Jaypee Kensington Boulevard Apartments Welfare Association & Ors. vs Nbcc (India) Ltd. & Ors.

Insolvency and Bankruptcy Code, 2016 – Resolution plan – Activities of the corporate debtor had impact on a large number of persons/ entities, including buyers of flats/apartments in its real estate development projects – Whether, after approval of the resolution plan of NBCC by the Committee of Creditors, where homebuyers as a class assented to the plan, any individual homebuyer or any association of homebuyers could maintain a challenge to the resolution plan and could be treated as a dissenting financial creditor or an aggrieved person – Whether any housing project which was completed or nearing completion ought to be kept out of the purview of the resolution plan – Held: On facts, the homebuyers as a class having assented to the resolution plan of NBCC, any individual homebuyer or any association of homebuyers cannot maintain a challenge to the resolution plan and cannot be treated as a dissenting financial creditor or an aggrieved person; and when the resolution plan comprehensively deals with all the assets and liabilities of the corporate debtor, no housing project of the corporate debtor could be segregated merely for the reason that same was completed or nearing completion. The instant matters essentially related to a resolution plan in the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 concerning the corporate debtor, Jaypee Infratech Limited (JIL), whose activities had impact on a large number of persons/ entities, including buyers of flats/apartments in its real estate development projects. CIRP in relation to the corporate debtor JIL had been entangled in various disputes in the past and even when the resolution plan submitted by the resolution applicant, NBCC (India) Limited was approved by the Committee of Creditors by a substantial majority of 97.36% of voting share of the financial creditors, several disputes/objections came up from various stakeholders and role players, voicing the concerns of their own, like dissenting financial creditors, dissatisfied homebuyers, displeased land providing agency, disillusioned creditor of a wholly-owned subsidiary of the corporate debtor and disappointed minority shareholders. Apart from all these, the holding company of the corporate debtor, namely, Jaiprakash Associates Limited (JAL) and its stakeholders had several questions over the resolution process in question and were particularly concerned with the sum of INR

750 crores, which was deposited by JAL pursuant to the orders passed by this Court in the first round of litigation. The principal points calling for determination were:

A. What is the extent of, and limitations over, the powers and jurisdiction of the Adjudicating Authority while dealing with the resolution plan approved by the Committee of Creditors?

B. As to whether approval of the resolution plan of NBCC is vitiated because of simultaneous voting over two resolution plans in the Committee of Creditors?

C.(i) As to whether the Adjudicating Authority erred in not approving the stipulations in the resolution plan for meeting with the contingent liability of additional amount of land acquisition compensation; and has also erred in modifying these stipulations?

(ii) As to whether the Adjudicating Authority erred in not approving the mechanism provided in the resolution plan for transfer, of the concessionaire’s rights and obligations under the Concession Agreement with Yamuna Expressway Industrial Development Authority (YEIDA), to the SPVs proposed to be incorporated; and has also erred in modifying the relevant stipulations? (iii) As to whether the Adjudicating Authority erred in not approving the reliefs and concessions sought for in the resolution plan in relation to YEIDA?

D. As to whether the Adjudicating Authority erred in not approving the treatment of dissenting financial creditor like ICICI Bank Limited in the resolution plan, as being not in accord with Section 30(2)(b) of the Code read with Regulation 38(1)(b) of the CIRP Regulations; and erred in modifying the terms of resolution plan and in directing payment to the dissenting financial creditor in monetary terms?

E. As to whether the Adjudicating Authority erred in modifying the step provided in the resolution plan in regard to the fixed deposit holders and in directing the resolution applicant to make provision towards the dues of unclaimed fixed deposit holders also?

F. (i) As to whether the resolution plan unauthorisedly purports to deal with the assets of Jaypee Healthcare Limited (JHL)? (ii) As to whether the Adjudicating Authority erred in assuming that YES Bank Limited had agreed for constitution of a committee to take forward the disinvestment process of Jaypee Healthcare Limited?

G. As to whether the stipulation in the resolution plan for cancellation of certain agreements/sub-leases is unfair and the Adjudicating Authority erred in not modifying the same? H. As to whether the minority shareholders are entitled to state their claims/objections despite having not approached the Adjudicating Authority; and as to whether the resolution plan does not provide fair treatment to the minority shareholders? I. (i) As to whether, after approval of the resolution plan of NBCC by the Committee of Creditors, where homebuyers as a class assented to the plan, any individual homebuyer or any association of homebuyers could maintain a challenge to the resolution plan and could be treated as a dissenting financial creditor or an aggrieved person? (ii) As to whether the stipulations in the resolution plan stand in violation of the provisions of the Real Estate (Regulation and Development) Act, 2016? (iii) As to whether the resolution plan is violative of the requirements of CIRP Regulations? (iv) As to whether any housing project which has been completed or is nearing completion ought to be kept out of the purview of the resolution plan?

