NATIONAL COMPANY LAW APPELLATE TRIBUNAL

PRINCIPAL BENCH, NEW DELHI

Company Appeal (AT)(Insolvency) No. 1214 & 1215 of 2023

[Arising out of orders dated 11.08.2023 passed by the Adjudicating

Authority, National Company Law Tribunal, Mumbai Bench in I.A. No.
1777 of 2021 and I.A. No. 1150 of 2021 in CP(IB) No. 2995/MB/2019]

IN THE MATTER OF:

Ms. Amita Saurabh Bihani

Block No: 16/16, Trimurti Residency,
JB Nagar, Andheri (East),
Mumbai, Maharashtra - 400 059

Mrs. Madhu Pradeep Bihani

Block No: 16/16, Trimurti Residency,
JB Nagar, Andheri (East),
Mumbai, Maharashtra - 400 059

Mrs. Roma Moti Thakur

Flat No. 05, Helicon Castle,
Plot No.75, Mahatma Nagar,
Nashik, Maharashtra - 422 007

Mr. Ashok Mulchand Khatpal

Plot No.26, Sneh Bungalow, Dsouza Colony,
College Road, Nashik,
Maharashtra - 422 005 .....Appellants

Versus

E&G Global Estates Limited

Through the Resolution Professional,
Having address at:
502, Brookfield Society,
Old Lokhandwala Complex Road, Opposite
Ashok Academy, Andheri (W),
Mumbai, Maharashtra - 400 053 ...Respondent No.1

Mr. Gajesh Labhchand Jain

Resolution Professional of
E&G Global Estates Limited
Having address at:
502, Brookfield Society,
Old Lokhandwala Complex Road, Opposite
Ashok Academy, Andheri (W),
Mumbai, Maharashtra - 400 053 ...Respondent No.2
Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
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Mrs. Asha Sanap,
Successful Resolution Applicant,
Having address at:
Aikya Bunglow, Plot No.27,
Ashvin Co-Operative Housing Society,
Jay Bhavani Road, Nashik Road,
Nashik, Maharashtra - 422 101 ...Respondent No.3

Dnyaneshwar Chaudhari
Suspended Director of the Corporate Debtor,
Ideal Apartment, Near Khanderao Mandir,
Sharmik Nagar, Satpur, Nashik,
Maharashtra - 422 012 ...Respondent No.4

Mr. Ganesh K Ahire,

Suspended Director of the Corporate Debtor,
Flat No.1, Nikita Pride, Date Nagar,
Ayodhya Colony, Next to Akashwari Tower,
Gangapur Road, Nashik,
Maharashtra - 422 013 ...Respondent No.5

Mr. Hiraman Patil,

Suspended Director of the Corporate Debtor,
PL 3 & 4, I/F Godavari Heights,
Savarkar Nagar, Opposite Shri
Swamisamarth Temple,
Nashik, Maharashtra – 422 007 ...Respondent No.6

Small Industrial Development Bank of India

Specialized Asset Recovery Branch (SARB),
Smarudhi Venture Park, Upper Ground Floor,
MIDC Road, MIDC Marol, Andheri (East),
Mumbai, Maharashtra - 400 093 ...Respondent No.7

Present:

Appellants: Mr. Krishnendu Datta, Sr. Advocate with Mr.

Pranjit Bhattacharya, Ms. Raj Sarit Khare,
Advocates.

For Respondents: Mr. Sumesh Dhawan, Mr. Saurya Shyam, Mr.

Sagar Thakkar and Mr. Raghav Dembia,
Advocates for SRA.

Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
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 Mr. Gaurav Mitra, Mr. Aman Varma, Ms. Riya S.
Wasade, Advocates for R-4, 5 & 6.

With

Company Appeal (AT)(Insolvency) No. 1217 & 1218 of 2023

[Arising out of orders dated 11.08.2023 passed by the Adjudicating

Authority, National Company Law Tribunal, Mumbai Bench in I.A. No.
1609 of 2021 and I.A. No. 1150 of 2021 in CP(IB) No. 2995/MB/2019]

IN THE MATTER OF:

G.S. Constructions
(Through its sole proprietor,
Shri Sushil Uttarwar)
Office No.301, 3rd Floor, Divine Tej,
Opposite Kilbil School,
Thatte Marg, College Road,
Nashik, Maharashtra – 422 005 …Appellant

Versus

E & G Global Estates Ltd.

Through the Resolution Professional
502, Brookfield Society,
Old Lokhandwala Complex Road,
Opposite Ashok Academy,
Andheri (W), Mumbai – 400 053 …Respondent No.1

Gajesh Labhchand Jain

Resolution Professional of E&G Global
Estates Limited
502, Brookfield Society,
Old Lokhandwala Complex Road,
Opposite Ashok Academy
Andheri (W), Mumbai-400 053 …Respondent No.2

Jitender Kothari,
Authorized Representative of Class Of
Creditors Homebuyers of E&G Global
Estates Limited
702, Orchid A Wing, Evershine Park
Off Veera Desai Road, Andheri (W)
Mumbai- 400 053 …Respondent No.3

