NCLAT observed that the dissenting creditors and homebuyers cannot have their claims compared due to the differing nature of their claims and the agreed-upon terms.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) was hearing an appeal filed by the dissenting financial creditors and noted that the Dissenting Financial Creditors are entitled to receive payments as per Section 30(2)(b) of the Code.
The argument that the Financial Creditor is entitled to receive amounts as per security interest was rejected. The comparison of claims between dissenting financial creditors and homebuyers is inappropriate due to the differing nature of their claims and the agreed-upon terms.
In a recent judgment by the NCLAT, multiple appeals were adjudicated concerning the approval of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeals were filed by dissenting Financial Creditors Beacon Trusteeship Ltd. and ICICI Prudential Venture Capital Fund Real Estate Scheme I, challenging the orders of the Adjudicating Authority dated 02.12.2022 and 09.01.2023.
The case originated from a dispute over a redevelopment project involving the Maharashtra Housing and Area Development Authority (MHADA), a Housing Society, and Radius Estates and Developers Pvt. Ltd. (Corporate Debtor). Beacon Trusteeship Ltd., acting as a debenture trustee, initiated a Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to stalled construction and financial distress.
The Resolution Plan proposed by Adani Goodhomes Pvt. Ltd. was approved by the Committee of Creditors (CoC) on 27.12.2021, securing 83.99% of the vote shares. This Plan focused on injecting interim finance and restarting construction as per the terms outlined in the Request for Resolution Plan (RFRP).
Dissenting Financial Creditors contested the approval, arguing that the Resolution Plan disproportionately favoured Homebuyers and imposed significant haircuts on their claims. They also alleged procedural irregularities and valuation discrepancies in the approval process.
After hearing arguments from all parties, including the Resolution Professional (RP) and the Successful Resolution Applicant (SRA), the NCLAT upheld the decisions of the Adjudicating Authority. It found that the Resolution Plan complied with Section 30 of the IBC and that the CoC had exercised its commercial judgment in approving the Plan.
The judgment underscored that dissenting Financial Creditors are entitled to receive payments as per Section 30(2)(b) of the Code, which does not necessarily equate to the liquidation value of their assets. The NCLAT dismissed allegations of procedural lapses, affirming the fairness and equity of the Resolution Plan that included provisions for construction restart and interim finance to revive the project.
Ultimately, the NCLAT dismissed the appeals by Beacon Trusteeship Ltd. and ICICI Prudential Venture Capital Fund Real Estate Scheme I, thereby upholding the approval of the Resolution Plan and emphasizing the importance of respecting CoC decisions in such matters.
In the NCLAT judgment, the Tribunal examined the distribution of assets in an insolvency case involving a corporate debtor, highlighting the transfer of units to unsecured creditors, particularly Homebuyers, instead of secured creditors. It emphasized that the comparison of claims between dissenting financial creditors and Homebuyers was inappropriate due to the differing nature of their claims and the agreed-upon terms of allotment and consideration.
The Tribunal referenced previous judgments, including Sabari Realty Private Limited v. Sivana Realty Private Limited and Others, REEDLAW 2023 NCLAT Del 11507, where Homebuyers were categorized based on their mortgage-related entitlements. This categorization was upheld as fair under the approved Resolution Plan, ensuring equitable treatment under the law.
Further, the Tribunal cited legal principles from Supreme Court decisions, stressing the requirement for fair and equitable treatment among creditors regardless of their categories. It reiterated that the commercial judgment of the CoC in approving Resolution Plans, including differential payments to creditors, should not be overturned unless statutory provisions are violated.
Regarding dissenting financial creditors seeking higher payouts based on their security interests, the Tribunal referenced precedents such as India Resurgence ARC Private Limited v. Amit Metaliks Limited and Another, REEDLAW 2021 SC 05523 and Edelweiss Asset Reconstruction Limited v. Anuj Jain, Resolution Professional of Ballarpur Industries Limited and Others, REEDLAW 2023 NCLAT Del 07514. These cases established that dissenting financial creditors cannot demand payments exceeding the amount stipulated in Section 30(2)(b) of the IBC. The Tribunal also cited cases where such claims were rejected in favour of adhering to the commercial wisdom of the CoC.
In conclusion, the NCLAT upheld the Adjudicating Authority's approval of the Resolution Plan, citing compliance with statutory provisions and the detailed considerations undertaken by the CoC. It dismissed challenges by dissenting financial creditors, emphasizing that their entitlement to payment must strictly adhere to the provisions set forth in the Insolvency and Bankruptcy Code.
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