J. (i) As to whether the amount of INR 750 crores, which was deposited by JAL pursuant to the orders passed by this Court in the case of Chitra Sharma, and accrued interest thereupon, is the property of JAL and stipulation in the resolution plan concerning its usage by JIL or NBCC is impermissible? (ii) As to whether any amount is receivable by JIL and/or its homebuyers from JAL; and the accounts between JAL and JIL need reconciliation?

K. (i) As to whether Clause 23 of Schedule 3 of the resolution plan providing for extinguishment of security interest of lenders of JAL could not have been approved by the Adjudicating Authority? (ii) As to whether adequate provision is required to be made in the resolution plan as regards utilisation of the land bank of 758 acres, that has become available to JIL in terms of the judgment dated 26.02.2020 by this Court? L. What should be the appropriate orders on the other issues raised by the resolution applicant seeking clarification/directions?

M. As to whether the Appellate Authority was justified in providing for an Interim Monitoring Committee for implementation of the resolution plan in question during the pendency of appeals?

Disposing of the matters, the Court

HELD:

A. The Adjudicating Authority has limited jurisdiction in the matter of approval of a resolution plan, which is well-defined and circumscribed by Sections 30(2) and 31 of the Code. In the adjudicatory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by Committee of Creditors. If, within its limited jurisdiction, the Adjudicating Authority finds any shortcoming in the resolution plan vis-à-vis the specified parameters, it would only send the resolution plan back to the Committee of Creditors, for resubmission after satisfying the parameters delineated by the Code and exposited by this Court.

B. The process of simultaneous voting over two plans for electing one of them cannot be faulted in the present case; and approval of the resolution plan of NBCC is not vitiated because of simultaneous consideration and voting over two resolution plans by the Committee of Creditors.

C. The stipulations in the resolution plan, as regards dealings with YEIDA and with the terms of Concession Agreement, have rightly not been approved by the Adjudicating Authority but, for the stipulations which have not been approved, the only correct course for the Adjudicating Authority was to send the plan back to the Committee of Creditors for reconsideration. D. The Adjudicating Authority had not erred in disapproving the proposed treatment of dissenting financial creditor like ICICI Bank Limited in the resolution plan; but erred in modifying the related terms of the resolution plan and in not sending the matter back to the Committee of Creditors for reconsideration. E. The Adjudicating Authority erred in issuing directions to the resolution applicant to make provision to clear the dues of unclaimed fixed deposit holders. Paragraph 125 of the impugned order dated 03.03.2020 of the Adjudicating Authority (NCLT) is set aside.

F. The issues related with the objections of YES Bank Limited and pertaining to JHL, the subsidiary of the corporate debtor JIL, are left for resolution by the parties concerned, who will work out a viable solution in terms of paragraphs 141 and

142 of this judgment.

G. In the overall scheme of the resolution plan, the stipulation in Clause 21 of Schedule 3 thereof cannot be said to be unfair; and the observations in paragraphs 132 and 133 of the order dated 03.03.2020 justly take care of the right of any aggrieved party (agreement holder) to seek remedy in accordance with law and ensures viability of the resolution plan.

H. It cannot be said that the resolution plan does not adequately deal with the interests of minority shareholders. The grievances as suggested by the minority shareholders cannot be recognised as legal grievances. Their objections stand rejected.

I. The homebuyers as a class having assented to the resolution plan of NBCC, any individual homebuyer or any association of homebuyers cannot maintain a challenge to the resolution plan and cannot be treated as a dissenting financial creditor or an aggrieved person; the question of violation of the provisions of the RERA does not arise; the resolution plan in question is not violative of the mandatory requirements of the CIRP Regulations; and when the resolution plan comprehensively deals with all the assets and liabilities of the corporate debtor, no housing project of the corporate debtor could be segregated merely for the reason that same has been completed or is nearing completion.

