Approval of Resolution Plan - Jaypee Infratech Limited… — Insolvency and Bankruptcy

Part	Contents	Page no.
I.	Background	6-8
II.	Directions of the Hon’ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Ltd. & Ors. - Civil Appeal No. 3395 of2020	9-11
III.	Approval of Resolution Plan by CoC, Affidavit in compliance of Section 29A and Performance Guarantee by SRA	11-18
IV.	Financial Outlay of Resolution Plan	19-21
V.	Salient Features of Resolution Plan	21-31
VI.	Compliance Certificate in Form H and Compliance Chart for Resolution Plan	32-54
VII.	IA N. 3457/PB/2021 - Objections of ICICI Bank	55-88
VIII.	IA No. 3306/PB/2021 – Objections of YEIDA	89-141
IX.	Objections of M/S JAL and Mr. Manoj Gaur	142-174
X.	Reliefs and Concessions	175-199
XI.	IA No. 2521/PB/2022 filed by Ms. Nina Sahani and Ors.	199-200
XII.	Conclusion	201-205
Annexure	Resolution Plan of SRA

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NATIONAL COMPANY LAW TRIBUNAL: NEW DELHI SPECIAL BENCH

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IA. NO. 2836/PB/2021, IA. NO. 3457/PB/2021 IA. NO. 3306/PB/2021, and IA. NO. 2521/PB/2022

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IN

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Company Petition No. (IB)-77(ALD)/2017

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IN THE MATTER OF: IDBI BANK LIMITED ... Applicant/Financial Creditor

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Versus JAYPEE INFRATECH LIMITED … Respondent/Corporate Debtor

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AND IN THE MATTER OF IA. No. 2836/PB/2021

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(SECTION: 30(6) of IBC, 2016)

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Mr. Anuj Jain Interim Resolution Professional Jaypee Infratech Limited Building No. 10, 8^th Floor, Tower B, DLF Cyber City, Phase – II, Sector – 25, Gurugram, Haryana – 122002 … Applicant

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Versus 1. Suraksha Realty Limited 3, Narayan Building, 23, L.N. Road Dadar (East) Mumbai, Maharashtra – 400014 … Respondent No.1

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2. Lakshdeep Investments and Finance Private Limited 3, Narayan Building, 23, L.N. Road Dadar (East) Mumbai, Maharashtra – 400014 … Respondent No.2 AND IN THE MATTER OF IA. No. 2521/PB/2022

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(SECTION: 60(5) of IBC, 2016)

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Mrs. Nina Sahani & Ors. E-322, Second Floor, Greater Kailash-2, South Delhi, Delhi -11 0048 … Applicants

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Versus

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Jaypee Infratech Limited Through Interim Resolution Professional, Mr. Anuj Jain Sector -128, Noida, Uttar Pradesh - 201304 … Respondent

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AND IN THE MATTER OF IA. No. 3457/PB/2021

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(SECTION: 60(5) of IBC, 2016)

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ICICI Bank Limited

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Corporate Office at: NBCC Place, Bhishma Pitamah Marg, New Delhi – 110003 … Applicant

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Versus

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1. Mr. Anuj Jain Interim Resolution Professional Jaypee Infratech Limited Building No. 10, 8^th Floor, Tower B, DLF Cyber City, Phase – II, Sector – 25, Gurugram, Haryana – 122002 … Respondent No.1 2. Suraksha Realty Limited 3, Narayan Building, 23, L.N. Road Dadar (East) Mumbai, Maharashtra – 400014 … Respondent No.2 3. Lakshdeep Investments and Finance Private Limited 3, Narayan Building, 23, L.N. Road Dadar (East) Mumbai, Maharashtra – 400014 … Respondent No.3

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AND IN THE MATTER OF IA. No. 3306/PB/2021

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(SECTION: 60(5) of IBC, 2016)

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Yamuna Expressway Industrial Development Authority

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First Floor, Commercial Complex, P-2, Sector Omega 1, Greater Noida District, Gautam Budh Nagar, Uttar Pradesh – 201308 … Applicant

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Versus 1. Mr. Anuj Jain Interim Resolution Professional Jaypee Infratech Limited Building No. 10, 8^th Floor, Tower B, DLF Cyber City, Phase – II, Sector – 25, Gurugram, Haryana – 122002 … Respondent No.1 2. Suraksha Realty Limited 3, Narayan Building, 23, L.N. Road Dadar (East) Mumbai, Maharashtra – 400014 … Respondent No.2 3. Lakshdeep Investments and Finance Private Limited 3, Narayan Building, 23, L.N. Road Dadar (East) Mumbai, Maharashtra – 400014 … Respondent No.3

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Order Delivered on: 07.03.2023

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CORAM:

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JUSTICE RAMALINGAM SUDHAKAR, HON’BLE PRESIDENT

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SHRI. L. N. GUPTA, HON’BLE MEMBER (TECHNICAL)

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PRESENTS: For the IRP : Adv. Sumant Batra, Adv. Ruchi Goyal, Adv. Sanjay Bhatt For the SRA : Sr. Adv. U.K. Chaudhary, Sr. Adv. Sudhir Makkar, Adv. Aditya Maheshwari, Adv. Eshna

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	Kumar, Adv. Sagar Bansal, Adv. Mansumyer Singh, Adv. Suamya Gupta, Adv. Veera Matha
For the CoC	:Adv. Bishwajit Dubey, Adv. Namrata Sadhnani, Adv. Varisha Sharma
For the Home Buyers	:Adv. Shoeb Alam, Adv. Nakul Gandhi, Adv. Gauri Goburdhan
For the FD Holders	:Adv. Mohit Sharma
For the ICICI Bank	:Sr. Adv. Arun Kathpalia, Adv. Mahima Sareen, Adv. Nikhil Mathur, Adv. Misha
For the YEIDA	:Sr. Adv. Abhinav Vasisht, Adv. Amar Gopal, Adv. Aniket Aggarwal
For the JAL	:Sr. Adv. Krishnan Venugopal, Adv. Pallavi Srivastava, Adv. Krishnan Agarwal, Adv. Vishal Gupta, Adv. Divyanshu Gupta, Adv. Anupam Choudhary

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ORDER

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The present application I.A No. 2836/PB/2021 is filed by the Interim Resolution Professional ( IRP ) Mr. Anuj Jain (Applicant/IRP) of M/s. Jaypee Infratech Limited ( JIL ), pursuant to the directions given by the Hon’ble Supreme Court of India in the Judgement of Jaypee Kensington Boulevard Apartments Welfare Association & Ors Vs. NBCC (India) Ltd & Ors. ( for brevity, hereinafter referred to as the “ Jaypee Kensington” ) in Civil Appeal No. 3395 of 2020.

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The application has been preferred by the IRP under Section 30(6) read with Section 31(1) of the Insolvency and Bankruptcy Code, 2016 ( for brevity, the “ IBC, 2016” ) and Regulation 39(4) of Insolvency and Bankruptcy Board

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of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ( for brevity, the “ CIRP Regulations” ) for approval of the Resolution Plan submitted jointly by a Consortium of M/s. Suraksha Realty Limited and M/s. Lakshdeep Investments and Finance Private Limited ( for brevity, called

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“ Suraksha Realty”/ “Suraksha” ) in respect of Jaypee Infratech Limited ( for brevity, called “ JIL/the Corporate Debtor” ) seeking the following prayers:

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a) Pass an order approving the Resolution Plan dated 07.06.2021 together with the Addendum dated 09.06.2021 submitted by the Successful Resolution Applicant, namely, Suraksha Realty Limited and Lakshdeep Investments and Finance Private Limited in respect of the Corporate Debtor under Section 31(1) and declare that the same shall be binding on the Corporate Debtor and its employees, members, all creditors including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force such as authorities to whom statutory dues are owed, guarantors and other stakeholders in the CIRP of the Corporate Debtor;

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b) Pass an appropriate order in respect of allowing ICICI Bank (being the sole Dissenting Financial Creditor) to enforce security interest mentioned in Para 76-80 of the instant Application for realization of liquidation value payable to ICICI in terms of Clause 15.48 & 15.50 of the Resolution Plan in terms of Section 30(2)(b) of the Code;

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c) Pass an order that details of security interest mentioned in Para 76-80 of the instant Application for realization of liquidation value payable to ICICI shall form part of the order approving the Resolution Plan;

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d) Consider passing necessary directions for grant of reliefs as sought under Clause 12 read with Annexure II of the Resolution Plan dated 07.06.2021, if deemed appropriate;

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e) Pass such other order/orders as it may deem fit and proper in the facts and circumstances of the case.

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I. BACKGROUND

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To put the facts succinctly, the underlying main Petition CP (IB)77/ALD/2017 was filed by the IDBI Bank Limited against the Corporate Debtor under Section 7 of IBC, 2016, which was admitted vide Order dated 09.08.2017 of the Allahabad Bench of this Tribunal. The Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor was initiated and the Applicant/IRP Mr. Anuj Jain was appointed as the Interim Resolution Professional (IRP). The IRP in accordance with the provisions of the IBC 2016, took over the management and affairs of the Corporate Debtor/JIL on 12.08.2017.

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In the meantime, the homebuyers of Corporate Debtor/JIL filed a Writ Petition (C)-744/2017 Chitra Sharma & Ors. Vs. Union of India & Ors. [2018 18 SCC 575] before the Hon’ble Supreme Court of India challenging certain provisions of the IBC 2016, and the Order dated 09.08.2017 passed by the Allahabad Bench of this Tribunal. The Hon’ble Supreme Court vide its Judgement dated 09.08.2018 ordered to restart of the CIR Process of the JIL/ Corporate Debtor.

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Accordingly, in terms of Regulation 6(1) of CIRP Regulations, 2016, the IRP made a public announcement in Form-A on 17.08.2018.

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The IRP then, constituted the Committee of Creditors (for brevity, the “CoC” ) on 07.09.2018 comprising the following members:

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It is submitted that the IRP had earlier filed an Application CA-5/2020 on 20.12.2019 before the Allahabad Bench of this Tribunal for approval of the Resolution Plan of NBCC under Section 30(6) read with Section 31 and Section 60(5) of the IBC, 2016 and Regulation 39(4) of the CIRP Regulations, 2016.

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It has been further submitted by the Applicant that in the meantime, the Principal Bench of this Tribunal vide its order dated 13.01.2020 in Petition (IB)-77/ALD/2017 directed the registry of NCLT Allahabad Bench to transfer the matters relating to CIRP of Corporate Debtor/JIL and the related applications to itself.

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It has been stated that the application for approval of the Resolution Plan along with other interlocutory applications was considered by the NCLT Principal Bench. It is submitted by the Applicant that the Resolution Plan of NBCC (India) Ltd. was approved by this Tribunal vide order dated 03.03.2020 with certain modifications.

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It is further stated by the Applicant that NBCC (India) Ltd. challenged the order dated 03.03.2020 of this Tribunal, in an appeal filed before the Hon’ble NCLAT bearing Company Appeal (AT) (Insolvency) No. 465 of 2020. The Hon’ble NCLAT passed an interim order dated 22.04.2020 directing the Applicant/IRP to constitute an Interim Monitoring Committee (IMC) to implement the approved Resolution Plan. However, the said direction was subject to the outcome of the Appeal. The Interim Monitoring Committee was to comprise the Successful Resolution Applicant i.e., NBCC and three major Financial Institutions, who were the members of the CoC, namely, IDBI Bank Limited, Indian Infrastructure Finance Company Limited, and LIC of India.

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In the meantime, the Hon’ble Supreme Court vide Order dated 06.08.2020, passed in Civil Appeal No. 3395/2020 in the matter of Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Limited directed an ad-interim stay on the operation of the Order dated 22.04.2020 of the Hon’ble NCLAT and the Applicant/IRP to manage the affairs of the Corporate Debtor. A further direction was passed to transfer all the Appeals pending before the Hon’ble NCLAT, arising out of the Order dated 03.03.2020 of this Tribunal, to itself.

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II. DIRECTIONS OF THE HON’BLE SUPREME COURT

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The Hon’ble Supreme Court vide its Judgement dated 24.03.2021 in the matter of Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Limited in Civil Appeal no. 3395/2020 (hereinafter referred to as Jaypee Kensington ) set aside the order dated 03.03.2020 of this Tribunal and remanded the matter back to the

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CoC with a direction to complete the CIR process of the Corporate Debtor within 45 days. The Hon’ble Apex Court permitted only Suraksha Realty and NBCC to submit the Resolution Plans. The relevant paragraphs of the Jaypee Kensington are reproduced hereinbelow:

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“225. Accordingly, while once again exercising our powers under Article 142 of the Constitution of India to do substantial and complete justice to the parties and in the interest of all the stakeholders of JIL, we conclude on these matters with the following order:

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225.1. The matter regarding approval of the resolution plan stands remitted to the Committee of Creditors of JIL and the time for completion of the process relating to CIRP of JIL is extended by another period of 45 days from the date of this judgment.

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225.2. We direct the IRP to complete the CIRP within the extended time of 45 days from today. For this purpose, it will be open to the IRP to invite modified/fresh resolution plans only from Suraksha Realty and NBCC respectively, giving them time to submit the same within 2 weeks from the date of this judgment.

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225.3. It is made clear that the IRP shall not entertain any expression of interest by any other person nor shall be required to issue any new information memorandum. The said resolution applicants shall be expected to proceed on the basis of the information memorandum already issued by IRP and shall also take into account the facts noticed and findings recorded in this judgment.

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225.4. After receiving the resolution plans as aforementioned, the IRP shall take all further steps in the manner that the processes of voting by the Committee of Creditors and his submission of report to the Adjudicating Authority (NCLT) are accomplished in all respects within the extended period of 45 days from the date of this judgment. The

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Adjudicating Authority shall take final decision in terms of Section 31 of the Code expeditiously upon submission of report by the IRP.

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225.5. These directions, particularly for enlargement of time to complete the process of CIRP, are being issued in exceptional circumstances of the present case and shall not be treated as a precedent .”

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It is submitted by the Applicant/IRP that NBCC (India) Limited and Suraksha Realty submitted their respective Resolution Plans on 07.04.2021. The Applicant/IRP further submitted that after negotiations, NBCC (India) Limited submitted its revised Resolution Plan on 04.06.2021 and the Suraksha Realty submitted its revised Resolution Plan along with an addendum on 07.06.2021.

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III. APPROVAL OF RESOLUTION PLAN BY COC

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As submitted by the Applicant/IRP, the members of the CoC discussed and deliberated upon the revised Resolution Plans along with their respective addendums submitted by NBCC (India) Limited and Suraksha Realty in the 24^th CoC meeting convened on 10.06.2021 and both the plans were put to vote from 14.06.2021 to 23.06.2021. It is further submitted by the Applicant/IRP that the Resolution Plan of Suraksha Realty received 98.66% votes and the plan of NBCC (India) Limited received 98.55% votes of the CoC. Thus, the Resolution Plan submitted by M/s. Suraksha Realty Limited along with M/s Lakshdeep Investments and Finance Private Limited was passed by the CoC. The relevant extracts of the voting sheet relating to the Resolution Plan of the Suraksha Reality are reproduced overleaf:

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The Applicant/IRP has also enclosed the Affidavits filed by the Successful Resolution Applicants (SRAs) stating that they are not barred under Section 29A of IBC, 2016 to submit the Resolution Plan. The said affidavits are reproduced below, for immediate reference:

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It is submitted by the Applicant/IRP that subsequent to passing of its Resolution Plan, the “Suraksha Realty” ( hereinafter, referred to as “Successful Resolution Applicant” or “SRA” ) have submitted the Performance Bank Guarantee of Rs.100 (one hundred) Crores valid till 06.07.2022. However, during the pendency of the present application, the said Performance Guarantee expired and therefore, the Resolution Applicant later submitted the amended Performance Bank Guarantee valid till 05.07.2023 (placed at page 14 of the Affidavit dated 11.08.2022 filed by the

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Applicant). The scanned copy of the Amended Performance Bank Guarantee

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is reproduced below:

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Since the Resolution Plan of “Suraksha Realty” is approved by the requisite majority of the CoC and the Successful Resolution Applicants are not barred under Section 29A of IBC, 2016, therefore, we would proceed to examine the other aspects of the Resolution Plan under consideration.

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The Applicant/IRP has filed an Affidavit dated 18.04.2022 giving details of the Corporate Debtor’s Liquidation Value (LV) and Fair Market Value (FMV). The relevant contents of the said Affidavit are reproduced below, for the sake of convenience:

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IV. FINANCIAL OUTLAY OF RESOLUTION PLAN

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Through the same Affidavit dated 18.04.2022, the Applicant/IRP has also filed details of the total Financial Outlay of the Suraksha’s Resolution Plan. The relevant extracts are reproduced below, for the immediate reference:

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V. SALIENT FEATURES OF RESOLUTION PLAN

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The salient features of the CoC-approved Resolution Plan as submitted by Suraksha Realty; Successful Resolution Applicant (SRA) are the following:

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20.1 The SRA proposes to resolve the defaults of the Corporate Debtor in the following manner:

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a) Limiting and resolving the debt obligations of the Corporate Debtor;

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b) Infusing additional working capital;

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c) Taking control of all the business activities by terminating concerned related party agreements/ contracts;

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d) Prudent financial planning and transparency in management and utilization of funds; and

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e) Good corporate governance

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20.2 The SRA proposes to construct homes for the Homebuyers as per the

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following timelines (Part IV; Annexure-I of the Resolution Plan):

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20.3 Feasibility and viability of the Resolution Plan: The Resolution

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Applicant has committed to bringing the equity infusion and working capital

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facility/ group company loan for the purpose of construction of projects and delivery of homes. The such commitment of delivery is given based on the

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estimated cost provided in the Virtual Data Room (VDR) which, as per them, is achievable. They have further averred that all other treatments provided in the Resolution Plan are viable and achievable.

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20.4 Sources of Funds: The Resolution Applicants at para 13 on page no. 26-27 of the Resolution Plan have detailed sources of funds as given in the following table:

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20.5 Application/Utilisation of Funds : The Resolution Applicants at para

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13 on page no. 27-28 of the Resolution Plan have also indicated utilization of

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funds as given in the following table:

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20.6 Treatment for CIRP Costs: The Resolution Applicant understands that as per the information available in the Virtual Data Room (VDR) out of the total CIRP Cost, a sum of Rs. 33.63 Crore has been paid out of the internal accruals of the Corporate Debtor and a sum of Rs. 5.45 crore remains to be paid. In the event, the CIRP cost increases beyond Rs. 5.45 crore, the excess amount shall be paid by the Resolution Applicant by bringing additional funds, in the event the full CIRP Cost is not paid out of the internal accruals of the Corporate Debtor.

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20.7 Treatment to Dissenting Financial Creditors (Para 15.47): The Resolution Applicants have proposed to allow enforcement of security interest to the Dissenting Institutional Financial Creditor in order to make the plan viable, feasible and effectively implementable. The details are given below:

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20.8 Treatment of Institutional Financial Creditors by way of NCDs and

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Land Parcels (Para 15.11): The Resolution Applicant proposes to issue 0.01% Non-Convertible Debentures (called Assenting NCD’s) and the following land parcels to the Assenting Institutional Financial Creditors:

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20.9 Admitted claims of Institutional Financial Creditors (Para 15.10):

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As submitted by the Resolution Applicant, the admitted claims of Institutional Financial Creditors are to the tune of Rs.9,782.60 crore as per the following details and breakup provided in the Information Memorandum (IM):

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20.10 Treatment for the Fixed Deposit Holders (Para 16.2):

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Particulars	Rs. In Crore
Payment against Claims Admitted asper IM	29.26
Proportionate Payment to Claims filed	9.16
subsequent to IM however prior to NCLT
Approval Date(asgoodwillgesture)
Total	38.42

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It has been stated by the Resolution Applicants that against the admitted claims of Rs. 29.26 crores of Fixed Deposit Holders, the entire amount of Rs. 29.26 Crore shall be paid to the Fixed Depositors, whose Claims have been admitted in IM, on pro-rata basis, in three equal half-yearly instalments from the Transfer Date, as full and final settlement of all the claims of Fixed Deposit holders in accordance with the provisions of the Code. No payment shall be made towards interest over such fixed deposits. It has been added that against the Claims filed subsequent to the finalization of IM but prior to NCLT Approval Date, an amount of Rs. 9.16 Crore shall be paid to Fixed Deposit holders, on a pro-rata basis, in three equal half-yearly instalments, from the Approval Date, as full and final settlement of all the claims. No payment shall be made towards interest over such fixed deposits. It has been clarified that though the Resolution Applicant is legally entitled not to deal with the Claims not admitted by IRP, however, the Resolution Applicant has provided for payment of Rs. 9.16 crore as a goodwill gesture, in the interest of such public depositors and shall not be construed to be differential treatment.

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20.11 Treatment of the Financial Creditor in a class – Homebuyers: It

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has been stated by the Resolution Applicants that the admitted claims of

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Homebuyers as of 29.05.2021 are to the tune of Rs. 12,806 Crores, as per the details given below:

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20.12 Treatment for Workmen Dues (Para 18): It has been stated by the

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Resolution Applicants that the admitted claims of the Workmen as on 31.03.2021 were NIL. In the event any workmen dues are added to the admitted claims by the IRP prior to the Approval Date, the Resolution Applicants shall pay the same in accordance with the Code and the Regulations, from its internal sources.

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20.13 Treatment for Claims of Income Tax Department (Para 19.2):

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It has been stated by the Resolution Applicants that since the Income Tax Department did not file any claim pertaining to operational debt owed to them by the Corporate Debtor, therefore, no payment is provided in the Resolution Plan in line with Jaypee Kensington Judgement.

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20.14 Treatment for Claims of YEIDA (Para 20.2 and 20.8): It has been stated by the Resolution Applicants that the YEIDA had filed an aggregated claim of Rs. 6,111.60 Crores, out of which IRP admitted the claim of Rs. 461 Crores as per the IM as on 31.03.2021 pertaining to External Development Charges (EDC) including interest and pending work. However, payment of

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Rs. 0.10 crore shall be made towards the admitted claim of YEIDA. The remaining claims of Rs. 5,650.60 Crores filed by YEIDA includes a Disputed Claim under Arbitration relating to 64.7% additional compensation of Rs. 1,689 Crores. The Resolution Applicants have proposed to provide Rs. 0.10 Crore towards this disputed claim.

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20.15 Treatment to Claims of other Operational Creditors (Para 21.2):

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It has been stated by the Resolution Applicants that against the Claims of other Operational Creditors amounting to Rs. 3.2 Crores, no amount is payable in accordance with section 30 read with section 53 of the Code. However, a payment of Rs. 0.10 Crore is being made towards such Operational Creditors in the Resolution Plan.

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20.16. Treatment of the liability of Corporate Debtor with respect

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to the Jaypee Healthcare Ltd (“JHL”) (Para 23): It has been stated by the Resolution Applicant that all contingent liabilities as detailed in the IM or appearing in the books of the Corporate Debtor or otherwise, inter-alia including any contingent liabilities relating to guarantee(s), shortfall undertaking or any other similar instrument provided by the Corporate Debtor to secure the financial indebtedness of Jaypee Healthcare Limited or any other person, along with any related legal proceedings (including criminal proceedings), if any, shall stand irrevocably and unconditionally abated, and extinguished in perpetuity on and in with effect from the date of approval of Resolution Plan by the Adjudicating Authority. The Corporate Debtor shall have a right of subrogation against its subsidiary JHL, in the event the

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pledged shares owned by the Corporate Debtor are enforced and monies are recovered by the lenders of JHL. It has been further submitted that without prejudice to the above-mentioned treatment, the Resolution Applicants are in discussion with Yes Bank to explore the possibility of a mutually acceptable amicable solution.

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20.17 Treatment for the Equity Shareholders (Para 24): It has been stated by the Resolution Applicants that the outstanding equity share capital as on 31.03.2021 was Rs. 1389 Crores and upon approval of the Resolution plan by this Adjudicating Authority, the issued, subscribed and paid-up share capital of the Corporate Debtor including preference shares if any, shall be cancelled and reduced in its entirety, without requiring any further act, instrument or deed, such that on effecting the said reduction, the entire share capital of the Corporate Debtor held by the shareholders of the Corporate Debtor shall be deemed to have been cancelled immediately. The face value of the cancelled shares shall be credited to “Capital Reserve Account” of the Corporate Debtor. The Corporate Debtor shall take the steps for delisting of its Equity Shares in accordance with the provisions of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009. The existing paid-up share capital shall stand to be fully written down (“Capital Reduction”) and the Shareholding after resolution of the Corporate Debtor shall stand as reproduced overleaf:

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20.18 Term of Resolution Plan & the Implementation Schedule (Para 26):

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The Resolution Applicant has sought various Reliefs and Concessions as detailed in the Annexure II (page no. 132-138) of the Resolution Plan. The proponents of the Plan, however, have undertaken that the Resolution Plan shall be implemented whether those concessions are granted or not. The relevant Clause 12 of the plan to this effect is reproduced overleaf:

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“ 12. Reliefs and Concessions

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The reliefs and concessions sought by the Resolution Applicants are more particularly contained in Annexure-II hereto. The Resolution Applicants undertake that they will implement this Resolution Plan, whether or not the reliefs and concessions are granted.”

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VI. COMPLIANCE CERTIFICATE & COMPLIANCE CHART

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The applicants have attached the Compliance Certificate in “Form-H”

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with the Application as required under Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which for the sake of convenience, is reproduced below:

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The Applicant/IRP has further submitted that the Resolution Plan does not contradict any Regulation or provisions of IBC, 2016. To support its contention, the IRP has attached the Compliance Chart along with the Application, which is reproduced below:

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Although the Resolution Applicant and the IRP have averred that the

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Resolution Plan is compliant in all respects, however, Yamuna Expressway Industrial Development Authority (hereinafter referred to as “YEIDA” ), ICICI Bank, Ex-Promoter of JIL, Mr. Manoj Gaur have raised their objections to Approval of the Resolution Plan by filing separate Interlocutory Applications (IAs). Therefore, at this stage, in order to adjudicate whether the Resolution Plan under consideration is compliant in all respects or not, we consider it necessary to visit these objections IA-wise.

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VII. I.A. NO. 3457/PB/2021

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OBJECTIONS OF ICICI BANK

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First, we consider it appropriate to deal with the objections raised to the Resolution Plan by the Dissenting Financial Creditor (DFC) ICICI Bank (hereinafter, referred to as the “Applicant Bank” ) by filing the present I.A.3457 of 2021. The prayers made in this IA are reproduced below:

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“a. Allow the present application and direct the Resolution Plan to be made compliant with the mandatory requirements under Section 30(2) of the Insolvency & Bankruptcy Code, 2016 and the law laid down by the Hon’ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Limited & Ors. by providing payment of Liquidation Value to the Applicant in its capacity as the dissenting financial creditor either in cash or by permitting it to enforce its security interest over all or any assets of the Corporate Debtor secured in its favour as per Applicant’s own discretion and choice.

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b. Pass such other order/orders as it may be deem fit and proper in the facts and circumstances of the face.”

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In addition to the ICICI Bank, JAL - the Holding Company and the expromoter of the Corporate Debtor have also objected to the Resolution Plan. For the sake of convenience, the ICICI Bank (the Applicant herein), JAL, and Ex Promoter of JIL together, hereinafter, are referred to as “Objectors”.

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It is submitted by the Objectors that:

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27.1 The ICICI Bank Limited is a Secured Financial Creditor to the Corporate Debtor having a claim of approximately Rs. 304.1 Crores and it is having 1.31% of the voting share in the Committee of Creditors (“CoC”).

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27.2 The ICICI Bank had voted against the Resolution Plan and is therefore, having the status of Dissenting Financial Creditor (for brevity, hereinafter, referred to as “DFC” ). It is stated that under the proposed Resolution Plan, a ‘DFC’ is proposed to be settled by enforcing security interest in relation to certain secured parcels of land to be equivalent to its liquidation value.