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Asha Sanap
Successful Resolution Applicant of E&G
Global Estates Limited
Aikya Bunglow, Plot No. 27, Ashvin
Co-operative Housing Society,
Jay Bhavani Road,
Nasik Road, Nashik – 422101 …Respondent No.4

Small Industries Development Bank of India

Specialized Asset Recovery Branch (SARB),
Samrudhi Venture Park,
Upper Ground Floor,
IDC Road, MIDC Industrial Area,
Marol, Andheri (East), Mumbai – 400093 …Respondent No.5

Bela Gujarati
3, Datta Bhavan, N.D. Patel Road,
Opp. S.T. Workshop, Nashik – 422001 …Respondent No.6

Pallavi Girish Malani

Shankar Kunj Bunglow, Jagtap Malani,
Nisarg Datta Mandir, Near Taran Talav,
Nashik – 422 101 …Respondent No.7

Govind Malani
04 Shankar Kunj Jagtap,
Nisarga Datt Nagar Jagtap,
Maala Nashik Road – 422101 …Respondent No.8

Madan Vallabhdas Devi

Plot No. 11, Raghav, Ramdas Colony,
Behind Seva Hospital, Canada Cover,
Nashik – 422005 …Respondent No.9

Mina Gopal Gokhale

8 Archana CHS, Sector 17, Plot No. 18,
Vashi, Navi Mumbai – 400705 …Respondent No.10

Gaurav Anil Mahajan

702, Orchid A Wing, Evershine Park
Off Veera Desai Road, Andheri (W)
Mumbai- 400 053 …Respondent No.11

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Gokulsingh Morkar
Flat No. 12, The Imperial Heights,
Off Gangapur Road, Riverfront Cruiseway,
Chandshi, Nashik – 422003 …Respondent No.12

Present:

Appellant: Mr. Abhijeet Sinha, Mr. Abhirup Dasgupta, Ms.

Jayashree Shukla, Mr. Ishaan Duggal and Ms.
Mukta Halbe, Advocates.

For Respondents: Mr. Sumesh Dhawan, Mr. Saurya Shyam, Mr.

Sagar Thakkar and Mr. Raghav Dembia,
Advocates for SRA.

Mr. Gaurav Mitra, Mr. Aman Varma, Ms. Riya S.

Wasade, Advocates

Mr. Parvindra Nutiyal, Advocate

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

These two sets of appeals have been filed challenging the impugned

orders dated 11.08.2023 passed in I.A. Nos. IA No.1777, 1150 and 1609 of

2021 by the Adjudicating Authority in CP (IB) No.2995/MB/2019. The first

set of appeal filed under Section 61 of Insolvency and Bankruptcy Code, 2016

(“IBC” in short) by the Appellants/Homebuyers (hereinafter referred to as

‘Appellants-1’) arises out of the Order dated 11.08.2023 (hereinafter referred

to as “First Impugned Order”) passed by the Adjudicating Authority (National

Company Law Tribunal, Mumbai Bench-V) in IA No.1777 of 2021 in CP (IB)

No.2995/MB/2019. By the first impugned order, the Adjudicating Authority

dismissed the challenge raised by the Appellants-1 to the constitution of the

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Committee of Creditors (“CoC” in short) for the purposes of initiating

Corporate Insolvency Resolution Process (‘CIRP’ in short) against the

Corporate Debtor. These Appellants have also challenged another Order dated

11.08.2023 (hereinafter referred to as “Second Impugned Order”) passed by

the said Adjudicating Authority in IA No.1150 of 2021 in the same company

petition at supra by which the resolution plan of the Successful Resolution

Applicant has been approved. The second set of appeal filed by M/s. G.S.

Constructions (hereinafter referred to as ‘Appellant-2’) also arises out of the

Order dated 11.08.2023 (hereinafter referred to as “Third Impugned Order”)

in I.A. 1609 of 2021 wherein the same Adjudicating Authority dismissed the

challenge raised by this Appellant to the constitution of the CoC. This

Appellant has also challenged the second impugned order passed by the same

Adjudicating Authority in IA No.1150 of 2021 approving the resolution plan

of the Successful Resolution Applicant.

2. The factual matrix in both the appeals shares commonality and facts

which are of relevance in deciding the two appeals are as outlined below: -

 SIDBI–Financial Creditor filed a Section 7 application under IBC to

initiate CIRP against the Corporate Debtor, namely, E & G Global

Estates Ltd. in CP(IB) No. 2995 of 2019 which was admitted on

24.06.2020.

 The interim Resolution Professional was confirmed as Resolution

Professional (“RP” in short) in the 2nd CoC meeting held on 01.09.2020.

The same meeting also appointed a Forensic Auditor to undertake

forensic audit of the books of account of the Corporate Debtor.

 The RP constituted the CoC with SIDBI having 20.40% vote share and

Home Buyers as class of creditors with 79.60% vote share. The Home

Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
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 Buyers appointed an Authorized Representative to represent their

interests in the CoC.

 The Appellants -1 filed an IA No. 1430 of 2020 in respect of fraudulent

transactions entered between certain set of suspect/fraudulent home

buyers and suspended Director of the Corporate Debtor seeking the

quashing of the CoC and reconstitution thereof. The Adjudicating

Authority disposed of the said IA on 16.09.2020 stating that the

outcome of the forensic audit which had been sought by the CoC would

provide the way forward.

