The NCLAT, New Delhi Bench opined that a related cannot be allowed to participate in CoC’s voting share. 

In the present case, it was noted that the resolution plan was approved by homebuyer as a class. Appellant therefore becomes a minority of that class and hence, could not be allowed to challenge the Resolution Plan which has received approval of class of homebuyers on the basis of majority of votes of homebuyers. 

The Bench further ruled that commercial wisdom of the Committee of Creditors, which has approved the Resolution Plan under which different treatment has been given to ‘Affected Homebuyers’ and ‘Unaffected Homebuyers’, cannot be faulted. 

Brief Facts: 

The present 3 appeals have been filed against the NCLT’s order of same date but different orders in different application. 

One appeal is against the order for application of the Appellant seeking rejection of resolution plan by Successful Resolution Applicant (Respondent No.2). 

Another is against the order vide which rectification of the Register of Member of the Corporate Debtor sought was dismissed. 

Third appeal is against the order vide which Resolution Plan submitted by Respondent No.2 was allowed. 

Brief Background: 

In the year 2008, Appellant alongwith its sister concern – ‘Sabari Developers LLP’ acquired 11.31% and 26.38% share of the Corporate Debtor and advanced INR 7 crores loan. 

A mortgage deed was executed as per which Corporate Debtor was required to take prior written permission of LIC before sale or creation of any third-party rights over the aforesaid mortgaged properties. 

A Memorandum of Settlement dated 31.10.2018 was entered between the Vira Group and SHIPL where the shareholders of the Corporate Debtor including the Appellant as part of a larger settlement agreed to transfer their entire shareholding in favour of the Vira Group. 

Thereafter, Appellant issued a notice to Vira Group alleging failure to issue Allotment letter and failure to pay Share Purchase consideration. 

CIRP was initiated against the Corporate Debtor on an application filed by ‘Spartan Engineering Industries Pvt. Ltd.’. Mr. Manish Jaju (Respondent No.2) was appointed as the Resolution Professional. 

Initially, claim of Appellant was not accepted, thereafter Appellant’s claim as Homebuyers/Allottees/ Financial Creditors in a class in respect of 25 flats was admitted. 

Appellant was not allowed to participate in CIRP as it was a related party. 

Contentions of the Appellant: 

It was contended that the Appellant was not a related party.  Further, Respondent No.3 and its associates in spite of being related party were allowed to participate in the CoC whereas they having shareholding in the Corporate Debtor could not be member of the CoC 

It was further contended that there could be no differential treatment between same class of creditors i.e Homebuyers/allottees. 

Contentions of the Resolution Professional:

It was argued that the Appellant was reflected as the shareholder in the books of accounts of the Corporate Debtor as on the date of commencement of CIRP and hence was a related party. 

It was further contended that the allotment made to the group of homebuyers classified as ‘Affected Allottees’ were those whose allotments were made without taking NOC from the LIC Housing Finance Ltd. to whom the project was mortgaged. Allotment in favour of the Appellant without NOC of LIC was no allotment and rightly been treated as void in the plan, however, fresh allotments have been made in favour of the Affected Parties on the basis of sum received by the Affected Parties 

 Contentions of the Successful Resolution Applicant: 

It was argued that Appellant has no locus standi to challenge the plan which was approved by majority of CoC. 

Observations of the Tribunal: 

It was observed that Appellant was reflected as shareholder on the date of commencement of the CIRP and himself had given declaration to this effect which is why the Resolution Professional proceeded to classify the Appellant as related party. 

It was ruled that the Appellant was a related party and hence, rightly not allowed to participate in CoC’s voting share. 

As for Respondent No.3 being a shareholder and a related party, it was held that it has only 16% shareholding and hence, it would be a related party. 

 

It was noted that the resolution plan was approved by homebuyer as a class. Appellant therefore becomes a minority of that class and hence, could not be allowed to challenge the Resolution Plan which has received approval of class of homebuyers on the basis of majority of votes of homebuyers. 

Noting that there was a rationale for different treatment of two sets of homebuyers in view of the allotment to the homebuyer with/without NOC of the Mortgagee, it was opined that there could be a differential treatment. 

The Bench opined that commercial wisdom of the Committee of Creditors, which has approved the Resolution Plan under which different treatment has been given to ‘Affected Homebuyers’ and ‘Unaffected Homebuyers’, cannot be faulted. 

The decision of the Tribunal: 

Based on the aforementioned reasons, the appeals were accordingly dismissed. 

Case Title: Sarabi Realty Pvt. Ltd. V. Sivana Realty Private Limited with connected matters 

Case No.: Company Appeal (AT) (Insolvency) No.1162 of 2023 with connected matters 

Coram: Justice Ashok Bhushan (Chairperson),  Barun Mitra (Technical Member), Arun Baroka (Technical Member),

Advocates for Appellant: Advs. Mr. P. Nagesh, Mr. Akshay Sharma, Mr. Prashant Kumar Nai 

Advocates for Respondent: Advs Mr. Abhijeet Sinha, Mr. Dhaval Deshpande, Mr. Manish Jaju,Mr. Arun Kathpalia, Mr. Vishesh, Mr. Vinit Trehan, Mr. Aditya Dhopar, Mr. Nipun Singh Kalra, Mr. Akshay Jain, Mr. Krishnendu Datta, Sr. Advocate with Mr. Lzafeer Ahmad B.F, Mr. Rajdeep Saraf, Ms. Neha Agarwal

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