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27.3 The Applicant Bank has, inter alia, opposed the Resolution Plan on the ground that the payment provided to it in the plan fails to satisfy the liquidation value, as mandatorily provided under Section 30(2)(b) of the Code and to the Judgment passed by the Hon’ble Supreme Court in the Jaypee Kensington . In terms of the Suraksha’s Resolution Plan, the Applicant is a DFC and is required to bear the entire enforcement costs such as stamp duty, transfer charges, registration charges, the compensation sought by local farmers, external development charges, encroachments and other legal and incidental costs (which are not even predictable at this stage), while liquidating the land allocated to it under the proposed Resolution Plan. It is further stated that payment of a minimum liquidation value to a DFC is a matter of minimum prescription for validity and approval of a resolution plan.

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27.4 The proposed resolution plan envisages that not only the task for liquidating the secured land asset (which is identified unilaterally by the SRA) shall be undertaken by a DFC but also the enforcement/incidental costs for liquidating such land assets are also left to be borne by the DFC. In this context, the Applicant has referred to Clauses 15.52 and 15.54 of the Resolution Plan, which are reproduced below:

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“15.52. The Corporate Debtor and / or the Resolution Applicants shall not be obliged to the Dissenting Institutional Financial Creditors, in any manner, including any payment / obligation, whatsoever, once allowed to enforce its security interest as mentioned hereinabove. The Claim of the Dissenting Institutional Financial Creditors shall stand extinguished in perpetuity upon allowing enforcement of such security interest and the Corporate Debtor shall not be liable for the any cost, charges, expenses, taxes including income tax, GST, etc. or otherwise that may arise due to enforcement of security interest, as the same are incidental expenses for enforcement of security interest and such liability shall be incurred by the Dissenting Institutional Financial Creditors without any recourse, express or implied, to the Corporate Debtor and/or Resolution Applicants.

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15.54. The Dissenting Institutional Financial Creditors shall bear the costs, if any, viz. applicable stamp duty, registration or any other charges for creation of such mortgage, enforcement of security interest and any other cost in relation thereto. The Corporate Debtor shall not be liable for any such costs, charges and/or other levies in relation thereto as the Resolution Applicant is providing what is required as per the directions of Hon’ble Supreme Court in Jaypee Kensington Judgment.”

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27.5 It is submitted by the Applicant Bank that the intent of the Code is to provide full liquidation value to a DFC without any additional costs. The effect of the abovementioned clauses proposed in the Resolution Plan has the effect of transferring all potential, future, uncertain liabilities (in the nature of stamp duty, compensation sought by local farmers, external development charges, encroachments etc.) attached to the proposed land parcels to the Applicant and would result in payment, which may be much less than the

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liquidation value. Thus, non-satisfaction of a mandatory requirement renders the resolution plan non-compliant with the provisions of the Code.

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27.6 The Applicant Bank has relied upon the Judgement of the Hon’ble Supreme Court in the Jaypee Kensington to demonstrate that: a) a Dissenting Financial Creditor’s liquidation value has to be paid in cash, and b) as an exception to the above, a Dissenting Financial Creditor, being a Secured Financial Creditor can be allowed to recover its “amount payable” by enforcing its security interest to the extent of its Liquidation value.

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27.7 The relevant extracts of the Jaypee Kensington are reproduced below:

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“ 121.1. Therefore, when, for the purpose of discharge of obligation mentioned in the second part of clause (b) of Section 30(2) of the Code, 244 the dissenting financial creditors are to be “paid” an “amount” quantified in terms of the “proceeds” of assets receivable under Section 53 of the Code; and the “amount payable” is to be “paid” in priority over their assenting counterparts, the statute is referring only to the sum of money and not anything else . In the frame and purport of the provision and also the scheme of the Code, the expression “payment” is clearly descriptive of the action of discharge of obligation and at the same time, is also prescriptive of the mode of undertaking such an action. And, that action could only be of handing over the quantum of money, or allowing the recovery of such money by enforcement of security interest, as per the entitlement of the dissenting financial creditor.”

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121.2. We would hasten to observe that in case a dissenting financial creditor is a secured creditor and a valid security interest is created in his favour and is existing, the entitlement of such a dissenting financial creditor to receive the “amount

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payable” could also be satisfied by allowing him to enforce the security interest, to the extent of the value receivable by him and in the order of priority available to him. Obviously, by enforcing such a security interest, a dissenting financial creditor would receive “payment” to the extent of his entitlement and that would satisfy the requirement of Section 30(2)(b) of the Code. In any case, that is, whether by direct payment in cash or by allowing recovery of amount via the mode of enforcement of security interest, the dissenting financial creditor is entitled to receive the “amount payable” in monetary terms and not in any other term.

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(Emphasis Supplied)

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27.8 It is further stated by the Applicant Bank that even Section 13(7) of SARFAESI Act, 2002 provides that all expenses, costs, and charges, which have been incurred by the secured creditor in realizing such secured asset shall be ‘recoverable’ from the borrower.

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27.9 The next objection raised by the Applicant Bank is that the proposed Resolution plan does not give the DFC an opportunity to choose the security interest it wishes to enforce, instead it thrusts its unilateral decision to allocate only one of the secured land assets of the Corporate Debtor to the Applicant (i.e., land at Tappal, U.P., which is commercially unviable and less marketable), in comparison to and in complete disregard to the other parcels of land and movable assets over which also the Applicant holds valid security interest. Additionally, the SRA has also overlooked the cash generated from the Yamuna Expressway, over which the Applicant holds valid security interest and is itself sufficient to recover the “amount payable” to the Applicant. The Applicant Bank, in this context, has relied upon Clauses 15.47 and 15.49 of the Resolution Plan, which are reproduced overleaf:

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“15.47. The Resolution Applicants / Corporate Debtor shall identify specific and distinct security interest, out of the Consortium Pari-passu Corporate Debtor Land Parcels Security Interest , exclusively for each of the Dissenting Institutional Financial Creditor(s):

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Table 16: Treatment to Dissenting Institutional Financial Creditors

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@ as provided by IRP; 166 acres out of 666 acres mortgaged to exclusive charge holders.”

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“15.49. The Resolution Applicants have right to identify and earmark specific land at any of the locations, out of the existing security interest, in order to provide specific, exclusive and distinct security interest for enforcement of security interest, for recovery of entitlement, by each Dissenting Institutional Financial Creditor/(s). However, in order to provide fair and equitable treatment to the Dissenting Institutional Financial Creditors, the Resolution Applicants shall exercise their aforesaid right of identifying specific, distinct and exclusive land parcels, after inviting views / suggestions of such Dissenting Institutional Financial Creditors. It is also clarified that since the Resolution Applicants need to identify such land parcels expeditiously in

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order to make it part of the Resolution Plan, prior to the submission of the same for approval before the Adjudicating Authority by IRP, the Resolution Applicants shall provide maximum five working days to such Dissenting Institutional Financial Creditor (s) for such giving their views / suggestions in this regard. In the event the Dissenting Institutional Financial Creditors fail to arrive at a consensus regarding the identification of the security interest by the Resolution Applicants then the identification done by the Resolution Applicants shall be binding on each Dissenting Institutional Financial Creditors. In the event, the Dissenting Institutional Financial Creditors so agree, then the Resolution Applicants shall identify and earmark land parcels out of the existing security interest and shall provide such identified land parcels to Dissenting Institutional Financial Creditors as security on pari-passu basis for recovery of their entitlement by way of enforcement of such security interest.”

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27.10 It is contended by the Applicant Bank that Clause 15.49 of the Resolution Plan proposes to seek views/suggestions from a DFC, as regards the proposed land to be offered, however in case of failure of the to arrive at consensus qua the same, the decision of the Resolution Applicant shall be final.

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27.11 It is further stated that the land parcel admeasuring 180 acres at Tappal, U.P. proposed by the SRA vide their email dated 2 July 2021 is admittedly a parcel of ‘mix use of land’ – viz., residential, community facility, sector green and roads. The proposed land parcel is commercially unviable and less marketable which in all likelihood, may not even yield the liquidation value to the Applicant Bank as contemplated under Section 30(2) of the Code.

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27.12 Another objection raised by the Applicant Bank is that the IRP has calculated the liquidation value payable to the Applicant only to the extent of the value of the security available to it, with no further entitlement given towards the Applicant’s rights as an unsecured creditor on the unencumbered and other available assets of the Corporate Debtor. Thus, the computation of the Liquidation Value by IRP is erroneous and is in violation of the Code.

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27.13 As per Section 53 of the Code, once a secured creditor has been given the entitlement of its security under Section 53(1)(b) of the Code, the secured creditor can claim the balance unpaid portion from the apportionment of unencumbered assets of the corporate debtor, which are available to unsecured financial creditors under Section 53(1)(d) on account of said assets being unsecured assets. It is a settled position that a secured creditor is secured to the extent of its value, and for the remaining debt, it continues to be an unsecured creditor. The debt owed to the Applicant from the Corporate Debtor is admittedly a financial debt and to the extent, the same is covered by the security in its favour, it is a secured debt and for the remaining debt, the Applicant is an unsecured financial creditor entitled for payment towards the balance at priority no. 4 under Section 53(1)(d) of the Code, after deduction of dues owed to the employees for 12 (twelve) months prior to the insolvency commencement date.

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27.14 It is stated by the Applicant Bank that IRP has misinterpreted Section 53 of the Code to calculate the additional entitlement payable to the Applicant as per Section 53(1)(e)(ii) of the Code at priority no. 5 and he has erroneously computed the Applicant’s liquidation value at Rs. 218 Crores,

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while negating the fact that the Applicant was entitled to be apportioned further amounts at priority no. 4 under Section 53(1)(d) as an unsecured financial creditor for the purposes of calculation of its liquidation value. It is relevant to highlight that the said erroneous calculation by the IRP was objected to by the Applicant as recorded in its letter dated 19.5.2021.

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27.15 It is stated by the Applicant Bank that it has been wrongfully contended by the SRA that since the Applicant is ‘enforcing its security interest’, its entitlement is to be computed in accordance with Section 52 of the Code. At the outset, it is submitted that the Applicant has simply dissented to the Suraksha’s Resolution Plan and accordingly, its entitlement is to be computed in accordance with Section 30(2) read with Section 53 of the Code, and not as per Section 52 of the Code. There is a distinction between ‘entitlement to liquidation value’ which refers to the calculation of a minimum guaranteed amount to a DFC under Section 30(2) in accordance with Section 53(1) of the Code, as against the mode of satisfaction of such an amount which ordinarily gets paid off as cash, or by way of enforcement of security interest, depending upon terms of the resolution plan in question. That is to say, there is a difference between entitlement and the mode of satisfaction of the entitlement. The mode of satisfaction of the entitlement, cannot change the manner of its calculation itself. Therefore, computation of liquidation value is to be carried out in terms of Section 30(2) read with Section 53(1) of the Code, and not in terms of Section 52, which is relevant only as a mode of satisfaction of the entitlement (of liquidation value), in terms of the Jaypee Kensington .

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27.16 It is further stated by the Applicant that the IRP has not maintained any consistency in its interpretation of Section 53 of the Code, which is clearly demonstrated from the computation of liquidation value carried out by the IRP for different creditors of the Corporate Debtor. Whereas for the purpose of liquidation value payable to the homebuyers first, they have been treated at par with the other secured creditors (similar to the Applicant) under Section 53(1)(b) of the Code at priority no. 2 and second, they have been treated as unsecured financial creditors under Section 53(1)(d) of the Code at priority no. 4; per contra, for the unsecured portion of its debt, the Applicant has been placed under Section 53(1)(e)(ii) of the Code at priority no. 5, instead of being placed under Section 53(1)(d) at priority no. 4. No reasonable explanation has been provided in support of this computation of liquidation value carried out by the IRP. It is, however, submitted that the Applicant is in no way impugning the treatment envisaged for the homebuyers under the Suraksha’s Plan, it has only sought to demonstrate the contradictory stand adopted by the IRP, which has been ratified by the CoC, in its interpretation of Section 53 of the Code. The counsels for lenders, during the 21^st CoC meeting, themselves admitted that a secured financial creditor is entitled to receive the balance value under Section 53(1)(d) of the Code (priority no. 4) and it does not have to fall under Section 53(1)(e) of the Code. Thus, it is evident that the computation of the liquidation value of the Applicant carried out by the IRP is in violation of the Code and hence, incorrect.

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The IRP, CoC through IDBI Bank and the SRA ( hereinafter, together

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referred to as “Supporters of Plan” ) have filed their Replies and Written

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Submissions and stated the following in response to the objections raised by the DFC / ICICI Bank:

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28.1 The Resolution plan was prepared with the intention that even if 34% of CoC members dissent, the plan shall not fail and therefore, the mechanism incorporated in the plan should accommodate the same. Accordingly, the treatment given to the Dissenting Financial Creditor is given in Clause 15.47 of the proposed Resolution Plan. As a matter of fact, the CoC of the Corporate Debtor approved the Resolution Plan on 23.06.2021 by 98.66% voting in favour of the plan and hence, the treatment proposed in Clause 15.47 shall be available to the DFC representing the remaining 1.34% voting of the CoC.

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28.2 It could not have been anticipated how many and which secured financial creditor will dissent, the practice of recognizing security interest out of Consortium Pari-passu Security Interest, against which a dissenting financial creditor will be allowed to enforce its right to the extent of liquidation value could only have been done subsequent to voting on the Resolution Plan and before submission to this Adjudicating Authority for approval. Hence, it was proposed that Suraksha Group shall identify specific, distinct, and exclusive security interest relatable only to the debt of each of dissenting financial creditors, out of the Consortium Pari-passu Security interest, as per their liquidation value due to them.

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28.3 In response to the objection that the proposed Resolution Plan did not give choice to the ICICI Bank to enforce security interest as per its choice, it is stated by Supporters of the plan that SRA has the full right to decide which part of the security is to be given to the DFC for enforcement. Under Section

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5(26) of the Code, Resolution Plan means a plan proposed by the resolution applicant for insolvency resolution of the corporate debtor as a going concern. It is stated that the plan includes treatment to the dissenting financial creditor which is to be proposed by the Resolution Applicant.

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28.4 Neither the Jaypee Kensington nor the provisions of the Code give any right to a DFC to choose a security interest or that it should be allowed to enforce from a common pool of security interest over which other financial creditors (assenting and/or dissenting) also have a paid pari passu charge. The Jaypee Kensington provides for an alternative form of payment by way of enforcement of security interest, but it does not provide that an option has to be given to the DFC to choose from available secured assets of the corporate debtor, for enforcement of its security interest.

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28.5 That the right to choose was never with IC1CI Bank, as it is one of the lenders in the IDBI consortium with only around 3% of the total debt of the consortium. Security interest belongs to the entire consortium and therefore, ICICI Bank, itself, could never have exercised enforcement of security interest without the consent of the consortium lenders.

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28.6 Further, it is not a unilateral decision of the Resolution Applicant to first provide land parcels at Tappal to a DFC. Such a decision has been accepted by CoC in its commercial wisdom (by virtue of 98.66% voting in favour of the Resolution Plan) and the same is binding on the DFC. In this regard, the Supporters of the Plan have placed reliance on Para 112 of Ebix

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Singapore (P) Ltd. Educomp Solutions Ltd . (COC), [(2022) 2 SCC 401] .

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28.7 It is further stated that the resolution applicant has proposed a fair and equitable treatment to the dissenting FCs by way of inviting views/ suggestions of such DFCs within a period of 05 working days from the approval of the Resolution Plan by the CoC. Thereafter, if such Dissenting Financial Creditor fails to arrive at a consensus regarding the identification of the security interest by the resolution applicant, then the identification done by the resolution applicant will be binding on each dissenting FC. Accordingly, the Suraksha (SRA) vide its email dated July 02, 2021 communicated to ICICI Bank that it had identified 180 acres of land for the ICICI Bank (the value of which will correspond to its entitlement) out of 666 acres of land at Tappal and requested it to provide its views/ suggestions. The Applicant ICICI Bank vide letter dated July 08, 2021, raised objections to the same which, inter alia, included ICICI's grievance of not being permitted to choose the security interest to be enforced by it. Thereafter, again the Suraksha (SRA) vide its letter dated July 29, 2021 responded to the objections raised by ICICI Bank and also invited it to choose from any land parcel from 666 acres in Tappal. However, the ICICI Bank did not revert, and as a consequence, the selected 180 acres of land parcels were allotted by Suraksha to ICICI Bank. Thus, ICICI Bank failed to exercise this right provided under the Resolution Plan.

¶316

28.8 In response to the objection raised by the ICICI Bank with regard to its contention that land parcels proposed to be transferred to ICICI Bank are of 'mix use of land' and thus, are non-marketable and commercially unviable, enforcement of which may not yield the liquidation value, the Supporters of the Plan have stated that there is no evidence to show that the land parcels

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being allotted to ICICI Bank are not marketable and are commercially unviable. Having accepted the same land parcels as security, while giving the loan, the Applicant/ICICI Bank now cannot be permitted to reject the same on a ground, which is not backed with any cogent evidence.

¶320

28.9 The valuation of the Corporate Debtor's assets, including the land parcels being allocated to Applicant/ICICI Bank, has been done in compliance with the IBC read with the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Under Regulation 35 read with Regulation 27 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the IRP had appointed two registered valuers namely RBSA Valuation Advisors LLP and GAA Advisory LLP for such valuation. Thereafter, the IRP considered the average of the two valuations proposed by both the valuers for the Corporate Debtor's assets to arrive at their fair market value and liquidation value.

¶321

28.10 The individual liquidation value of ICICI Bank's claim is Rs. 218 Crores against its admitted claim of Rs. 304 Crore. The Liquidation value for 1,266 acres of land parcels located in Tappal is given below:

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The ICICI Bank did not challenge the aforesaid valuation. Hence, it cannot question the value at this belated stage.

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28.11 It is further stated that the SRA vide Clause 15.17 of the Resolution Plan has given a Shortfall Undertaking in the Resolution plan, as per which further security interest shall be provided in case of any shortfall in treatment to Dissenting Financial Creditor. The Clause 15.17 of the plan reads thus:

¶326

28.12. As regards the objection relating to the transfer of liability of enforcement of security interest and other allied costs upon ICICI Bank, it is stated by the Supporters of the Plan that the term “liquidation cost” as defined under Regulation 2(1)(ea) of the IBBI (Liquidation Process) Regulations, 2016 does not include any costs incurred by a secured creditor. Further, the “liquidation value” as defined under Regulation 2(k) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 does not include the cost of enforcement or realization which a creditor might incur in enforcing security interest. The definition uses the term “realizable value” and not “net realizable value”.

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28.13 It is further stated that the Hon’ble Supreme Court in the Jaypee Kensington and India Resurgence ARC Private Limited v. M/S. Amit

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Metaliks Limited & Anr. (Civil Appeal No. 1700 of 2021) provides for the right of the Dissenting Financial Creditor to get liquidation value and not liquidation value along with enforcement costs.

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28.14 It is stated that the liquidation value is always less than the fair market value of the assets. The liquidation value is the value recoverable from the distressed sale of assets when the company is not a going concern. The land parcels being provided to ICICI Bank are worth Rs. 218 Crores at the liquidation value, however, the fair market value of such land parcels is much higher than Rs. 218 Crores which shall be sufficient to cover the enforcement costs.

¶332

28.15 As per Section 52(8) of the IBC, on enforcement of security interest during liquidation, Secured Financial Creditors are required to pay their proportionate share in the CIRP costs to the liquidator. Thus, costs incurred by a creditor to enforce the security interest has to be borne by such creditor and such creditor needs to provide his share of costs to the liquidator. Therefore, the need to provide for such enforcement costs does not arise.

¶333

28.16 As regards to the objection taken by the ICICI Bank with respect to the mode of determination of its Liquidation value, it is stated by the supporters of the plan that RP's computation of average liquidation value due to each secured Institutional Financial Creditor of the Corporate Debtor (including ICICI Bank) assumed that each secured Institutional Financial Creditor would enforce their existing security interest under Section 52(1)(b) of the IBC and accordingly, would be paid the remaining dues, if any, under Section 53(1)(e)(ii) of the IBC. For each consortium lender, the liquidation

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value was computed by considering the ratio of the liquidation value of Consortium Secured Assets computed by the registered valuers of the Corporate Debtor, and the admitted debt of Consortium Lenders. Such computation of liquidation value due to Institutional FCs was approved by the CoC in the 21^st CoC meeting held on 20.05.2021.

¶337

28.17 The ICICI Bank is a “secured creditor” as per Section 3(30) of the IBC as it has given a loan in respect of which security interest was created. Accordingly, a liquidation value of Rs. 218 Crores was computed for ICICI Bank out of its admitted claim of Rs. 304 Crores. Its balance claim of Rs. 86 Crores could not be considered as: (a) subsequently, the remaining proceeds which were due to the unsecured creditors i.e., Home Buyers and fixed deposit holders in accordance with Section 53(1)(d) of the IBC; and (b) post consideration of payments to be made to Home Buyers and fixed deposit holders, the proceeds were not sufficient to pay the remaining creditors in the liquidation waterfall under Section 53 of the IBC, including payments to secured creditors for any amount unpaid following the enforcement of security interest under Section 53(1)(e)(ii) of the IBC. Therefore, payment under Section 53(1)(e)(ii) of the IBC to ICICI is Nil.

¶338

28.18. Section 53 of the IBC prescribes a distribution waterfall, with the ranking of each class of creditors based on an identified priority. If the total liquidation value of the assets of the Corporate Debtor is not sufficient for full payment of all dues of a certain higher rank of creditors, the lower rank will not be entitled to any proceeds from the assets/liquidation of the Corporate Debtor. Under the IBC, the unsecured financial creditors are not mandatorily

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entitled to receive payments under a resolution plan in the event that the liquidation value of the corporate debtor is likely to be even insufficient to satisfy the claims of the secured creditors and workmen dues in full.

¶342

28.19. In the distribution waterfall prescribed under the IBC, ICICI Bank falls under Section 53(1)(e)(ii) of the IBC for the balance amount of Rs. 86 Crores and not under Section 53(1)(d) of IBC as contended by ICICI Bank.

¶343

28.20 The Hon’ble Supreme Court in the Jaypee Kensington has introduced the concept of enforcement of security interest by a dissenting financial creditor by clearly adverting to the principle contained in Section 52(1)(b) of the IBC. Such concept/principle has been imported from Section 52 of the IBC (since Section 53 of the IBC does not provide for enforcement of security interest, but rather provides for dues after relinquishment). Therefore, Section 52 has to be read with Section 53 of the IBC, otherwise, there is no provision under the IBC that will govern the enforcement of security interest by dissenting financial creditors. Having alluded to the principle contained in Section 52(1)(b) of the IBC, the consequent effect would be that any remaining claims of the dissenting financial creditor will be secured claims recoverable under Section 52(9) of the IBC, which places such dissenting financial creditor under Section 53(1)(e)(ii) of the IBC,2016.

¶344

28.21. In any event, as laid down in the Jaypee Kensington , the requirement of Section 30(2)(b) of the IBC is automatically satisfied by allowing dissenting the financial creditor to enforce its security interest (refer para 121.2 of Jaypee Kensington). In other words, this judgment clearly states that the money received by a dissenting financial creditor to the extent of its

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entitlement pursuant to the enforcement would amount to payment to such creditor under Section 30(2)(b) of the IBC. Thus, the question of inadequate treatment of ICICI by not allowing dues under Section 53 does not arise at all.

¶348

After going through the documents placed on record and hearing submissions made by the Objectors as well as the Supporters of the Resolution Plan, this Bench observes that the Objectors have raised the following main objections to the Resolution Plan:

¶349

a) The Resolution Applicant had thrust its choice of land on the Dissenting Financial Creditor for enforcing its Security Interest. The Dissenting Financial Creditor was not given a choice to enforce security interest in its desired property.

¶350

b) The proposed Resolution Plan compels the Dissenting Financial Creditor to bear the entire cost of enforcing security interest, which might create a risk for the Dissenting Financial Creditor not to realize even the Minimum Liquidation Value.

¶351

c) The manner of computation of the Liquidation value of ICICI Bank itself is erroneous as the entitlement of the ICICI Bank for another Rs. 86 Crore over and above Rs.218 Crore under Section 53(1)(d) i.e., as an Unsecured Financial Creditor, was not considered.

¶352

Per Contra, the Supporters of the Resolution Plan have contended that:

¶353

a) There is no provision under the IBC 2016, which stipulates that the Dissenting Financial Creditor can choose the property of its own choice to enforce its Security Interest.

¶354

b) The Resolution Applicant has provided the “Shortfall Undertaking” under the plan which shall protect the interest of the Dissenting Financial Creditor. Further, the Liquidation value of the asset for which Security Interest is to be enforced is sufficient to meet

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the expenses incurred on realizing the Liquidation value. Moreover, the fair market value of the said asset is higher than the Liquidation value.

¶358

c) The other Secured Financial Creditors have accepted the mode of calculation of the Liquidation value, in their commercial wisdom. Further, the entitlement of the Liquidation value of ICICI Bank over Rs. 218 Crore is ‘Nil’ in terms of Section 53(1)(e)(ii) of the IBC,2016.

¶359

Now, we would like to examine the contentions of both sides. It is a matter of fact that the Resolution Applicant vide its email dated 02.07.2021 had informed the Applicant ICICI Bank/DFC that it had identified 180 Acres of land at Tappal, UP and requested the Applicant Bank to provide its views/ suggestions. The said email dated 02.07.2021 is reproduced below:

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In response to the abovesaid e-mail, the Applicant ICICI Bank vide letter dated July 08, 2021 raised objections which, inter alia, included the ICICI Bank's grievance of not being permitted to choose the security interest to be enforced by it. In reply to this, the Suraksha vide letter dated July 29, 2021 responded to the objections raised by ICICI Bank. At this stage, we therefore, refer to the said letter, which is reproduced below for immediate reference:

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Thus, we notice that the Suraksha vide letter dated July 29, 2021 invited the

¶366

ICICI Bank to choose any land parcel out of the 666 acres of land in Tappal.

¶367

However, the ICICI Bank did not revert back. Thus, ICICI Bank failed to exercise this right provided by the SRA under the Resolution Plan. Resultantly, the selected 180 acres of land was allotted by Suraksha to the DFC/ICICI Bank.

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The grievance of the ICICI Bank is that it was not given an opportunity to select property of its own choice, for enforcing the Security Interest. We are aware the Hon’ble Supreme Court in the Jaypee Kensington had recognized the enforcement of Security Interest, as a mode of payment of Liquidation value. The relevant extracts of the Judgement are reproduced below:

¶371

“ 124. To sum up, in our view, for a proper and meaningful implementation of the approved resolution plan, the payment as envisaged by the second part of clause (b) of sub-section (2) of Section 30 could only be payment in terms of money and the financial creditor who chooses to quit the corporate debtor by not putting his voting share in favour of the approval of the proposed plan of resolution (i.e., by dissenting), cannot be forced to yet remain attached to the corporate debtor by way of provisions in the nature of equities or securities. In the true operation of the provision contained in the second part of sub-clause (ii) of clause (b) of subsection (2) of Section 30 (read with Section 53), in our view, the expression “payment” only refers to the payment of money and not anything of its equivalent in the nature of barter; and a provision in that regard is required to be made in the resolution plan whether in terms of direct money or in terms of money recovery with enforcement of security interest, of course, in accordance with the other provisions concerning the order of priority as also fair and equitable distribution. We are not commenting on the scenario if the dissenting financial creditor himself chooses to accept any other method of discharge of its payment obligation but as per the requirements of law, the resolution plan ought to carry the provision as aforesaid.”

¶372

(Emphasis Supplied)

¶373

On perusal of the above, it is observed that the Dissenting Financial

¶374

Creditor has to be paid in terms of “money” or in terms of “money recovery with enforcement of security interest”. Here, we further refer to the Judgement

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of the Hon’ble Supreme Court in the matter of India Resurgence Arc Private

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Limited Vs M/s. Amit Metaliks Limited & Anr. Civil appeal no. 1700 of

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2021, wherein the following is held:

¶380

“14.1. In Jaypee Kensington (supra), this Court repeatedly made it clear that a dissenting financial creditor would be receiving the payment of the amount as per his entitlement; and that entitlement could also be satisfied by allowing him to enforce the security interest, to the extent of the value receivable by him . It has never been laid down that if a dissenting financial creditor is having a security available with him, he would be entitled to enforce the entire of security interest or to receive the entire value of the security available with him . It is but obvious that his dealing with the security interest, if occasion so arise, would be conditioned by the extent of value receivable by him .”

