The NCLAT, Principal Bench, New Delhi, reiterated that the Tribunal does not have residual equity-based jurisdiction to direct modifications of claims once the Resolution plan is approved.
Bench stated that,"The NCLT has very limited jurisdiction once the Resolution Plan is approved and cannot interfere with the merits of the Business Decision of the Committee of Creditors (hereinafter referred to as “CoC”).
Regarding discrimination between creditors, the Tribunal noted that the equity principle cannot be stretched to a point where unequal are given equal treatment as then the purpose of IBC would be destroyed. The power of judicial review in such cases is also very limited to the extent of seeing that the CoC has considered the fact that the Corporate Debtor stays a going concern during the Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) and the value of its assets is maximized.
It was observed that the Corporate Debtor was dependent on the land owned by GMADA. Even though it was not appreciated by the Tribunal that GMADA did not file their claims, it was noted that the GAMDA was in communication with the Resolution Professional and the statutory dues owed to GMADA cannot be faulted. Moreover, the differential treatment of the dues of the Operational Creditors is solely based on the commercial decision of the CoC and the same cannot be construed as material irregularity.
BRIEF FACTS:
All the Appeals preferred are filed against the same Order passed by the NCLT vide which Resolution Plan was approved.
CONTENTIONS OF THE APPELANTS:
- Company Appeal (AT) (Insolvency) No. 554 of 2021
It was submitted that the Appellants are a group of small-scale firms who supplied services to the Corporate Debtor, a real estate company. CIRP was initiated against the Corporate Debtor and in their capacity as ‘Operational Creditors’ claims were submitted by the Appellants.
It was contended that during the end of the CIRP, Appellants got to know that the Resolution Plan of one ‘One City Infrastructure Pvt. Ltd.’ was approved by the Coc.
It was submitted that the Appellant submitted objections to the approval of the said plan as it was discriminatory, but the application was never decided by the NCLT till 2021. Without conducting any hearing of the Application, the order was published on the website of NCLT.
It was argued that the order passed violated Rules 151 and 152 of the NCLT Rules, 2016. The order was passed without disposing of the objections filed by the Appellants.
It was argued that GMADA cannot be treated as a Secured Operational Creditor as they did not prefer any claims.
- Company Appeal (AT) (Insolvency) No. 564 of 2021
It was submitted that the order was passed by the Hon’ble Acting President who took charge for a period of one day. It was argued that without deciding on the pending Applications first, NCLT could not have approved the Resolution Plan confidentially.
- Company Appeal (AT) (Insolvency) No. 664 of 2021
It was contended that the Resolution Plan creates an artificial and arbitrary classification between the same class of Creditors.
- Company Appeal (AT) (Insolvency) No. 645 of 2021
It was argued that the object of the Insolvency and Bankruptcy Code (hereinafter referred to as “IBC”) would fail if a Resolution Plan is approved without considering the objections.
- Company Appeal (AT) (Insolvency) No. 804 of 2021
The Appeal by GMADA is preferred on the ground that the claim consisting of EDC and License Fee cannot be rejected as it is like statutory dues. It was alleged that there was a material irregularity in the conduct of the Resolution Professional.
- Company Appeal (AT) (Insolvency) No. 269 of 2022
The Appeal is preferred by Financial Creditors/Allottees because there was discrimination against them.
CONTENTIONS OF THE RESPONDENTS:
- Company Appeal (AT) (Insolvency) No. 554 of 2021
It was argued that the Appellants have concealed a material fact which is that the High Court of Delhi had allowed the Appellants to file an Appeal only on merits. It was argued that the pendency of the application cannot delay the approval of a Resolution Plan.
- Company Appeal (AT) (Insolvency) No. 564 of 2021
It was argued that the Resolution Plan was put to vote only after discussions and that it was approved by a 100% voting majority.
- Company Appeal (AT) (Insolvency) No. 664 of 2021
It was argued that the revised claims of the Appellant could not have been considered as the Resolution Plan was approved after the application of commercial wisdom. It was contended that GMDA is a Statutory Authority and Corporate Debtor had hypothecated a certain portion of land in favour of GMADA. Therefore, GMADA became a Secured Creditor.
- Company Appeal (AT) (Insolvency) No. 645 of 2021
It was argued that GMADA and the other Appellants do not fall in the same class as GMADA is a Statutory Authority. Hence, there was no discrimination.
