Allotment Of Commercial Space By Corporate Debtor Through Unregistered Allotment Letter Remains Their Asset, Can't Be Excluded From Resolution Plan: NCLAT

The NCLAT New Delhi bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has held that allotment of commercial spaces by the corporate debtor through unregistered documents like allotment letter, lease deed etc.cannot divest the CD of their ownership. They would continue to remain the assets of the CD therefore they cannot be excluded from the Resolution Plan.Brief FactsThe Corporate Debtor – M/s IP Construction Pvt. Ltd., a real estate company, involved in development of Project. The Corporate Debtor (“CD”) has issued an allotment letter dated 04.07.2012 in favour of Appellant in Company Appeal (AT) (Ins.) Nos.40 and 45 of 2024, allotting the office spaces Nos.GF-08, GF-09 and GF-10 on the ground floor, each admeasuring 47.93 sq. mt. in the Project Coral Brio situated at C5, Sector-18, Vasundhara, Ghaziabad. Similarly, the Appellant in Company Appeal (AT) (Ins.) No.61 of 2024 was allotted Commercial space/ office Nos. SF-02, SF03 and F-05 vide allotment letter dated 31.03.2013. On 07.05.2014, Nupur Garg issued a letter to the CD requesting cancellation of commercial spaces/ Office Nos. SF-02 and SF03 and sought refund of the booking amount.The CIRP against the Corporate Debtor commenced on an application filed under Section 7 by the Union Bank of India. The Adjudicating Authority vide order dated 11.01.2019 initiated the CIRP by admitting Section 7 application.The Appellant(s) in Company Appeal (AT) (Ins.) Nos.40 and 45 of 2024, filed their claims on 02.12.2019. The Appellant in Company Appeal (AT) (Ins.) No.61 of 2024 filed its claim on 14.02.2019. The Appellant – Nupur Garg again submitted a consolidated Form CA on 05.03.2019.The RP verified the claim of Appellant and has issued a List of Financial Creditors in the class of Commercial Space Buyer, which included the name of the Appellants of Company Appeal (AT) (Ins.) No.40 of 2024 at Sl. No.21 and Appellant – Nupur Garg at Sl. No.17, admitting their claims.In the CIRP of the Corporate Debtor, Resolution Plan was submitted by individual of consortium. The Committee of Creditors (“CoC”) on 16.01.2020/ 30.10.2020 approved the Resolution Plan with 87.49% vote shares. The Resolution Plan offers payment of 50% of the principal amount to the class of commercial space buyers and in alternate permitted them to opt for equivalent commercial space at alternate places on rates as mentioned in the Resolution Plan. ContentionsThe appellants in Company Appeal (AT) (Ins.) Nos.40 and 45 of 2024 submitted that the Appellants being commercial space buyers, who had paid substantial amount to the CD, were entitled for execution of Sale Deed for commercial spaces. In the Resolution Plan the claim of the Appellants for execution of the Deed has not been accepted and there were initial proposal only of 50% of principal amount in the Resolution Plan. That the Appellant-Nupur Garg, having been allotted commercial space, with regard to which, Lease Deed was also executed by the CD and the Appellant was also entitled for the rent. The Lease Deed have been executed in favour of the Appellant only on the premise that the Appellant is owner of the commercial space. The Resolution Plan does not accept the claim of the Appellant that Appellant is the owner of the commercial space and the said space being SF-05, ought to have been excluded from the Resolution Plan.Per contra, the respondent/RP submitted that the Appellants are commercial space buyers, whose claims as Financial Creditor of a class, i.e., commercial space buyers, were admitted in CIRP of the CD. The Appellant(s) being dissenting Financial Creditor have no right to challenge the Resolution Plan.That the Resolution Plan having been approved by majority by 87.49%, the Plan is binding on all stake holders of the CD, including the Appellant(s). The Appellant(s) as dissenting Financial Creditors were entitled to the liquidation value as per Section 30, sub-section (2). The SRA submitted that the Appellant(s) being dissenting Financial Creditors are entitled only for the liquidation value as per Section 30, sub-section (2). The liquidation value of both the Appellant(s) are 'zero', however, the SRA has proposed to pay the Appellant 100% of principal amount of claim admitted in the CIRP.That the prayer of the Appellant – Nupur Garg that assets be excluded from the Resolution Plan, cannot be accepted. Nupur Garg and other Appellants cannot claim ownership of the commercial spaces. The ownership still lies with the CD, since no Deed of Title has been executed in favour of the Appellant(s).Issues Before NCLATWhether the units allotted to commercial space buyers (the Appellant(s) herein), required to be excluded from the assets of the Corporate Debtor? Whether the Appellant(s) on the basis of allotment of commercial spaces by the CD, by virtue of Lease Deed dated 24.12.2014 in respect to Appellant – Nupur Garg, the Appellant(s) are owners of the units allotted to them?Whether the Appellant(s) being...

Allotment Of Commercial Space By Corporate Debtor Through Unregistered Allotment Letter Remains Their Asset, Can't Be Excluded From Resolution Plan: NCLAT

Mohd Malik Chauhan

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