J. (i) The amount of INR 750 crores (which was deposited by JAL pursuant to the orders passed by this Court in the case of Chitra Sharma) and accrued interest thereupon, is the property of JAL and stipulation in the resolution plan concerning its usage by JIL or the resolution applicant cannot be approved. The part of the order of NCLT placing this amount in the asset pool of JIL is set aside. (ii) The question as to whether any amount is receivable by JIL and/or its homebuyers from JAL, against advance towards construction and with reference to the admitted liability to the tune of INR 195 crores as on 31.03.2020, shall be determined by NCLT after reconciliation of accounts in terms of the directions contained in paragraphs 189 to 191.1 of this judgment. The amount, if found receivable by JIL, be made over to JIL and the remaining amount together with accrued interest be refunded to JAL in an appropriate account. The present matter being related to CIRP of JIL, no other orders are passed in relation to the amount that would be refunded to JAL because treatment of the said amount in the asset pool of JAL shall remain subject to such orders as may be passed by the competent authority dealing with the affairs of JAL.

K. (i) Clause 23 of Schedule 3 of the resolution plan, providing for extinguishment of security interest of the lenders of JAL could not have been approved by the Adjudicating Authority, particularly in relation to the security interest that has not been discharged. This part of the order dated 03.03.2020 is set aside. (ii) Adequate provision is required to be made in the resolution plan as regards utilisation of the land bank of 758 acres, that has become available to JIL free from encumbrance, in terms of the judgment dated 26.02.2020 of this Court in the case of Anuj Jain.

L. (i) The impugned order dated 03.03.2020 of the Adjudicating Authority (NCLT) shall be read as modified in relation to Clause 7 of Schedule 3 of the resolution plan; and the said clause shall stand approved. (ii) As regards possession/control over the project sites/lands of JIL, it is left open for the resolution applicant to take recourse to the appropriate proceedings in accordance with law, whenever occasion so arise. M. The Appellate Authority was not justified in providing for an Interim Monitoring Committee for implementation of the resolution plan in question during the pendency of appeals. The impugned order dated 22.04.2020 passed by NCLAT is set aside. [Para 216][893-F-H; 894-A-H; 895-A-H; 896-A-D]

2. Some of the terms and stipulations of the resolution plan of NBCC, which was voted for approval by 97.36% of the voting share of the Committee of Creditors, do not meet with approval. Although, barring such terms and stipulations, all other terms and propositions of the resolution plan stand approved. To be specific, the terms and stipulations in the resolution plan which do not meet with approval are those concerning: (a) the land providing agency [as held in Point C]; (b) the dissenting financial creditor [as held in Point D]; (c) the undischarged security interest of the lender of JAL [as held in Point K (i)]. [Para 217][896-D-F]

3. The decision of the Adjudicating Authority in relation to the said amount of INR 750 crores with accrued interest has been disapproved. This amount is the property of JAL and the stipulations in the resolution plan concerning its usage by JIL or the resolution applicant cannot be approved [as held in Point J

(i) (supra)]. However, the final treatment of the said amount of INR 750 crores with accrued interest shall be determined by NCLT after the reconciliation of accounts between JAL and JIL and in terms of the directions contained in this judgment. [Para 217.1][896-F-G]

4. Adequate provision is required to be made by the resolution applicant for utilisation of the land bank of 758 acres on which, security interest of the lenders of JAL stands discharged in terms of the judgment of this Court in Anuj Jain. [Para 217.2][896-H; 897-A]

5. The matters aforesaid, one way or the other, relate to the commercial terms of the resolution plan and carry their own financial implications. [Para 217.3][897-A-B]

6. When several shortcomings are found in the resolution plan approved by the Committee of Creditors vis-à-vis the specified parameters, the plan cannot be approved and the matter is required to be sent back to the Committee of Creditors. But the course to be adopted in the present matter carries its own share of complications. [Para 218][897-B-C]

7. In this matter twice over in the past, this Court had to invoke its plenary powers under Article 142 of the Constitution of India, so that the insolvency resolution process concerning JIL could be taken to its logical fruition but within the discipline of IBC. Having regard to the circumstances, this Court had provided windows for completion of CIRP while essentially discounting on the time spent in the course of litigations. [Para 219][897-D]