¶381

(Emphasis Supplied)

¶382

On perusal of the Judgement (Supra), it is observed that as per the need of the situation, the enforcement of security interest can be conditioned. Since the Code provides for minimum Liquidation value to be paid to the Dissenting Financial Creditor(s), it is the prerogative of the SRA as to what amount it proposes to pay to its stakeholders and the prerogative is not questionable as long as it satisfies the provisions of the Code by providing the minimum Liquidation value to the Dissenting Financial Creditor(s).

¶383

We are aware that the Prospective Resolution Applicants (PRAs) furnish their Resolution Plans based on the Information Memorandum (IM) prepared by the Resolution Professional, where the list of all the Assets of the Corporate Debtor is given. If a DFC is given the option to select an asset for enforcing security interest, then there will be uncertainty, as there will be a surprise

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loss of that Asset, which formed part of the said Information Memorandum and for which the Prospective Resolution Applicant might have got attracted to submit the Resolution Plan. A prospective Resolution Applicant to a Corporate Debtor having multiple Creditors, cannot anticipate as to which Creditor will dissent to the Resolution Plan. If the plan is approved by the requisite majority, the Successful Resolution Applicant gets the pre-emptive right over the assets of the Corporate Debtor, and as a corollary, it is his prerogative whether it wants to retain or release a particular asset for enforcing security interest.

¶387

Here, we refer to the Judgement of the Hon’ble Supreme Court in the matter of Ram Kishun and Ors. vs. State of U.P Civil Appeal No. 6204 of 2009 dated 24.05.2012, wherein the following is observed:

¶388

“8. Undoubtedly, public money should be recovered and recovery should be made expeditiously. But it does not mean that the financial institutions which are concerned only with the recovery of their loans, may be permitted to behave like property dealers and be permitted further to dispose of the secured assets in any unreasonable or arbitrary manner in flagrant violation of statutory provisions.”

¶389

(Emphasis Supplied)

¶390

Thus, in our considered view, as long as the minimum Liquidation Value is paid by the Resolution Applicant to the Dissenting Financial Creditor(s), the latter cannot seek any replacement or ask for an alternate property, as a matter of right, for enforcing its Security Interest.

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Further, we are unable to find any provision under the IBC 2016, or any Rule or Regulation framed thereunder providing that the Creditor is entitled to choose the security interest of its own choice.

¶394

Hence, we do not find any fault in Suraksha’s Resolution Plan on the ground that the Dissenting Financial Creditor ICICI Bank has not been given the choice to select a property for enforcing its Security Interest.

¶395

The next objection raised by the plan objectors is that the cost of enforcing security interest has been left to the Dissenting Financial Creditor, which may even result in the non-realization of Liquidation value.

¶396

It is a matter of fact that the SRA vide clause 15.54 of the Resolution Plan has left it on the Dissenting Financial Creditor to bear the cost of enforcing security interest. Further, land admeasuring 180 acres at Tappal, U.P has been allotted to the Dissenting Financial Creditor to enforce its Security Interest (as per the map attached with the application filed by the ICICI Bank and reproduced overleaf):

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The Liquidation value of the land at Tappal has been calculated @ Rs 1.30

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Crore per Acre, as per Clause 15.47 of the Proposed Resolution Plan, details of which as provided in the Resolution Plan are reproduced overleaf for

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immediate reference:

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Whereas, the Liquidation value of the ICICI Bank has been stated to be Rs. 218 Crores only, the Liquidation value for the 180 Acres of land parcel at Tappal aggregates to (Ac. 180 x Rs. 1.30 Crore per acre) Rs. 234 Crores, which is clearly higher than the liquidation value entitlement of the ICICI Bank. We further observe that the Resolution Applicant has given the “Shortfall Undertaking” in the Plan, as per which it has undertaken to provide additional 2594 Acres of land parcel for enforcing security interest, in the event of any shortfall. Moreover, the fair market value (FMV) of the land is still higher especially, in the backdrop of the ever-rising trend in land prices. In view of the above, we are of the view that the SRA has made sufficient arrangements to enable the Dissenting Financial Creditor/ICICI Bank to achieve its Liquidation value and cover expenses of enforcing security interest. Hence, this objection raised by the Applicant ICICI Bank and other objectors does not merit consideration and therefore, is rejected.

¶405

Another objection raised by the objectors of the plan is with respect to the amount of Liquidation value receivable by the ICICI Bank. It is contended by the ICICI Bank that it has been given entitlement only to the extent of the

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value of the security available to it, with no further entitlement given to the Applicant’s rights as an unsecured creditor, on the unencumbered and other available assets of the Corporate Debtor. To examine this contention, we refer to Section 30(2) of IBC, 2016, which reads as under:

¶409

30. Submission of resolution plan. –

¶410

(1)……

¶411

(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan -

¶412

(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the 4 [payment] of other debts of the corporate debtor;

¶413

(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-

¶414

(i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or

¶415

ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53,

¶416

whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor .…..”

¶417

(Emphasis Supplied)

¶418

On perusal of the above, it is observed that the Dissenting Financial Creditor is required to be paid an amount in accordance with the provision under Section 53(1) of the IBC 2016, in the event of Liquidation of a Corporate Debtor, which implies that the principle of deemed fiction of Liquidation has

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been applied in respect to the entitlement of a dissenting financial creditor in the context of Resolution Plan.

¶422

The ICICI Bank has contended that after availing its entitlement under Section 53(1)(b)(ii) IBC, 2016, it is further entitled under Section 53(1)(d) as an unsecured creditor. Per Contra, the Plan Supporters have contended that ICICI Bank’s further entitlement falls under Section 53(1)(e)(ii) of IBC, 2016, which makes ICICI Bank’s additional entitlement as Nil.

¶423

Here, we consider it appropriate to refer to Section 53(1) of IBC, 2016,

¶424

which is reproduced below:

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Section 30(2) stipulates that Liquidation value, receivable under Section 53(1) has to be taken into account. The contention of the Supporters of the Plan is that Section 53 has to be read with Section 52 of IBC, 2016 since the Security Interest has been enforced in the instant case. Therefore, at this stage, we would like to visit Section 52 of IBC, 2016 which reads thus:

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When we peruse Section 53, it is observed that it contains the provision for the distribution of assets during the Liquidation proceedings. The reference of Section 53(1) in Section 30(2)(b) has been only for a limited purpose i.e., to define the minimum entitlement of the dissenting financial creditors, which shall not be less than the liquidation value of the Corporate Debtor. When we further refer to Section 53(1)(b)(ii), we observe that the provision therein is meant only for those Secured Creditors, who have relinquished their Security interest. In contrast, there is no such provision under Section 53(1) for the Creditors, who have enforced their security interest. We understand that such Creditors have been left on their own to recover their dues and it is not the Liquidator’s responsibility to distribute the proceeds. But in the case herein, it is the question of calculating the Liquidation value. Since in the context of a Resolution Plan, the enforcement of security interest is nothing but the alternate mode of payment of cash as enunciated by the Jaypee Kensington . Therefore, for calculating the Liquidation value as an entitlement of a Dissenting Financial Creditor in the context of a Resolution Plan, we have to treat the Dissenting Financial Creditor under Section 53(1)(b)(ii) of the IBC, 2016.

¶431

For the remaining entitlement of the ICICI Bank, we observe that the ICICI Bank is the only Creditor, who has dissented to the Resolution Plan. When we visit Form-H submitted by the Applicant, we observe that the ICICI Bank was always classified as a Secured Financial Creditor and not as an Unsecured Financial Creditor. Further, Homebuyers and Fixed Deposit

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Holders were categorized as Unsecured Creditors, as would be evident from

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the relevant extracts of the Form-H as reproduced below:

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In our considered view, the DFC/ICICI Bank cannot sail in two boats, either it can be treated as a Secured Financial Creditor or as an Unsecured Financial Creditor. The wording under Section 53(1)(b)(ii) regarding “relinquished security ” will not make the Secured Creditor as an Unsecured Creditor. Since in the context of a Resolution plan, Section 53(1)(b)(ii) has a limited role i.e., only for calculation of minimum entitlement of a DFC in terms of Liquidation value, it does not mean that relinquishment of Security Interest in actual has taken place by the Secured Creditor, the requirement of which only arises when the Corporate Debtor is under Liquidation. Hence, a Secured Creditor cannot be treated as an Unsecured Creditor and will not be entitled to both the benefits under Section 53(1)(b)(ii) and Section 53(1)(d) both simultaneously.

¶439

On perusing Section 53(1)(e)(ii), it is observed that the unpaid entitlement of a Secured Creditor is only recognized below in priority to the payment to an Unsecured Creditor 53(1)(d), which in the present case turns out to be “Nil”. Hence, we find that no error has been committed by the IRP of JIL, while calculating the Liquidation value of the Dissenting Financial Creditor/ ICICI Bank.

¶440

In view of the aforesaid discussion, we find no merit in the IA3457/PB/2021 filed by the ICICI Bank and the same is accordingly, Dismissed.

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VIII. IA. NO. 3306/PB/2021

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OBJECTIONS OF YEDIA

¶445

By filing this IA, the Yamuna Expressway Industrial Development Authority (hereinafter, referred to as “YEIDA” ) has raised objections to the CoC-approved Resolution Plan of Suraksha Realty. YEIDA have, however, clarified that their objections are not intended to disrupt or stall the present Resolution Plan, but solely and exclusively for the reason that the SRA/ Suraksha has disregarded the observations and findings of the Judgement of Hon’ble Supreme Court passed in the Jaypee Kensington .

¶446

It is submitted by YEIDA that it is a stakeholder of the Corporate Debtor and the Hon’ble Supreme Court, in pursuant to YEIDA’s objections to the earlier Resolution Plan of NBCC (India) Limited, has observed in the Jaypee Kensington that the approval of YEIDA “ remains sine qua non, for validity of the Resolution Plan in question, particularly qua the terms related with YEIDA ”. The YEIDA has submitted that the present Resolution Plan under Consideration is inconsistent with the findings of the said Judgement of Hon’ble Supreme Court.

¶447

It is submitted by YEIDA that it had entered into a Concession Agreement (hereinafter referred to as “CA ”) dated 07.02.2003, with Jaiprakash Industries Limited (JIL) for a period of 36 years for implementation of the Yamuna Expressway Project.

¶448

It is further submitted by YEIDA that it had filed its claims arising on account of different reasons in Form B on 23.08. 2017 and 28.11.2017 with

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¶451

the IRP. The summary of the claims filed by YEIDA and their treatment in the Resolution Plan is reproduced below:

¶452

S. No.	Claim	Amount Claimed (INRCrores)	Amount Admitted (INRCrores)	Treatment in Suraksha’s Plan (INRCrores)
1.	^{Claim towards} Pending Works	98.1	51.4
2.	Claim towards External Development Charges (EDC) including interest	624.6	409.6	0.10
3.	^{Claim for works to be}	2024	-	Nil
Clai	taken up in future ms under Arbitration
4.	64.7% Additional Compensation	1689.0	-	0.10
Clai	payable to Farmers ms not admitted
5.	EDC for land parcels at Tappal and Agra (undeveloped land)	572.9	-	Nil
6.	Miscellaneous works	340	-	Nil
7.	Capital Cost of Noida – Greater Noida Expressway*	750	-	Nil
8.	Lease Rent	2.607	-	Nil
9.	Consultancy Fees	10.42	-	Nil
	Total	6,111.591	461	0.20

¶453

The YEIDA has mainly raised objections to the treatment meted out in the Resolution Plan to its claims pertaining to:

¶454

i. Pending works and External Development Charges (EDCs) including interest;

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¶457

ii. Unexecuted External Development Works and Other future Works; and

¶458

iii. 64.7% Additional Compensation Payable to farmers.

¶459

Other than the above, YEIDA has raised objections towards certain Reliefs and Concessions sought in the Resolution Plan and to the “Transfer and Monetisation of Beneficial Interest in Land Parcels” to the Assenting Financial Creditors.

¶460

Further, YEIDA has contended that the following clauses of the Suraksha’s Resolution Plan are inconsistent with the findings of the Jaypee Kensington and with terms of the Concession Agreement (CA) . The summary of objections raised by YEIDA, in nutshell, is given below:

¶461

Terms in Suraksha’s Plan	*Findings inJaypee* Kensington**	Terms of the CA	YEIDA’s Objections
I. CLAIM P INTERE	ERTAINING TO PENDI ST	NG WORK AND ED	Cs INCLUDING
Against admitted claims of INR 461 crore, Suraksha’s Plan only provides for payment of INR	(i) Para 103– Any tinkering with CA could not be carried out without approval and consent of	(i) Clause 3.2(v): JIL is to bear the entire cost of Yamuna Expressway	(i) By failing to provide for payment towards pending works and EDCs, the
10 lakhs to YEIDA [*paras.* *20.1 – 20.2* *@ p.* *67,* *Compilation*].	YEIDA. YEIDA’s approval is_sine_ qua non for approval of the plan, particularly qua the terms related to YEIDA [*pp. 36 – 37,* *Compilation*].	[@ p. *53,* *Compilation*] (ii) Clause 7.2.1(j): External Development works to be completed without cost	Plan shifts the liability for these costs onto YEIDA. However, the CA provides that YEIDA will not bear any cost and that the

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¶464

Terms in Suraksha’s Plan	*Findings inJaypee* Kensington**	Terms of the CA	YEIDA’s Objections
II. COSTS	(ii) Para 104.4– Any alteration in essentials of CA would require consent of YEIDA [p. *40,* *Compilation*]. PERTAINING TO UNEX WORKS AND O	to YEIDA [@ p. *63,* *Compilation*] ECUTED EXTERN THERFUTUREWO	Concessionaire – JIL will bear the entire cost [*@ para (c), p.* *131,* *Compilation]. (ii) Therefore, such treatment is contrary to the terms of the CA and the Jaypee* Kensington judgment. AL DEVELOPMENT RKS
Claim towards	(i) Para 103– Any	(i) Under	(i) If Suraksha
unexecuted/	tinkering with CA	Clauses	cannot fulfil all
future works	could not be	3.2(v) and	works and bear
has not been	carried out	7.2.1(j)of CA	all costs as
provided for in	without approval	[*@ pp. 53 &*	required by
Suraksha’s Plan	and consent of	*63,*	CA, YEIDA
[*@ para (d), pp.* *133-134,*	YEIDA. YEIDA’s approval is_sine_	*Compilation*, liability	would have to execute the
*Compilation*].	qua non for	towards costs	work and bear
	approval of the plan, particularly qua the terms related to YEIDA	of all works under the CA (including External	the costs – this is an alteration of the CA and violative of
	[*pp. 36 – 37,* *Compilation*].	Development of	Jaypee Kensington[@
	(ii) Para 104.4– Any alteration in essentials of CA would require	undeveloped land) is of the Concessionai re alone.	*para* *(c),* p. *133,* *Compilation* *and para (e),*
	consent of YEIDA		p. *134,*
	[p. *40,*	(ii) UnderClause	*Compilation*].
	*Compilation*].	7.1.1(ix) of the CA,	(ii) Suraksha states it is

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¶467

Terms in Findings in Jaypee Terms of the YEIDA’s
Suraksha’s Kensington CA Objections
Plan
Concessionai ready and
re must willing to
indemnify execute all
YEIDA for all future works,
costs as and when
incurred due required, as
to failure to per the CA.
perform Suraksha is
obligation willing to bear
under the CA all costs as per
[ @ p. 60, the CA [ paras
Compilation ] 16(c) and (d),
p. 89,
Compilation ].
(iii)Suraksha
must be
strictly bound
by its
undertaking.
III. 64.7% ADDITIONAL COMPENSATION PAYABLE TO FARMERS
[Subject to dispute in Arbitration]
After discussing After noting the (i) Clause 3.2(v): The Plan [ paras.
YEIDA’s claim, pendency of JIL is to bear (o) – (t), pp. 140 –
Suraksha’s Plan proceedings in the entire 141,
only provides for relation to the claim cost of Compilation ]:
payment of INR [ paras. 88, 89 & Yamuna (i) Fails to provide
10 lakhs (as 92, pp. 16, 18 & 21, Expressway for acquisition
against the Compilation ], it was [ @ p. 53, cost (i.e.,
claim of INR held that: Compilation actual/
1689 crores) (i) Resolution plan ]. additional
[ paras 20.3– must provide for (ii) As per compensation)
20.8, pp. 68– liability towards clauses 4.1(d) as per the CA.
78, additional and 4.3(c) of (ii) Fails to provide
Compilation ]. compensation CA, for the
[ para 106, p. 42, acquisition contingency of
Compilation ]. cost shall be payment of
(ii) Concessionaire is actual additional
liable for payment compensatio compensation
of additional n paid to and deflects

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¶470

Terms in Suraksha’s Plan	*Findings inJaypee* Kensington**	Terms of the CA	YEIDA’s Objections
	compensation.	landowners	the liability
	The Plan providing	[*@ pp. 56 &* *58,*	back onto YEIDA.
	otherwise amounts to an impermissible alteration of the CA [*para 106.1,* *pp.* *42-43,* *Compilation*].	*Compilation*]	(iii) If Suraksha will not bear this cost, then YEIDA will have to, resulting in material
	(iii) YEIDA is not responsible for collection of additional compensation [*para 106.2, p.* *43,* *Compilation*].		alteration of the CA and violation of Jaypee Kensington.
IV.	RELIEFS & CONCESS	IONS SOUGHT IN	THE PLAN
Following reliefs	(i) Para 103– Any	(i) Land is to be	*Re:* *Reliefs* *‘a’*
have been	tinkering with CA	transferred in	*and‘b’*
sought under	could not be	accordance	(i) This is
Suraksha’s Plan	carried out	with Chapter	admittedly
[*para 37, pp.*	without approval	IV of the CA	covered under
*81–82,*	and consent of	and subject	the CA. As per
*Compilation*]:	YEIDA. YEIDA’s	to the terms	Jaypee
(a) Reliefs ‘a’	approval is_sine_	contained	Kensington
and ‘b’:	qua non for	therein.	Judgment,
transfer of	approval of the	(ii) Clause 3.1:	YEIDA’s
79 acres of	plan, particularly	Concession is	consent is_sina_
land; treatment of	qua the terms	granted for a	qua non.
capital cost	related to YEIDA	period of 36	Suraksha may
and handing	[*pp. 36 – 37,*	years[*p. 53,*	approach
over of	*Compilation*].	*Compilation*]	YEIDA for
NOIDA–	(ii)Para 1044– Any		these matters
Greater	. alteration in		and YEIDA
NOIDA E	essentials of CA		shall consider
xpressway. (b)Relief ‘c’:	would require		the same in
extensionof	consent of YEIDA		terms of the CA

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¶473

Terms in Suraksha’s Plan	*Findings inJaypee* Kensington**	YEIDA’s Objections
the CA by 15	[p. *40,*	and having
years.	*Compilation*].	regard to
(c) Relief ‘d’:	(iii) Para 107 –	public interest
return of deposit of INR ~35 crores.	Without YEIDA’s consent, resolution	[*para (f) (1), p.* *144,* *Compilation*]
(d) Reliefs ‘e’	applicant cannot,	*Re: Relief‘c’*
and ‘g’:	by way of relief	(ii) As per_Jaypee_
revision of	clause in the	Kensington
toll as per	plan, seek [*p. 44,*	Judgment [@
law and issue of	*Compilation*]:	*para 107, p.*
approvals.	• YEIDA’s	*44,*
(e) Relief ‘f’:	withdrawal	*Compilation*],
compensatio	from pending	extension of
n for alleged	litigation.	CA cannot be
delay.	• Extinguishme nt of existing liability.	sought by way of relief clause in a resolution
	• Extension of time period of the CA.	plan without the consent of YEIDA. Suraksha may approach YEIDA for this and YEIDA shall consider the same in terms of the CA and having regard to public interest [*para* 2, p. *145,* *Compilation]. Re: Relief‘d’* (iii) This relief is unparticularis ed and vague – YEIDA is unclear as to

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¶476

Terms in	*Findings inJaypee***	Terms of the	YEIDA’s
Suraksha’s Plan	*Kensington*	CA	Objections
			what deposit is being referred to [*para 3,* p. *145,* *Compilation]. (iv) YEIDA is not liable to return any amount. Re:* *Reliefs* *‘e’*
			*and‘g’*
			(v) This pertains to discharge of YEIDA’s statutory functions. No directions can
			be issued to YEIDA in
			relation to its statutory functions
			[*para 4,* p. *146,* *Compilation] (vi) IBC cannot override statutory authority’s right and public duty to control and regulate – Municipal* Corporation of Greater
			Mumbai v.
			Abhilash Lal,
			2019 SCC
			OnLine SC
			1479[*@ para*

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¶479

Terms in	*Findings inJaypee***	Terms of the	YEIDA’s
Suraksha’s Plan	*Kensington*	CA	Objections
			*48, p. 106,* *Compilation. Re: Relief‘f’*
			(vii) Request in this respect is vague and lacking in particulars. YEIDA denies any liability to pay any compensation – same is not provided under the CA. No delay is attributable to YEIDA [*para*
			5, p. *146,* *Compilation*]

¶480

V. TRANSFER AND MONETISATION OF BENEFICIAL INTEREST IN LAND PARCELS TO ASSENTING FINANCIAL CREDITORS

¶481

Suraksha	's Plan	(i) Para	103– Any	Concessionaire	(i) Concessionaire
proposes	to	tinke	ring with CA	only holds	only holds
transfer	the	could	not be	leasehold	leasehold
"beneficia	l	carrie	d out	interest	interest and
interest'	in a	witho	ut approval	[*expressway*	such interest
substanti	al part	and	consent of	*land @ clause*	can be dealt
of the	Project	YEID	A. YEIDA’s	*4.1(b), p. 56*and	with only in
Land	to	appro	val is_sine_	*LFD* *land* @	terms of the CA
assenting		qua	non for	*clause 4.3(a), p.*	(including
Financial		appro	val of the	58 of *the*	obligation to
Creditors	and	plan,	particularly	*Compilation*].	pay acquisition
proposes	to	qua	the terms		cost &
monetize	such	relate	d to YEIDA		additional
land parc	els for	[*pp.*	*36 – 37,*		compensation.
repaymen	t of	*Comp*	*ilation*].		(ii) Suraksha
debt	[****para	(ii) Para	104.4– Any		states it is
		altera	tion in		transferring

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¶484

Terms in Suraksha’s Plan	*Findings inJaypee* Kensington**	YEIDA’s Objections
*15.16, p. 84,*	essentials of CA	only the
*Compilation*].	would require consent of YEIDA	leasehold rights obtained
	[p. *40,* *Compilation*].	by the CD under the CA. No transfer
		charges are payable under the CA [*para* *26,* p. *90,* *Compilation*]. (iii) It must be clarified that the transfer is limited to the interest held by the Concessionaire and would be subject to the terms of the CA.

¶485

While emphasizing on its claim regarding the Additional Compensation payable to the farmers, YEIDA, in its pleadings as well as submissions made during the course of hearing, has stated the following:

¶486

57.1 Under the Concession Agreement (CA), the Concessionaire - JIL is liable to pay the entire actual “acquisition cost” of the Project Land. Specifically, Clause 4.1(d) and 4.3(c) of the CA provides that “The Acquisition cost shall be the actual compensation paid to the land owners”. Accordingly, YEIDA had raised a demand/claim of approximately Rs.1689 Crores towards the additional compensation payable to the farmers.

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¶489

57.2 It is submitted by YEIDA that the Project Land was acquired by it under the following three modes:

¶490

a. Under the provisions of the Land Acquisition Act, 1894;

¶491

b. From Noida Industrial Development Authority under a Deed of Assignment; and

¶492

c. From private land-owners through sale deeds.

¶493

57.3 The acquisition of a part of the Project Land was challenged in a batch of writ petitions in Gajraj & Ors. v. State of UP & Ors. (CWP No. 37443 of 2011) before the Allahabad High Court, wherein it was held that the petitioners therein were entitled to the additional compensation to the tune of 64.7% for their land (“ Gajraj Judgment ”). The Court also directed that the relevant authority i.e., NOIDA may consider extending this benefit to other landowners, who were not before the Court. Following the Gajraj Judgment, several former landowners demanded additional compensation. As with the subject land in the above matters, the acquisition for the remaining Project Land was challenged in over 700 writ petitions filed before the Allahabad High Court during 2007 to 2011. YEIDA too received representations from its allottees that their development work was interrupted by farmer-landowners.

¶494

57.4 Given the litigations and agitations, the Government of Uttar Pradesh set up a committee under the Cabinet Minister of State of UP – Mr. Rajendra Chaudhary (“ Chaudhary Committee ”) to resolve the issues. The Chaudhary Committee considered the views of all the stakeholders and finally, recommended the grant of additional compensation of 64.7% to former landowners, whose lands were acquired by YEIDA.

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¶497

57.5 The recommendation of the Chaudhary Committee was accepted and approved by the UP Govt, which issued an order dated 29 August 2014 (“ Government Order ”) directing YEIDA to ensure payment of additional compensation to all the landowners. The cost of the additional compensation was to be recouped from allottees and included in the costing of future allotment of land by YEIDA.

¶498

57.6 The said Government Order was challenged before the High Court of Allahabad and the same was struck down. It is further submitted by YEIDA that Special Leave Petitions (SLP(C) No. 009891 - 009910/2020 and SLP(C) No. 010015 - 010034/2020) against the judgment of the Hon’ble High Court are currently pending before the Hon’ble Supreme Court where the issue of the validity of the Government Order is under consideration.

¶499

57.7 It is further submitted by YEIDA that in terms of the CA, YEIDA raised the demand towards additional compensation on the Corporate Debtor/JIL. It is added that the demand was eventually challenged in the Arbitration. The Arbitral Award held that the demand made by YEIDA was unsustainable.

¶500

57.8 It is further stated by YEIDA that it had challenged the abovesaid Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996 before the court of Ld. District Judge Gautam Budh Nagar (Arbitration Case No. 3 of 2020).

¶501

57.9 It is submitted by YEIDA that the liability of the Concessionaire on account of additional compensation is pending adjudication in various proceedings. If the competent court finally confirms this liability, the

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¶504

Concessionaire will be bound to discharge the liability under the terms of the Concession Agreement.

¶505

Further, it is contended by YEIDA that the Hon’ble Supreme Court upheld its objections, when the previous Resolution Plan of NBCC was under challenge. The summary findings of the Hon’ble Supreme Court relating to YEIDA in the JP Kensington as stated by it are submitted below:

¶506

(i) The Concession Agreement (CA) cannot be altered “ without the approval and consent ” of YEIDA.

¶507

(ii) The contingency towards the additional compensation must be provided for. YEIDA cannot be made liable to collect the additional compensation nor it be made liable to pay the additional compensation towards the Expressway Land. Such provisions would be contrary to the Concession Agreement.

¶508

(iii) Transfer of rights and obligations under the Concession Agreement must be “ in accordance with the approval of YEIDA and with the execution of necessary tripartite documents as envisaged by CA. ”

¶509

(iv) None of the reliefs sought can be granted to the resolution applicant. Such reliefs cannot be imposed on YEIDA and must be subject to YEIDA’s consent.

¶510

Furthermore, it is stated by YEIDA that the Resolution Plan of Suraksha contains various errors, as summarized below:

¶511

59.1 Suraksha’s Plan has ignored the conclusive determination and the principles set out by the Hon’ble Supreme Court. Suraksha’s Plan provides for payment of Rs.10 lakhs towards the amount of additional compensation.

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¶514

59.2 Suraksha has admitted that it “cannot provide for treatment which is wholly illogical and that amounts to material alterations in terms of the Concession Agreement.”

