Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3778 OF 2020
Amit Katyal …Appellant
Versus
Meera Ahuja and others …Respondents
WITH
IA NO. 105732/2021(for Impleadment)
IA NO. 18679/2022 (for directions on behalf of
Respondent Nos. 1-3)
J U D G M E N T
M.R. SHAH, J.
1. Interlocutory Application No. 105732/2021(for impleadment) is
allowed in terms of the prayer made and they are ordered to be
impleaded as respondents in the instant appeal.
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2022.03.03
17:23:29 IST
Reason:
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1A. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 09.11.2020 passed by the National Company Law
Appellate Tribunal, New Delhi (hereinafter referred to as the
‘NCLAT/Appellate Authority’) in Company Appeal (AT) (Insolvency) No.
1380 of 2019, by which the Appellate Authority has dismissed the said
appeal preferred by the appellant herein – Promoter/Majority
Shareholder of the Corporate Debtor – Jasmine Buildmart Pvt. Ltd. and
has confirmed the order passed by the National Company Law Tribunal,
New Delhi (hereinafter referred to as the ‘NCLT/Adjudicating Authority’)
in admitting the petition under Section 7 of the Insolvency and
Bankruptcy Code, 2016 (for short, ‘IBC’), the appellant –
Promoter/Majority Shareholder of the Corporate Debtor has preferred
the present appeal.
2. That respondent no. 4 herein – Corporate Debtor – Jasmine
Buildmart Pvt. Ltd. had come out with a Gurgaon based housing project,
namely, Krrish Provence Estate (hereinafter referred to as the ‘Project’).
That respondent no.4 herein – Corporate Debtor could not complete the
project even after a period of eight years. Therefore, respondent nos. 1
to 3 herein (hereinafter referred to as the ‘original applicants’) who were
the home buyers preferred Section 7 application before the Adjudicating
Authority/NCLT, Delhi being CP No. 1722/ND/2018 seeking initiation of
CIRP against respondent no. 4 – Corporate Debtor. That the original
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applicants sought refund of an amount of Rs.6,93,02,755/- due to an
inordinate delay in the completion of the project and failure to handover
possession within the stipulated time. The said application was filed on
06.12.2018, i.e., prior to the amendment to Section 7 of the IBC, which
now permits 100 or 10% of the home buyers/allottees to apply under
Section 7 of the IBC.
2.1 That the NCLT/Adjudicating Authority admitted Section 7
application on 28.11.2019 and appointed the Interim Resolution
Professional (for short, ‘IRP’) and declared a moratorium. That the
appellant herein challenged the order of admission of Section 7
application before the NCLAT/Appellate Authority being CA (AT)
(Insolvency) 1380 of 2019. It appears that during the hearing before the
NCLAT/Appellate Authority, the appellant herein tried to settle the matter
with the original applicants, however, the settlement did not go through.
That by the impugned judgment and order, the NCLAT has dismissed
the said appeal and has upheld the admission order and directed
commencement of CIRP.
2.2 The IRP issued the public announcement on 10.11.2020 and
constituted the Committee of Creditors (for short, ‘COC’) on 23.11.2020.
In the meantime, the appellant preferred the present appeal. By order
dated 03.12.2020, this Court, while issuing notice in the appeal, stayed
the operation and implementation of the impugned order, subject to the
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appellant depositing the amount of Rs.2,75,55,186/- plus interest at the
rate of 6% per annum in the Registry of this Court within two weeks from
that date. It is reported that the appellant had deposited an amount of
Rs. 3,36,02,000/- on 17.12.2020 with the Registry of this Court, which
has been invested in a Fixed Deposit Receipt, which is to mature on
9.3.2022.
2.3 Krrish Provence Flat Buyers Association had filed a caveat before
this Court apprehending that if any order is passed in the present
proceedings, it may affect them as home buyers. Three other home
buyers, namely, Sanjiv Puri, Akshat Seth and Kaustav Mukherjee have
preferred IA No. 105732 of 2021 for impleadment.