8. In the judgment dated 09.08.2018 in Chitra Sharma, this Court revived the CIRP after taking note of the peculiarities of the case and later amendment to IBC whereby, the doubts about the status of homebuyers were removed and they were duly accorded the recognition as financial creditors. Then, in the judgment dated 06.11.2019 in Jaiprakash Associates Ltd., this Court provided another period of 90 days for completion of the CIRP from the date of judgment, after observing that delay in completion of CIRP was attributable to the process of law and neither the homebuyers nor any other financial creditor was to be blamed for pendency of the proceedings. This Court also observed that extraordinary situation had arisen because of constant experimentation at different levels due to lack of clarity on the matters crucial to the decision making process of CoC and besides, there had been further legislative changes whereby, the scope of resolution plan was expanded. This Court also took note of the fact that there was unanimity amongst all the parties appearing before the Court that liquidation of JIL must be eschewed and an attempt be made to salvage the situation by finding out some viable arrangement which could subserve the interests of all concerned. The Court further took into account the third proviso to Section 12(3) of the Code whereby, another period of 90 days was provided in relation to the pending insolvency resolution process. All these factors led this Court to issue directions under Article 142 of the Constitution of India for the second time in this matter, to do substantial and complete justice to the parties and in the interest of all the stakeholders. [Para 220][897-E-H; 898-A-B]

9. It appears that the resolution applicant, as also a large number of homebuyers of JIL having substantial voting share in CoC, carried a misplaced notion that the said amount of INR 750 crores and accrued interest has become an asset of JIL. At the same time, it appears that there had been lack of clarity as regards the treatment of contingent liability of the additional amount of compensation. The lack of clarity percolated in the decision of the Adjudicating Authority too, where it was assumed by the Adjudicating Authority that some of the questionable terms/stipulations of the resolution plan could be modified/ modulated by it. [Para 221][898-C-D]

10. The consequence and impact of the judgment of this Court in Anuj Jain dated 26.02.2020 was also not properly taken in comprehension by the Adjudicating Authority and, it was assumed by the Adjudicating Authority in its order dated 03.03.2020 that the entire ‘858’ acres of land stood discharged from the burden of security. Although the so-called correction of errors was carried out by the Adjudicating Authority on 17.03.2020 and the figure was corrected to ‘758’ acres but the consequences of such a material correction were not examined. [Para 221.1][898-E]

11. Nevertheless, encumbrance over 758 acres of land (which is said to be carrying a valuation of over INR 5000 crores) is removed; and availability of the said land parcel has a substantial impact on the position of assets and liquidity of the corporate debtor JIL. [Para 221.1][898-F]

12. The entire substratum of the corporate insolvency resolution concerning JIL has undergone a sea of change. The added features in the continuing processes had been that JAL asserts to have carried out several works to reduce its liability towards JIL and on the other hand, IRP has asserted to have carried out further construction works and having made Offers of Possession to several homebuyers. [Para 222][898-G-H]

13. Taking all the facts and circumstances into account and in keeping with the spirit and purport of the orders passed in the past, this Court is inclined to again exercise the powers under Article 142 of the Constitution of India and to enlarge the time for completion of CIRP concerning JIL while extending opportunity to the said resolution applicants Suraksha Realty and NBCC to submit modified/fresh resolution plans, which are compliant with the requirements of the Code and the CIRP Regulations and are in accord with the observations and findings in this judgment. [Para 223][899-A-B]

14.1. Accordingly, while once again exercising powers under Article 142 of the Constitution to do substantial and complete justice to the parties and in the interest of all the stakeholders of JIL, the matter regarding approval of the resolution plan stands remitted to the Committee of Creditors of JIL and the time for completion of the process relating to CIRP of JIL is extended by another period of 45 days from the date of this judgment. [Para 225.1][900-B]

14.2. The IRP is directed to complete the CIRP within the extended time of 45 days. For this purpose, it will be open to the IRP to invite modified/fresh resolution plans only from Suraksha Realty and NBCC respectively, giving them time to submit the same within 2 weeks from the date of this judgment. [Para 225.2][900-C]

14.3. The IRP shall not entertain any expression of interest by any other person nor shall be required to issue any new information memorandum. The said resolution applicants shall be expected to proceed on the basis of the information memorandum already issued by IRP and shall also take into account the facts noticed and findings recorded in this judgment. [Para 225.3][900-D]

14.4. After receiving the resolution plans as aforementioned, the IRP shall take all further steps in the manner that the processes of voting by the Committee of Creditors and his submission of report to the Adjudicating Authority (NCLT) are accomplished in all respects within the extended period of

45 days from the date of this judgment. The Adjudicating Authority shall take final decision in terms of Section 31 of the Code expeditiously upon submission of report by the IRP. [Para 225.4][900-E-F]

14.5. These directions, particularly for enlargement of time to complete the process of CIRP, are being issued in exceptional circumstances of the present case and shall not be treated as a precedent. [Para 225.5][901-A]

K. Sashidhar v. Indian Overseas Bank and Ors. (2019)

12 SCC 150: [2019] 3 SCR 845; Committee of

Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Ors.: (2020) 8 SCC 531: [2019]16 SCR 275; Maharashtra Seamless Limited v. Padmanabhan

Venkatesh and Ors. (2020) 11 SCC 467 and India Thermal Power Ltd. v. State of M.P. and Ors. (2000) 3 SCC 379 : [2000] 1 SCR 925 – relied on.