¶515

59.3 Having admitted that it cannot treat the liability regarding additional compensation in any manner except as provided under the Concession Agreement, Suraksha was necessarily bound to make a provision for the entire acquisition cost, and specifically for the additional compensation, to conform with the Concessionaire’s obligation under Clauses 4.1(d) and 4.3(c) of the CA which requires it to bear “the actual compensation paid to the land owners”.

¶516

59.4 As Suraksha’s Plan currently stands (i.e., with a provision of Rs.10 lakhs), it violates the principles set by the Hon’ble Supreme Court, as follows:

¶517

a) It fails to provide for the remaining Rs.1688.90 Crores of the liability towards additional compensation, and

¶518

b) The liability of the remaining Rs.1688.90 Crores has been deflected on to YEIDA, in violation of the terms of the CA. Such deflection of liability had been deprecated and denounced in the Jaypee Kensington.

¶519

59.5 It may be noted that the RP itself had doubted whether the claim towards additional compensation could be extinguished in the manner proposed by the Suraksha’s Plan. In this regard, YEIDA has drawn reference to Para. 81 of the RP’s application (I.A. No. 2836 of 2021) and the RP’s report dated 10 June 2021 on the Suraksha’s Plan.

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¶522

59.6 The Hon’ble Supreme Court was cognizant of the pendency of the matters concerning additional compensation before itself and before the Gautam Budh Nagar District Court. Mindful of the uncertainty in that regard, the Hon’ble Apex Court directed that the contingency of the Concessionaire being found liable to pay these amounts, must be provided for.

¶523

Reply of IRP of JIL, Successful Resolution Applicant (SRA), IDBI Bank and Association of Home Buyers to the Objections of YEIDA (together referred to as the “Supporters to the Plan” hereinafter)

¶524

The IRP of JIL, the SRA, IDBI Bank and Associations of Home Buyers have filed their replies and Written Submissions to the objections of YEIDA and stated that the Suraksha’s Resolution Plan is compliant in all respects and the objections of YEIDA ought to be rejected. The Supporters of the Plan stated that:

¶525

60.1 The Resolution Plan submitted by the SRA is in consonance with the Concession Agreement (CA) and it does not alter the CA in any manner, whatsoever. In this regard, they have referred to paragraph 20.9 (@ Page 77) of the Resolution Plan, which reads thus:

¶526

“ 20.9. It is submitted that the Resolution Applicant has not carried out any alterations in the Concession Agreement under the garb of the Resolution Plan, it has only lawfully provided treatment to Claim in terms of provisions of the Code in order to have clean slate / fresh plate in line with several Honourable Supreme Court Judgments.”

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¶529

60.2 The Resolution Plan is in compliance of the provisions of the Code as well as the observations and findings of the Hon’ble Supreme Court in the Jaypee Kensington Judgment”.

¶530

Reply of “Supporters to the Plan” with respect to YEIDA’s Claims pertaining to External Development Charges including interest and pending works (termed as “EDC and Pending Works” hereinafter)

¶531

60.3 The admitted claim of YEIDA pertaining to EDC including interest and pending works is Rs.461 Crores. The Resolution Plan provides for payment of Rs.10 lakh towards these admitted claims of YEIDA. In this regard, YEIDA has objected that the Resolution Plan is contrary to the Clause 3.2 and 7.2.1(j) of the Concession Agreement, and therefore, results in alteration of the Concession Agreement without YEIDA’s consent. In response to the aforesaid contention, the following is stated by the Supporters of the Plan:

¶532

(i) YIEDA being an operational creditor, the liquidation value owed to it is ‘Nil’, and only Rs.461 Crores was admitted out of a total claim of Rs.6,111.591 Crores, a decision which was not challenged by YIEDA. The payment proposal for YEIDA is in compliance with Regulation 37(f) of the CIRP Regulations and Section 30(2) of the IBC.

¶533

(ii) The treatment of YEIDA’s claim which is only extinguishment of its claim as per the provisions of the IBC cannot be said to be contrary to the provisions of the IBC and the Jaypee Kensington Judgment, and does not amount to alteration of the Concession Agreement. The Resolution Plan deals with YEIDA’s claims as any other operational creditor without any bias.

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¶536

(iii) The Hon’ble Supreme Court in the Jaypee Kensington provided against the alteration of the Concession Agreement in light of NBCC’s plan wherein (i) the responsibility of the additional compensation was shifted to the SPVs (created under that plan) and Home Buyers, (ii) responsibility of collecting the additional compensation, if determined at a future date, was shifted to YEIDA, (iii) creation of SPV itself, splitting up of rights available to the Concessionaire vis-a-vis the Expressway and the land, in each case without specific approval of YEIDA, and (iv) hiving off of land. It was in these specific contexts, the provisions of the NBCC plan were held to alter the terms of the CA. However, in the present case, the Suraksha’s Resolution Plan only extinguishes claims of YEIDA and other creditors in accordance with the provisions of the IBC.

¶537

(iv) The Jaypee Kensington is only limited to variation of the terms of the CA and that the SRA’s right to settle and extinguish the debt of the creditor as per the provisions of applicable law including the IBC and allied regulations cannot be construed as variation of the terms of the Concession Agreement.

¶538

(v) The SRA has only lawfully provided treatment to the claims in terms of provisions of the IBC in order to have clean slate / fresh plate in line with a catena of judgments passed by the Hon’ble Supreme Court ( Jaypee Kensington, para 135.1); Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited , Civil Appeal No. 1554 of 2021 (para 86); and Essar Steel India

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¶541

Ltd. Committee of Creditors v. Satish Kumar Gupta , (2020) 8 SCC 531 (para 107).

¶542

(vi) Further, the Hon’ble Supreme Court in the case of Swiss Ribbons Pvt. Ltd. and Ors. Vs. Union of India (UOI) and Ors ((2019) 4 SCC 17), and Committee of Creditors of Essar Steel India Limited Through Authorised Signatory v. Satish Kumar Gupta & amp; Ors . (Civil Appeal No. 8766-67 of 2019), has held that the payment of liquidation value to the operational creditors is fair and equitable treatment of such creditors under the IBC and a resolution plan which provides for such payment, is a valid resolution plan under the IBC.

¶543

(vii) The proposal for YEIDA is based on the commercial discretion of the SRA and approval by the CoC in exercise of its commercial wisdom. ( India Resurgence ARC Private Limited v. M/S. Amit Metaliks Limited (2021) SCC OnLine SC 409) (para 11)).

¶544

(viii) As laid down in the Jaypee Kensington (at para 77.3), it is not within the scope of Adjudicating Authority to assess the resolution plan in question on the basis of quantitative analysis.

¶545

(ix) The Hon’ble Supreme Court has nowhere invited resolution plan with a direction to pay the entire claim of YEIDA. If such direction is given, it shall tantamount to preferential payment to a class of creditors over another, say income tax claims which shall be against the discipline of the IBC (para 22.5 of Jaypee Kensington ).

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¶548

(x) The Hon’ble Supreme Court has given paramount importance to the provisions of the Code and has directed the fresh/modified plans to be in compliance with the provisions of the IBC and allied regulations. (para 223 of Jaypee Kensington ).

¶549

60.4 The Hon’ble Supreme Court only directed the parties to submit a plan as per the provisions of the Code, by following discipline of the Code and same has been done. YEIDA cannot arm twist the Resolution Applicant for recovery of its operational debt, preferentially under the garb of Concession Agreement. Such a treatment would be contrary to the provisions of the Code.

¶550

60.5 YEIDA being an operational creditor, stands at par with other operational creditors and treatment given by the SRA to such an operational debt of an operational creditor does not violate any provisions of law and does not tinker the Concession Agreement. It is necessary to note that the primary objective of the CIRP is to resolve insolvency of the Corporate Debtor and Resolution Plan submitted by Resolution Applicant provides best possible treatment to all stakeholders. Recovery on part of one creditor could not be allowed to become a reason for jeopardizing the resolution of the Corporate Debtor. The Resolution Plan has been approved by the CoC in its commercial wisdom, hence an operational creditor does not have any right to challenge the Resolution Plan approved by 98.66% voting share of the CoC.

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¶553

Reply of “Supporters to the Plan” with respect to Additional Compensation payable to YEIDA

¶554

60.6 It is submitted that YEIDA has raised the objection that under the Resolution Plan, payment of Rs.0.10 Crore only is proposed against the claim towards 64.7% of additional compensation total amounting to Rs.1,689 Crore.

¶555

60.7 It is further submitted that YEIDA has raised another objection that as per Clause 4.1(d) and 4.3(c) of the Concession Agreement, the acquisition cost shall be the actual compensation paid to the landowners. Accordingly, the same should be borne by the Corporate Debtor. By not providing for payment of Rs.1,688.90 Crores towards the additional compensation, the liability has been deflected onto YEIDA, which is in violation of the Concession Agreement.

¶556

In response to the above objections, Supporters of the Plan have stated that:

¶557

(i) The Hon’ble Supreme Court (in SLP(C) No. 009891 – 009910/2020 and SLP(C) No.010015 – 010034/2020, dated May 19, 2022), upheld the validity of the Government Order dated 29.08.2014. However, whether such additional compensation is payable by YEIDA or by Corporate Debtor is disputed and the matter is sub judice. It is further stated that there is an Arbitral Award dated 02.11.2019 in favour of JIL, which has been challenged by YEIDA before the Gautam Budh Nagar District Court and is pending. It is further stated that Arbitral Tribunal had passed an award, in favour of the Corporate Debtor by stating that the Corporate Debtor is not liable to pay any amount to YEIDA towards additional compensation.

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¶560

(ii) The Hon’ble Supreme Court acknowledged in the Jaypee Kensington (para 106), the pendency of the dispute and the fact that liability towards additional compensation may ultimately be fastened upon the Corporate Debtor and therefore, it is important that this liability be dealt with under the Resolution Plan. Suraksha’s resolution plan does provide for the contingency if such liability is fastened onto JIL, so that the Resolution Applicant could proceed on a fresh/clean slate, in line with observations in Jaypee Kensington (para 135.1) and law laid down by the Hon’ble Supreme Court ( Ghanshyam Mishra And Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited , Civil Appeal No. 1554 of 2021 (para 86); and Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta , (2020) 8 SCC 531 (para 107)).

¶561

(iii) Hon’ble Supreme Court’s observation in Jaypee Kensington was in relation to the provisions of the NBCC plan which provided for (i) collection of amounts by YEIDA from end users in relation to the development land and (ii) YEIDA’s liability to bear and pay the entire amount for expressway land, which is not the case in Suraksha’s plan.

¶562

(iv) YEIDA is an operational creditor and it is admitted position on behalf of YEIDA that disputed/contingent claim is of the nature of an operational debt. Even YEIDA has filed its claim as an operational creditor (Form B - Annexure 3 to the Application). Thus, being an operational creditor, YEIDA is entitled to only the liquidation value as

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¶565

per provisions of Section 30(2) of the IBC, which in the present case is calculated to be “Nil”.

¶566

(v) Extinguishment of debt cannot be construed to mean amendment of the Concession Agreement. The Resolution Applicant can exercise its discretion in diluting the claim of YEIDA in commercial terms. There is no provision under the IBC which prescribes that a resolution applicant is required to provision for the entire sum admitted / due to a given creditor under the resolution plan and to the contrary, in terms of Regulation 37 of the CIRP Regulations may inter alia reduce the amount payable to the creditors. It is the commercial discretion of the Resolution Applicant to stipulate the commercial terms of the Resolution Plan, and for the CoC to approve such a Resolution Plan in exercise of its commercial wisdom.

¶567

(vi) YEIDA’s interpretation of the Jaypee Kensington that the resolution plan for the Corporate Debtor must provide for payment of the entire additional compensation is erroneous. The observations of the Hon’ble Supreme Court cannot be interpreted to mean that it directed the Resolution Applicant to provide for the entire sum of the claim in the Resolution Plan. The Hon’ble Apex Court did not hold as contended and it has not indicated any manner to override the requirements of the IBC and CIRP regulations.

¶568

(vii) The Hon’ble Supreme Court has nowhere indicated that Resolution plan will provide for and pay entire claim of YEIDA, the Operational Creditor. If such is the claim and treatment, it will

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tantamount to preferential payment to a class of creditors over another, say income tax claims, which shall be against the discipline of the Code (para 22.5 of Jaypee Kensington ).

¶572

(viii) Further, YEIDA never objected to the quantum of compensation payable and now it is an afterthought, misinterpreting the directions of the Supreme Court and misleading the Tribunal for payment of entire claim thereby making IBC as a recovery tool. Focus of IBC is on resolution of the corporate debtor as a going concern and it is not a recovery legislation for the creditors (para 63.2 at page 143-144 of Jaypee Kensington ).

¶573

(ix) The Hon’ble Supreme Court has given paramount importance to the provisions of the Code and has directed the fresh/ modified plans to be in compliance with the provisions of the Code and regulations (para 223 of Jaypee Kensington ). The contents of the same are reproduced below –

¶574

“223. Taking all the facts and circumstances into account and in keeping with the spirit and purport of the orders passed in the past, we are inclined to again exercise the powers under Article 142 of the Constitution of India and to enlarge the time for completion of CIRP concerning JIL while extending opportunity to the said resolution applicants Suraksha Realty and NBCC to submit modified/fresh resolution plans, which are compliant with the requirements of the Code and the CIRP Regulations and are in accord with the observations and findings in this judgment.”

¶575

(Emphasis Supplied)

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¶578

Reply of “Supporters to the Plan” with respect to Reliefs being

¶579

inconsistent with the Concession Agreement

¶580

60.8 It is stated by the Supporters of the Plan that YEIDA has raised an objection that the Resolution Plan provides for unilateral imposition of ‘reliefs’ which amounts to alteration of the Concession Agreement and the same cannot be done without YEIDA’s consent.

¶581

60.9 In response, it is submitted by the Supporters of the Plan that the Resolution Plan is to be implemented by the Resolution Applicant even if the reliefs and concessions under the Resolution Plan are not granted. In this regard they have referred to the undertaking given by the SRA in 12 of the Resolution Plan, which reads thus:

¶582

“12. Reliefs and Concessions

¶583

The reliefs and concessions sought by the Resolution Applicants are more particularly contained in Annexure-II hereto. The Resolution Applicants undertake that they will implement this Resolution Plan, whether or not the reliefs and concessions are granted.”

¶584

Reply of “Supporters to the Plan” with respect to YEIDA’s objection regarding Transfer and monetisation of beneficial interest in land

¶585

parcels to Assenting Financial Creditors

¶586

60.10 It is stated by the Supporters of the Plan that YEIDA has raised an objection regarding the provision relating to “beneficial ownership” of land parcels being transferred to the assenting financial creditors. The relevant provision in the plan (para 15.12 at page 34) reads as follows:

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¶589

“It is hereby clarified that the Assenting Institutional Financial Creditors shall be free to sell or monetise the land parcels from the date of transfer of beneficial ownership of the land parcels to the Assenting Institutional Financial Creditors.”

¶590

60.11 YEIDA has raised the following objections to the aforesaid clause:

¶591

(i) That the land in question has been given to JIL on lease and JIL owns only leasehold interest. Therefore, the transfer and monetization of land can only be limited to the leasehold Interest in the project land, and the ownership rights remain with YEIDA.

¶592

(ii) Any transfer of “beneficial interest” and subsequent proposed monetization can only be concluded in accordance with the terms of the Concession Agreement and in a manner that shall ensure adherence to the terms of the Concession Agreement, including the obligation to pay the entire acquisition cost of the project land i.e., cost inclusive of additional compensation, when the liability arises.

¶593

(iii) That the transfer of such beneficial interest can only take place “after payment of transfer charges in accordance with YEIDA’s prevailing policy”.

¶594

60.12 In response to the aforesaid objections, the Supporters of the Resolution Plan have submitted the following:

¶595

(i) By way of transferring the beneficial interest in the land in favour of assenting financial creditors, Suraksha is only transferring/ subleasing the leasehold rights obtained by the Corporate Debtor under the terms and condition of the Concession Agreement.

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¶598

(ii) To that effect, the resolution plan does not prescribe execution of any sale deed for such transfer, which shows that the transfer is only of beneficial ownership i.e., leasehold interest in the land parcels. Resolution Plan does not state that YEIDA will cease to be the owner of the land. YEIDA will continue to be the owner of the land parcels, in terms of the Concession Agreement.

¶599

(iii) Clause 4.3(d) of the Concession Agreement clearly stipulates that the Concessionaire shall be entitled to further sub-lease developed undeveloped land to sub-lessees/end-users in its sole discretion without any further consent or approval or payment of any charges/fees etc. to TEA or any other relevant Authority”.

¶600

(iv) Clause 4.3(e) of the Concession Agreement stipulates that “sublease of part of the land by the Concessionaire, the same can be transferred / assigned without requiring any consent or approval of or payment of any additional charges, transfer fee, premiums, etc. to TEA or to any other relevant authority and/or there can be subsequent multiple sub- leases of the land in smaller parts.”

¶601

(v) Further, even the Lease Deed dated May 15, 2008 executed between YEIDA and JIL for the project land (164.8 acres in Shahpur Goverdhanpur Khadar) provides an identical clause 4 which states that: “The Lessee shall have unfettered right to sub-lease the whole or any part of the Demised Land, whether developed or undeveloped, and whether by way of plots or constructed properties or give on leave and license or otherwise dispose of its interest in the Demised Land or part

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¶604

thereof / permit to any person in any manner whatsoever, without requiring any consent or approval of or payment of any additional charges, transfer fee, premiums etc. to the Lessor or to any other relevant authority.”

¶605

(vi) Thus, the Concession Agreement and the Lease Deed, both clearly stipulate that transfer charges are not payable to YEIDA for sublease of developed/undeveloped land parcels. Therefore, the claim of transfer charges is contradictory to YEIDA’s own stance that the transfer of project land must necessarily be undertaken in accordance with the terms of the Concession Agreement (refer to para (v)(a)(3) and (v)(b) of the Application at page 32 [PDF page 34]). By seeking transfer charges, YEIDA itself is attempting to alter the terms of the Concession Agreement.

¶606

(vii) The acquisition cost of the land has already been claimed by YEIDA as part of the CIRP and stands extinguished as per the resolution plan, read with Regulation 37(f) of the CIRP Regulations. It being an operational debt which stands extinguished under the resolution plan, the obligation to make payment towards such debt cannot be revived and transferred to assenting Institutional Financial Creditors.

¶607

YEIDA has also filed its rejoinder and stated the following:

¶608

(i) The Resolution Plan is manifestly inconsistent with the findings, observations and conclusions of the Jaypee Kensington . There is an attempt to justify the departure made by the Plan from the said

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¶611

judgment and the inconsistencies therein, by placing reliance on provisions of the Insolvency and Bankruptcy Code 2016.

¶612

(ii) Section 30 of the Code mandates that the Resolution Plan must not contravene any provision of law for the time being in force. Article 141 of the Constitution of India mandates that the law declared by the Supreme Court shall be binding on all courts within the territory of India. The principles laid down in Jaypee Kensington are thus, as a matter of law, binding on all courts, and the Resolution Plan must conform to those principles.

¶613

(iii) Hon’ble Supreme Court made the findings after specifically noting the provisions of the Code. The Supreme Court found that even though the Code may ordinarily allow modification of a contract, the Concession Agreement being “a contract entered into between the concessionaire and statutory authority, that is, YEIDA…” could not be altered or tinkered with “without the approval and consent of the authority concerned, that is, YEIDA”. Therefore, YEIDA is not agreeable to the alterations sought to be made to the Concession Agreement.

¶614

(iv) By virtually extinguishing the claim and providing only Rs. 10 Lakhs, the Resolution Plan has directly violated the provisions of the Concession Agreement. It has shifted the liability of these costs to YEIDA in contradiction to Clauses 3.2 and 7.2.1(j) of the Concession Agreement and amounts to its alteration. The contention that the Resolution Applicant is only liable to carry out the work on its own and

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¶617

not liable to pay any amount to YEIDA towards the same is without any basis and contrary to the provisions of the Concession Agreement.

¶618

(v) Hon’ble Supreme Court has unambiguously held that the Resolution Plan for the Corporate Debtor must provide for payment of entire additional compensation in the event the said liability is “ultimately fastened” on Corporate Debtor/JIL, in a mode and manner that is consistent with the terms of the Concession Agreement. The plea of the Resolution Applicants that the Authority is an operational creditor with regard to the claim on account of additional compensation does not at all have any legal basis and is clearly contrary to the finding of the Hon’ble Supreme Court with regard to treatment of the said claim.

¶619

OBSERVATIONS OF THE BENCH

¶620

Before, we proceed to adjudicate upon the objections of YEIDA, we observe from the SRA/Suraksha’s reply that it is willing to execute and bear all costs pertaining to “Future works” as per the terms of the Concession Agreement. The contents of the relevant reply, reads thus:

¶621

“c. The Resolution Applicant is ready and willing to execute all the future works as and when required, as per the terms and conditions of the Concession Agreement. With regard to work from which external development charges arise, it is submitted that the same is to be decided and done in future, therefore Resolution Applicant is not liable to pay the same as on today and will deal with the same in future as per terms of the Concession Agreement.

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d. As the Resolution Applicant is willing to execute the future work, as and when required, and bear all the costs under the terms and condition of the Concession Agreement, no amount is due and payable to YEIDA at present.”

¶625

Hence, in view of the above referred willingness/undertaking of the SRA, the dispute with regard to “Costs pertaining to unexecuted External Development works and other future works.” requires no adjudication.

¶626

We have heard the Ld. Senior Counsels for YEIDA, SRA/Suraksha, IDBI Bank and Ld. Counsels for IRP of JIL and Home Buyers’ Association, at length. We have also perused the documents filed by the parties regarding the objections raised by YEIDA to the Resolution Plan and replies as well as written submissions thereto.

¶627

In nutshell, YEIDA has opposed the Suraksha’s Resolution Plan on the following four grounds:

¶628

a) Meagre provision of Rs. 10 Lakhs in the Resolution Plan for payment to YEIDA towards the claim of External Development Charges results in tinkering with the terms of the Concession Agreement, which is against the mandate of Hon’ble Supreme Court passed in Para 103 of the Jaypee Kensington Judgement;

¶629

b) Meagre provision of Rs. 10 Lakhs in the Resolution Plan for payment to YEIDA towards the Additional Compensation of Rs 1689 Crores violates Para 106 of the Jaypee Kensington Judgement;

¶630

c) The Reliefs and Concession sought in the Resolution Plan tinkers with the terms of the Concession Agreement; and

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¶633

d) The Resolution Applicant cannot transfer and pass on beneficial

¶634

interest in land parcels to the Assenting Financial Creditors.

¶635

Per Contra, the “Supporters of Plan” have raised the following defence:

¶636

a) YEIDA is an Operational Creditor and extinguishment of its claim in line with other Operational Creditors, is in accordance with the provisions of IBC, 2016 and therefore, cannot be said to be tinkering with the terms of the Concession Agreement.

¶637

b) As regards to the Additional Compensation payable to farmers, the YEIDA being an Operational Creditor, under the scheme of IBC, cannot be given preference over other Financial and Operational Creditors.

¶638

c) The Successful Resolution Applicant/Suraksha has given undertaking in Clause 12 of the Resolution Plan that even if no reliefs and concessions are granted to it, they will implement the Plan.

¶639

d) In terms of Clause 4.3(d) of the Concession Agreement, the Resolution Applicant is entitled to further sub-lease the developed/ undeveloped land to sub-lessees/end-users at its sole discretion without any further consent or approval or payment of any charges/fees etc.

¶640

In order to examine the contention of YEIDA that whether non-payment of External Development Charges results in tinkering of the Concession Agreement, we would like to visit Para 103 and 104 of the Jaypee Kensington , which reads thus:

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¶643

“103. The contract in question, the CA, even though not a statutory one, is nevertheless a contract entered into between the concessionaire and statutory authority, that is, YEIDA. It is needless to observe that even if in the scheme of IBC, a resolution plan could modify the terms of a contract, any tinkering with the contract in question, that is, the Concession Agreement, could not have been carried out without the approval and consent of the authority concerned, that is, YEIDA. Any doubt in that regard stands quelled with reference to Regulation 37 of CIRP Regulations that requires a resolution plan to provide for various measures including ‘necessary approvals from the Central and State Governments and other authorities. The authority concerned in the present case, YEIDA, is the one established by the State Government under the U.P. Act of 1976 and its approval remains sine qua non for validity of the resolution plan in question, particularly qua the terms related with YEIDA. The stipulations/assumptions in the resolution plan, that approval by the Adjudicating Authority shall dispense with all the requirements of seeking consent from YEIDA for any business transfer are too far beyond the entitlement of the resolution applicant. Neither any so-called deemed approval could be foisted upon the governmental authority like YEIDA nor such an assumption stands in conformity with Regulation 37 of the CIRP Regulations.

¶644

104. Furthermore, the suggestion that Clause 18.1 of the CA had been a one-time measure and that stands exhausted with creation of JIL as SPV and transfer of original concessionaire’s rights to JIL, has its own shortcomings. The concept and purport of Clause 18.1, of course, at the relevant time had been of the obligation on the original concessionaire to execute the documents for creation of SPV and this clause came in operation when JIL was created as an SPV. However, it would be wholly unrealistic to say that once JIL was created as an SPV, the said Clause 18.1 stood exhausted and there remained no obligation on the part of JIL (as the substituted concessionaire) to execute the necessary documents if it would propose to transfer its rights and obligations under the CA to

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¶647

another SPV; and it could do so without the consent of YEIDA. This suggestion carries an inherent fallacy because if Clause 18.1 is removed from the CA, a serious question would arise as to how the rights and obligations of the substituted concessionaire JIL could at all be transferred to another SPV? Looking to the pith and substance of the CA, the said Clause 18.1 has to be applied for creation of any SPV by or on behalf of JIL.

¶648

104.1. The other clauses in CA permitting creation of sub-lease could hardly be applied for en bloc transfer of land to the SPVs, as proposed in the resolution plan. The referred Clauses 4.3(d) and 4.3(e) were essentially meant for creation of sub-leases when the land given to the concessionaire for development, or part thereof, was to be sub-leased to the end-user/s. Even in that regard, the provisions were made for the concessionaire to make a request to the land providing agency to execute the lease-deed directly in favour of its subsidiaries, assigns or transferees; and in case the agency and the concessionaire would consider it appropriate, tripartite agreement for sub-lease may be executed. Taking all the relevant clauses together with the substance and purport of CA, it is difficult to countenance that the proposed transfer to SPVs could be treated as an ordinary sub-lease for which, no documentation involving YEIDA would be required.

¶649

104.2. Although, as urged, the proposal to create two separate SPVs may not be impermissible looking to the framework of the CA, where different stipulations were made in relation to the land for constructing Expressway with its allied facilities and the land for commercial exploitation, respectively in Clauses 4.1 and 4.3 of the CA, but the question is as to the method of transfer of concessionaire’s rights and obligations to such SPVs. That could only be in accordance with the approval of YEIDA and with the execution of necessary tripartite documents as envisaged by CA.

¶650

104.3. As observed hereinbefore, looking to the terms and purport of the CA, creation of two SPVs, one for Expressway and another for the

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remaining land for commercial development, is not altogether prohibited but then, it cannot be suggested by NBCC that such creation of SPVs could be even without necessary documentation involving YEIDA. In this regard, YEIDA seems to be right in its contentions that such documentation is even otherwise required for avoiding any ambiguity about the rights and obligations and also for itself (YEIDA) to properly monitor the functioning of SPVs, each of which would stand in the capacity of concessionaire and would be carrying the rights and obligations under the CA.

¶654

104.4. For what has been discussed above, we need not delve into the decision of this Court in MCGM (supra), where the statutory provision itself required prior approval of the local body before dealing with its properties through lease or by creation of any other interest. Though in the present case, there is no such statutory embargo but for that matter, all the terms of the Concession Agreement cannot be forsaken. Any alteration in the essentials of the Concession Agreement would require the consent of YEIDA.