2.4 The present appeal was adjourned from time to time on the ground
that the dispute between the appellant and respondent Nos. 1 to 3
herein (original applicants) is being settled and that the
appellant/Corporate Debtor is prepared to complete the project within a
period of nine months, if the home buyers make payments, as
scheduled.
2.5 When the present appeal was taken up for further hearing on
04.02.2022, it was reported by the learned Senior Advocates/counsel for
the respective parties including the impleaders and the Association that
the original applicants/respondent Nos. 1 to 3 herein as well as 79 other
home buyers have settled the dispute with the Corporate Debtor and a
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settlement has been entered into, under which, it is agreed that the
Corporate Debtor shall complete the entire project and hand over the
possession to the home buyers (who want the possession), within a
period of one year. It was also submitted on behalf of the original
applicants that they have also settled the dispute with the
appellant/Corporate Debtor and the appellant had agreed to refund the
amount of Rs.3,36,02,000/- with applicable/accrued interest to the
original applicants. Therefore, it was requested to record the settlement
and permit the original applicants to withdraw CIRP proceedings pending
before the NCLT/Adjudicating Authority. This Court passed the following
order on 04.02.2022:
“IA Nos. 131763/2020 and 130570/2021 stand disposed of with liberty in
favour of the applicant(s) to avail any other remedy which may be
available to them, as permissible under the law to protect their rights.
It is reported that out of 128 home buyers of 176 units, 79 + 3 (i.e. 82)
home buyers have settled the dispute with the corporate debtor including
the original applicants/respondent nos. 1 to 3 herein who have initiated the
IBC proceedings. It is reported that the original applicants/respondent
nos.1 to 3 herein as well as 79 home buyers have settled the dispute with
the corporate debtor and a settlement has been entered into under which
it is agreed that the corporate debtor shall complete the entire project and
hand over the possession to the home buyers (who wants the possession)
within a period of one year from today.
In that view of the matter, it is requested to dispose of the matter. As the
respondent nos. 1 to 3 want to withdraw the original proceedings in view of
the settlement and in the peculiar facts and circumstances of the case and
considering the fact that the order passed by the NCLT has been stayed
by this Court pursuant to the earlier interim order dated 3.12.2020 and the
corporate debtor has deposited the entire amount as directed by this Court
which is lying with the Registry and considering the provisions of Section
12-A of the IBC read with Section 2 (11), let the respondent nos.1 to 3
herein/original applicants before the NCLT who has initiated the
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proceedings under Section 7, file an application for withdrawal of the
proceedings.
Put up on 16.02.2022.”
2.6 Pursuant to order dated 4.2.2022, the original applicants have
preferred IA No. 18679 of 2022 under Article 142 of the Constitution of
India read with Rules 11 and 12 of the National Company Law Tribunal
Rules, 2016, praying for permitting the original applicants to withdraw
CIRP proceedings on their being paid a sum of Rs.3,36,02,000/- along
with applicable interest, out of the amount deposited by the appellant in
the Registry of this Court. It is also further prayed to dismiss all matters
pending between the appellant and respondent Nos. 1 to 3 herein
(original applicants) mentioned in paragraph 7 of IA No. 18679 of 2022
and close the CIRP proceedings of respondent No. 4 – Corporate Debtor
initiated by respondent Nos. 1 to 3 herein (original applicants).
3. Shri Kapil Sibbal, learned Senior Advocate has appeared on behalf
of the appellant, Shri Lokesh Bhola, learned Advocate has appeared on
behalf of respondent Nos. 1 to 3 herein, Shri K.V. Vishwanathan, learned
Senior Advocate has appeared on behalf of the three impleaders (IA No.
105732/2021), Shri Nakul Diwan, learned Senior Advocate has
appeared on behalf of the Krrish Provence Flat Buyers Association, Mr.
