Information Memorandum Based On Which Resolution Plan Is Submitted And Approved By CoC Cannot Be Modified: NCLAT

Brief Facts

This Appeal is filed by six Appellants/homebuyers whose Application before the NCLT was rejected as per the Orders dated 07.08.2024 which is being impugned in this case.

As per this Appeal, the Appellants are seeking, inter-alia, equitable treatment with that of other creditors in class. Specifically, they seek amendment of the Information Memorandum (IM) reflecting the units of the Appellants as cancelled and further seek that the present Appeal be allowed and the Impugned Order be set aside.

On 02.01.2023, the Appellants were sent an email with the Information Memorandum, wherein they found that their names in the list of allottees whose units have been cancelled but these units are still vacant. The Appellant contends that, it was for the first time when the Appellants were made aware that their units have been cancelled.

In similar cases where unit holders, who had approached the RERA and filed their complaint, even though unit holders were paid significant amount, such units were never cancelled. In their case the units have been cancelled unilaterally and arbitrarily.

The RP intimated the Appellants, through the authorised representative, that their units were found cancelled in the books of accounts of Corporate Debtor, prior to the CIRP initiation and hence the same cannot be restored. It was further informed by the RP that the Appellants cannot be treated at par with other 15 homebuyers whose units were not cancelled, despite them being on the same boat.

The final approved Resolution Plan of Clause 6 provides that the allottees whose units have been cancelled shall be allotted unit at base selling price (BSP) of INR 4200 per sq feet of super area. Additionally, it was provided that 100% of their admitted principal amount shall be adjusted against the freshly allotted unit.

Contentions

The Appellants submitted that the Information Memorandum which was used to determine the Resolution Plan contained incorrect facts regarding the Appellant's unit.Had correct information been provided, the CoC may not have approved the Resolution Plan

That the AA has wrongly relied on the judgment of the "K. Sashidhar vs. Indian Overseas Bank & Ors. 2018, to say that the commercial wisdom of CoC is given paramount status.Had the CoC been provided with correct facts, the CoC would not have voted incorrectly. The AA has not only dismissed the Application by not following the principles of natural justice, but has also caused grave prejudice to the Appellants herein by denying their rightful ownership of the units.

Per contra, RP/Respondent No. 1 submitted that after initiation of CIRP, the Applicants filed their respective claims with the Resolution Professional for full amount without deducting the amount of part payment received by them from their Corporate Debtor.

That RP carried out the verification of their claims as per the records of the Corporate Debtor and it was found that the units allotted to the Applicants were cancelled by the Corporate Debtor even prior to the initiation of CIRP period.Respondent No. 1/RP admitted the balance amount to be paid to them and kept them in a separate category of creditors in a class of homebuyers.

That the units were cancelled pre-CIRP and the Appellants had full knowledge for about 10 months but they did not raise their grievance. They waited till the time the Resolution Plan provided specific treatment and that Hon'ble NCLT is concerned only with the matters relating to CIRP of the CD and any cancellation of the units done by the CD prior to the initiation of CIRP cannot be challenged before this Hon'ble NCLT.

That IRP/RP is required to only collate all the claims filed before him and verify the same from the books of the CD as per the provisions of the IBC. The RP lacks adjudicatory powers on the claims filed before him. The RP could not have reversed the actions of cancellation taken by the Corporate Debtor prior to the initiation of CIRP.

The SRA/Respondent No.2 submitted that the Resolution Plan has been prepared and filed by the Resolution Applicant in compliance with Section 30 of the Code, only after looking into the claims collated and provided by the Resolution Professional in the Information Memorandum. Even though the allotments were cancelled by the erstwhile management of the Corporate Debtor, the Respondent has provided treatment to the said cancelled allottees.

That the Applicant had already approached UPRERA seeking the refund of their entire amount along with interest which was awarded to them in terms of the RERA. The Applicant had admittedly accepted the partial amount from the erstwhile management, which implies that the Applicants by accepting the partial refund had acquiesced to the cancellation of the allotment.