¶655

104.5. The Adjudicating Authority (NCLT), while disapproving the stipulations in the resolution plan whereby documentation for such transfer was sought to be avoided, proceeded to order execution of such documents. According to YEIDA, this modification has no commercial effect and therefore, has rightly been ordered by NCLT. Although this modification, prima facie, does not appear to be having any commercial effect, for it being only a matter of proper documentation but, interlaced with this process of documentation are the other stipulations, which do impact the commercial terms of the resolution plan, particularly those relating to the amount of additional compensation, if payable.”

¶656

(Emphasis Supplied)

¶657

On perusal of the above paragraphs, it is observed that the Hon’ble Supreme Court has, inter alia, observed in Para 103 (ibid) that any tinkering

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with the contract in question, that is, the Concession Agreement, could not have been carried out without the approval and consent of the authority concerned, that is, YEIDA, while referring to the provisions of Regulation 37 of IBBI (CIRP) Regulations 2016.

¶661

On conjoint reading of para 103 with para 104, we notice that the abovesaid observations, however, were made in the context of the facts elaborated in para 104 in context of the provision in the NBCC’s Resolution Plan regarding creation of SPVs, splitting up of rights available to the Concessionaire vis-a-vis the Expressway and the land for commercial development, in each case without specific approval of YEIDA. Therefore, in Para 104.4 the Hon’ble Apex Court again observed that “ all the terms of the Concession Agreement cannot be forsaken. Any alteration in the essentials of the Concession Agreement would require the consent of YEIDA”.

¶662

Since the observations of the Hon’ble Supreme Court contains reference to Regulation 37 of IBBI (CIRP) Regulations, 2016, therefore, at this juncture we would like to visit the contents of Regulation 37, which reads thus:

¶663

“ 37. Resolution plan.

¶664

A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets, including but not limited to the following: -

¶665

a……

¶666

b……

¶667

(l) obtaining necessary approvals from the Central and State Governments and other authorities”

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¶670

Further, when we read Paragraphs 103 and 104 of the Jaypee Kensington along with Regulation 37 of IBBI (CIRP) Regulations, 2016, we observe that the Resolution Plan of the previous SRA namely, NBCC contained certain provisions, which were found to be lacking necessary approval of the concerned authority i.e., YEIDA, in violation of the Regulation 37 of IBBI (CIRP) Regulations, 2016.

¶671

However, when we come to the facts of the present case, we see YEIDA in a dual capacity. Although it is an “Authority” within the meaning and context of Regulation 37 (l) but at the same time, in terms of the nature of claim filed by it against the Corporate Debtor in an IBC proceedings, it is also an “Operational Creditor”.

¶672

It is a matter of fact that YEIDA, though an “Authority”, being an “Operational Creditor” is not the part of the CoC of the Corporate Debtor, which alone is empowered under law to consider and approve or reject a Resolution Plan on commercial terms. However, under the provisions contained in Regulation 37 (l) of IBBI (CIRP) Regulations, 2016, approval of YEIDA is still required as an Authority, if any of the proposals in the Resolution Plan seeks to alter the term of the Concession Agreement. However, this does not give any right to the Authority (i.e., YEIDA) to negotiate with the Successful Resolution Applicant, that if its claim is not fully discharged, it shall object to the Resolution plan. In our considered view, what YEIDA cannot get directly as an “Operational Creditor”, it cannot get it indirectly under the attire of being an “Authority”.

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¶675

In the instant case, if we ignore the reliefs and concessions sought in the Resolution Plan for a moment, then in our view, we find no such provision in the Suraksha’s Resolution Plan, which is in violation of the terms of the Concession Agreement (CA) under reference. Further, the proposal regarding extinguishment of claim of YEIDA in the Resolution Plan, because of it being the Operational Creditor, does not amount to violation of the Concession Agreement by the Successful Resolution Applicant, as the same is being effected due to operation of law.

¶676

Hence, we find no illegality in the Resolution Plan, so far as it relates to provision of Rs. 10 Lakhs towards the operational claim relating to External Development Charges (EDC) of YEIDA.

¶677

Now, we would like to examine the objection of YEIDA towards provision of another Rs 10 Lakhs, made by the Successful Resolution Applicant in its Resolution Plan with respect to YEIDA’s claim towards Additional Compensation of Rs. 1689 Crores payable to farmers.

¶678

While examining the objection relating to the provision in the Plan regarding additional compensation to the farmers, we would like to refer to the Paragraphs 105 to 107 of the Jaypee Kensington, which read thus:

¶679

“105. With the observations foregoing, we may now take up another important aspect of the objections, which relates to the provisions in the resolution plan towards the amount of additional compensation, if payable.

¶680

105.1. Concisely put, as per the resolution plan, the contingent liability concerning additional amount of land acquisition compensation is proposed to be dealt with in the manner that in the event any such

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¶683

amount of additional compensation is to be paid, YEIDA would collect the same from the end-users; and as regards the land of Expressway, such additional compensation shall be payable by YEIDA because YEIDA will be the end-user on getting ownership of the land of Expressway after expiry of the concession period. NBCC has justified these propositions on various grounds as noticed hereinabove. YEIDA takes serious exception to them and particularly to the stipulation that additional compensation in regard to the land of Yamuna Expressway would be payable by it. The Adjudicating Authority has made two-fold modifications in this regard. In paragraph 120 of the impugned order dated 03.03.2020, the Adjudicating Authority has said that to iron out creases and to make the resolution plan viable, it would direct that the plan shall be read to mean that YEIDA has a right to collect acquisition cost through the SPVs concerned. On the other hand, concerning the Expressway land, the Adjudicating Authority has provided in paragraph 122 of the impugned order that the resolution plan would be read to mean that it is left open to both the parties to have proper recourse before competent forum when the time comes for payment of additional compensation. In the submissions of YEIDA, such modifications were necessary to make the plan compliant with the rights and obligations under the CA.

¶684

105.2. We find the prescriptions in the resolution plan in regard to the contingent liability of additional compensation to be questionable on more than one count.

¶685

106. The question is yet to be finally determined as to whether such a liability towards additional amount of compensation rests with the corporate debtor JIL or with YEIDA , because the arbitral award made in favour of JIL is the subject matter of challenge in the Court . However, the contingency was required to be provided in the plan in case liability would be ultimately fastened on the corporate debtor JIL. It has not been suggested that any such bifurcation of liability, qua the land under Expressway on one hand and other parcels on the other, is a subject matter of the arbitration

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¶688

proceedings. However, going by the terms of the CA, prima facie, we are unable to find any indication therein that the liability for compensation with reference to the land under Expressway is not of the concessionaire. In any case, while making a provision for meeting with this contingent liability of additional amount of compensation, the resolution applicant could not have decided of its own that there will not be any liability of the concessionaire or its assigns towards the land under Expressway.

¶689

106.1. It appears that while proposing to create two different SPVs, the resolution applicant stumbled on an idea that the liability for additional compensation as regards Expressway land could be simply deflected to YEIDA with reference to the fact that YEIDA will get this land back after 36 years; and reflected this idea by way of the questioned proposition in the resolution plan. The Adjudicating Authority has chosen to leave this issue open, for being litigated at the appropriate time and before the competent forum. In our view, such a prescription as regards Expressway land amounts to alterations of the material terms of CA and cannot be made without the consent of YEIDA. This aspect could have only been disapproved.

¶690

106.2. Similarly, the resolution applicant, of its own, could not have decided that end-user would mean sub-lessee and thereby deflect even collection of the amount towards this liability on YEIDA and that too when YEIDA was not going to be a party in creation of any sub-lease. The structuring of these propositions regarding contingent liability turns out to be wholly illogical, apart from being at loggerheads with the terms of the Concession Agreement.

¶691

106.3. It needs no great deal of discussion to find that the said aspect concerning the provision for additional compensation, if not approved on material terms, is of significant commercial impact. Even the other modification by the Adjudicating Authority, that YEIDA shall have a right to collect acquisition cost through SPVs concerned, carry their own commercial implications. These are not the terms which could be taken up for modification without disturbing the financial proposal of the

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¶694

resolution plan. While these prescriptions could not have been approved, in our view, the Adjudicating Authority could not have entered into any process of modification. The only course open for the Adjudicating Authority (NCLT) was to send the plan back to the Committee of Creditors for reconsideration.

¶695

107. Apart from the aforesaid, the reliefs and concessions as sought for by the resolution applicant in relation to YEIDA in Clauses 4, 14 and 27 of Schedule 3 are also required to be disapproved. We are unable to countenance the proposition that by way of a resolution plan, it could be enjoined upon an agency of the government like YEIDA to give up or withdraw from a pending litigation. Similarly, extinguishment of existing liability qua YEIDA is not a relief that could be given to the resolution applicant for askance. For the same reason, the resolution applicant cannot seek extension of time period of the Concession Agreement by way of a clause of ‘relief’ in the resolution plan without the consent of a governmental body like YEIDA.”

¶696

(Emphasis Supplied)

¶697

From the aforesaid paragraphs of the Jaypee Kensington , it is noticed that the Hon’ble Supreme Court has specifically observed in Para 106 that the contingency towards additional amount of compensation was required to be provided in the Resolution Plan in case liability would be ultimately fastened on the corporate debtor/JIL.

¶698

During the course of hearing, the Ld. Senior Counsel appearing for the SRA submitted that YEIDA had filed its claim towards additional compensation in the capacity of an Operational Creditor and the Liquidation value owed to the Operational Creditor is ‘Nil’. Against that, even if this liability of additional amount of compensation is fastened on the Corporate

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¶701

Debtor/JIL, the SRA/Suraksha has provided (for this contingency) an amount of Rs. 10 Lakh in the Resolution Plan proposed.

¶702

We find credence in the submissions made by the Ld. Senior Counsel appearing for the SRA that the dues of YEIDA even if found payable, are at the most, in the nature of an Operational Debt. We are aware that the Hon’ble Supreme Court in the matter of New Okhla Industrial Development Authority Versus Anand Sonbhadra in Civil Appeal No. 2222 of 2021, in the context of NOIDA Authority, (which is similar in status as YEIDA) has held vide its Judgement dated 17.05.2022 that NOIDA Authority is an Operational Creditor. The relevant extracts of the Judgement are reproduced below:

¶703

“144. The appellant would, in fact, point out that it is not necessary to probe the matter further, in view of the concurrent findings that the appellant is an operational creditor. No doubt, Smt. Madhavi Divan does point out that the words ‘arising under any law’, may not be the same as amounts being made recoverable under a law. Of course, she would point out that as far as the rental part of the claim, it may be relatable to the first limb of an operational debt. When questioned further, as to what her position is, if this Court found that the appellant is not a financial creditor, the appellant may be entitled, at least, to be treated as an operational creditor. We would think that, having regard to the fact that both the NCLT and NCLAT have proceeded on the basis that the appellant is an operational creditor, we need not stretch the exploration further and pronounce on the questions, which may otherwise arise. We must not be oblivious to the following prospect, should we find that the appellant is not an operational creditor, even under the IBC Regulations apart from claims by financial creditors and operational creditors, claims can be made by other creditors. However, there are, undoubtedly, certain advantages, which an operational creditor enjoys over the other creditors. We would proceed on the

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¶706

basis that, while the appellant is not a financial creditor, it would constitute an operational creditor .”

¶707

(Emphasis Supplied)

¶708

Further, we are conscious of the fact that under the provisions of IBC 2016, NCLT has no ‘equity jurisdiction’. It can neither interfere with the commercial wisdom of CoC nor it can go beyond the provisions of the Code. Since YEIDA itself had filed its claim as an “Operational Creditor” and the Liquidation value owed to the Operational Creditors in the proposed Resolution Plan is ‘Nil’, and the SRA/Suraksha has still provided an amount of Rs. 10 Lakh for this contingency in its Resolution Plan, we find no illegality committed by the SRA/Suraksha by treating the claim of YEIDA as an Operational Debt and making a provision towards its payment in accordance with the provisions of IBC, 2016.

¶709

As regards the objection taken by YEIDA that certain reliefs and concessions sought by the SRA in the Resolution Plan tinkers with the Concession Agreement, as we have noted earlier, under clause 12 of the Resolution Plan, the SRA/Suraksha has undertaken that “….. they will implement this Resolution Plan, whether or not the Relief and Concession are granted .” Hence, we are of the view that the SRA/Suraksha has not made the grant of reliefs and concessions as the condition precedent for approval of the Resolution Plan. However, while considering reliefs and concessions, we will be conscious that any relief and concession, if granted, does not tinker with the Concession Agreement.

¶710

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¶711

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¶712

Another objection taken by YEIDA is that the Resolution Applicant cannot “transfer and pass on beneficial interest in land parcels to the assenting Financial Creditors”. The Supporters of the Resolution Plan, in response to this objection, have stated that the SRA/Suraksha is only subleasing the portion of land, which was leased to the Corporate Debtor/JIL by YEIDA. Further, the Concession Agreement (CA) itself permits such subleasing without any consent of YEIDA without any charge or fee.

¶713

Hence, we would like to examine this contention with reference to the relevant Clause 4.3(d) and (e) of the Concession Agreement dated 07.02.2003, which reads as under:

¶714

From the above, we find that in terms of the CA, the lessee i.e.,

¶715

Corporate Debtor/JIL is entitled to further sub-lease the land without any consent/approval of YEIDA. Hence, we find the proposed transfer of

¶716

beneficial interest to the Assenting Financial Creditors in accordance with the terms of the Concession Agreement and find no illegality in this

¶717

proposal in the Resolution Plan.

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¶720

During the course of the hearing, one more objection was raised by YEIDA as well as JAL that the Hon’ble Supreme Court of India in the matter of State Tax Officer v. Rainbow Papers Limited reported as 2022 SCC OnLine SC 1162 , observed that the Committee of Creditors comprising of financial creditors cannot secure its own dues at the cost of dues owed to the government or any governmental authority. They relied on the following paragraph of the Judgement:

¶721

“52. If the Resolution Plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the Adjudicating Authority is bound to reject the Resolution Plan.”

¶722

The SRA/Suraksha in its reply to the said contention submitted that the observations made in the Rainbow Papers (Supra) do not apply to the facts of the present case. The issue before the Hon’ble Supreme Court in the Rainbow Papers was whether the provisions of the Code and, in particular, Section 53 of IBC overrides Section 48 of the GVAT Act. In this context, they referred to the following paragraph of the Rainbow Papers :

¶723

“2. The short question raised by the appellant in this appeal is, whether the provisions of the IBC and, in particular, Section 53 thereof, overrides Section 48 of the GVAT Act which is set out herein below for convenience: -…”

¶724

The SRA/Suraksha further contended that in the facts of the present case, under Clause 17.1 of the Concession Agreement, YEIDA has permitted “notwithstanding anything”, to mortgage and hypothecate the land and assets created thereon to the financial institutions and other lenders for financial assistance. Therefore, now YEIDA cannot have priority over the secured

¶725

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¶727

financial creditors. The said clause 17.1 of the Concession Agreement is

¶728

reproduced below, for immediate reference:

¶729

It is further contended by the SRA that YEIDA is an unsecured Operational Creditor and the same is evident from its own claim form filed with the IRP of Corporate Debtor/JIL.

¶730

We have heard the submissions of both sides and gone through the relevant pleadings. In order to examine the contentions of both parties, we would like to visit the Judgement of the Hon’ble Supreme Court in Rainbow Papers (Supra ), the relevant extracts of which reads thus:

¶731

“30. The learned Solicitor General rightly argued that in view of the statutory charge in terms of Section 48 of the GVAT Act, the claim of the Tax Department of the State, squarely falls within the definition of “Security Interest” under Section 3(31) of the IBC and the State becomes a secured creditor under Section 3(30) of the Code.

¶732

57. As observed above, the State is a secured creditor under the GVAT Act. Section 3(30) of the IBC defines secured creditor to mean a creditor in

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¶735

favour of whom security interest is credited. Such security interest could be created by operation of law. The definition of secured creditor in the IBC does not exclude any Government or Governmental Authority.”

¶736

On perusal of the above paragraph, it is observed that the Tax Department/Government was categorized as a Secured Creditor, as in that particular case security interest was created by virtue of law under the GVAT Act.

¶737

In order to determine, whether the same can be made applicable to YEIDA, we refer to the definition of the “Secured Creditor” as provided under Section 3(30) of IBC, 2016, which thus:

¶738

“Secured creditor” means a creditor in favour of whom security interest is created;

¶739

Further, the term “Security interest” is defined under Section 3(31) of IBC, 2016, as reproduced below:

¶740

“(31) “security interest” means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person:

¶741

Provided that security interest shall not include a performance guarantee;”

¶742

Hence, in order to determine whether any Security Interest is created in favour of YEIDA, we refer to the Claim Form-B dated 28.08.2017 filed by YEIDA with the IRP of Corporate Debtor/JIL, which is reproduced overleaf:

¶743

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¶745

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¶746

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¶748

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¶749

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¶750

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¶751

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¶752

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¶755

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¶756

On perusal of column 9 of Form B of YEIDA reproduced above, it is observed

¶757

that there is no retention of title in respect of any property to which the claim of YEIDA refers. Therefore, while going through the claim Form B (ibid), we find that in respect of the claim, no security interest is found to have been created by YEIDA and therefore, we are of the view that YEIDA cannot be termed as a ‘Secured Creditor’.

¶758

Further, even during the course of the hearing, YEIDA was unable to explain that as to how it has created any security interest, in the light of the Judgement

¶759

of the Hon’ble Supreme Court in the Rainbow Papers Limited (Supra ).

¶760

Since, in the instant case, YEIDA has not been able to show any creation

¶761

of security interest, we find that the Judgement of the Rainbow Papers

¶762

Limited (Supra) is not applicable to the instant case.

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¶765

92. In view of the foregoing discussion on all the issues raised by YEIDA, the IA-3306/PB/2021 filed by YEIDA is Dismissed.

¶766

IX. OBJECTIONS OF M/S JAL AND MR. MANOJ GAUR

¶767

M/s. JAL and Mr. Manoj Gaur, the Personal Guarantor of JIL have raised certain objections towards approval of the proposed Resolution plan. They have submitted that:

¶768

93.1 The proposed Resolution plan fails to maximize the value of assets. While placing reliance on the Judgement of the Hon’ble Supreme Court in the matter of Committee of Creditors, Essar Steel Vs Satish Gupta, (2020) 8 SCC 531 (Para 73), they contended that it is the duty of the CoC to maximize the value of assets and balance the interest of all the stakeholders. Further, the principles laid down in the Judgement of Essar Steel (Supra) were also recognized in the Jaypee Kensington in Para 77.5.

¶769

93.2 Further, they have stated that the value of the assets owned by the Corporate Debtor is in far excess of the liabilities owed by it. Moreover, the value of JIL’s assets has been steadily rising. The value of assets of JIL as given by JAL is reproduced below:

¶770

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¶772

Further, the Liquidation value and Fair Market value of the Corporate Debtor/JIL as provided in ‘Form H’ are as given below:

¶773

93.3 Thus, it is seen that the value of the assets owned by JIL is far more

¶774

than its liabilities. The Financial outlay or value of Suraksha’s Resolution Plan aggregates to Rs.17,329.09 Crores, which is less than the Corporate Debtor/JIL’s Liquidation value. It is further added that Corporate Debtor/JIL owns more than 3,500 acres of land and the CoC, in its wisdom has staked its claim only to a part of the land, taking a hefty voluntary haircut.

¶775

93.4 The Suraksha’s Resolution Plan does not take into account the 758 acres of land belonging to JIL, which was earlier covered by 6 mortgage transactions but now stands released from encumbrances and is part of the assets of the Corporate Debtor/JIL in terms of the Judgement of Hon’ble Supreme Court in Anuj Jain Vs Axis Bank Ltd. (2020) 8 SCC 401.

¶776

93.5 Further, as noted in Para 62 of the Jaypee Kensington that IRP had handed over 7,996 units to homebuyers during the period of CIRP. This has led to a reduction of liability of Corporate Debtor/JIL towards home buyers by Rs. 2,250 Crores.

¶777

93.6 In view of the aforesaid facts, it is stated by the objectors herein that the value of Corporate Debtor/JIL has changed substantially.

¶778

Per Contra, the IRP of Corporate Debtor/JIL, COC, and the SRA

¶779

(together termed as Supporters of the Plan) have stated the following:

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¶782

94.1 In terms of Anuj Jain Vs Axis Bank Ltd ., 758 acres of land of the Corporate Debtor, which was earlier mortgaged to the lenders of JAL, was released from any encumbrances under the provisions of avoidance transactions. The Resolution Plan submitted by Suraksha factors in this land of 758 acres released from encumbrances and has been approved by the CoC after due deliberations. To substantiate its point, the IRP has provided the comparison of land offered by the NBCC’s Resolution Plan and Suraksha’s Resolution Plan, which is reproduced below, for immediate reference:

¶783

Thus, it is abundantly clear that the land offered by Suraksha to the stakeholders under the Resolution Plan takes into account the additional land of 758 acres released from any encumbrances under the provisions of avoidance transactions.

¶784

94.2 Further, during the 17^th CoC meeting held on 12.04.2021, the IRP presented and circulated a detailed chart on findings of the Hon’ble Supreme

¶785

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¶787

Court in the Jaypee Kensington which categorically mentioned the land of 758 acres which was to be taken into consideration by the Resolution Applicant. Further, in the 18^th CoC meeting held on 17.04.2021, the IRP presented the Liquidation Value calculations, which included the 758 acres of land earlier mortgaged to JAL lenders. Therefore, the CoC was fully aware of the increased portion of 758 acres of land in the kitty of the Corporate Debtor and with full knowledge of the same, the CoC in its commercial wisdom took an informed decision as regards the inclusion of 758 acres of land and the plan value of the resolution applicant and approved the Suraksha’s Resolution Plan by a majority of 98.66%. Therefore, the commercial wisdom of the CoC cannot be questioned by JAL.

¶788

94.3 Both the valuers, RBSA and GAA Advisory took into account the entire 3501 acres of land, which included these 758 acres of land too. The valuation summary of the same is reproduced below:

¶789

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¶791

Thus, the CoC in its commercial wisdom has maximised the value of the assets of the Corporate Debtor/JIL and has taken an informed decision and therefore, the objection raised by JAL with regard to the Resolution Plan failing to maximise the value of assets stands no merit and ought to be dismissed qua the commercial decision taken by the CoC.

¶792

94.4 Further, the Hon’ble Supreme Court in paragraphs 77.6.1 of the Jaypee Kensington has held that whether a particular resolution plan and its propositions are leading to maximisation of value of assets or not, would be the matter of inquiry/assessment of the Committee of Creditors alone and when CoC takes a decision in this regard in its commercial wisdom by the requisite majority, the Adjudicating Authority has no jurisdiction to question/substitute any commercial term of the Resolution Plan approved by the CoC.

¶793

We have heard both sides and gone through the documents and written submissions placed on record. JAL has contended that the Suraksha’s Resolution plan does not take into account 758 acres of land belonging to JIL, which was earlier covered by 6 mortgage transactions. Per Contra, the IRP has stated that Suraksha’s plan covers the said land parcel of 758 acres of land, which has been duly considered and approved by the COC by the requisite majority. Moreover, the aforesaid land was also taken into account by the valuers while computing the Fair Market Value and Liquidation Value of the Corporate Debtor.

¶794

In view of the submissions of IRP and the documents placed on record,

¶795

we find the allegations of M/S JAL and Mr. Manoj Gaur with regard to

¶796

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¶798

not including the land parcel of 750 acres in the Resolution Plan and the SRA failing to maximise the value of assets as baseless and hence, in our view, these allegations merit no consideration.

¶799

As regards the role of the Adjudicating Authority, in regard to maximizing the value of assets, we refer to the following observations of the Hon’ble Supreme Court in the Jaypee Kensington (Supra):

¶800

“77.6.1. The assessment about maximisation of the value of assets, in the scheme of the Code, would always be subjective in nature and the question, as to whether a particular resolution plan and its propositions are leading to maximisation of value of assets or not, would be the matter of enquiry and assessment of the Committee of Creditors alone . When the Committee of Creditors takes the decision in its commercial wisdom and by the requisite majority; and there is no valid reason in law to question the decision so taken by the Committee of Creditors, the adjudicatory process, whether by the Adjudicating Authority or the Appellate Authority, cannot enter into any quantitative analysis to adjudge as to whether the prescription of the resolution plan results in maximisation of the value of assets or not. The generalised submissions and objections made in relation to this aspect of value maximisation do not, by themselves, make out a case of interference in the decision taken by the Committee of Creditors in its commercial wisdom.”

¶801

(Emphasis Supplied)

¶802

In view of the above, we conclude that this Adjudicating Authority cannot enter into any quantitative analysis to adjudge as to whether the Resolution Plan results in maximisation of the value of assets or not. Hence, we reject the objection in regard to maximisation of the value of

¶803

assets.

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¶806

Another objection raised by JAL is against Clause 34.50 of the Resolution Plan, which reads as under:

¶807

“34.50 Upon completion of transfer of the beneficial ownership of land parcels to Assenting Institutional Financial Creditors as contemplated in clause no 15 above, the outstanding dues of the Assenting Institutional Financial Creditors shall stand settled and the Assenting Institutional Financial Creditors shall not take any action against the Corporate Debtor for recovery of any outstanding dues. Further, notwithstanding the treatment of the Claims of the Institutional Financial Creditors under this Resolution Plan (including but not limited to the extinguishment of any such Claims), any personal and corporate guarantors, other than the Corporate Debtor, shall continue to be liable to the Institutional Financial Creditors for any amounts due to them to the fullest extent under the Applicable Laws without any recourse or remedy against the Corporate Debtor. Further, any right or remedy including but not limited to right of subrogation as may be available to such corporate or personal guarantors against the Corporate Debtor in the event of exercise of rights by Institutional Financial Creditors shall stand extinguished.”

¶808

The following is stated by Mr. Manoj Gaur, Personal Guarantor of JIL in respect of the abovesaid clause of the Resolution Plan:

¶809

100.1 The Financial Creditors cannot be allowed to fasten liability on Mr. Manoj Gaur, the personal guarantor of JIL, for their remaining dues. Under the provisions of the Indian Contract Act of 1872, a surety or guarantor has a right to subrogation. The liability of a surety is co-extensive with that of the principal debtor and, upon the discharge of the principal debtor from its obligation to repay the debt, the liability of surety also gets extinguished. Upon invocation of the guarantee, the surety or guarantor enters into the shoes of

¶810

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¶812

the principal creditor and can recover the dues independently from the principal Debtor. If any amount is taken towards the discharge of JIL's liability from the guarantee provided by JAL or by Mr. Manoj Gaur, they necessarily step into the shoes of JIL's creditors vis-a-vis the loans discharged under their respective guarantees. As a result, they become creditors of JIL and are entitled to the benefit of every security which the creditors of JIL may have to the extent that they have made good on the guarantees.

¶813

100.2 In the instant case, the Suraksha is being unjustly enriched by taking over an asset-rich company at a hefty haircut while depriving JAL and Mr. Manoj Gaur of their statutory rights of discharge under Section 135 of the Contract Act, right to get possession of the securities under Section 141, and their right to become creditors of JIL as the principal debtor under Section 140 of the Contract Act (i.e., the right of subrogation). Thus, Suraksha’s Plan is illegal, unfair, unreasonable, and contrary to the provisions of the law for the time being.

¶814

IRP of CD/JIL, SRA, and the CoC (together termed as Supporters of the Plan), in response to the abovesaid contention, have stated that:

¶815

101.1 Section 238 of the Code provides for overriding effect to the provisions of the Code over the Indian Contract Act of 1872.

¶816

101.2 The Hon’ble NCLAT in Lalit Mishra Vs. Sharon Bio Medicine Ltd ., [2018 SCC OnLine NCLAT 862], while discussing the right of a personal guarantor observed the following:

¶817

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¶819

“9 . It was not the intention of the legislature to benefit the ‘Personal Guarantors’ by excluding exercise of legal remedies available in law by the creditors, to recover legitimate dues by enforcing the personal guarantees, which are independent contracts. It is a settled position of law that the liabilities of guarantors is co-extensive with the borrower . This Appellate Tribunal held that the resolution under the ‘I&B Code’ is not a recovery suit. The object of the ‘I&B Code’ is, inter alia, maximization of the value of the assets of the ‘Corporate Debtor’, then to balance all the creditors and make availability of credit and for promotion of entrepreneurship of the ‘Corporate Debtor’. While considering the ‘Resolution Plan’, the creditors focus on resolution of the borrower ‘Corporate Debtor’, in line with the spirit of the ‘I&B Code’.