Yogesh Mittal, learned Advocate has appeared on behalf of the
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Resolution Professional and Ms. Radhika Gupta, learned Advocate has
appeared on behalf of the intervenors.
3.1 Shri K.V. Vishwanathan and Shri Nakul Diwan, learned Senior
Advocates appearing on behalf of the three impleaders – respective
home buyers and the Association and Shri Kapil Sibal, learned Senior
Advocate appearing on behalf of the appellant have jointly submitted
that a majority of the home buyers and the appellant and Corporate
Debtor have settled the disputes and a joint statement regarding
proposed settlement plan signed by the respective parties is filed under
which, the appellant and respondent No.4 (Corporate Debtor) have
undertaken that they shall complete the entire project within one year
from the date of settlement and offer possession of the flats to the home
buyers. Under the said agreement, the appellant and respondent No.4
(Corporate Debtor) have undertaken before this Court as under:
“That the appellant and respondent No.4 (Company) shall undertake
before the Hon’ble Court the following: -
1. Complete the entire project within 1 year from the date of settlement
and offer the possession to the Homebuyers.
2. Complete the entire project including all the apartments, common
areas, amenities, etc. as specified in the ABA.
3. All demands be raised and timely paid, strictly in terms of ABA.
4. Company commits to continue the provisions of all maintenance
services as per the ABA.
5. Company will make the application for obtaining Occupancy
Certificate within 6 months, before the Competent Authority.
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4. Learned counsel on behalf of the respective parties have reported
that out of the total 128 home buyers of 176 units, 79 + 3 home buyers
have settled the dispute with the Corporate Debtor and have accepted
the joint statement regarding proposed settlement plan dated 3.2.2022
and have agreed to the proposal/undertaking by the appellant and the
Corporate Debtor that they shall complete the project and hand over the
possession to the home buyers within a period of one year. Learned
counsel appearing on behalf of the respective parties therefore have
prayed to exercise the powers under Article 142 of the Constitution of
India read with Rules 11 and 12 of the National Company Law Tribunal
Rules, 2016 and permit the original applicants to withdraw the CIRP
proceedings which shall be in the larger interest of the majority of the
home buyers who want the possession and under the settlement they
will get now the possession after waiting for eight to nine years.
4.1 Learned counsel appearing on behalf of the respective parties
have also submitted that after the COC was constituted on 23.11.2020
by the IRP, no further steps are taken either by the IRP and/or even the
COC and even the first meeting of the COC has also not been convened
and before any further CIRP proceedings are proceeded, this Hon’ble
Court has stayed the impugned order. It is submitted therefore that there
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shall not be any impediment in permitting the original applicants to
withdraw the CIRP proceedings.
4.2 Learned counsel for the respective parties have heavily relied upon
paras 82 to 87 of the decision of this Court in the case of Swiss Ribbons
Private Limited and Another v. Union of India and others, reported in
(2019) 4 SCC 17 and one another order passed by this Court in the case
of Kamal K. Singh v. Dinesh Gupta & Another (Civil Appeal No. 4993 of
2021, decided on 25.08.2021) , in which this Court has permitted the
original applicants before the Adjudicating Authority to withdraw the CIRP
proceedings in view of the settlement entered into between the parties.
5. We have heard learned counsel for the respective parties at length.
5.1 The original applicants (respondent Nos. 1 to 3 herein) now have
moved before this Court by way of an interlocutory application No.
18679/2022, praying for permitting them to withdraw the CIRP
proceedings initiated by them against respondent no.4 – Corporate
Debtor by submitting, inter alia , that the appellant has agreed to pay to
the original applicants Rs.3,36,02,000/- with applicable/accrued interest
thereon and they do not propose to thereafter proceed further with the
insolvency proceedings. Similarly, 82 (79+3) home buyers out of the total
128 home buyers, who are also represented before this Court, have
stated that they are satisfied with the undertaking given by the appellant
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and respondent no.4 before this Court recorded in the joint statement
regarding the proposed settlement plan dated 3.2.2022, under which the
appellant and respondent No.4 (Corporate Debtor) have undertaken to
complete the project within a period of one year and to hand over the
possession to them. Thus, out of 128 home buyers of 176 units, 82
home buyers + three original applicants have agreed to the settlement
and agreed to withdraw the CIRP proceedings and/or have no objection
if the CIRP proceedings initiated by respondent Nos. 1 to 3 herein are
permitted to be withdrawn.