 The Forensic Auditor, appointed on 01.09.2020, submitted its report

(“FAR” in short) on 14.01.2021 basis which the RP filed IA 107 of 2021

under Section 66 of the IBC on the fraudulent and circuitous

transactions by certain home buyers with the suspended directors of

the Corporate Debtor. The RP had sought cancellation of their voting

rights as they were not Financial Creditors and for having filed

fraudulent claims. Relief was also sought against the suspended

directors for returning money back to the Corporate Debtor which had

been siphoned off through circular transactions.

 The Adjudicating Authority in the matter of IA 107 of 2021 directed

the removal of these home owners from the CoC and reconstitution of

the CoC by the RP on 17.11.2021. This order of the Adjudicating

Authority was however challenged before this Tribunal in

CA(AT)(Ins)No 26 of 2022 by the homebuyers who had been removed

from the CoC. This matter was remanded back to the Adjudicating

Authority for reconsideration without entering into the merits of the

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 matter by this Tribunal on 08.03.2022. The IA 107 of 2021 continues

to remain pending.

 The RP also filed IA No. 149 of 2021 under Sections 43 to 45 of the

IBC for preferential transactions to bring back the amount siphoned

through fraudulent/circuitous transactions in which adjudication

remains pending.

 In the interim, in pursuance to duly published Form G, the CoC

received resolution plans from 3 prospective resolution applicants

namely, G.S. Constructions (sole proprietorship of Sushil Uttarwar);

Mrs. Archana Sanap and Mrs. Asha Sanap.

 The 8th CoC meeting held on 20.04.2021 approved the resolution plan

submitted by Asha Sanap with 79.60% vote share.

 Thereafter the RP filed IA No. 1150 of 2021 seeking approval of the

resolution plan of Asha Sanap which was approved by the

Adjudicating Authority vide second impugned order on 11.08.2023.

Both Appellants-1 and Appellant-2 have come up in appeal against

this impugned order approving Asha Sanap as the Successful

Resolution Applicant (“SRA” in short).

 While the IA 107/2021 was still pending before the Adjudicating

Authority, the Appellants-1 filed IA No. 1777 of 2021 praying for

removal of alleged illegitimate home owners from the CoC and to

disregard the votes cast by them during 8th CoC meeting; reconstitute

the CoC with genuine home buyers; conduct forensic audit of the

accounts of related parties of the Corporate Debtor and to approve the

resolution plan submitted by M/s. G.S. Constructions (‘GSC’ in short)

Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
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 on grounds of being a superior and commercially viable plan than that

of the SRA.

 The IA No. 1777 of 2021 was dismissed by the Adjudicating Authority

vide first impugned order on 11.08.2023 which order has been

assailed by the Appellants-1 in the present appeal.

 Appellant-2 filed IA No. 1609 of 2021 praying for removal of alleged

illegitimate home owners from the CoC; reconstitute the CoC and call

for fresh voting besides rejection of resolution plan by SRA. This IA

1609 of 2021 was rejected by the Adjudicating Authority vide third

impugned order on 11.08.2023 which order has been assailed by

Appellant-2.

 Aggrieved by the first, second and the third impugned orders, both the

Appellants have come up in appeal.

3. More or less identical submissions were made by Learned Senior

Counsel for Appellants-1 and Learned Counsel for Appellant-2 and hence for

reasons of convenience both their pleadings/arguments are being summed

up together. Making their submissions, it was submitted that the Appellants-

1 had filed IA 1430 of 2020 before the Adjudicating Authority seeking the

quashing of the irregularly constituted CoC since illegitimate home buyers

who had entered into fraudulent and circuitous transactions with the

suspended directors of the Corporate Debtor were included in the CoC by the

RP. The Adjudicating Authority in its orders dated 16.09.2020 disposed of IA

1430 by observing that conduct of forensic audit would address these

concerns. It was submitted that their apprehensions of fraudulent and

circuitous transactions were validated by the FAR dated 14.01.2021. It was

submitted that the Appellant-2 had also made similar prayers in IA1609 inter

Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
9
alia to set aside the existing CoC of the Corporate Debtor and declare the

decisions taken by them in the CIRP proceedings as void and non-est; to

reconstitute the CoC and call for fresh votes on each Resolution Plan and to

direct the RP to conduct a thorough investigation on the purported

transactions entered into by the fraudulent home buyers and that Resolution

Plan of SRA be rejected.

4. It was further submitted that the RP admitted the claims of these

illegitimate home owners who had committed irregularities by way of

fraudulent transactions and gave them access to the CoC at a time when in

IA 107 of 2021, the RP had himself prayed for reconstitution of the CoC.

Further the RP not only allowed their entry into the CoC but also allowed

these illegitimate home buyers to discuss and approve the resolution plan.