¶820

10. The present appeal has been preferred by the promoters, who are responsible for having contributed to the insolvency of the ‘Corporate Debtor’. The ‘I&B Code’ prohibits the promoters from gaining, directly or indirectly, control of the ‘Corporate Debtor’, or benefiting from the ‘Corporate Insolvency Resolution Process’ or its outcome. The ‘I&B Code’ seeks to protect creditors of the ‘Corporate Debtor’ by preventing promoters from rewarding themselves at the expense of creditors and undermining the insolvency processes.

¶821

11. For the aforesaid reasons, it will be evident from the ‘I&B Code’ that the powers of the promoters as the members of the Board of Directors of the ‘Corporate Debtor’ are suspended. The voting right of the shareholders, including promoter shareholders, are suspended and shareholders' approval is deemed to have been granted for implementation of the ‘Resolution Plan’ as apparent from explanation to Section 30(2)(f) of the ‘I&B Code’. The

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¶824

promoters, being ‘related parties’ of the ‘Corporate Debtor’, have no right of representation, participation or voting in a meeting of the ‘Committee of Creditors’.

¶825

(Emphasis Supplied)

¶826

101.3 The NCLT Hyderabad Bench in the matter of CP(IB)

¶827

297/95/HBD / 2021 State Bank of India Vs Shri Ghanshyam Surajbali Kurm held that:

¶828

“13.8 It is stated that under Code, after the CIRP is concluded, a guarantor cannot enjoy a right of subrogation when the payment is made by the guarantor with respect to the debt for which the guarantee is provided. This position has been settled by the Hon’ble National Company Law Tribunal (NCLAT) in Lalit Mishra & Ors. v. Sharon Bio Medicine Ltd3 dated 14.11.2018, wherein the Appellate Tribunal held that the guarantor cannot exercise its right of subrogation under the Indian Contract Act, 1872 as proceedings under the Code are not recovery proceedings. The object of the proceedings under the Code is to revive the company and focus on maximization of value of its assets and not to ensure that credit is available to all stakeholders.

¶829

17.20 We are also of the view that guarantor cannot enjoy a right of subrogation when the payment is made by the guarantor with respect to the debt for which the guarantee is provided.”

¶830

101.4 In terms of the foregoing Judgement, it is clear that the rights of the personal guarantor are co-extensive to that of the borrower. While considering

¶831

the Resolution Plan, the Adjudicating Authority is required to focus on the resolution of the borrower, i.e., the Corporate Debtor, and the promoters of

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¶834

the Corporate Debtor, who are responsible for the insolvency of the Corporate Debtor, cannot gain benefit from the resolution of the Corporate Debtor. Accordingly, supporters of the Plan have submitted that the provisions of the Code prohibit the right to subrogation to the personal guarantor, who is a promoter of the Corporate Debtor undergoing CIRP.

¶835

We have heard the submissions of both parties and gone through the documents and written submissions placed on record. In our view, even if such a clause (like clause 34.50) in the Resolution Plan did not exist, the personal guarantor of the Corporate Debtor would still have been liable, under the contract of guarantee and the approval of the resolution plan would not have given immunity to the personal guarantors from that debt. At this juncture, we refer to the Hon’ble Supreme Court’s judgement dated 21.05.2021 in the matter of Lalit Kumar Jain Vs Union of India & Ors . in the Transferred Case (Civil) No. 245/2020:

¶836

“11. In view of the above discussion, it is held that approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e., by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract.”

¶837

(Emphasis Supplied)

¶838

Since the Resolution Applicant has to re-start the functions of the Corporate Debtor on a fresh slate in terms of the Judgement of Hon’ble

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¶841

Supreme Court in Essar Steel (Supra ), any fresh proceedings by virtue of subrogation on the Corporate Debtor managed by SRA are contrary to the scheme of IBC. Further, if such a right of subrogation is crystalized after the approval of the Resolution Plan, then recovery from the Corporate Debtor managed by SRA under the such right of subrogation is contrary to the Judgement of Hon’ble Supreme Court in the matter of Ghanshyam Mishra

¶842

and Sons Vs Edelweiss Asset Reconstruction Company, CIVIL APPEAL

¶843

NO.8129 2019 , dated 13.04.2021, which reads thus:

¶844

“95. In the result, we answer the questions framed by us as under: i) That once a resolution plan is duly approved by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; …..”

¶845

(Emphasis Placed)

¶846

104. Hence, in terms of the Judgement (Supra), we find that the Personal Guarantor has no right to subrogation, and to recover its dues from the Corporate Debtor, after approval of the Resolution plan. Hence, we find no illegality in Clause 34.50 of Suraksha’s Resolution Plan.

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¶849

105. It is further contended by JAL that once the Resolution plan is approved, it cannot be modified, whereas the Suraksha’s Resolution Plan contains the following modification clauses and is conditional:

¶850

106. It is argued by JAL that the aforesaid clauses are contrary to the Judgements of Hon’ble Supreme Court passed in the matter of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited, (2022) 2 SCC 401 and Committee of Creditors of Amtech Auto v. Dinkar T. Venkatasubramanian, (2021) 4 SCC 457 .

¶851

107. It is further stated by JAL that there is one Long Stop Date clause bearing No. 40.8, in the Resolution Plan, which makes the plan conditional. The contents of the said clause are reproduced overleaf:

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¶854

108. Per Contra, the IRP of JIL, SRA, and CoC (Supporters of the Plan) have contended t hat the above-referred Clauses of the Resolution Plan nowhere suggest that the Resolution Applicant would bypass the ‘commercial wisdom’ of the CoC in order to bring any change in the Resolution Plan. No withdrawal or modification is contemplated in the Resolution Plan post-approval by CoC or Adjudicating Authority. No evidence is shown to say that Resolution Applicant is trying to modify or withdraw the plan. Hence, no parallel can be drawn to the Ebix judgment (which came after the approval of the present Resolution Plan by the CoC). Further, the Resolution Applicant will be bound by Section 31 of the Code to implement the Resolution Plan and any clause which has been rendered infructuous due to EBIX judgment becomes void ab initio. Thus, any objection to such a clause is just academic and cannot be a ground for rejection of the Plan. The Long stop date clause s hall be rendered infructuous as soon as the NCLT passes an order with respect to the Resolution Plan.

¶855

We have heard both sides and gone through the pleadings and written submissions placed on record. We observe that, as a matter of fact, no modification has ever been sought by the SRA in the Resolution Plan from the date of its approval (by the CoC) to till date. In our view, till the time any

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¶858

modification is actually sought by the SRA, there is no cause of action to challenge the Resolution plan on this ground. Hence, in view of the fact that no modification has actually been sought by the SRA in the Resolution Plan and submission of the SRA that this clause is rendered infructuous in the light of the EBIX Judgement, we reject this objection of M/S JAL. Further, the Long Stop Date clause will become infructuous as soon as the order is passed by this Adjudicating Authority.

¶859

It is further objected by JAL that the Resolution plan interferes with the Reconciliation process of Rs 750 Crore, which has been conducted in terms of the Judgement of Hon’ble Supreme Court passed in the Jaypee Kensington and which is adjudicated by this Adjudicating Authority under IA-2593/2021. It is stated by JAL that the following clauses in the Resolution Plan interfere with the reconciliation process:

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¶862

It is stated by JAL that the SRA has no right whatsoever to participate in the reconciliation process or to give treatment to the amount in the Resolution plan which is a subject matter of the Reconciliation Process. Further, the Hon'ble Supreme Court made it clear in the Jaypee Kensington (at para 224) that the reconciliation process and the approval of the resolution plan were to be kept separate and that the process of approval of the resolution plan was not to be made dependent on the outcome of the reconciliation process.

¶863

In response to this objection raised by JAL, the SRA has stated that Para 225.3 of the Jaypee Kensington mandates that the new Resolution Plan to be submitted by NBCC and Suraksha has to be based on the already existing Information Memorandum, without any additions. Therefore, the Resolution Applicant has to deal with the claim of JAL as an Operational Debt. Paragraph 225.3 of the Jaypee Kensington is reproduced below:

¶864

“225.3. It is made clear that the IRP shall not entertain any expression of interest by any other person nor shall be required to issue any new information memorandum. The said Resolution Applicants shall be expected to proceed on the basis of the information memorandum already issued by IRP and shall also take into account the facts noticed and findings recorded in this judgment.”

¶865

On merits, with respect to the treatment of Rs. 212 Crore, the SRA/Suraksha has adopted the same arguments as advanced by the IRP. As regards to clause 35 of the Resolution Plan, it has been stated that the said clause falls under the category of relief and concession, and under Clause 12

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¶868

of the Resolution Plan, the SRA has already given an undertaking that it will implement the plan even if no reliefs and concessions are granted.

¶869

In our considered view, ideally, the Resolution Applicant should not have taken this task on itself to give any treatment to the amount of Rs. 212 Crore, in the absence of any adjudication on this amount. However, we are of the further view that the said clause is redundant, since the amount of Rs.750 Crore has been lying with the registry of NCLT Allahabad Bench in terms of the direction passed by Hon’ble Supreme Court in the matter of Chitra Sharma (Supra ), and the said amount would be distributed as per the directions passed by this Adjudicating Authority. The question of forfeiting this amount by the SRA does not arise. Hence, the existence of this clause cannot prejudice the rights of JAL.

¶870

The adjudication of Clause 35 will be done at the time of dealing with the reliefs and concessions.

¶871

Another objection raised by JAL is that the Suraksha’s Plan contains various provisions that impinge on JAL's assets, and violates JAL's contractual rights guaranteed under the Indian Contract Act, 1872 and consequently, violates Section 30(2)(e) of the IBC, which provides that a resolution plan cannot "contravene” the provisions of any law for the time being in force". Further, the Plan seeks to take back rights in immovable property consisting of 302 acres sold by JIL to JAL between 2006 and 2009 by illegally terminating the agreements between JIL and JAL in this regard. In this regard, there are two clauses bearing no. 22.6 and clause 10 (falling under reliefs and concessions) of the Suraksha Plan, which are reproduced below:

¶872

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¶874

xxx xxx xxx

¶875

Thus, the proposed plan provides that the economic and beneficial interest in the 302 acres of land has been transferred in favour of JAL. While explaining the background of the transaction relating to the aforesaid land, JAL has stated that the entire consideration was paid by JAL to JIL during the period 2006 to 2009. Accordingly, the physical possession of the land was handed over by JIL to JAL and a number of housing projects, duly registered under RERA, have been launched by JAL on the said land as part of inclusive urban infrastructure development, the development/construction of which is still in progress. Since nearly 4,000 home buyers have purchased flats or plots from JAL on these 302 acres of land, termination of the agreements between JIL and JAL in respect of 302 acres of land would create an unprecedented crisis as homebuyers, whose flats are still under construction, may lose the money they have already paid to JAL as JAL will not be able to continue construction and deliver flats to the homebuyers. JAL has already incurred expenditure on construction and the undelivered flats are at various stages of construction. Hence, such a provision in the Suraksha’s Plan is impractical, unfair, harmful

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¶878

to the interest of a number of homebuyers, and would make it unimplementable and violative of the provisions contained in Sections 30(2)(d) and 30(2)(e) read with Section 31(1) of the IBC. Further, these 302 acres of land have not been shown as an asset of the corporate debtor/JIL in its Annual Financial Statements and books of accounts since 2009. Both in the matter of Embassy Property and in Jaypee Kensington, the Hon'ble Supreme Court has specifically held that a corporate debtor cannot claim any interest in the assets of a third party, whether in the CIRP period or under a resolution plan.

¶879

The IRP of JIL, COC, and SRA (together called Supporters of the Plan), while replying to the abovesaid contention of JAL, have stated the following:

¶880

117.1 JAL has objected to Clause 22.6 of the Resolution Plan submitting that it seeks termination of the agreements between JIL and JAL without any consideration for the projects under development/construction over the 302 acres of land which is still in the name of JIL and if JIL is permitted to cancel all arrangements, then the 4000 homebuyers of JAL will be left in a lurch with no title to their own flats/plots. Supporters of the Plan have argued that Clause 22.6 does not relate to economic/beneficial interest relating to land on which the real estate project of JAL is situated. The total land under the project is 1232 acres, out of which 745 acres of land is with the JIL/Corporate Debtor and the remaining 463 acres of land has been sub-leased (i.e., beneficial interest has been transferred in respect of 302 acres to JAL and of 61 acres to third parties). Therefore, neither any provision of law is violated by Clause 22.6 and nor any modification is required to the same in view of

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¶883

the general expression used “in the event” and “land comprising in real estate projects of the corporate debtor”. Hence, clause 22.6 is inserted only to protect the interest of the 20,000 homebuyers of Corporate Debtor/JIL to the extent that JAL will have no lien or any kind of right over the 745 acres of land on which the projects of JIL are being developed and it has nothing to do with the 302 acres sold to JAL or homebuyers of JAL. In this regard, they have referred to the Information Memorandum [Page 28 of IM filed by RA as document compilation] which clearly demarcated the sub-leased land of 302 acres in favour of JAL, for which entire consideration has been received and therefore, the same does not form a part of the assets of the Corporate Debtor.

¶884

117.2 Clause 10 of “Reliefs and Concessions” on page 133 of the Resolution Plan pertains to a legitimate transaction with JAL whereby JAL has paid consideration to JIL but has not executed necessary conveyance documents. It is submitted that JAL should rather execute the necessary conveyance deed with payment of applicable stamp duty and complete the transaction as per applicable laws in the interest of its 4000 homebuyers. In this regard, an email dated 08^th Oct 2022 has been sent by IRP to JAL authorities requesting JAL to take necessary action for the transfer of land and this fact has been mentioned by IRP before this Adjudicating Authority and is duly recorded in its order in the current proceedings. However, no sublease deed has been executed till date. The IRP further submitted that, in the event, the sub-lease deed is executed by JAL, the legal title of the land shall stand transferred in favour of JAL and the said clause, if dealing with the 302

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¶887

acres of land, will be rendered infructuous. The said email is reproduced

¶888

overleaf, for immediate reference:

¶889

We have heard the submissions of both sides and gone through the

¶890

pleadings and written submissions placed on record. The SRA, who has drafted and submitted the Resolution Plan as well as the IRP of JIL has

¶891

clarified that clause 22.6 is only to protect the interest of the homebuyers of

¶892

JIL/ Corporate Debtor and it has nothing to do to 302 Acres of land referred

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¶895

by JAL. Further, clause 22.6 clearly uses the phrase “……comprising in real estate projects of the Corporate Debtor…” which implies that it is not applicable to the land and projects of JAL. In view of the above, we agree with the submissions of IRP and SRA that clause 22.6 has no relation to the land referred by JAL. Further, as already noted above, an e-mail along with a letter dated 8^th Oct 2022 has been sent by IRP of JIL to JAL authorities requesting them to take necessary action for execution and registration of sublease deed for the said 180 acre of land. In our considered view, once the sub-lease deed is executed by JAL, the legal title of the land shall stand transferred in favour of JAL and the issue raised by JAL will become infructuous. Hence, we find

¶896

no force in the contention of JAL relating to its objection to clause 22.6

¶897

of the Resolution Plan.

¶898

Since the other clause 10 of the Resolution Plan falls under the head of “Reliefs and Concessions”, therefore, we will examine the same while considering the entitlement of SRA of reliefs and concessions.

¶899

JAL has further objected that the proposed Resolution Plan seeks unilateral termination of JAL’s contracts/agreements. The relevant clauses in this regard are reproduced below:

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¶902

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¶903

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¶904

JAL has stated that it is a settled principle of law that no contract can be terminated unilaterally at the sweet will of one of the contracting parties, without leaving open the right of the other party to take recourse to legal remedies. It is more so when the IRP had affirmed the contracts with JAL during the CIRP period and JAL cannot be left remediless in respect of actual losses suffered during the CIRP period on account of sudden termination by the Suraksha’s Plan of its contracts with JIL. Further, it is not permissible for Suraksha’s Plan to wipe out the monetary liabilities in terms of actual work

¶905

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¶907

incurred by JAL towards JIL during the CIRP period under contracts that were affirmed by the IRP and under which JIL accepted performance by JAL. The IBC does not permit a resolution plan to abrogate or modify obligations incurred by a corporate debtor during the CIR period while it is under the management and control of an IRP. JIL owes JAL a significant amount towards the works performed by JAL pursuant to Contract Agreements executed and subsisted between JIL and JAL as of date. Moreover, Section 20(2)(b) of the IBC allows the IRP to amend or modify contracts entered into before the CIRP began, but there is no similar provision in the IBC to permit a resolution plan to amend or modify contracts that the IRP/RP has affirmed and under which the corporate debtor has received benefits during the CIRP period prior to the approval of the resolution plan. Further, neither Regulation 37 (which specifies measures that may be included in a resolution plan) nor Regulation 38 (which prescribes mandatory contents of a resolution plan) mentions that contracts, whether with related parties or otherwise, may be modified without incurring monetary liability by the corporate debtor and/or without legal recourse by the aggrieved party.

¶908

Per Contra, the IRP of JIL, SRA, and CoC (together termed as the Supporters of the plan) have stated JAL has objected to clauses 22.2, 22.3, 22.5, 22.8, 34.30, 34.55, and 34.57 of the Resolution Plan to submit that the Resolution Applicant cannot unilaterally terminate the contracts/agreements with JAL. In this regard, the supporters of the plan have mainly stated that (i) It is an admitted fact that out of the 6 construction agreements, 5 agreements already stand expired, as on date; (ii) JAL is a related party, which is responsible for the present state of affairs of the Corporate Debtor/JIL; (iii)

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¶911

Agreements executed between JAL and the Corporate Debtor are not in the interest of the Corporate Debtor or its homebuyers; (iv) In Clause 28.2 (c) of the Resolution Plan, the Resolution Applicant has also given measures to resolve the defaults by the termination of such agreements; (v) With Section 7 application (CP 330 of 2018) against JAL having been filed by ICICI Bank and SBI, the solvency of JAL is in doubt and hence, not terminating such agreements will jeopardize the interests of the Corporate Debtor; (vi) Unilateral right to terminate the agreement is incorporated in Regulation 39(6) of the CIRP Regulations. In Bhushan Steel’s case, there was an agreement between Bhushan Steel and its subsidiary, Bhushan Energy which was terminated by Tata Steel (Resolution Applicant therein). NCLT rejected the objection of Bhushan Energy, which was upheld by Hon’ble NCLAT; (vii) The continuation of these agreements with JAL will amount to back door entry of JAL, in spite of it being barred expressly under Section 29A of the Code; (viii) The Hon’ble Supreme Court has considered the issues raised by agreement holders who are third parties but has not objected to the clause of termination of the JIL and JAL agreements; (ix) Clause 17.41 of the Resolution Plan is an enabling clause which envisages “smooth transition” in relation to the projects of Corporate Debtor, currently being developed by JAL so that it can start implementation in timely manner; (x) Section 31 of the Code mandates that the Resolution Plan once approved is binding on all stakeholders which includes JAL, Clause 22.2 of the Resolution Plan only envisages that upon approval of the Resolution Plan, all claims of JAL shall be treated as claims of “operational creditor” and shall stand extinguished as the liquidation value for OC is NIL; (xi) Resolution Applicant is entitled to take over the management

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¶913

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¶914

on a clean slate with no right to remedy with JAL leaving hydra head popping up in future. [Paragraph 106 and 107 of the Essar Steel Judgment, CoC vs. Satish Kumar Gupta (2020) 8 SCC 531 and Paragraph 68, 84 and 93 of the Ghanshyam Mishra vs Edelweiss Asset Reconstruction 2021 9 SCC 657; and (xii) Further, during the course of argument, JAL itself contended that it is not going after the damages or any future claims based on termination. Its only objection is limited to its entitlement for work executed during the CIRP. In response, it is submitted that payment for work executed by JAL is being made regularly by internal accruals of JIL/Corporate Debtor and further, the SRA has given a blanket Clause 14 in the Resolution Plan and an undertaking specifically in Para 14.3 to pay the CIRP Cost as per the provisions of the Code. Thus, it leaves no question of a right to remedy for termination of JAL’s contracts.

¶915

We have heard the submissions of both parties and gone through the relevant pleadings and written submissions placed on record. The SRA has submitted that out of the 6 construction agreements between JAL and JIL, 5 agreements have already expired, a fact, that was not disputed during the course of the hearing. Further, in the context of the present issue, we would like to refer to Regulation 39(6) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which deals with the approval of the Resolution Plan. The same is reproduced below:

¶916

“39. Approval of resolution plan.

¶917

1.. 2..

¶918

3..

¶919

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4..

5..

6. A provision in a resolution plan which would otherwise require the consent of the members or partners of the corporate debtor, as the case may be, under the terms of the constitutional documents of the corporate debtor, shareholders’ agreement, joint venture agreement or other document of a similar nature , shall take effect notwithstanding that such consent has not been obtained.”

¶924

(Emphasis Supplied)

¶925

On perusal of Regulation 39(6) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, it is evident that inter alia, lack of consent of shareholders/members of JIL i.e., JAL (being the holding company) for joint venture agreement or other document of a similar nature cannot create any hindrance in approval of the Resolution plan. Therefore, we are of the view that the contracts/agreements, to which JAL is referring, will come under the ambit of Regulation 39(6). A similar observation was given by the

¶926

Hon’ble NCLT Principal Bench in the matter of State Bank of India Vs. Bhushan Steel Limited dated, (2018) ibclaw.in 274 NCLT, dated 15.05.2018, which reads as under:

¶927

“67. A perusal of Regulation 38 would clearly show that by virtue of mandatory contents of the resolution plan discussed under Section 30 and 31 of the Code the requirement of Regulation 38 stand fulfilled. However, the objections raised under Section 29A (a) and (d) of the Code which are discussed separately. Even the requirement of Regulation 39 stand fulfilled as the RP has submitted the resolution plan of H1 resolution applicant as approved by the CoC to this Tribunal with the certification that the contents of the resolution plan meet all requirements of the Code and the CIRP Regulations and that the resolution plan has

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¶930

been duly approved by the CoC. There is no scope for argument left that shareholder, or parties to joint venture agreement or anyone holding similar document need to accord sanction in view of the provisions of Regulation 39(6) of the CIRP Regulations. Regulation 39 (6) clarifies that the resolution plan as approved by the CoC must take effect notwithstanding the requirement of consent of the members or partners of the Corporate Debtor under the terms of the constitutional documents of the Corporate Debtor, shareholders' agreement, joint venture agreement or other document of a similar nature.”

¶931

(Emphasis Supplied)

¶932

The aforesaid judgment was upheld by the Hon’ble NCLAT passed in the matter of Bhushan Energy Limited vs. State Bank of India and Ors. in CA(AT)(I) 267 of 2018, dated 10.08.2018 and even the challenge to it before the Hon’ble Supreme Court was withdrawn [M/s. Bhushan Energy Limited vs. State Bank of India in Civil Appeal No. 8517 of 2018, dated 10.01.2020].

¶933

In view of the above findings, we find no illegality in the clause seeking termination of the related party contracts of JAL .

¶934

The next objection raised by JAL relates to Clause 17.18 and Clause 22.9 of the Plan, which reads thus:

¶935

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¶937

xxx xxx xxx xxx

¶938

It is contended by JAL that, (i) assuming the amounts are paid to JIL as part of the reconciliation process, Clause 17.18 of the Resolution plan provides that SRA and JIL will not have any obligation or be liable to the home buyers in respect of the amounts paid by them to JAL; (ii) Clause 17.18 cannot interfere in this manner with third party contracts between JAL and JIL's homebuyers; (iii) Clause 17.18 cannot mandate return by JAL of amounts paid by home buyers towards maintenance, especially without taking account of amounts owed by home buyers when accounts have not been settled between JAL and homebuyers in respect of maintenance by JAL; (iv) Clause 22.9 of the Resolution Plan is also inconsistent with Section 11(4)(e) read with Section 11(4)(g) of the RERA, which reads thus:

¶939

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¶941

Section 11(4)(e) and (g) of RERA, if read together, clearly provide that in the absence of any local laws, the promoter shall ensure that the association of allottees is formed within 03 months of the majority of allottees having booked their apartments in a project and that the promoter is required to transfer the IFMD to the such association of allottees. Therefore, it is clearly against provisions of RERA, for Clause 22.9 to mandate that the IFMD must be transferred back to the allottees, who in turn, must hand over the IFMD to JIL.

¶942

Per contra, the SRA has stated that the submission of JAL is false and incorrect. For the real estate projects of the Corporate Debtor, JIL is the land owner and JAL is the developer and maintenance agency. JAL was expected to receive Rs.380.6 Crores from the homebuyers under the maintenance contracts for the flats on the projects of Corporate Debtor/JIL. However, JIL and JAL being under the same promoter group, JIL has taken this burden by paying an advance of Rs. 380.6 Crores to JAL on the understanding that the

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¶945

same shall be subsequently recovered by JIL from the Homebuyers and JAL shall be given set-off to the extent of the amount received from homebuyers. Against this, only Rs. 106.90 Crores was deposited by the homebuyers with JIL and therefore, the advance given by JIL to JAL has been reduced to Rs. 273.70 Crores. Therefore, effectively, Rs. 106.90 Crores deposit lying with JAL belongs to homebuyers, and Rs. 273.70 Crores lying with JAL belongs to JIL.

¶946

It is submitted by the SRA that, upon the termination of JAL’s contracts, the three possible scenarios are (i) JAL refunds the said Rs. 106.90 Crores to the homebuyers either directly or through an escrow account, or (ii) JAL does not pay back the said deposit, or (iii) JAL returns the said Rs. 106.90 Crores to JIL through the process of reconciliation.

¶947

The issue of Rs. 106.90 Crores is between JAL and the Home Buyers, Clause 17.18 states that only in scenario (ii), JIL shall have no liability towards homebuyers for IFMD or for the monies paid by homebuyers to JAL. In the event of scenario (iii) materializing, the said IFMD amount received by the Resolution Applicant/JIL shall be passed on to the new maintenance agency. Further, it is submitted that the aforesaid amount is held in trust by JAL for

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¶950

the homebuyers and it is incumbent on JAL to place the same in the escrow account as also submitted by the IRP.

¶951

We are aware that this amount of Rs.106.90 Crores is a subject matter of the reconciliation process being carried out as per the direction of the Hon’ble Supreme Court in Jaypee Kensington . Though, the SRA has anticipated three scenarios in respect of the amount of Rs. 106.90 Crores belonging to Home Buyers lying with JAL, its treatment or payment shall be decided and governed by the Judgement of this Adjudicating Authority on the reconciliation process, the application for which is under consideration separately.

¶952

So far as clause 22.9 of the Resolution Plan, relating to the termination of the maintenance agreement is concerned, we have already held that in terms of the Judgement of the Hon’ble Apex Court in the matter of Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta , (2020) 8 SCC 531, SRA has to start on a clean slate and under Regulation 39(6) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and therefore, SRA can terminate the contract/agreement entered by it with its related party JAL. Hence, in view of the above observations, we do not find any merit in the objections raised by M/s JAL.

¶953

130. In view of the foregoing discussion, we Dismiss all the objections raised by M/s JAL and Mr. Manoj Gaur.

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¶956

X. RELEIFS AND CONCESSIONS

¶957

The Successful Resolution Applicant (SRA)/Suraksha, has sought for 38 “Reliefs and Concessions”, as detailed in Annexure II, from Pages 132 to 138 of the Resolution Plan. It is, however, important to note that the SRA/Suraksha has undertaken in clause 12 of the Resolution Plan that it will implement the plan even if no relief or concession is granted to it. The said Clause 12 of the Resolution plan is reproduced below, for the sake of immediate reference:

¶958

Nevertheless, we would like to examine each of the reliefs and concessions asked for. The first relief and concession sought in the AnnexureII of the Resolution Plan are:

¶959

“1. All the existing legal proceedings relating to Income Tax shall stand irrevocably and unconditionally abated, settled and all liability/ obligations of the Corporate Debtor vis-a-vis the Income Tax authority in relation to such matters shall stand extinguished in perpetuity .”