- Company Appeal (AT) (Insolvency) No. 804 of 2021
It was contended that once the Resolution Plan is approved, it is binding on all the stakeholders including Government Authorities.
- Company Appeal (AT) (Insolvency) No. 269 of 2022
Contentions of the Successful Resolution Applicant (hereinafter referred to as “SRA”):
It was argued that the Hon’ble High Court of Delhi granted an opportunity to the Appellants to file an appeal before the appropriate forum on merits and not on grounds of natural justice. It was contended that there is no discrimination between GMADA and other Operational Creditors as GMADA’s claim is different from the rest.
Observations of the Tribunal:
It was observed that the Appellant’s contention primarily was that the said order of the NCLT was uploaded in 2021 during the period of summer vacations and that the order could not have been prepared in a single day by the Acting President.
The Tribunal opined that the NCLT had already pronounced that the Application would be allowed and the Resolution Plan would be approved. It was already clarified that a detailed order would be passed during the day. Therefore, there was no procedural irregularity.
It was remarked by the Tribunal that the Appellants could not have raised the grounds of natural justice at this Appellate stage as they were only allowed to file an appeal on merits.
The Appellate Authority further reiterated that the Tribunal does not have residual equity-based jurisdiction to direct modifications of claims once the Resolution plan is approved. The NCLT has very limited jurisdiction once the Resolution Plan is approved and cannot interfere with the merits of the Business Decision of the CoC.
Regarding discrimination between creditors, the Tribunal noted that the equity principle cannot be stretched to a point where unequal is given equal treatment as then the purpose of IBC would be destroyed. The power of judicial review in such cases is also very limited to the extent of seeing that the CoC has considered the fact that the Corporate Debtor stays a going concern during the CIRP and the value of its assets is maximized.
It was observed that the Corporate Debtor was dependent on the land owned by GMADA. Even though it was not appreciated by the Tribunal that GMADA did not file their claims, it was noted that the GAMDA was in communication with the Resolution Professional and the statutory dues owed to GMADA cannot be faulted. Moreover, the differential treatment of the dues of the Operational Creditors is solely based on the commercial decision of the CoC and the same cannot be construed as material irregularity.
The decision of the Tribunal:
Noting that the Resolution Plan was approved by the CoC in 2019 and then the NCLT approved the plan after a period of 2 years in 2021, the plan has already been implemented. The Tribunal did not consider it as a fit case to set the clock back and hence, accordingly, the appeal was dismissed.
Case Title: Paramvir Singh Tiwana & Ors. V. Puma Realtors Pvt. Ltd. & Anr. With
Mr. Vivek Joshi & Ors. V. Shei Pawan Kumar Garg & Ors. With
Akila Constructions Pvt. Ltd. & Anr. V. Puma Realtors Pvt. Ltd. & Anr. With
Larsen & Toubro ltd. V. Puma Realtors Pvt. Ltd. & Ors. With
Greater Mohali Area Development Authority V. Puma Realtors Pvt. Ltd. & Anr. With
Amarjeet Kaur & Ors. V. Puma Realtors Pvt. Ltd. & Anr.
Coram: Justice Anant Bijay Singh (Judicial Member), Ms. Shreesha Merla (Technical Member)
Case No.: Company Appeal (AT) (Insolvency) No. 554 of 2021 With
Company Appeal (AT) (Insolvency) No. 564 of 2021 With
Company Appeal (AT) (Insolvency) No. 664 of 2021 With
Company Appeal (AT) (Insolvency) No. 645 of 2021With
Company Appeal (AT) (Insolvency) No. 804 of 2021With
Company Appeal (AT) (Insolvency) No. 269 of 2022.
Advocates for Appellants: Advs. Mr. Bilal Ali, Mr. Adarsh Kumar Gupta, Mr. Gautum Singhal, Ms. Pallavi Singh, Mr. Anand Shankar Jha, Ms. Meenakshi S. Devgan, Ms. Anusha Nagarajan, Ms. Akanksha Bhola
Advocates for Respondents: Advs. Mr. Krishnendu Datta, Mr. Adhish Sharma, Mr. Nitin Pandey, Ms. Varsha Himat Singh, Mr. Akash Kattar, Mr. Virendrar Ganda, Mr. Vivek Sinha, Mr. Vivek Malik, Ms. Akanksha, Ms. Sreemanini Mukherjee, Mr. Abhijeet Sinha, Mr. Kushank Sindhu, Ms. Gazal Ghai, Mr. Anmol Singh
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