Had the votes of the illegitimate home owners been excluded, the results of

the voting on the resolution plan of SRA would have been different. It has,

therefore, been contended that when the composition of the CoC itself is under

cloud and the question of reconstitution of CoC was still pending in IA 107 of

2021, the approval of the resolution plan of the SRA by the Adjudicating

Authority was against the fundamental tenets of IBC. The Appellants have

relied on the judgment of this Tribunal in Jayanta Banerjee v. Shashi

Agarwal and Anr. in CA (AT) (Ins.) No. 348 of 2020 (‘Jayanta’ in short)

which has held that if the constitution of CoC is a nullity in the eye of law,

the entire CIRP process is vitiated. In support of their contention, they have

also relied upon the judgment of this Tribunal on similar lines in Hindalco

Industries Ltd. v. Hirakud Industrial Works Ltd. & Ors. in CA (AT) (Ins.)

No. 42 of 2022 (‘Hindalco’ in short) in that if related parties are allowed on

the CoC, it is sufficient to render the constitution of CoC illegal and their

Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
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decisions null and void. Submitting that a resolution plan approved by a

wrongly constituted CoC is invalid and non-est in the eyes of law, it was also

articulated that the resolution plan of the SRA was commercially less viable

than the plan submitted by another resolution applicant, namely, GSC.

5. The Learned Counsels appearing for the SRA and suspended directors

of the Corporate Debtor have opposed the submissions made by both set of

Appellants. Since their submissions largely overlap, the same have been

clubbed together. It has been contended that IA 1777 of 2021 was filed by the

Appellants-1 challenging the constitution of CoC only after the rejection of the

resolution plan of GSC as an after-thought. Prior to the approval of the

resolution plan of the SRA, the Appellants never raised any objections to the

constitution of the CoC and had in fact participated in the voting process

without any protest or demur. That the Appellants-1 in IA 1777 of 2021 had

also prayed for approval of the resolution plan of GSC manifests their motive

which was to revive the rejected resolution plan of GSC though it had failed

to secure the requisite majority votes in favour. This shows that their motives

are not bona fide in that they aimed only to derail the CIRP process and to

somehow manage approval of the resolution plan of GSC.

6. It was also contended that the grounds of non-joinder of necessary

parties cited by the Adjudicating Authority in rejecting IA 1777 of 2021 was

also right as the alleged suspect/fraudulent homebuyers whose removal from

the CoC was sought had not been impleaded by the Appellants-1. Even the

RP had been kept away from the list of parties. Even the Appellant-2 in

IA1609/2021 had sought the removal of certain alleged fraudulent home

buyers from the CoC but failed to implead them as parties to its application.

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It had only arrayed the RP and the Authorized Representative as parties before

the Adjudicating Authority. It was also argued that the alleged suspect home

buyers have been impleaded only at the appeal stage without seeking leave of

this Tribunal to implead additional parties who were not parties in the

application before the Adjudicating Authority.

7. In support of their contention, the Learned Counsel for the SRA has

relied upon the judgment of the Hon’ble Supreme Court in the case of

Moreshar Yadaorao Mahajan v. Vyankatesh Sitaram Bhedy LR & Ors.

(2022) SCC OnLine SC 1307 wherein it has been held that in the absence of

a necessary party, in whose absence no effective decree could be passed by

the Court, the suit itself is liable to be dismissed.

8. It was also contended that in terms of Section 25(2)(j) of the IBC, it is

the duty of the RP to file applications for avoidance of transactions. The

Appellants-1 being homebuyers of the Corporate Debtor and Appellant-2

being an unsuccessful resolution applicant are not entitled to file such

avoidance applications. Hence on this count itself the IA 1777 was not

maintainable. Further even if the issue of avoidance application merits

consideration, in terms of Section 26 of IBC, there was no requirement to put

the process of approval of the resolution plan into abeyance.

9. It has also been contended that the Appellants being individual home

buyers who by themselves constitute only a minority of the entire financial

creditor in class cannot object to the resolution plan of SRA once it has been

approved by the requisite majority of the homebuyers. It is also submitted

that the Hon’ble Supreme Court in the case of Jaypee Kensington

Boulevard Apartments Welfare Association and Ors. Vs. NBCC (India)

Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
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Ltd. and Ors. (2022)1 SCC 401 (‘Jaypee’ in short) has categorically held

that individual home buyers constituting the financial creditors cannot object

to the resolution plan once such resolution plan has been approved by the

requisite majority of the homebuyers.

10. We have duly considered the arguments advanced by the Learned

Counsel for the parties and perused the records carefully.

11. We propose to start with the tenability of the first impugned order of

the Adjudicating Authority in IA 1777/2021. It is the contention of the

Appellants-1 that they are legitimate owners of Holiday Homes developed by

the Corporate Debtor and that they are part of CoC with 16.53% vote share.

The Appellants-1 claim that they have reasonable grounds to feel aggrieved

as the RP had admitted the claims of certain illegitimate home owners who

had committed irregularities which amounted to fraudulent transactions and

made them part of the CoC. It was asserted that in IA No. 1430 of 2020, the

Adjudicating Authority was convinced of dubious transactions undertaken by

the suspended directors of the Corporate Debtor with the illegitimate home

owners which had led to ordering of forensic audit of the books of account of

the Corporate Debtor. The FAR had clearly set out the fact that fraudulent

and circuitous transactions were actually carried out by some home owners

and suspended directors.