6. As observed hereinabove, immediately on constitution of COC, this
Court has stayed the impugned order. No further steps are taken by the
IRP/COC pursuant to the admission of the CIRP proceedings except the
IRP was appointed and the COC was constituted. Under Section 12A of
the IBC which has been inserted by the Insolvency and Bankruptcy
(Second Amendment) Act, 2018 with retrospective effect from
06.06.2018, the Adjudicating Authority may allow the withdrawal of
application admitted under Section 7 or Section 9 or Section 10, on an
application made by the applicant with the approval of ninety per cent
voting share of the COC, in such manner as may be specified. The
rationale behind the insertion of Section 12A is contained in the
Insolvency Law Commission Report, which is as under:
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“29.1 Under Rule 8 of the CIRP Rules, NCLT may permit withdrawal of
the application on a request by the applicant before its admission.
However, there is no provision in the Code or the CIRP Rules in relation to
permissibility of withdrawal post admission of a CIRP application. It was
observed by the Committee that there have been instances where on
account of settlement between the applicant creditor and the corporate
debtor, judicial permission for withdrawal of CIRP was granted. [….] Thus,
it was agreed that once CIRP is initiated, it is no longer a proceeding only
between the applicant creditor and the corporate debtor but is envisaged
to be a proceeding involving all creditors of the debtor. The intent of the
Code is to discourage individual actions for enforcement and settlement to
the exclusion of the general benefit of all creditors.”
7. It is true that the procedure for preferring an application under
Section 12A of the IBC is contained in Regulation 30A of the CIRP
Regulations, 2016. However, as per the decision of this Court in the
case of Brilliant Alloys Pvt. Ltd. v. S. Rajagopal, 2018 SCC Online SC
3154 , the said provision is held to be directory, depending on the facts of
each case.
7.1 In the case of Swiss Ribbons Pvt. Ltd. (supra) , it is held that at any
stage before a COC is constituted, a party can approach
NCLT/Adjudicating Authority directly and the Tribunal may in exercise of
its powers under Rule 11 of the NCLT Rules, allow or disallow an
application for withdrawal or settlement. Therefore, in an appropriate
case and where the case is being made out and the NCLT is satisfied
about the settlement, may permit/allow an application for withdrawal or
settlement.
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8. In the present case, as observed hereinabove, although the COC
was constituted on 23.11.2020, there has been a stay of CIRP
proceedings on 3.12.2020 (within ten days) and no proceedings have
taken place before the COC. It is to be noted that the COC comprises
91 members, of which 70% are the members of the Flat Buyers
Association who are willing for the CIRP proceedings being set aside,
subject to the appellant and the Corporate Debtor – company honouring
its undertaking given to this Court as per the settlement plan dated
3.2.2022.
9. Therefore, in the peculiar facts and circumstances of the case,
where out of 128 home buyers, 82 home buyers will get the possession
within a period of one year, as undertaken by the appellant and
respondent No.4 – Corporate Debtor, coupled with the fact that original
applicants have also settled the dispute with the appellant/Corporate
Debtor, we are of the opinion that this is a fit case to exercise the powers
under Article 142 of the Constitution of India read with Rule 11 of the
NCLT rules, 2016 and to permit the original applicants to withdraw the
CIRP proceedings. We are of the opinion that the same shall be in the
larger interest of the home buyers who are waiting for the possession
since more than eight years.
