that ICICI Bank was always classified as a Secured Financial Creditor and not as an Unsecured Financial Creditor and commented that ICICI Bank cannot sail in two boats, either it can be treated as a Secured Financial Creditor or as an Unsecured Financial Creditor.

The Yamuna Expressway Industrial Development Authority (YEIDA) challenged the Resolution Plan for the kind of treatment thereby the SRA disregarding the observations and findings of Supreme Court in the Jaypee Kensington (supra). However, the Court refused to adjudicate on costs pertaining to unexecuted External Development works and other future works due to SRA’s willingness to bear all costs.

The Tribunal acknowledged that NCLT has no ‘equity jurisdiction’ under the provisions of IBC 2016 and refused any illegality by SRA in treating YEIDA’s claim as an Operational Debt finding no illegality in the Resolution Plan as against the application of State Tax Officer (1) v. Rainbow Papers Ltd., 2022 SCC OnLine SC 1162.

Another objection concerns approval of the proposed Resolution plan not including the land parcel of 750 acres and SRA’s failure to maximize the value of assets, which the Tribunal found baseless. The Tribunal concluded that the Adjudicating Authority cannot enter any quantitative analysis to adjudge whether the Resolution Plan results in maximization of the value of assets or not.

The Tribunal added that “Since the Resolution Applicant has to re-start the functions of the Corporate Debtor on a fresh slate in terms of the Judgement in Essar Steel), any fresh proceedings by virtue of subrogation on the Corporate Debtor managed by SRA are contrary to the scheme of IBC.” concluding that the personal guarantor has no right to subrogation for recovering dues from Corporate Debtor after Resolution Plan is approved.

On objection against Resolution plan interfering with the Reconciliation process of Rs 750 Crore, the Tribunal said that the question of forfeiting this amount by the SRA does not arise.

For SRA seeking irrevocable and unconditional abatement/settlement in perpetuity of all Income Tax proceedings of the Corporate Debtor, the Tribunal found it inappropriate to interfere with the jurisdiction of various legal forums on a blanket basis and declined the same. The Court granted relief regarding procedural requirements noting that approval of the Resolution Plan under the IBC 2016 is a single window clearance and there is no need to follow any separate procedure. Since waiver of Stamp Duty is not a liability of the Corporate Debtor of the pre-CIRP period and will cause a loss of revenue to the Public Exchequer, the Tribunal refused to waive stamp duty. The Tribunal also refused to waiver non-compliances of Corporate Debtor as well as blanket termination of pending litigations. The Tribunal agreed to lenders regularizing all loan accounts of Corporate Debtor. It also refused to interfere with investigations or Corporate Debtor dealings with third parties, leaving the SRA free to proceed according to the applicable law. The Tribunal agreed to direct RERA for making expeditious changes in records related to the said projects in accordance with the Resolution Plan.

The Tribunal granted all the reliefs sought which would expedite the Resolution Plan and rejected grant of reliefs interfering with other authorities or halting the Resolution proceedings.

None of the objections sustained in the Tribunal’s view in terms of Section 30(2) of the IBC, 2016. The Tribunal referred to the well-settled principle of law of not interfering with CoC’s decision in its commercial wisdom. Thus, the Tribunal allowed the present application approving the COC-approved Resolution Plan with the following directions:

  • Resolution Plan binding on all stakeholders effective

  • Reliefs and Concessions sought by SRA granted

  • Setup of Monitoring Committee by the applicant within 7 days of passing order

  • SRA to deliver/provide possession of the units to the Home Buyers/Allottees strictly as per the time frame promised in the Resolution Plan

  • Forfeiture of Performance Security furnished by the Resolution Applicant in case of non-compliance

The Tribunal further perused Section 53(1) of IBC, 2016 and observed that only the proceeds of sales of Liquidation Assets are eligible for distribution in terms of Waterfall Mechanism. From conjoint reading of Section 36(4) and Section 53(1) of IBC, 2016, the Tribunal pointed out that the assets listed under Section 36(4) cannot form part of the Liquidation Estate Assets. The Tribunal viewed that “Rs. 750 Crore is the property of Jayprakash Associates Ltd. (‘JAL’), and if any amount is found payable to JAL out of the said Rs.750 Crore, it shall not be the payment made in priority to the Financial Creditors of JIL and it would entirely be in conformity with the provisions of IBC, 2016.” and refused to reject the claim of JAL merely on the ground of dues pertaining to the pre-CIRP period. The Tribunal further added that any amount appropriated to Corporate Debtor would have to be utilized by the Applicants in accordance with the resolution plan for the purpose of construction work of the incomplete real estate projects of the Corporate Debtor in the interest of around 20,000 home buyers.

The Tribunal passed orders in favour of the aggrieved homebuyers ordering g JAL/JIL/Jaypee/RP to continue with adjusting the delay compensation allowing additional time to register and recognize the balance amounts in liabilities and pass suitable orders assuring against any loss to homebuyers without additional payment irrespective of insolvency proceedings. The Tribunal also directed SRA of the Corporate Debtor JIL to consider the prayers of applicants under the Resolution Plan.

[IDBI Bank Ltd. v. Jaypee Infratech Ltd., Company Petition No. (IB) 77 (ALD) of 2017, decided on 7-03-2023]

Advocates who appeared in this case :

Senior Advocate U.K. Chaudhary, Senior Advocate Sudhir Makkar Senior Advocate Aditya Maheshwari, Senior Advocate Arun Kathpalia, Senior Advocate Abhinav Vasisht, Senior Advocate Krishnan Venugopal, Advocate Sumant Batra, Advocate Ruchi Goyal, Advocate Sanjay Bhatt, Advocate Eshna Kumar, Advocate Sagar Bansal, Advocate Mansumyer Singh, Advocate Suamya Gupta, Advocate Veera Matha, Advocate Bishwajit Dubey, Advocate Namrata Sadhnani, Advocate Varisha Sharma, Advocate Shoeb Alam, Advocate Nakul Gandhi, Advocate Gauri Goburdhan, Advocate Mohit Sharma, Advocate Mahima Sareen, Advocate Nikhil Mathur, Advocate Misha, Advocate Amar Gopal, Advocate Aniket Aggarwal, Advocate Pallavi Srivastava, Advocate Krishnan Agarwal, Advocate Vishal Gupta, Advocate Divyanshu Gupta, Advocate Anupam Choudhary

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