12. It is also the case of the Appellants that in view of the clear findings of

the FAR, the RP had filed IA No. 107/2021 for fraudulent transactions under

Section 66 of the IBC and IA No. 149 of 2021 for preferential transactions

under Section 43-45 of IBC and prayed that the illegitimate home owners be

removed from the CoC and their voting rights cancelled. Submitting that the

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IA 107/2021 was still pending, the Adjudicating Authority without deciding

on the said IA should not have dismissed IA No. 1777 of 2021 filed by them

praying for removal of alleged illegitimate home owners from the CoC and to

disregard the votes cast by them during CoC meetings as well as to

reconstitute the CoC with genuine home buyers. Under such circumstances,

where 17 out of 53 home buyers had irregularly and illegally gained access to

the CoC, it has been the contention of the Appellants-1 that the constitution

of CoC was clearly rendered illegal and decisions taken by the said CoC is

invalid.

13. Before we delve into the sustainability of the first impugned order of the

Adjudicating Authority in IA 1777/2021, it would be constructive to note the

status of IA 107/2021 as filed by the RP seeking reconstitution of the CoC. It

is the claim of the Appellants-1 that the Adjudicating Authority in its order

dated 17.11.2021 in IA 107/2021 had removed the alleged fraudulent home

buyers from the CoC. On the other hand, it is the counter claim of the

Respondents that the said order was challenged by the expelled home buyers

before this Tribunal in CA(AT)(Ins)No 26 of 2022 and was set aside by this

Tribunal on 08.03.2022 and the matter remanded back for reconsideration

by the Adjudicating Authority. Perusal of the said order of this Tribunal clearly

shows that in para 8 it has held that the Adjudicating Authority had passed

the orders on 17.11.2021 under the wrong impression that the entire money

invested by the suspect home buyers was routed back, which obviously not

being the position, the same ought to have been cleared by the Resolution

Professional before the Adjudicating Authority. This Tribunal had accordingly

set aside the order of the Adjudicating Authority without expressing any

opinion on merits and remitted the matter for reconsideration of the

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Adjudicating Authority after hearing the parties afresh. Thus, we hold that

the earlier order of the Adjudicating Authority on IA 107/2021 removing

certain home buyers from the CoC having been set aside does not hold good.

14. Coming to the tenability of the first impugned order, it is the contention

of the Appellants-1 that the impugned order in IA 1777/2021 reflects non-

application of mind by the Adjudicating Authority. Though grave allegations

were raised by them on the constitution of the CoC, and IA 107 was still

pending, these facts were disregarded by the Adjudicating Authority without

examining the merits of the same or providing reasons for negating the same.

The CoC was illegally constituted with illegitimate home buyers who had

entered into collusive arrangements with the suspended directors of the

Corporate Debtor and voting undertaken for approval of the resolution plan

with a CoC comprising of such illegitimate home buyers. If the votes of the

illegitimate home owners were excluded, which should have been the right

course of action on the part of the RP, the results of the voting on the

resolution plan of SRA would have been different. Relying on the judgments

of this Tribunal in Jayanta and Hindalco supra, it was contended that the

RP by allowing related parties of the Corporate Debtor to become members of

the CoC made the constitution of CoC illegal and rendered decisions

undertaken by such an irregularly constituted CoC to be null and void.

15. It may be useful at this stage to notice the first impugned order and

would like to extract hereinunder the relevant observations and conclusions

arrived therein:

“14. It has further been observed by this Bench that the Resolution

Professional, who has admitted the claims of the homebuyers under

challenge has not been made a party in the present Interlocutory

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 Application. Further, the allottees, whose claims have been challenged in

the present IA, are also not made a party in this IA. In the given situation

no order can be passed at the back of such allottees without providing them

an opportunity of being heard.

15. This bench has further observed that the present application is filed by

the owners of holiday homes/villas in the Project collectively having

25.55% voting share in the COC out of which 2 applicants namely Applicant

nos. 3 & 4 having 2.85% and 3.17% voting share have already sought

removal of their names form the present application which had been

allowed by this Bench vide daily order dated 04.05.2023. Furthermore, the

individual homebuyers who have been sought to be removed from the list

of home buyer/ Committee of Creditors constitute just about 12% voting

share in the COC. Therefore, assuming if their names are excluded, even

that would not alter the final outcome and the plan of Mrs. Asha Sanap

would still fetch more than 66% of voting share. Even otherwise, the

applicants as the Home Buyers do not have any locus to agitate as to which

plan should be approved especially when the Home buyers as a class

having 79.60% voting share have voted in favour of the Resolution Plan

submitted by Mrs. Asha Sanap.

16. Even otherwise, the Applicants being the individual home buyers, as

per the terms of Section 25-A(3-A) of IBC, can vote only through the

Authorised Representative who is required to cast the vote on behalf of the

Creditors in class after taking into account majority percentage of the

Homebuyers against or in favour of a particular Resolution Plan. The

relevant extract of Section 25-A(3-A) of IBC is as under:

25A. (1) The authorised representative under sub-section (6) or sub-

section (6A) of sect 21 or sub-section (5) of section 24 shall have the

right to participate and vote in meetings of the committee of creditors

on behalf of the financial creditor he represents in accordance with

Company Appeal (AT) (Ins.) No. 1214 & 1215 of 2023 and 1217 & 1218 of 2023
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 the prior voting instructions of such creditors obtained through

physical or electronic means.