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10. If the original applicants and the majority of the home buyers are
not permitted to close the CIRP proceedings, it would have a drastic
consequence on the home buyers of real estate project. If the CIRP
proceedings are continued, there would be a moratorium under Section
14 of the IBC and there would be stay of all pending proceedings and
which would bar institution of fresh proceedings against the builder,
including proceedings by home buyers for compensation due to delayed
possession or refund. If the CIRP is successfully completed, the home
buyers like all other creditors are subjected to the pay outs provided in
the resolution plan approved by the COC. Most often, resolution plans
provide for high percentage of haircuts in the claims, thereby significantly
reducing the claims of creditors. Unlike other financial creditors like
banks and financial institutions, the effect of such haircuts in claims for
refund or delayed possession may be harsh and unjust on homebuyers.
On the other hand, if the CIRP fails, then the builder-company has
to go into liquidation as per Section 33 of the IBC. The homebuyers
being unsecured creditors of the builder company stand to lose all their
monies that are either hard earned and saved or borrowed at high rate of
interest, for no fault of theirs.
11. Even the legislative intent behind the amendments to the IBC is to
secure, protect and balance the interests of all home buyers. The
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interest of home buyers is protected by restricting their ability to initiate
CIRP against the builder only if 100 or 10% of the total allottees choose
to do so, all the same conferring upon them the status of a financial
creditors to enable them to participate in the COC in a representative
capacity. Being alive to the problem of a single home buyer derailing the
entire project by filing an insolvency application under Section 7 of the
IBC, the legislature has introduced the threshold of at least 100 home
buyers or 10% of the total home buyers of the same project to jointly file
an application under Section 7 of the IBC for commencement of CIRP
against the builder company. The Insolvency Bankruptcy Code (Second
Amendment) Bill, 2019 that proposed the amendment to Section 7
contained a statement of object and reasons, inter alia, stated as follows:
“2. A need was felt to give the highest priority in repayment to last
mile funding to corporate debtors to prevent insolvency, in case the
company goes into corporate insolvency resolution process or liquidation,
to prevent potential abuse of the Code by certain classes of financial
creditors, to provide immunity against prosecution of the corporate debtor
and action against the property of the corporate debtor and the successful
resolution applicant subject to fulfilment of certain conditions, and in order
to fill the critical gaps in the corporate insolvency framework. It has
become necessary to amend certain provisions of the Insolvency and
Bankruptcy Code, 2016.”
12. In the present case, as observed hereinabove, out of the total 128
home buyers of 176 units, 82 homebuyers are against the insolvency
proceedings and the original applicants have also settled their dispute
with the appellant and corporate debtor. Even the object and purpose of
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the IBC is not to kill the company and stop/stall the project, but to ensure
that the business of the company runs as a going concern.
13. In view of the aforesaid facts and circumstances, more particularly
when the withdrawal of the CIRP proceedings initiated by the original
applicants is allowable by the NCLT in exercise of its powers under Rule
11 of the NCLT rules, 2016 and in the peculiar facts and circumstances
of the case, instead of relegating the original applicants to approach the
NCLT/Adjudicating Authority by moving an application under Section 12A
of the IBC, we are of the opinion that this is a fit case to exercise powers
under Article 142 of the Constitution of India as the settlement arrived at
between the home buyers and the appellant and corporate debtor –
company shall be in the larger interest of the home buyers and under the
settlement and as undertaken by the appellant/corporate debtor, out of
128 home buyers, 82 home buyers are likely to get possession within a
period of one year, for which they are waiting since last more than eight
years after they have invested their hard earned money. This shall be in
furtherance of the object and purpose of IBC.
14. In view of the above and for the reasons stated above, IA No.
18679/2022 in Civil Appeal No. 3778/2020 filed by respondent Nos. 1 to
3 herein (original applicants before the NCLT/Adjudicating Authority) is
allowed.
