Information Memorandum Based On Which Resolution Plan Is Submitted And Approved By CoC Cannot Be Modified: NCLAT

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that Information Memorandum prepared by the Resolution Professional based on which the Resolution Plan was submitted and later approved by the CoC, cannot be modified.In this case, the allotment units to homebuyers were cancelled by the erstwhile management of the Corporate Debtor and this information was also included in the Information Memorandum based on which the plan was submitted and approved. Brief Facts This Appeal is filed by six Appellants/homebuyers whose Application before the NCLT was rejected as per the Orders dated 07.08.2024 which is being impugned in this case. As per this Appeal, the Appellants are seeking, inter-alia, equitable treatment with that of other creditors in class. Specifically, they seek amendment of the Information Memorandum (IM) reflecting the units of the Appellants as cancelled and further seek that the present Appeal be allowed and the Impugned Order be set aside. On 02.01.2023, the Appellants were sent an email with the Information Memorandum, wherein they found that their names in the list of allottees whose units have been cancelled but these units are still vacant. The Appellant contends that, it was for the first time when the Appellants were made aware that their units have been cancelled. In similar cases where unit holders, who had approached the RERA and filed their complaint, even though unit holders were paid significant amount, such units were never cancelled. In their case the units have been cancelled unilaterally and arbitrarily. The RP intimated the Appellants, through the authorised representative, that their units were found cancelled in the books of accounts of Corporate Debtor, prior to the CIRP initiation and hence the same cannot be restored. It was further informed by the RP that the Appellants cannot be treated at par with other 15 homebuyers whose units were not cancelled, despite them being on the same boat. The final approved Resolution Plan of Clause 6 provides that the allottees whose units have been cancelled shall be allotted unit at base selling price (BSP) of INR 4200 per sq feet of super area. Additionally, it was provided that 100% of their admitted principal amount shall be adjusted against the freshly allotted unit. Contentions The Appellants submitted that the Information Memorandum which was used to determine the Resolution Plan contained incorrect facts regarding the Appellant's unit.Had correct information been provided, the CoC may not have approved the Resolution Plan That the AA has wrongly relied on the judgment of the "K. Sashidhar vs. Indian Overseas Bank & Ors. 2018, to say that the commercial wisdom of CoC is given paramount status.Had the CoC been provided with correct facts, the CoC would not have voted incorrectly. The AA has not only dismissed the Application by not following the principles of natural justice, but has also caused grave prejudice to the Appellants herein by denying their rightful ownership of the units. Per contra, RP/Respondent No. 1 submitted that after initiation of CIRP, the Applicants filed their respective claims with the Resolution Professional for full amount without deducting the amount of part payment received by them from their Corporate Debtor. That RP carried out the verification of their claims as per the records of the Corporate Debtor and it was found that the units allotted to the Applicants were cancelled by the Corporate Debtor even prior to the initiation of CIRP period.Respondent No. 1/RP admitted the balance amount to be paid to them and kept them in a separate category of creditors in a class of homebuyers. That the units were cancelled pre-CIRP and the Appellants had full knowledge for about 10 months but they did not raise their grievance. They waited till the time the Resolution Plan provided specific treatment and that Hon'ble NCLT is concerned only with the matters relating to CIRP of the CD and any cancellation of the units done by the CD prior to the initiation of CIRP cannot be challenged before this Hon'ble NCLT. That IRP/RP is required to only collate all the claims filed before him and verify the same from the books of the CD as per the provisions of the IBC. The RP lacks adjudicatory powers on the claims filed before him. The RP could not have reversed the actions of cancellation taken by the Corporate Debtor prior to the initiation of CIRP. The SRA/Respondent No.2 submitted that the Resolution Plan has been prepared and filed by the Resolution Applicant in compliance with Section 30 of the Code, only after looking into the claims collated and provided by the Resolution Professional in the Information Memorandum. Even though the allotments were cancelled by the erstwhile management of the Corporate Debtor,...

Information Memorandum Based On Which Resolution Plan Is Submitted And Approved By CoC Cannot Be Modified: NCLAT

Mohd Malik Chauhan

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