(3A) Notwithstanding anything to the contrary contained in sub-

section (3), the authorised representative under sub-section (6A) of

section 21 shall cast his vote on behalf of all the financial creditors

he represents in accordance with the decision taken by a vote of

more than fifty per cent of the voting share of the financial creditors

he represents, who have cast their vote:

17. In the instant case, the class of creditors (i.e. Home Buyers) have voted

in favour of Resolution Plan of Mrs. Asha Snap with 42.03% voting which

represents more than 50% of the total voting strength of their class

i.e.79.60%. Therefore, the entire vote (i.e. 79.60%) would be considered to

have been cast in favour of the plan submitted by Mrs. Asha Sanap, as

required in terms of provisions of the Code.

18. In view of the above, the objections raised by the Applicants in an

individual capacity as a home buyer are inconsequential as they represent

homebuyers in minority and are thus bound by the decision taken by the

majority within the class of homebuyers. In this regard, reliance can be

placed as the law laid down by the Hon'ble Supreme Court in Jaypee

Kensington Boulevard Apartments Welfare Association and Ors. Vs.

NBCC(India) Ltd. and Ors.(2022)1 SCC 401 wherein it was held that when

Homebuyers as a class have voted in favour of the Resolution Plan, any

particular constituent of that class cannot be heard in opposition to the

Resolution Plan by way of objection as there is no concept of dissenting

homebuyers within Creditors in class. The relevant extracts of this

judgement are reproduced below:-

"164.4 Having regard to the scheme of IBC, and the law declared by

this Court, it is more than clear that once a decision is taken, either

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 to reject or to approve a particular plan, by a vote of more than 50%

of the voting share of the financial creditors within a class, the

minority of those who vote, as also all others within that class, are

bound by that decision. There is absolutely no scope for any

particular person standing within that class to suggest any

dissention as regards the vote over the resolution plan. It is obvious

that if this finality and binding force is not provided to the vote cast

by the authorize representative over the resolution plan in

accordance with the majority decision of the class he is authorized

to represent, a plan or resolution involving large decision of the class

he is authorized to represent, a plan or resolution involving large

number of parties (like an excessively large number of homebuyers

herein) may never fructify and the only result would be liquidation,

which is not the prime target of the Code. In the larger benefit and

common good, the democratic principles of the determinative role of

the opinion of majority have been duly incorporated in the scheme

of the Code, particularly in the provisions relating to voting on the

resolution plan and binding nature of the vote of authorized

representative on the entire class of the financial creditor/s he

represents.

170. To sum up this part. of discussion, in our view, after approval

of the resolution plan of NBCC by CoC, where homebuyers as a

class assented to the plan, any individual homebuyer or association

cannot maintain any challenge to the resolution plan nor could be

treated as carrying any legal grievance.

171. Once we have held that these dissatisfied homebuyers and

associations are not entitled to put up any challenge to the resolution

plan contrary to the decision of the requisite majority of their class,

all their objections are required to be rejected outright...."

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 19. In the light of what has been held by the Hon'ble Supreme Court in the

afore-cited judgment it becomes abundantly clear that Home Buyers can

vote for or against the Plan only as a class and if there are some Home

Buyers pitted against the Resolution Plan, who are otherwise in minority,

they have absolutely no locus to oppose the Plan in the capacity of

dissatisfied or dissenting Home Buyers. It is also abundantly clear that

such dissenting minority segment within the class of Home Buyers cannot

arrogate themselves to be dissenting Financial Creditors.”

16. It is an undisputed fact that the Appellants-1 had only impleaded the

suspended directors of the Corporate Debtor as parties in IA 1777/2021 and

not included the suspect home buyers or even the RP. We therefore find sound

logic in the dismissal of IA 1777/2021 by the Adjudicating Authority on the

ground that the alleged illegitimate home buyers had not been impleaded in

the said IA at a time when their ouster from the CoC was being agitated. Any

decision by the Adjudicating Authority to remove these home buyers from the

CoC without hearing them would have caused deep prejudice to their interests

and been unfair, unequitable, unjust besides running contra to the principles

of natural justice. That apart we notice that no objections were ever raised

earlier by the Appellants-1 to the constitution of the CoC or on the

participation of the suspect home buyers in the voting process until the 7th

CoC meeting. Even the Appellants never raised any objections to the

appointment of the Authorised Representative or in the latter’s participation

in the voting process in CoC. It was only after the resolution plan of the SRA

was approved that the Appellants approached the Adjudicating Authority by

way of filing an IA 1777/2021 and challenging the constitution of the CoC. If

the Appellants were genuinely aggrieved with the constitution of the CoC, we

fail to comprehend as to what prevented them from objecting to the

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constitution of the CoC and participation in the CoC meetings at any stage

prior to the 8th CoC meeting. This clearly shows that the Appellants sprang

into action only after the resolution plan of GSC was not approved.

17. During the course of making oral arguments, the Learned Senior

Counsel of the Appellants-1 handed over a chart containing revised

calculations of the shares of the home buyers post the removal of the

suspect/fraudulent homebuyers. We also notice that the FAR observations

with respect to related party transactions have been placed by Appellants-1

at pages 134-136 of Appeal Paper Book (‘APB’ in short), preferential

transactions at page 137 of APB, undervalued transactions at pages 138-139

of APB, besides other suspicious transactions at pages 140-144 of APB. Be

that as it may, it would be misplaced to place any reliance on the list of

fraudulent home buyers as furnished by the Appellants in the absence of

unequivocal findings of fraud against these parties.