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As agreed, respondent Nos. 1 to 3 shall be paid an amount of
Rs.3,36,02,000/- along with accrued interest, out of the amount
deposited by the appellant, pursuant to the earlier order passed by this
Court dated 3.12.2020. Respondent Nos. 1 to 3 herein (original
applicants before the Adjudicating Authority) are permitted to withdraw
the application filed by them under Section 7 of the IBC, 2016 bearing
CP No. 1722/ND/2018 pending before the NCLT, New Delhi. Hence, CP
No. 1722/ND/2018 pending before the NCLT, New Delhi stands
dismissed as withdrawn. Consequently, all the orders passed by the
NCLT, New Delhi, including appointment of IRP and constitution of COC
are hereby quashed and set aside. Consequently, the impugned
judgment and order passed by the NCLAT also stands quashed and set
aside. As agreed between respondent Nos. 1 to 3 herein, the appellant
and the corporate debtor, Consumer Case bearing CC No. 984 of 2019,
filed by respondent Nos. 1 to 3 herein, which is pending before the
National Consumer Disputes Redressal Commission, New Delhi and
Criminal Complaint being Case No. 540/2021 filed by respondent Nos. 1
to 3 herein, pending before the learned Chief Metropolitan Magistrate,
SED, New Delhi are hereby dismissed as withdrawn/quashed. Either of
the parties to place a copy of the present order before the National
Consumer Disputes Redressal Commission, New Delhi and in the Court
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of Chief Metropolitan Magistrate, SED, New Delhi to complete the record
of the Courts.
15. The joint statement regarding the settlement plan dated
27.01.2022/03.02.2022 along with the list of the members of the Krrish
Provence Flat Buyers Association who have accepted and agreed to
take possession of the respective apartments, signed by the appellant,
impleaders Akshat Seth, Sanjiv Puri & Kaustav Mukherjee and the office
bearers of the Krrish Provence Flat Buyers Association are directed to be
taken on record. It is directed that if the original of the joint statement
regarding the settlement plan dated 27.01.2022/3.2.2022 signed by the
respective parties and their advocates is not placed on record, the same
be placed on record of the present proceedings, within a period of one
week from today. The appellant herein and respondent No.4 – Jasmine
Buildmart Pvt. Ltd. are directed to file separate undertakings before this
Court, within a period of one week from today, specifically stating and
undertaking that:
(1) they shall complete the entire project within one year from
01.03.2022 and offer the possession to the respective home buyers;
(2) they shall complete the entire project including all the
apartments, common areas, amenities, etc. as specified in the ABA;
(3) all demands be raised and timely paid, strictly in terms of ABA;
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(4) Company shall continue the provisions of all maintenance
services as per the ABA; and
(5) Company will make the application for obtaining Occupancy
Certificate within six months, before the competent authority.
The aforesaid undertakings shall be backed by the Resolution of
the Company, which shall also be placed on record along with the
undertakings.
15.1. The appellant and respondent No.4 – Jasmine Buildmart Pvt. Ltd.
shall abide by the settlement plan recorded hereinabove and the
undertakings to be filed within a period of one week from today. Any
breach on the part of the appellant and respondent No.4 – Jasmine
Buildmart Pvt. Ltd. shall be viewed very seriously. Liberty is reserved in
favour of the home buyers and the Krrish Provence Flat Buyers
Association to approach this Court, in case of any difficulty.
16. To do the complete justice in the matter and considering the fact
that after the admission of the CIRP proceedings, IRP was appointed
and COC was constituted by the IRP and it is reported by the IRP that he
had incurred some expenditure, we direct the appellant to pay a sum of
Rs.6,00,000/- to the IRP, to be paid towards the expenditure that might
have been incurred by the IRP and also the litigation costs, which shall
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be paid to the IRP by way of a Demand Draft within a period of two
weeks from today.
17. The present proceedings stand disposed of accordingly, in terms of
the above order. All other pending Interlocutory Applications stand
disposed of.
………………………………J.
[M.R. SHAH]
NEW DELHI; ……………………………….J.
MARCH 03, 2022. [B.V. NAGARATHNA]
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