¶960

Through this relief, the SRA is seeking irrevocable and unconditional abatement/settlement in perpetuity of all Income Tax proceedings of the Corporate Debtor. Thus, the relief sought being abatement/settlement of all legal proceedings relating to Income Tax in perpetuity, we are not inclined to

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¶963

grant such a blanket relief. In our view, it is the duty of the SRA to seek termination of such litigations, pending before the relevant Authorities, in accordance with the law. It would not be apt for this Adjudicating

¶964

Authority to interfere with the jurisdiction of various legal forums on a blanket basis and therefore, the relief is declined.

¶965

The next Relief and Concession sought by the SRA is at Serial No.2 of Annexure-II, which is reproduced below:

¶966

“ 2. The approval of this Plan by the Adjudicating Authority shall be deemed to have waived all the procedural requirements in terms of Section 66, Section 42, Section 62, Section 71 of the CA, 2013 and relevant rules made thereunder, in relation to reduction of share capital of the Corporate Debtor, issuance of shares by Expressway SPV, Land Bank SPV, conversion of Admitted Financial Debt due to the Institutional Financial Creditors to equity, subscription of debentures by the Corporate Debtor or transfer of shares of the Land Bank SPV from the Corporate Debtor to Institutional Financial Creditors.”

¶967

In our view, if Resolution Plan proposes a reduction of share capital or further allotment of shares, there is no need to follow any separate procedure, as the approval of the Resolution Plan under the IBC 2016 is a single window clearance. Hence, we are inclined to grant this relief.

¶968

The next relief and concession sought by the SRA is at Serial No.3 of Annexure-II, which reads thus:

¶969

“ 3. All relevant Governmental Authorities to grant relief/waiver from payment of stamp duty, to the extent permissible under the Applicable Law, for the successful implementation of the Plan inter alia including for the increase in authorized share capital, issuance/transfer of shares or debentures (optionally convertible debentures/non-convertible

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¶972

debentures), transfer of Expressway asset and land bank asset (including leasehold rights in underlying land) to Expressway SPV and Land Bank SPV respectively, pursuant to business transfer, etc.”

¶973

Since waiver of Stamp Duty is not a liability of the Corporate Debtor of the pre-CIRP period and will cause a loss of revenue to the Public Exchequer, we

¶974

are not inclined to grant this relief and concession.

¶975

The next relief and concession asked by the SRA is mentioned in Serial No.4 of Annexure II, which reads as under:

¶976

“4. All Governmental Authorities (including the Income Tax authority) to waive the non-compliances of the Corporate Debtor or further claims of the Governmental Authorities on the Corporate Debtor arising out of or in relation to the past claims or non-compliances, prior to the Approval Date.”

¶977

Since the relief sought is with respect to non-compliance of the CD or further claims of the Governmental Authorities (including the Income Tax authority) on the Corporate Debtor, which has neither been crystalized nor an opportunity of hearing to the relevant Governmental Authorities including the Income Tax Department was available, we are not inclined to grant such a

¶978

blanket relief in rem .

¶979

The next relief and concession sought by the SRA is listed in Serial No.5 of Annexure-II, which is reproduced below:

¶980

“ 5. All Governmental Authorities (including the Income Tax authority, Service Tax department and VAT department) to provide relief to the Corporate Debtor from all past litigations pending at different levels and

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¶983

provide waiver from tax dues including interest and penalty on such litigations as on the Approval Date.”

¶984

Through, this relief, the SRA is seeking blanket termination of litigations pending before all Governmental Authorities. In our view, it is the duty of the SRA to seek termination of those litigations, pending before the relevant Governmental Authorities, in accordance with the law. It would not be apt for this Adjudicating Authority to interfere with the jurisdiction of Governmental Authorities on a blanket basis and therefore, the relief is declined. However, the SRA would be at liberty to proceed in accordance with law.

¶985

The next relief and concession sought by the SRA listed at Serial No.6 of Annexure II, which reads thus:

¶986

“6. The lenders (including Institutional Financial Creditors) to the Corporate Debtor shall regularize all the loan accounts of the Corporate Debtor and shall ensure that the asset classification of such loan accounts is "standard" in their books with effect from the Approval Date.”

¶987

None of the Financial Creditors of the Corporate Debtor have objected to this relief at any stage. Further, in our view, the Financial Creditors having been treated as per their entitlement in the Resolution Plan, the relief sought will not cause any prejudice to the Financial Creditors. Hence, we are agreeable

¶988

to granting this relief.

¶989

The next relief and concession sought is mentioned in Serial No.7 of Annexure II, which reads as under:

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¶992

“7. All creditors (including the Institutional Financial Creditors, FD Holders, Home Buyers Refund Seekers and the Operational Creditors) of the Corporate Debtor to withdraw all legal proceedings commenced against the Corporate Debtor in relation to Claims including proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Recovery of Debt and Bankruptcy Act, 1993 and seek quashing of criminal proceedings including proceedings under Section 138 of the Negotiable Instruments Act, 1881, within a period of 90 (ninety) days of the Approval Date.”

¶993

Through, this relief and concession, the SRA is trying to seek blanket withdrawal of all legal proceedings initiated before various other forums. In our view, it is the duty of the SRA to seek termination of the legal proceedings, pending before various forums, in accordance with the law. It would neither be apt for this Adjudicating Authority to interfere with the jurisdiction of other forums nor to direct any third party to withdraw the legal proceedings and therefore, this blanket relief is declined. However, the SRA would be at liberty to proceed in accordance with law.

¶994

The next relief and concession listed at Serial No.8 of Annexure II is as follows:

¶995

“8. Except those agreements/letter of allotments, where the sub-lease deeds had been executed between the Corporate Debtor and the third parties, in relation to all the agreements/letter of allotments, entered into between the Corporate Debtor and the third parties in relation to the transfer of the leasehold rights over the land situated in Agra and Tappal, the Resolution Applicant reserves the right to terminate/cancel the same with concurrence of such third parties and with simultaneous repayment of the actual amount already paid by such third parties without any interest or further liabilities on the Corporate Debtor or the Resolution

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¶998

Applicant, Pursuant to such termination/cancellation, such land parcels and rights attached thereto shall be fully vested in the Corporate Debtor.”

¶999

Through this relief, the SRA is seeking blanket termination/cancellation of agreements/letters of allotments executed between the Corporate Debtor and third parties. In the absence of specific details of such agreements/letters of allotments being available before us and without affording an opportunity of hearing to the third parties, we are not inclined to interfere in the dealings of Corporate Debtor with third parties and therefore, this blanket relief is declined. However, the SRA would be at liberty to proceed in accordance with law.

¶1000

The next relief and concession sought by the SRA is mentioned in Serial No.9 of Annexure II, which is reproduced below:

¶1001

“9. The relevant Governmental Authorities shall not initiate any investigations, actions or proceedings against the Corporate Debtor or the Resolution Applicants or the new management (upon acquisition of the Corporate Debtor) including the board of directors, in relation to any noncompliance with Applicable Laws by the Corporate Debtor pertaining to any period up to Approval Date.

¶1002

Neither shall the Resolution Applicants nor the Corporate Debtor nor their respective directors, officers, and employees to be appointed after the Approval Date be liable for any violations, liabilities, penalties or fines with respect to or pursuant to the Corporate Debtor not having in place the requisite licenses and approvals required to undertake its business as per Applicable Laws and the Resolution Applicant seeks a time period of 12 months from the Approval Date, to ensure renewal of such consents/licenses and approvals. Licenses and approvals held by the Corporate Debtor which expired prior to the Approval Date or which will

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¶1005

expire within a period of 3 months thereafter shall be renewed/extended by the relevant Governmental Authorities and the Corporate Debtor shall be permitted to continue its business and assets in manner operated prior to submission of this Plan. Resolution Applicant seeks a time period of 12 months from the Approval Date, to ensure compliances.”

¶1006

There is no provision under any law (except as specified in Section 32A of IBC, 2016) by which blanket immunity against investigations, actions, or proceedings, in relation to any non-compliance with Applicable Laws or from taking requisite approvals and licenses for 12 months can be granted to the Corporate Debtor or the Resolution Applicants or the new management (upon acquisition of the Corporate Debtor) including the board of directors . Hence, we are not inclined to grant this relief. However, the SRA would be at liberty to proceed in accordance with law.

¶1007

The next relief and concession sought by SRA is listed in Serial No.10 of Annexure II, which reads thus:

¶1008

“10. In relation to any alleged transfer of any economic interest or other beneficial interest by the Corporate Debtor to JAL in the past pertaining to the land parcels for the real estate development, where the title and ownership is still lying with the Corporate Debtor, the Resolution Applicant shall have a right to proceed in accordance with Applicable Law including to terminate/cancel such arrangement without any liability (monetary or otherwise) on the Corporate Debtor or the Resolution Applicant.”

¶1009

During the course of the hearing, JAL has raised objections to this clause. It is argued by the JAL that this clause pertains to 302 acres of land for which, the entire consideration was paid by JIL to JAL as far back as between 2006

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¶1012

to 2009. Accordingly, physical possession of the land was also handed over by JIL to JAL. A number of housing projects, registered under the RERA, have been launched by JAL on the said land, the development/construction of which is still in progress. Further, the 302 acres of land have not been shown as an asset of the corporate debtor/JIL in its Annual Financial Statements since 2009, whereas this land has been shown as an asset of JAL in its Annual Financial Statements since 2009. The termination of the agreements between JIL and JAL of the 302 acres of land would create an unprecedented crisis for 4,000 homebuyers of flats/plots, who may lose the money which they have already paid to JAL. Further, JAL has already incurred expenditure on construction and the undelivered flats are at various stages of construction.

¶1013

Per contra, SRA has contended that there were many transactions and wrongdoings in the working of the Corporate Debtor under the garb of incorporating JIL as an SPV. In the event, any such transaction is found, where JAL is enjoying the land parcels, where ownership is with the JIL, JIL shall be entitled to terminate such contracts. This relief does not prejudice the legal right of any party and Resolution Applicant has the right to proceed only in accordance with prevailing laws.

¶1014

We have heard both parties. It is argued by the JAL that Clause 10 pertains to 302 acres of land for which, the entire consideration was paid by JIL between 2006 to 2009 and physical possession of the land was also handed over to JAL. What transpired during the hearing is that the JIL and JAL have yet to execute registration of the said land. As we have noted earlier a letter dated 4th Oct 2022 has been sent by IRP to JAL authorities requesting them

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¶1017

to take necessary action for the transfer of land which is duly mentioned in our order dated 3rd Oct 2022. In our considered view, once the sub-lease deed is executed by JAL, the legal title of the 302 acres of land shall stand transferred in favour of JAL and the issue raised by JAL will become redundant. However, till then, prejudice may be caused to the Homebuyers of JAL, if this relief is granted. Hence, we are not inclined to grant this relief. However, in case either of the parties does not take steps for registration of the aforesaid 302 acres of land, they shall be at liberty to approach

¶1018

the court of appropriate jurisdiction for requisite relief.

¶1019

The next relief and concession sought by the SRA is listed in Serial No.11 of Annexure-II, which is reproduced below:

¶1020

“11. The Resolution Applicants assume that, in compliance of his duties under Regulation 35A of the CIRP Regulations, the Interim Resolution Professional had determined whether the Corporate Debtor has been subjected to any transactions covered under sections 43, 45, 50 or 66 of the Code or not and applied to the Adjudicating Authority for seeking appropriate relief. Accordingly, though the Resolution Applicants reserve their right to institute any investigation pertaining to any transaction(s) carried out by the ex-management of the Corporate Debtor or to file appropriate applications before the court/tribunal of competent jurisdiction, the Resolution Applicants and its officers, directors, employees and the new management of the Corporate Debtor, shall never be liable/responsible for any such transactions carried out by the exmanagement of the Corporate Debtor.”

¶1021

The aforesaid relief sought is vague in nature. There is no provision in the law requiring permission of this Adjudicating Authority to file an application against ex-management. The SRA is free to initiate action which is permissible

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¶1024

under the law. However, the same shall not be treated as if the same is done with the permission of this Adjudicating Authority. In view of the above, the

¶1025

relief at Serial 11 is not granted.

¶1026

The next relief and concession sought by the SRA is mentioned in Serial No.12 of Annexure II, which reads as under:

¶1027

“12. With respect to any alleged transfer of land parcels by the Corporate Debtor to third parties without any proper agreement/sub-lease deeds and where the consideration amount has not been paid to the Corporate Debtor inter alia including the land parcels, the Resolution Applicant reserves a right to cancel such instruments/agreements/term sheets and upon cancellation the title in such land parcels. will continue to be legally vested in the Corporate Debtor without any liability/obligation to the counter-party, provided that such counter-party may take necessary steps as per Applicable Laws.”

¶1028

Through this relief, the SRA is seeking blanket permission to cancel such instruments/agreements/term sheets entered into by the Corporate Debtor for the transfer of land parcels to third parties. In our view, depending upon the specific facts of each case/transaction, the Resolution Applicant is free to take action as deemed fit and permissible under the law. However, such acts should not be deemed to have been initiated on the pretext, as if the same is permitted by this Adjudicating Authority. In view of the above, we are not

¶1029

inclined to grant this relief. However, the SRA would be at liberty to

¶1030

proceed in accordance with the law.

¶1031

The reliefs and concession sought by the SRA at Serial No.13 of Annexure II read thus:

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¶1034

“13. For the purpose of consolidation of the books of Corporate Debtor with Resolution Applicant, the Approval date shall be treated as the first day of the quarter immediately succeeding the quarter in which the Resolution Applicants acquire 100% shareholding of the Corporate Debtor.”

¶1035

The implications of the relief sought being not explained to our satisfaction ,

¶1036

we are not inclined to grant this relief.

¶1037

The next relief and concession sought by the SRA at Serial No.14 of Annexure II, is reproduced below:

¶1038

“14. The claims of all Home Buyers (including claims filed before RERA), Financial Creditors, Operational Creditors and Landowners (farmers) against the Corporate Debtor at all platforms including judicial, quasijudicial and regulatory shall stand withdrawn on the NCLT Approval Date.”

¶1039

Through this relief, the SRA is seeking blanket withdrawal of the claims of all Home Buyers (including those filed before RERA), Financial Creditors, Operational Creditors, and Landowners (farmers) against the Corporate Debtor at all platforms including judicial, quasi-judicial, and regulatory platforms. In our view, it would not be apt for this Adjudicating Authority to permit blanket withdrawal of claims of different stakeholders including Home Buyers and Farmers pending before other forums. It is the duty of the SRA to apprise the court of appropriate jurisdiction. Accordingly, we are not inclined to grant this relief. However, the SRA would be at liberty to proceed in accordance with law.

¶1040

The next relief and concession sought by SRA at Serial No.15 of Annexure II reads as under:

¶1041

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¶1043

“15. All the concerned authorities including the Central Government and the Reserve Bank of India to accord the necessary permissions or approvals under the Banking Regulation Act 1949 (to the extent permissible under the Applicable Law) to the Institutional Financial Creditor(s) (if required) in relation to the transfer of shareholding of the Expressway SPV and the Land Bank SPV to the Institutional Financial Creditors.”

¶1044

In our considered view, this Adjudicating Authority cannot interfere with the working of Central Government and RBI, for providing necessary approvals. It is the duty of the SRA to take necessary approvals from the competent authority. Accordingly, we are not inclined to grant this relief. However,

¶1045

the SRA would be at liberty to proceed in accordance with law.

¶1046

The next relief and concession as sought at Serial No.16 of Annexure II reads thus:

¶1047

“16. Entities including Serious Fraud Investigation Office, Income Tax Department will not stop the segregation of accounts, records, SAP, employees of Corporate Debtor and JAL and further, JAL will not hold back any document, hardware which is jointly held by the Corporate Debtor and JAL.”

¶1048

During the course of the hearing, JAL objected to this relief. In our view, under the garb of seeking this relief and concession, the SRA cannot ask for any direction with respect to the manner in which an investigating agency should act and as a matter of general principle, we would not like to interfere with the working of Investigating Agencies. However, it goes without saying as and when the need arises, both JIL and JAL will extend necessary cooperation to the Investigation Agencies. In view of the above, the relief sought is

¶1049

declined.

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¶1052

The next relief and concession sought at Serial No.17 of Annexure II is as under:

¶1053

“17. The various deposits under protest made with various authorities shall be unconditionally made available as assets of the Corporate Debtor immediately upon approval of this Resolution Plan as the underlying claims are being settled in terms of this Resolution Plan.”

¶1054

In our view, such a relief and concession cannot be sought under a Resolution plan. The SRA may take appropriate steps in accordance with law to recover any such deposit made under protest. Accordingly, we are not inclined to grant this relief.

¶1055

The next relief and concession sought by the SRA at Serial No.18 of Annexure II, is reproduced below:

¶1056

“18. The Resolution Applicants be permitted to claim set-off of the entire Minimum Alternate Tax (MAT) credit as available to the Corporate Debtor, against the normal income-tax as would be payable by the Corporate Debtor post the Approval Date i.e., no normal taxation should be applicable until the MAT credit is adjusted/utilized in full.”

¶1057

JAL had objected to such relief and concession. It has stated that the relief regarding MAT credit if granted, would violate the provisions of the IBC as well as that of the Income Tax Act. As per Section 115 JAA (3A) of the Income Tax Act, carry forward of a tax credit is not allowed beyond the fifteenth assessment year succeeding the assessment year in which tax credit becomes allowable. However, through approval of its Resolution Plan, Suraksha is attempting to bypass the relevant provisions of the Income Tax Act as it seeks to avail the benefit of MAT credit for an indefinite period i.e., till the MAT credit

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¶1060

is utilized in full. While agreeing with the submissions of JAL, the relief sought to be violative of the Income Tax Act, we decline this relief.

¶1061

The next relief and concession sought by the SRA at Serial No.19 of Annexure II reads as under:

¶1062

“19. All the losses already lapsed/not lapsed as on the Approval Date should be allowed to be carried forward for a period till the same are utilised/ set-off fully by the Corporate Debtor.”

¶1063

The JAL has objected to this relief and concession. Through this relief, the SRA seeks blanket permission to carry forward all losses already lapsed or not lapsed, as on the date of approval of the Suraksha Plan, for a period till the same is utilized or set off in full by the JIL. As per Section 72(3) of the Income Tax Act, no loss can be carried forward for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed. However, under the garb of the approval of the Plan, Suraksha is attempting to bypass the future application of relevant provisions of the Income Tax Act contrary to the express provisions of the law.

¶1064

In our view, this issue will have to be dealt with under the purview of the IT Act. Therefore, such a blanket relief and concession sought by the SRA, against the provisions of the Income Tax Act, cannot be granted. Accordingly,

¶1065

the same is declined.

¶1066

The next relief and concession sought by the SRA at Serial No.20 of Annexure II, which reads as given below:

¶1067

“20. The transfer of land to lenders and to Land Bank SPV as part of Resolution Plan in terms of the Resolution Plan may involve capital

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¶1070

gains/business income to the Corporate Debtor. Such a gain or income shall be treated as capital reserve for the purposes of Corporate Debtor.”

¶1071

JAL has objected to this Clause and has stated that the land in the case of JIL forms part of its assets as stock in trade. Accordingly, JIL has been accounting for the proceeds from sub-lease of land as business income and surplus from said sub-lease of such land as business profit, which is taxable as business income under Section 28 (i) of the Income Tax Act. However, through approval of the Resolution Plan, Suraksha is seeking to avoid the relevant provisions of the Income Tax Act and to escape taxation under the Income Tax Act by treating income as a capital reserve.

¶1072

Any capital gain is a subject matter of the extant tax laws. Whether the capital gain tax will be applicable or not on a particular transfer of land is to be determined within the framework of the Income Tax Act and Rules there under by the Competent Authority/Income Tax Department. Hence, we cannot interfere with the jurisdiction of the Central Government/Income Tax Department. Accordingly, the relief as sought is not granted.

¶1073

The next relief and concession sought by the SRA at Serial No.21 of Annexure II reads as under:

¶1074

“21. All Governmental Authorities including the Income Tax authority, Service Tax department and VAT department, Labour Cess department (BOCW), to provide relief to the Corporate Debtor from all past litigations pending at different levels and provide waiver from tax & cess dues including interest and penalty on such litigations as on the Insolvency Commencement Date.”

¶1075

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¶1077

Since, the aforesaid relief and concession is in the nature of a blanket relief,

¶1078

we are not inclined to grant the same.

¶1079

The next relief and concession sought by the SRA at Serial No.22 of Annexure II, is reproduced below:

¶1080

“22. The penalty levied/leviable and procedural requirements for delisting of shares, by the Stock Exchanges and SEBI, relating to reduction of Share Capital Delisting/ any Other reasons etc., (if any) to be waived off.”

¶1081

In our view, the penalty levied/leviable and procedural requirements for delisting of shares, by the Stock Exchanges and SEBI, relating to the reduction of Share Capital Delisting/any Other reasons, etc., (if any) shall be subject to the relevant provisions of law. In view of the above, the relief sought is not granted.

¶1082

The next relief and concession sought by SRA at Serial No.23 of Annexure II, reads thus:

¶1083

“23. All software/licences including SAP and hardware belonging to JAL or any other party which were being used by the Corporate Debtor shall stand transferred to the Corporate Debtor.”

¶1084

Since the relief sought is of a blanket nature with respect to the properties, which do not belong to Corporate Debtor/JIL and those may have been subject to certain/particular contractual arrangements, therefore, we are not

¶1085

inclined to grant this relief. Hence, the relief sought is declined.

¶1086

The next relief and concession sought by the SRA at Serial No.24 of Annexure II reads as under:

¶1087

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1088

P a g e 190 | 205

¶1089

“24. Issuance of necessary directions for the segregation of data of Corporate Debtor and JAL any other associate company of the Corporate Debtor will be allowed .”

¶1090

It is stated by JIL that there are several documents, information, and data stored in records of JAL i.e., Architectural drawings and Auto CAD designs, which are critical for effective implementation of the Resolution Plan. In view

¶1091

of the above, the relief sought is granted.

¶1092

The next relief and concession sought at Serial No. 25 of Annexure II is reproduced below:

¶1093

“25. Issuance of necessary direction to the concerned government authority for waiver of the stamp duty, registration charges, filing fees and other moneys payable to the government, if applicable and in relation to this Resolution Plan and its implementation including but not limited to reduction of share capital of the Corporate Debtor, issuance of Equity Shares and documentation in relation thereto, to the extent permissible under Applicable Laws.”

¶1094

Since the relief sought is a waiver of the stamp duty, registration charges, filing fees, and other amounts of money payable to the government, which will cause a significant loss of revenue to the public exchequer, we are not inclined to grant this relief and concession. Accordingly, the relief is declined.

¶1095

The next relief and concession sought by the SRA is at Serial No.26 of Annexure II, which reads as under:

¶1096

“26. Issuance of necessary directions to SEBI, relevant stock exchanges and MCA for expediting the delisting of shares and to take necessary

¶1097

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1098

P a g e 191 | 205

¶1099

actions in a time bound manner as applicable under the prevailing laws in order to implement the Resolution Plan.”

¶1100

As the relief sought is to facilitate implementation of the Resolution

¶1101

Plan, the same is granted.

¶1102

The next relief and concession sought by the SRA is at Serial No.27 of Annexure II reads thus:

¶1103

“27. Issuance of necessary directions to relevant RERA Authority(ies) to expeditiously make the appropriate changes in its records qua Projects, in accordance with the Resolution Plan.”

¶1104

Since the relief sought will expedite the implementation of the Resolution Plan, the same is granted .

¶1105

The next relief and concession sought by the SRA is at Serial No.28 of Annexure II is reproduced below:

¶1106

“28. Issuance of necessary directions to the lenders of the Homebuyers, waive the past defaults of the homebuyers/Corporate Debtor in relation to projects, disburse the outstanding sanctioned facility as per the project completion milestones in line with the terms of sanction, immediately upon approval of the Resolution Plan by the Adjudicating Authority, as it is critical for the construction/completion of the projects.”

¶1107

Through this relief, the SRA is seeking blanket direction to the Lenders of the Home Buyers to waive the past default of the Home Buyers/CD in relation to projects, which in our view, is unreasonable to the Lenders who may have

¶1108

entered tripartite agreements with the parties and beyond our Jurisdiction.

¶1109

Hence, the relief sought, being devoid of merit, is declined.

¶1110

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1111

P a g e 192 | 205

¶1112

The next relief and concession sought at Serial No.29 of Annexure II reads as given below:

¶1113

“29. The Hon’ble Adjudicating Authority be pleased to issue necessary directions to the local district administration of the respective states where the assets of the Corporate Debtor are situated to give assistance to the Resolution Applicant (s) for the implementation of the Resolution Plan, as and when required by the Resolution Applicants and for completing the Construction of Projects for Home Buyers.”

¶1114

Since the relief sought will expediate implementation of the Resolution Plan,

¶1115

the relief is granted.

¶1116

The next relief and concession sought is at Serial No. 30 of the Annexure II, which reads as under:

¶1117

“30. To direct the concerned Registrar of Companies to expeditiously associate, as per Applicable Laws, the Directors Identification Numbers (DIN) of the Directors who would be taking charge collectively as Board of Directors of the Corporate Debtor, pursuant to the approval of the Resolution Plan.”

¶1118

The aforesaid relief is granted.

¶1119

The next relief and concession sought at Serial No. 31 of Annexure II reads thus:

¶1120

“31. Issuance of necessary directions to Central Board of Direct Taxes for exemption /grant of relief to the Corporate Debtor from the provisions of Sections 41(1), 45, 72 (3), 43-B, 56, 79, 80 read with 139, 115JB and 269-SS, 269-T and 281, provisions of Chapter XVII of the Income Tax Act effective from the date of approval of the Resolution Plan or on account of implementation of the Resolution Plan.”

¶1121

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1122

P a g e 193 | 205

¶1123

The reliefs and concessions sought are contrary to the provisions of the Income Tax Act, of 1961, therefore, we are not inclined to grant such relief.

¶1124

Accordingly, the relief is declined.

¶1125

The next relief and concession sought at Serial No. 32 of Annexure II is reproduced below:

¶1126

“32. Issuance of necessary directions to Central Board of Indirect Taxes and Custom to waive any requirement of approval for transfer of assets or business undertaking in term of the Resolution Plan.”

¶1127

The reliefs and concessions sought are required to be considered under the provisions of the Income Tax Act, of 1961, therefore, we are not inclined to

¶1128

grant such relief. Accordingly, the relief sought is declined.

¶1129

The next relief and concession sought at Serial No.33 of Annexure II reads as under:

¶1130

“33. Issuance of suitable directions to the Ministry of Corporate Affairs, to waive the requirements under Section 140 of the Companies Act, 2013 in respect of the removal of the existing auditors of the Corporate Debtor. Issue directions to JAL to the effect that during the Transition Period, JAL, if so required by the Resolution Applicants, shall provide all facilitation to the Resolution Applicants /Corporate Debtor, with regard to maintenance and handing over the assets of the Corporate Debtor, for effective implementation of the Resolution Plan.”

¶1131

Since the relief sought will expedite the implementation of the Resolution

¶1132

Plan, the relief is granted.

¶1133

The next relief and concession sought at Serial No.34 of Annexure II is reproduced below:

¶1134

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1135

P a g e 194 | 205

¶1136

“34. Issue directions such that the Corporate Debtor receives the amounts due to it, with respect to and in interest of the Home buyers of the Corporate Debtor, including outstanding construction advance received from the Corporate Debtor, outstanding maintenance deposit received from the Corporate Debtor and outstanding maintenance deposits of the Home Buyers of the Corporate Debtor, and other outstanding advances related to Home Buyers of the Corporate Debtor, immediately upon completion of the reconciliation between the Corporate Debtor and JAL, as the same shall be utilised for completion of the construction for Home Buyers of the Corporate Debtor, in line with the following directions of the Jaypee Kengsinton Judgement.”