18. It is also noticed that while the RP in IA 107 of 2021 had impleaded

only 4 home buyers, the Appellants-1 have included other parties as suspect

home buyers than those named in IA 107 of 2021. We now proceed to examine

whether the Appellants-1 being a set of home buyers falling in a class of

creditors can decide on other home buyers falling in the same class of

creditors as suspect/fraudulent/illegitimate home buyers.

19. The statutory construct of IBC clearly puts the onerous responsibility

of pursuing avoidance applications on the RP. In terms of Section 25(2)(j) of

the IBC, it is the duty of the RP to file appropriate applications for avoidance

of transactions which fall under the ambit of preferential, fraudulent,

undervalued or extortionate transactions. When the statutory scheme clearly

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states that it is the duty of Resolution Professional to determine the nature of

such transactions and file an appropriate application before the Adjudicating

Authority, neither the Appellants-1 being home buyers themselves nor the

GSC as unsuccessful resolution applicant are entitled on their own to file

applications seeking avoidance of transactions. The ratio of the Jayanta case

also cannot come to the aid of the Appellant-1 since in that case the RP

without verifying the claims submitted by the Financial Creditors had allotted

voting share. Further, the RP had not prepared the Information Memorandum

and the CIRP proceedings were conducted without any valuation of the

Corporate Debtor. Neither was there any publication of Form G inviting

Expression of Interest. Moreover, in that case the CoC had rushed into

liquidation of the Corporate Debtor. We therefore cannot commend such

unilateral addition of names in the list of suspect home buyers by the

Appellants-1.

20. This brings us to the second impugned order passed by the

Adjudicating Authority in IA No. 1150/2023 approving the resolution plan of

the SRA. This order has been assailed by both Appellants-1 and Appellant-2

on more or less similar grounds that the Adjudicating Authority failed to take

cognizance of the fact that the decision of the CoC to approve the resolution

plan stood vitiated since the constitution of the CoC itself was a nullity. The

question before us is whether the CoC in the facts of the present case could

lawfully consider approval of the resolution plan when the constitution of the

CoC is claimed by both the Appellants to be tainted.

21. It is the contention of the Appellants-1 and 2 that the CoC was illegally

constituted with illegitimate home buyers who had entered into collusive

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arrangements with the suspended directors of the Corporate Debtor. 16 out

of 17 such suspect home buyers had voted in favour of the resolution plan of

the SRA. Such a resolution plan approved by related parties is therefore liable

to be set aside. It is therefore their case that the decision of CoC in the present

set of facts cannot be validated on the pretext of exercise of commercial

wisdom as the commercial wisdom of CoC cannot condone material

irregularities in the conduct of CIRP.

22. We find that the Adjudicating Authority while considering at length the

IA 1150 filed by the RP for approval of the resolution plan, held in the second

impugned order, that the plan meets the requirements of Section 30(2) of the

IBC and Regulations 37, 38, 38(1A) and 39(4) of the CIRP Regulations. It also

held that the resolution plan was feasible and viable which balances the

interests of the all the stake-holders and is in accordance with law and does

not contravene any of the provisions of Section 29(A) of the IBC. Further when

we see paras 15 to 18 of the first impugned order as extracted at Para 15

above, we find that the Adjudicating Authority has clearly held that the home

buyers as class of creditors have cast their votes in favour of the resolution

plan submitted by the SRA. The Adjudicating authority has also spelt out in

para 15 of the impugned order the vote share of the Appellants-1 and that of

the alleged suspect home buyers and that even if the names of the suspect

home buyers are excluded, the plan of the SRA had fetched more than the

requisite percent of votes. Thereafter the Adjudicating Authority has relied on

law laid down by the Hon’ble Supreme Court in Jaypee supra and held that

objections raised by a set of home buyers as a minority constituent of the

same class of creditors does not hold ground.

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23. The Hon’ble Supreme Court in the Jaypee matter has emphasized that

the democratic principles of a determinative role of majority opinion have been

enshrined in the statutory construct of the IBC and hence the minority

homebuyers have to necessarily sail with the majority within the class. Once

the CoC has approved the resolution plan by requisite majority and the same

is in consonance with applicable provisions of law, the same cannot be a

subject matter of judicial review and modification. We are therefore not

convinced with the plea raised by the Appellants that the Adjudicating

Authority had committed an error in approving the resolution plan.

24. This brings us to the third impugned order passed by the Adjudicating

Authority dated 11.08.2023 in I.A. 1609 of 2021 and IA No. 1150/2021 in

CP(IB) No. 2995/MB/2019 which has been challenged by Appellant-2/GSC

who is an unsuccessful resolution applicant.