NCLAT's Analysis

The tribunal, at the outset, noted that Information Memorandum was prepared by the RP on the basis of records of the Corporate Debtor. On receipt of all claims, along with those of the Appellants, the Resolution Professional carried out their verification as per the records of the Corporate Debtor. It was found by the RP that the units allotted to the Applicants were cancelled by the Corporate Debtor, much prior to the initiation of CIRP against it.

Based on the above,the tribunal reiterated the settled position that it is the duty of the RP to collate all the claims filed before him and verify the same from the books of the Corporate Debtor. The RP is right that it lacks adjudicatory powers on the claims filed before him. The RP could not have reversed the action of cancellation taken by the Corporate Debtor prior to the initiation of CIRP.

The tribunal further noted that the grievance of the appellants were placed before the CoC by the RP.The grievance of the Appellants was deliberated upon in various CoC meetings. Eventually, the cancelled units were dealt by the Successful Resolution Applicant (SRA) in the Resolution Plan which provided that Allottees/Decree Holders can choose from available units with the Corporate Debtor at a Base Selling Price (BSP) of INR 4200 per square feet of Super area. 100% of their admitted Principal Amount shall be adjusted against the freshly allotted unit.

Even though the allotment were cancelled by erstwhile management of the Corporate Debtor, the Resolution Plan had provided treatment to the said cancelled allottees. And this Resolution Plan was approved by the CoC with 100% majority in their 12th CoC meeting held on 03.08.2023, the tribunal noted.

The tribunal observed that Resolution Plan was prepared and filed by the Resolution Applicant in compliance with Section 30 of the Code and later it has been duly approved by the CoC in its commercial wisdom. It is well settled position of law that the Resolution Plan, duly approved by the COC as per their commercial wisdom has a very limited scope of judicial review and which is circumscribed by the provisions contained in Section 31 of the Code.

It was further noted that the appellants had approached the UPRERA for seeking refund of the entire amount along with interest which was allowed. The appellants had also accepted a partial amount from the corporate debtor.

After going through the sequence of events, the tribunal observed that the conduct of the allottees in accepting the refund towards their allotment, indicates that allottees have accepted the cancellation of the allotments.The refund, which was initiated by the erstwhile management at the instance of the Appellants, cannot be given a colour of unilateral cancellation of allotment.

While dealing with their contention with respect to principle of natural justice being violated, the tribunal noted that the Appellants always had opportunities to raise the objections either at the stage when they were getting part money based on the UPRERA Order or at the very beginning when CIRP process was going on and when they had an opportunity to raise the objections.

It is to be noted that the Information Memorandum was based on the Corporate Debtor's record and the Appellants by participating in the CoC meetings were deemed to have the knowledge of the information contained therein. Even though they had brought out their grievances before the RP, who in turn took it up in the meeting of the CoC, they cannot claim that they did not have the knowledge of the cancellation of their units till the time of the 5th CoC meeting and there was violation of principles of natural justice, the tribunal noted.

The tribunal further noted that the appellants have contended that there is a violation of the UPRERA Decree. The Appellants contend that as per UPRERA Decree, only partial payment was made and therefore the Corporate Debtor has not complied with the Orders of the UPRERA.

While addressing this contention, the tribunal noted that in fact, this Decree was prior to institution of insolvency and part payment was also made by the erstwhile management. The CoC, RP could not have revoked the cancellation as it was beyond their jurisdiction. In fact, they had gone ahead as per the information collated from the records of the Corporate Debtor. Therefore, the contention of the Appellant that there is a failure to comply with the UPRERA Decree cannot be accepted.

The tribunal concluded that the cancellation of the units was based on the UPRERA's Order which was not challenged. The Information Memorandum contained this information and CoC could not have revoked the cancellation and acted within its commercial wisdom approving the Resolution Plan. Accordingly, the present appeal was dismissed.

Case Title: Mrs. Supriya Singh Versus M/s Ansal Urban Condominiums Pvt. Ltd. and Ors.

Case Reference:Company Appeal (AT) (Insolvency) No. 1974 of 2024

Judgment Date: 25/11/2024

For Appellant : Mr. Vivek Kumar, Advocate.

For Respondent : Mr. Shivanshu Kumar and Mr. Rajesh Ramnani, Advocates for R-1/RP. Ms. Anuja Pethia and Mr. Rishabh Govila, Advocates for SRA.

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