NCLAT Delhi; IBC Does Not Provide Any Scope For Dissatisfied Homebuyers In Minority To Override Majority Decision Of COC
The National Company Law Appellate Tribunal (NCLAT) New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that the IBC does not provide any scope for dissatisfied homebuyers in the minority to override the majority decision taken by the Committee of Creditors (COC). Background Fact The Appellant is a Creditor in Class...
The National Company Law Appellate Tribunal (NCLAT) New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that the IBC does not provide any scope for dissatisfied homebuyers in the minority to override the majority decision taken by the Committee of Creditors (COC).
Background Fact
The Appellant is a Creditor in Class and represents 77 homebuyers of the Corporate Debtor (Respondent No. 4). These homebuyers had purchased flats in the Nirmal Sports City real estate project of the Corporate Debtor.
As this project failed to materialise, it was relaunched as Godrej Alive. Under this project, homebuyers were given the option to either continue with the project or exit with 9% compound interest. Subsequently, the homebuyers, along with the Appellant himself, decided to remain in the project.
Subsequently, this project faced another setback as it failed to materialise once again. Following this, CIRP was initiated against the Corporate Debtor on 04.05.2022. Following the initiation of CIRP, the Financial Creditor (Respondent No. 2) filed a claim amounting to Rs. 998.96 crores, comprising a principal sum of Rs. 502.91 crores along with an interest amount.
Further, the Resolution Professional (Respondent No. 1) constituted the CoC with the Financial Creditor holding 88.95% voting share and the remaining 11.05% voting share vested with the homebuyers.
In the 12th CoC meeting, the resolution plan proposed by a consortium of Ashar Ventures and Ors (SRA/Respondent No. 3) was approved by the CoC with an 88.95% vote share. The proposed resolution plan was voted against by the homebuyers, who held an 11.05% vote share.
As a result, the Resolution Professional filed an application before the NCLT Mumbai for approval of the resolution plan of Successful Resolution Applicant (SRA), while the appellant, representing 77 homebuyers, filed an application seeking rejection of the said plan.
The NCLT Mumbai, in its order dated 06.10.2023, dismissed the application filed by the appellant and approved the resolution plan filed by the Resolution Professional. Aggrieved by the NCLT Mumbai's order dated 06.10.2023, the appellant, representing 77 homebuyers, filed an appeal before the NCLAT Delhi.
NCLAT Verdict
The NCLT Delhi dismissed the appeal and held that appellant, being a dissatisfied homebuyer in a hopelessly minority position, has no option but to sail along or drag along with the overwhelming majority that has accepted the resolution plan.
NCLAT further held that in cases where the Committee of Creditors has duly sanctioned a resolution plan in accordance with the requisite legal procedures, and there is no evidence of any substantial irregularities committed by the Resolution Professional during the CIRP, such decisions are not subject to judicial review or alteration.
NCLAT relied on the Judgement of Supreme Court in the case of Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Ltd. and Ors., Which is read as follows :
214. The homebuyers as a class shall be deemed to have voted in favour of approval of the resolution plan of NBCC; and once having voted so, any particular constituent of that class cannot be heard in opposition to the plan by way of objection or appeal. The statute, that is IBC, has itself provided for estoppel against any such attempted opposition to the plan by a constituent of the class that had voted in favour of approval. The misplaced assumptions on the part of dissatisfied homebuyers have gone to the extent that they have attempted to put themselves at par with the dissenting financial creditors like ICICI Bank, who carry an entirely different legal status in CIRP, for being not within the class of homebuyers and being of a different class of financial creditors. The said financial creditor has rightly opposed these submissions and has rightly pointed out that its rights in terms of Section 30(2)(b) of the Code stand at an entirely different footing.
In conclusion, NCLAT dismissed the homebuyer's appeal to reject the resolution plan approved by the CoC, holding that the appellant, being a dissatisfied homebuyer in a hopelessly minority position, has no option but to sail along or drag along with the overwhelming majority that has accepted the resolution plan.
Case - Mr. Girish Nalavade Vs. Bhrugesh Amin and Ors.
Citation - Company Appeal (AT) (Insolvency) No. 1542 of 2023
Counsel for Appellant - Ms. Anjali Sharma, Mr. Ganesh Remani, Mr. Deepak Bashts, Mr. Sachin Daga, Advocates.
Counsel for Respondent - Mr. Krishnendu Datta, Sr. Advocate with Mr. Ayush J. Rajani, Ms. Khushboo Shah, Ms. Varsha Himatsingka, Advocates for Respondent No. 1, Mr. Amit Sibal and Mr. P Nagesh, Sr. Advocates with Mr. Ajay Bhargava, Ms. Trishala Trivedi, Ms. Phalguni Nigam, Advocates for Respondent No. 2, Mr. Arvind Varma, Sr. Advocate with Mr. Chirag J. Shah, Mr. Utsav Trivedi, Ms. Shivani Bhushan, Ms. Diksha Tyagi, Ms. Aishwarya Singh, Advocates for Respondent no. 3.
Click Here to read / download the order