25. In IA 1609 of 2021, the Adjudicating Authority has dismissed the

prayers of GSC to quash and set aside the CoC of the Corporate Debtor under

CIRP. The prayers are similar to those raised by Appellants-1 in IA

1777/2021. In the present IA 1609/2021 too, the prayers of the Appellant-2

have been rejected and the grounds are amplified by the Adjudicating

Authority at paras 5.3, 5.4 and 5.5 of the third impugned order which is as

reproduced below:

“5.3 This Bench is of the opinion that, once the majority of CoC decide on

one of the Resolution Plan, the decision of the CoC attains finality. It is

observed by the Bench that, in the present case, since the CoC comprising

of SIDBI and the home buyers approved the Resolution Plan presented by

Mrs. Asha Sanap, the Unsuccessful Resolution Applicant has no locus to

challenge the commercial decision of the CoC. Further, the prayer of the

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 Applicant recalling the order dated August 18, 2020 passed by this Tribunal

appointing Respondent No. 2 i.e. Mr. Jitender Kothari as the Authorised

Representative of the Home Buyers of the Corporate Debtor on the ground

that the same is vitiated by fraud perpetrated by the Fraudulent Home

Buyers, has no merit in view of the above discussion by this Bench.

5.4 It is observed by the Bench that, the Applicant who himself was

Prospective Resolution Applicant had submitted its Resolution Plan. At no

stage, the Applicant challenged the constitution of the CoC. The Applicant is

seeking relief to set aside and quash the CoC only after his plan not

approved with the requisite voting of the CoC. Moreover, no concrete

evidence has been given by the Applicant that transactions of some Home

Buyers (i.e. 14 Home Buyers) are fraudulent in nature. The question of some

of the Home Buyers as fraudulent was also raised by the Applicant after the

Plan of the Applicant was not approved with the requisite voting of CoC.

5.5 This Bench has further observed that, the Proprietor of the Applicant i.e.

Mr. Sushil Uttarwar, was an ex Director of the Corporate Debtor and in an

Application being IA No 1148 of 2020 in CP 2995 of 2019, filed by M/s G S

Constor & Infra Pvt. Ltd. for making M/s GS Constor & Infra Pvt. Ltd. part

of CoC was rejected by this Tribunal on the ground of being a Related Party

and the said decision was also confirmed by the Hon'ble NCLAT in Company

Appeal (AT) (Insolvency) No. 587 of 2021. Hence, the Applicant has no locus

to challenge the CoC at this when the CoC has already approved the Plan

submitted by Mrs. Asha Sanap.”

Since we have already recorded our reasonings in the preceding paragraphs

affirming the dismissal of IA 1777/2021, we have no reasons to take a

different stand and therefore uphold the third impugned order of the

Adjudicating Authority dismissing IA 1609/2021.

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26. In IA No. 1150/2021, the Adjudicating Authority has approved the

resolution plan of the Corporate Debtor. The issues challenged by the

Appellant-2 in IA 1150/2021 being the same as those challenged in the first

and second impugned orders by the Appellants-1 we do not propose to discuss

them again as they have already been dealt in the foregoing paragraphs. We

would only like to touch upon the argument proffered by Appellant-2 that the

resolution plan could not have been approved by the Adjudicating Authority

since applications under Sections 43, 44 and 66 of IBC as contained in IA 149

were still pending before the Adjudicating Authority.

27. We are not inclined to agree with this contention of the Appellant-2 in

view of the statutory construct of IBC. The IBC stipulates the conclusion of

CIRP in 330 days. Within this prescribed timeline, often the RP is unable to

identify avoidable transactions and apply to the Adjudicating Authority to

reverse them. We also notice that the avoidance applications are not

statutorily bound by time as is the resolution process. Section 26 of IBC

further provides that application for avoidance of transactions is not to affect

CIRP proceedings and therefore such applications can continue even after

completion of the CIRP. Section 26 of the IBC clearly stipulates that the

pendency of any avoidance application shall not come in the way of the

approval of the resolution plan. CIRP and avoidance applications are, thus by

their very nature, a separate set of proceedings. The former is time bound

whereas the latter requires a proper discovery of suspect transactions that

are time consuming. The scheme of the IBC reinforces this difference and thus

adjudication of an avoidance application is independent of the resolution of

the corporate debtor and can survive CIRP. Recently, a division bench of the

Delhi High Court in Tata Steel BSL Limited v. Venus Recruiter Private

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Limited and Others [(2023) SCC OnLine Del 155] has held that avoidance

applications which are initiated by the RP shall continue irrespective of the

finalisation of the Resolution Plan and the conclusion of the CIRP. In view of

the above reasons, we are of the considered opinion that simply because the

Appellants have raised the issue of avoidance application, it does not stand

to reason that the approval of the resolution plan needs to be put on hold or

kept in abeyance. We also find that the present resolution plan also provides

that recovery under Section 43, 45, 50 and 66 of the IBC would be the

exclusive rights of the CoC of the Corporate Debtor. We therefore affirm the

approval of the resolution plan by the Adjudicating Authority.

28. In view of the foregoing discussions, we are satisfied that no cogent

grounds have been raised in either of the two appeals which would warrant

any interference with the impugned orders passed by the Adjudicating

Authority. In result, both the appeals are dismissed. No costs.

[Justice Ashok Bhushan]

Chairperson

[Barun Mitra]
Member (Technical)

[Arun Baroka]
Member (Technical)

Place: New Delhi

Date: 05.12.2023

PKM

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