Chitra Sharma and Ors. v. Union of India and Ors. (2018) 18 SCC 575 : [2018] 12 SCR 1044; Jaiprakash Associates Limited and Anr. v. IDBI Bank Ltd. and Anr. (2020) 3 SCC 328; Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited Etc. Etc., (2020) 8 SCC 401; Pioneer Urban Land and Infrastructure Ltd. & Anr. v. Union of India & Ors. (2019) 8 SCC 416 : [2019] 10 SCR 381; Embassy Property Development Pvt. Ltd. v. State of Karnataka and Ors. (2019) SCC OnLine SC 1542; Swiss Ribbons Private Limited and Anr. v. Union of India and Ors. (2019) 4 SCC 17 : [2019] 3 SCR 535; Savitri Devi v. State of U.P. & Ors. (2015) 7 SCC 21 : [2015] 7 SCR 512; Kerala State Electricity Board and Anr. v. Kurien E. Kalathil and Ors. (2000) 6 SCC 293 : [2000]

1 Suppl. SCR 581; Municipal Corporation of Greater Mumbai (MCGM) v. Abhilash Lal and Ors. (2019) SCC OnLine SC 1479; Nand Kishore Gupta & Ors. v. State of U.P. & Ors. (2010) 10 SCC 282 : [2010] 11 SCR 356; Himachal Pradesh Housing and Urban

Development Authority and Anr. v. Ranjit Singh Rana (2012) 4 SCC 505 : [2012] 2 SCR 427; Commissioner of Income Tax, Madhya Pradesh & Bhopal v. Shrimati Sodra Devi AIR 1957 SC 832 : [1958] SCR 1; Kolkata Metropolitan Development Authority v. Gobinda Chandra Makal and Anr. (2011) 9 SCC 207 : [2011]

14 SCR 373; Indian Handicrafts Emporium and Ors. v. Union of India and Ors. (2003) 7 SCC 589 : [2003]

3 Suppl. SCR 43; CIT, Bangalore v. Venkateswara Hatcheries (P) Ltd. (1999) 3 SCC 632 : [1999] 2 SCR

177 and Union of India v. Sankalchand Himatlal Sheth and Anr. (1977) 4 SCC 193 : [1978] 1 SCR 423; State through Central Bureau of Investigation v.

Parmeshwaran Subramani and Anr. (2009) 9 SCC 729 : [2009] 14 SCR 385; Rathi Khandsari Udyog and Ors. v. State of Uttar Pradesh and Ors. (1985) 2 SCC 485 : [1985] 2 SCR 966; Dadi Jagannadham v. Jammulu Ramulu and Ors. (2001) 7 SCC 71 : [2001] 2 Suppl. SCR 60; Vodafone International Holdings BV v. Union of India and Anr. (2012) 6 SCC 613 : [2012] 1 SCR 573; Wg. Cdr. Arifur Rahman Khan & Ors. v. DLF Southern Homes Pvt. Ltd. & Ors. (2020) SCC OnLine SC 667; ONGC and Anr. v. Association of Natural Gas Consuming Industries and Ors. (2001) 6 SCC 627 : [2001] 1 Suppl. SCR 50 and South Eastern Coalfields Ltd. v. State of M.P. & Ors. (2003) 8 SCC 648 : [2003]

4 Suppl. SCR 651 – referred to.

Pradumna Kumar Jain v. U.P. Secondary Education Service Commission, Allahabad and Ors. (1997) 30 ALR 339; Gajraj and Ors. v. State of U.P. and Ors. (2011) SCC OnLine All 1711 – referred to.

Samuel Katkin and Doris Katkin v. Commissioner of Internal Revenue 570 F.2d 139 [Decision of the Court of Appeal for the 6th Circuit, USA]; White v. Elmdene Estates Ltd. 1959 ALL ER 605 – referred to.