¶1137

The relief and concession sought at serial no. 34, relates to the outcome of the reconciliation process taking place between JAL and IRP of JIL as per the direction of Hon’ble Apex Court. Since the matter is a subject of separate Adjudication, we are not inclined to grant any such relief. Accordingly, the relief is declined. However, it goes without saying that if any amount is found receivable by the JIL, it will be subject to the orders of this Adjudicating Authority passed in the Reconciliation proceedings.

¶1138

The next relief and concession sought at Serial No.35 of Annexure II reads as under:

¶1139

“35. Issue directions to JAL to make immediate payment of the outstanding amounts of Rs. 71 crore, as per the audited balance sheet of the Corporate Debtor dated March 31, 2021, payable by JAL to the Corporate Debtor, with respect to outstanding consideration for lands of the Corporate Debtor sub-leased to the lenders of JAL, as these funds also can be utilised for expediting the construction for Homebuyers. It is clarified that this relief is not linked to reconciliation directed by Hon’ble

¶1140

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1141

P a g e 195 | 205

¶1142

Supreme Court in Jaypee Kensignton Judgement and is sought independently, in the interest of justice.”

¶1143

This relief sought herein is a subject matter of the reconciliation process taking place between JAL and IRP of JIL as per the direction of the Hon’ble Apex Court. Since the matter is a subject of separate Adjudication, we are not inclined to grant any such relief. Accordingly, the relief is declined.

¶1144

The next relief and concession sought at Serial No.36 of Annexure II reads thus:

¶1145

“36. Issue such directions that the infrastructure of the Corporate Debtor (common between Home Buyers of the Corporate Debtor and home buyers of JAL) under the control and management of JAL, shall be made available/continue to be available to the Home Buyers of the Corporate Debtor, without any further payment.”

¶1146

The relief sought relates to the continued availability and utilisation of infrastructure of the Corporate Debtor/JIL (common between Home Buyers of the Corporate Debtor and home buyers of JAL) under the control and management of JAL without further payment. Whereas, it is important to have continuous availability and access to the common infrastructure for the Home Buyers and employees of JIL and JAL, however, it needs to be done on a reciprocal basis and sharing of future costs including maintenance thereof.

¶1147

Accordingly, we consider it appropriate to grant this relief to JIL/Corporate Debtor on a mutual/reciprocal basis and sharing of costs incurred subsequent to approval of the Resolution Plan.

¶1148

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1149

P a g e 196 | 205

¶1150

The next relief and concession sought at Serial No.37 of Annexure II is reproduced below:

¶1151

“37. Issue necessary directions to YEIDA to complete the following pending transactions expeditiously, as per the provisions of the Concession Agreement:

¶1152

a) transfer/sub-lease the balance land of approx. 79 acres in favour of the Corporate Debtor or grant compensation, as applicable, as per the provisions of the Concession Agreement.

¶1153

b) NBCC, had in its earlier plan sought a relief for extinguishment of liability of the Corporate Debtor towards Noida- Greater Noida expressway in terms of the Concession Agreement. Such relief was rejected by the Adjudicating Authority and accordingly the Corporate Debtor shall provide for debt in its books for value of construction cost (Capital Costs) of the same and pay the same to YEIDA as per the terms of the Concession Agreement and in lieu, as per the terms of the Concession Agreement, YEIDA shall hand over the possession of the Noida-Greater Noida Expressway and land required for construction of toll plaza thereon and Corporate Debtor shall exercise its rights to collect the toll on the NoidaGreater Noida Expressway in terms of the Concession Agreement.

¶1154

c) Any further extension of the Concession Period by 15 years, if eligible, as per the Concession Agreement, and that may be granted by YEIDA, shall be available to the Corporate Debtor and the Expressway SPV, as the case may be.

¶1155

d) the deposits already made by the Corporate Debtor of around Rs. 35 crore, shall be remitted back by the YEIDA to Corporate Debtor within 30 days of NCLT Approval Date.

¶1156

e) Revision of Toll as per Applicable Laws, for which request of IRP is pending.

¶1157

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1158

P a g e 197 | 205

¶1159

f) Payment of appropriate compensation of all the delays as per the Concession Agreement regarding the above clauses from a) to e), in line with the Concession Agreement

¶1160

g) Issuance of approvals/building completion certificate, in compliance with Applicable Laws, in the interest of more than 20,000 home buyers that are stuck since 8-10 years, as needed in order to effectively implement the Resolution Plan, which is one of the key requirements of the Code, in order to make Resolution Plan succeed.”

¶1161

YEIDA has strongly objected to the grant of such reliefs and concessions on the ground that such reliefs would result in tinkering with the Concession Agreement and the same cannot be done without taking the express consent of YEIDA. We agree with the submissions made by YEIDA. Accordingly,

¶1162

reliefs and concessions sought at 37(a) to 37(g) are declined.

¶1163

The next relief and concession sought at Serial No.38 of the Annexure II reads thus:

¶1164

“38. Issuance of necessary directions to the effect that the transaction pertaining to mortgage of 100 acres land of the Corporate Debtor situated at Tappal for securing the credit facility availed by JAL from its lenders can be agitated under the provisions of the Code before this Adjudicating Authority.”

¶1165

It is stated by the SRA that as per the information available to them, there was no consideration for creating a mortgage of 100 acres of land, which is an asset of the Corporate Debtor (out of total of 858 acres of the land mortgaged by the Corporate Debtor), in favour of the lenders for the loans given to JAL. Therefore, a mortgage over such 100 acres of land parcel is also

¶1166

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1167

P a g e 198 | 205

¶1168

invalid and requires to be reversed. The JAL had argued that whereas, 757 acres of land were transferred back to JIL/Corporate Debtor, the remaining 100 acres of land was found beyond the look-back period.

¶1169

In our view, the relief sought by the SRA has been the subject matter of litigation in the past and is not in the nature of relief and concession for implementation of the Resolution Plan. Hence, the relief sought is declined.

¶1170

XI. IA. No. 2521/PB/2022 Filed by Mrs. Nina Sahani and Ors.

¶1171

This IA has been preferred by one Mrs. Nina Sahani and 21 other home buyers seeking the following reliefs:

¶1172

a) “Consider the IA No. 2836 of 2021 in priority to the other pending applications on a day-to-day basis and consequently dispose of the application expeditiously;

¶1173

b) And pass any other orders as this Hon'ble Tribunal may deem fit.”

¶1174

In view of the IA. No. 2836 of 2021 has already been taken up for hearing on a day-to-day basis and the order passed in the IA. No. 2836 of 2021, the present application has become infructuous.

¶1175

As a matter of fact, the IA. No. 2836 of 2021 and all other related applications were given priority and heard on a day-to-day basis on 23.05.2022, 24.05.2022, 25.05.2022, 26.05.2022, 27.05.2022, 30.05.2022, 01.06.2022, 02.06.2022, 03.06.2022, 03.06.2022, 20.07.2022, 03.08.2022, 04.08.2022, 22.08.2022, 23.08.2022, 24.08.2022, 29.08.2022, 30.08.2022, 01.09.2022, 02.09.2022, 05.09.2022, 06.09.2022, 08.09.2022, 09.09.2022,

¶1176

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1177

P a g e 199 | 205

¶1178

13.09.2022, 14.09.2022, 20.09.2022, 21.09.2022, 22.09.2022, 23.09.2022, 26.09.2022, 28.09.2022, 29.09.2022, 03.10.2022, 04.10.2022, 10.10.2022, 11.10.2022, 17.10.2022, 01.11.2022, 02.11.2022, 14.11.2022, 15.11.2022, 16.11.2022, 18.11.2022, 22.11.2022. The parties argued the matter for over

¶1179

7 months and late hours on many days.

¶1180

173. The IA. No. 2521/PB/2022 is disposed of accordingly.

¶1181

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1182

P a g e 200 | 205

¶1183

XI. CONCLLUSION

¶1184

We have dealt with all the objections raised by the Objectors namely, ICICI Bank, YEIDA, JAL, and Mr. Manoj Gaur, which were argued at great length and we heard all the parties and the Home Buyers over several days. We had to accommodate different counsels for hearing on different dates considering the long-chequered history of the Corporate Debtor.

¶1185

In our considered view, none of the objections could sustain or result in rejection of the Resolution Plan of SRA/Suraksha under consideration, in terms of Section 30(2) of the IBC, 2016.

¶1186

As regards approval of a Resolution Plan, the role of the Adjudicating Authority has been examined by the Hon’ble Supreme Court in a catena of judgements. The relevant extracts of the Judgment of the Hon’ble Supreme Court in the matter of Civil Appeal No. 10673 of 2018 in the matter of K.

¶1187

Sashidhar Vs. Indian Overseas Bank & Ors. reads thus:

¶1188

“35. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation

¶1189

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1190

P a g e 201 | 205

¶1191

and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code.”

¶1192

“38. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I & B Code and not to act as a court of equity or exercise plenary powers.”

¶1193

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1194

P a g e 202 | 205

¶1195

In view of the Judgment of the Hon’ble Apex Court referred to Supra, it is a well-settled principle of law that the Adjudicating Authority is not required to interfere with the decision taken by the CoC in its commercial wisdom, save and except the circumstances referred to in Section 30(2) of the IBC, 2016.

¶1196

In the sequel to the above, we have no other option but to approve the Resolution Plan submitted by M/s. Suraksha Realty Limited along with M/s Lakshdeep Investments and Finance Private Limited along with addendums as duly considered, approved, and recommended by the CoC and placed by the Applicant/IRP of JIL before this Adjudicating Authority. We, therefore, allow the present Application and approve the COC-approved Resolution Plan placed before us by the Applicant/IRP with the following directions in respect of the Corporate Debtor:

¶1197

(i) The approved Resolution Plan as annexed with COC approved addendums shall be binding on all the stakeholders of the Corporate Debtor and become effective from the date of passing of this Order, and shall be implemented strictly as per the term of the plan and implementation schedule given therein. The Resolution Plan will form part of the order;

¶1198

ii) The reliefs and concessions as sought by the SRA/Suraksha in Annexure-II of the Resolution Plan are granted subject to the directions passed under this order as well as their admissibility under relevant law, regulations and rules for the time being in force;

¶1199

iii) The Monitoring Committee(s) as provided in the Resolution Plan shall be set up by the Applicant within 07 days of passing of this Order,

¶1200

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1201

P a g e 203 | 205

¶1202

which shall take all necessary steps for expeditious implementation of the Resolution Plan as per approval;

¶1203

iv) The SRA shall deliver/provide possession of the units to the Home Buyers/Allottees strictly as per the time frame promised in the Resolution Plan and approved by this Authority. The Monitoring Committee will supervise and monitor the progress of construction of units and related infrastructure developments on a day-to-day basis and file the progress report before this Adjudicating Authority on monthly basis;

¶1204

v) In case of non-compliance with any part of this order or withdrawal from implementing the Resolution Plan by the Successful Resolution Applicant, the Monitoring Committee shall forfeit the Performance Security furnished by the Resolution Applicant in the form of Performance Bank Guarantees and the Successful Resolution Applicant will be subject to such other action/actions as permissible under the law.

¶1205

vi) Certified copy of this Order be issued on demand to the concerned parties, upon due compliance.

¶1206

vii) A copy of this Order is to be submitted to the Office of the concerned ROC for compliance as per law.

¶1207

viii) The order of the moratorium in respect to the corporate debtor passed by this Adjudicating Authority under Section 14 of the IBC, 2016 shall cease to have effect from the date of passing of this Order.

¶1208

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1209

P a g e 204 | 205

¶1210

ix) The Interim Resolution Professional, Mr. Anuj Jain shall stand discharged from his duties immediately after constituting the Monitoring Committee(s) as provided in the Resolution Plan. He shall forthwith send a copy of this Order to the CoC, the SRA, and other parties for necessary compliance.

¶1211

x) The Registry is also directed to send e-mail copies of this order forthwith to all the parties.

¶1212

xi) A copy of this order shall also be sent by the Registry/IRP to the IBBI for their record.

¶1213

Files to be consigned to the record room after following the due procedure prescribed.

¶1214

The IA No. 2836/PB/2021 is accordingly ALLOWED. The other Applications (IAs) have been DISMISSED earlier as part of this order i.e., IA. NO. 3457/PB/2021 on page no. 88, IA. NO. 3306/PB/2021 on page no. 141, and IA. NO. 2521/PB/2022 on page no. 200.

¶1215

Sd/-

¶1216

(RAMALINGAM SUDHAKAR) PRESIDENT

¶1217

Sd/(L. N. GUPTA) MEMBER (TECHNICAL)

¶1218

IA. No. 2836/PB/2021 (Resolution Plan) in Company Petition No. (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P

¶1219

P a g e 205 | 205

¶1220

NATIONAL COMPANY LAW TRIBUNAL: NEW DELHI SPECIAL BENCH

¶1221

IA. NO. 2593/PB/2021 & IA. NO. 631/PB/2022 IN Company Petition No. (IB)-77(ALD)/2017

¶1222

IN THE MATTER OF: IDBI BANK LIMITED ... Applicant

¶1223

Versus

¶1224

JAYPEE INFRATECH LIMITED … Respondent/Corporate Debtor

¶1225

IN THE MATTER OF IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 Jaypee Infratech Limited Through Its Interim Resolution Professional, Mr. Anuj Jain Sector 128, District Gautam Budh Nagar, Noida Uttar Pradesh –201304 …Applicant

¶1226

Versus

¶1227

Jaiprakash Associates Limited

¶1228

Sector 128, District Gautam Budh Nagar, Noida Uttar Pradesh 201304 Also At:

¶1229

63, J House, Basant Lok, Vasant Vihar, New Delhi, Delhi – 110057 … Respondent

¶1230

Order Delivered on : 07.03.2023

¶1231

SECTION: Section 60(5) of IBC, 2016 read with Rule 11 of NCLT Rules, 2016

¶1232

CORAM:

¶1233

JUSTICE RAMALINGAM SUDHAKAR, HON’BLE PRESIDENT

¶1234

SH. L. N. GUPTA, HON’BLE MEMBER (TECHNICAL)

¶1235

PRESENTS:

¶1236

For the IRP : Adv. Sumant Batra, Adv. Ruchi Goyal, Adv. Sanjay Bhatt For the JAL : Sr. Adv. Krishnan Venugopal, Advs. Pallavi Srivastava, Krishnan Agarwal, Vishal Gupta, Divyanshu Gupta, Anupam Choudhary

¶1237

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1238

P a g e 1 | 107

¶1239

ORDER

¶1240

The IA-2593 of 2021 and IA-631 of 2022 have been filed by the Applicant/IRP of the Corporate Debtor i.e., Jaypee Infratech Limited (hereinafter referred to as ‘JIL’) under Rule 11 of the NCLT Rules, 2016 against Jaiprakash Associates Limited (hereinafter, referred to as ‘JAL’) with the following prayers:

¶1241

“a) Take on record the report dated 08.06.2021 (in sealed cover) filed by Grant Thornton Bharat LLP in respect of reconciliation of accounts between JIL and JAL;

¶1242

b) Pass appropriate orders/directions in respect of distribution of the amount of Rs.750 crore together with the interest accrued thereon between JIL and JAL in terms of Para 190 and its sub paras and Para 217.1 of Jaypee Kensington Judgment and direct the Registrar, National Company Law Tribunal, Allahabad Bench to transfer the amounts as per directions of this Hon’ble Adjudicating Authority in the bank accounts of JIL and JAL to be provided them to the Registrar;

¶1243

c) Pass any other order as may deem fit and proper by this Hon’ble Adjudicating Authority.”

¶1244

Through the present application, the IRP has brought on record the Report dated 08.06.2021 in a sealed cover submitted by the Grant Thornton Bharat LLP ( hereinafter referred to as GT ), which was appointed as an “independent accounting expert” by this Adjudicating Authority vide order dated 31.03.2021, in compliance of the directions passed by the Hon’ble Supreme Court vide its Judgement dated 24.03.2021 in the matter of JAYPEE KENSINGTON BOULEVARD APPARTMENT WELFARE ASSOCIATION & ORS VS NBCC (INDIA) LTD. & ORS. in CIVIL APPEAL NO. 3395 OF 2021 (hereinafter referred to

¶1245

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1246

P a g e 2 | 107

¶1247

as ‘Jaypee Kensington’). For the sake of convenience, the directions given by the Hon’ble Supreme Court are reproduced below:

¶1248

“189. After we have found that the impugned order dated 03.03.2020 placing the said amount of INR 750 crores and accrued interest in the asset pool of JIL is unsustainable, the question is as to what orders in sequel be made regarding this money? In ordinary circumstances, the consequence of the findings in the preceding paragraphs would have been of direct refund of this money to JAL but the present matter carries with it several entangled features relating to the amount otherwise payable by JAL to JIL; and these features cannot be ignored altogether.

¶1249

189.1. As noticed, even when JAL and JIL are two separate corporate entities, JIL is an alter ego of JAL, for having been set up as an SPV and having been substituted as concessionaire in the Concession Agreement aforesaid. The agreements with homebuyers had also been of such a nature where JAL and JIL both were signatories thereto. Additionally, JAL had been extended construction contracts by JIL and, as per the submissions made before us [vide paragraph 178.1.4 (supra)], JAL had been carrying out the construction work and taking steps to reduce the liability towards JIL that stood at a sum of INR 716 crores as on 31.03.2018 and was purportedly reduced to INR 195 crores as on 31.03.2020. Various homebuyers have allegedly made payments towards IFMD to JAL. Moreover, JAL has submitted that balance of INR 195 crores, which was to be appropriated towards the construction of JIL’s project, could be adjusted from the said sum of INR 750 crores, if the resolution applicant makes a formal submission of terminating the construction agreement. NBCC, on the other hand, has suggested several other amounts to be recoverable from JAL.

¶1250

189.2. Having comprehensively taken note of the complex and interwoven features, even while we are not inclined to countenance

¶1251

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1252

P a g e 3 | 107

¶1253

the other claims against JAL in these proceedings, so far as the admitted amount towards construction advance is concerned, in our view, the process had been a continuing one and admittedly an amount of INR 195 crores was due to JIL as on 31.03.2020. In the given circumstances, it would serve the interests of all stakeholders, if the proposition for reconciliation of accounts, as stated in the alternative submissions by JAL as also by the resolution applicant, be partly accepted and after reconciliation, the payable amount be made over to JIL before refunding the remainder to JAL.

¶1254

189.3. On behalf of JAL, it is submitted that verification/reconciliation could be carried out by IRP or by a chartered accountant appointed by him, whereas NBCC would submit that such reconciliation should be carried out by an independent third party to be nominated by this Court. However, as noticed, the said sum of INR 750 crores stood transferred to NCLT in terms of the final directions in the case of Chitra Sharma (supra). Having regard to all the relevant features of this case, it appears appropriate that the process of reconciliation of accounts between JAL and JIL be taken up under the supervision of NCLT.

¶1255

190. For the aforesaid purpose of reconciliation of accounts between JAL and JIL, the NCLT shall, within 7 days of receipt of copy of this judgment, nominate an independent accounting expert; and the accounting expert so nominated by NCLT shall carry out the process of reconciliation while involving IRP of JIL and one representative of JAL. Looking to the underlying urgency, the accounting expert shall complete the entire process of reconciliation of accounts and submission of his report to NCLT within 10 days of his nomination. The professional charges and expenses for the task assigned to the accounting expert shall be determined by NCLT and shall be borne equally by JAL and JIL.

¶1256

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1257

P a g e 4 | 107

¶1258

190.1. After receiving the report from the accounting expert, the NCLT shall pass appropriate orders in the manner that, if any amount is found receivable by JIL/homebuyers of JIL, the same shall be made over to JIL from out of the said amount of INR 750 crores and accrued interest; and remainder thereof shall be returned to JAL in an appropriate account and that shall abide by the directions of the competent authority dealing with the proceedings concerning JAL. The NCLT would be expected to pass appropriate orders within 2 weeks of submission of report by the accounting expert.

¶1259

190.2. However, we need to make it clear that this process of reconciliation is not meant for determination of any claim otherwise sought to be levied against JAL by IRP or homebuyers of JIL or by the resolution applicant; and only the accounts concerning the amount/s advanced to JAL by JIL towards construction contracts (vide paragraph 178.1.4.) are to be examined and reconciled with reference to the extent of liabilities discharged by JAL and then to find the extent of excessive amount, if any, available with JAL which is receivable by JIL/homebuyers of JIL.

¶1260

191. In regard to the aforesaid directions concerning reconciliation of accounts and disposal of the said amount of INR 750 crores and accrued interest, a few more comments and observations appear necessary. We have taken note of the submissions made on behalf of NBCC as also on behalf of various homebuyers of JIL that this money is required for construction of houses and if it goes to JAL, there would be acute shortage of funds for construction. We are also aware of the facts that have come on record that JAL is itself in distress and CIRP in its relation is looming large. We have further taken note of the submissions made by the financial creditor of JAL to place this sum of money within their control in an escrow account. However, we have not accepted any of these submissions in entirety.

¶1261

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1262

P a g e 5 | 107

¶1263

191.1. As observed hereinabove, after having found that the said money is the property of JAL, ordinarily, the consequence would have been of directing its refund to JAL but the other entangled features of the case relating to the amount otherwise payable by JAL to JIL cannot be ignored altogether, particularly when it was an admitted position on behalf of JAL before NCLT that an amount of INR 274 crores was payable by it to JIL and even before this Court, this obligation to pay has been admitted on behalf of JAL, albeit to the tune of INR 195 crores as on 31.03.2020; and it appears that JAL has been taking steps (maybe crippled steps) to carry out construction and to reduce its liability. We are not determining the extent of amount payable by JAL to JIL because that would be a matter of reconciliation of accounts but, having regard to the background in which, and the purpose for which, JAL made the said deposit pursuant to the orders of this Court and also having regard to the present position of these two companies, adopting this course appears to be in the balance of the legal rights of the respective stakeholders as also in the balance of equities. We would hasten to observe that ordinarily, the equitable considerations do not directly come into play in corporate insolvency resolution process but the matter concerning this amount of INR 750 crores and accrued interest thereupon is a convoluted and standalone issue, having the peculiarities of its own and hence, we have adopted the course as contemplated above. This process is otherwise not of determination of the claims of individual stakeholders, be it operational creditors or financial creditors. In the interest of justice, it is also made clear that disposal of the said sum of INR 750 crores shall otherwise not be treated as determinative of the rights and obligations of any stakeholder in any of these two companies, JAL and JIL.

¶1264

192. Before closing on this point for determination, we may indicate that a few of the arguments on this point have gone off on a tangent, as could be noticed from the submissions made by an association of homebuyers of JAL, who has directly approached this Court against

¶1265

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1266

P a g e 6 | 107

¶1267

the order of NCLT, that INR 160 crores be designated out of the said amount of INR 750 crores for completing the houses of the members of that association; and that in RERA proceedings, JAL was demanding money from its members, though, there was unexplained delay of 5 to 7 years in completion of project by JAL. We are unable to find any logic in the submission of this nature against JAL by its homebuyers having been made in these proceedings. It goes without saying that the dealing between JAL and its homebuyers is not the subject matter of the present proceedings. Similarly, the submission by some of the dissatisfied homebuyers of JIL, that NBCC is aiming at profiteering by getting hold of this money but without making corresponding provision in the resolution plan for the appropriate use of this money for the benefit of homebuyers, also remains baseless and redundant in view of what has already been discussed hereinbefore. Another block of submissions on behalf of some of the homebuyers of JIL, like seeking directions against NBCC that it shall not withdraw and should expedite construction as also seeking audit over the quality of construction, have gone far too beyond the real issues requiring determination in the present litigation. In regard to these and other submissions of similar nature, we would only leave the parties to take recourse to appropriate remedies in accordance with law, in case of any legal grievance existing or arising in future…”

¶1268

(Emphasis Placed)

¶1269

Though the Hon’ble Supreme Court granted this Tribunal two weeks’ time to complete the reconciliation of accounts based on the GT Report. The GT could not submit its report in time and an extension was sought and granted by the Hon’ble Supreme Court. Thereafter, the counsel for IRP and counsel for JAL took turns to file volumes of documents, pleadings, written submissions, notes on arguments, etc. one after the other, improvising their arguments. At the instance and

¶1270

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1271

P a g e 7 | 107

¶1272

request of the Ld. Counsels we granted sufficient time to each of the parties. The hearing took place for a long period of time over several hearing days at regular intervals.

¶1273

Further, the Hon’ble Supreme Court in Para 217.1 of the Jaypee Kensington also held the following:

¶1274

“217.1. Apart from the above, we have also disapproved the decision of the Adjudicating Authority in relation to the said amount of INR 750 crores with accrued interest and have held that this amount is the property of JAL and the stipulations in the resolution plan concerning its usage by JIL or the resolution applicant cannot be approved [as held in Point J (i) (supra)]. However, the final treatment of the said amount of INR 750 crores with accrued interest shall be determined by NCLT after the reconciliation of accounts between JAL and JIL and in terms of the directions contained in this judgment .”

¶1275

(Emphasis Placed)

¶1276

We are aware that the amount of Rs.750 Crore referred to above has been currently lying deposited with the Registry of NCLT Allahabad Bench in terms of the directions of the Hon’ble Supreme Court in the matter of Chitra Sharma v. Union of India & Ors , WP(C) 744 of 2017 , dated 06.11.2019 (hereinafter referred to as ‘Chitra Sharma’) . The relevant extract of the directions of the Hon’ble Supreme Court in the Chitra Sharma is reproduced below, for the sake of convenience:

¶1277

“(vi) The amount of Rs 750 crores which has been deposited in this Court by JAL/JIL shall together with the interest accrued thereon be transferred to the NCLT and continue to remain invested and shall abide by such directions as may be issued by the NCLT.”

¶1278

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1279

P a g e 8 | 107

¶1280

Further, during the course of the hearing, the Applicant/IRP has informed that the Hon’ble Supreme Court vide its order dated 27.07.2021 passed in the M.A. 769 of 2021 , has given the following directions to this Adjudicating Authority:

¶1281

“ This application by the Interim Resolution Professional for extension of time-cum-enlargement of time for completion of the task of reconciliation of accounts of the Corporate Debtor and JAL and submission of final report by Grant Thornton (for short, ‘GT’) before the adjudicating authority, as prayed, is granted as no objection is taken by other parties.

¶1282

The final report by the GT be submitted before 15th August, 2021, before the adjudicating authority.

¶1283

The adjudicating authority may thereafter consider the objections, if any, and pass appropriate directions as may be permissible in law.

¶1284

The adjudicating authority shall decide the objections, including on the draft report, within two weeks, as has been directed in terms of paragraph 190.1 of the judgment dated 24.03.2021 in Civil Appeal No.3395 of 2020.

¶1285

All contentions in that regard are left open.”

¶1286

In compliance with the directions of the Hon’ble Supreme Court, the Applicant/IRP has filed the present Application along with the Report of GT dated 13.08.2021 in a sealed cover . The s canned copy of the summary of findings of the Grant Thornton Report ( hereinafter referred to as the “GT Report” ) is reproduced overleaf, for the sake of convenience –

¶1287

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1288

P a g e 9 | 107

¶1289

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1290

P a g e 10 | 107

¶1291

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1292

P a g e 11 | 107

¶1293

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1294

P a g e 12 | 107

¶1295

Further, while going through the Report, we find that GT has also given the transaction-wise Computation of the amount payable by JAL to JIL or Vice Versa with a break-up in terms of the non-disputed and disputed amounts between JIL and JAL. The scanned copy of the same

¶1296

is reproduced overleaf:

¶1297

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1298

P a g e 13 | 107

¶1299

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1300

P a g e 14 | 107

¶1301

From the findings of the GT Report, it is observed that the nondisputed amount of Rs. 536.49 Crore receivable by JIL/home buyers of JIL from JAL should be adjusted from the deposit of Rs. 750 Crore made by JAL . Regarding the disputed amount of Rs. (170.21) Crore, the GT has requested this Adjudicating Authority to review each disputed transaction independently to decide on the amount to be received by JIL/home buyers of JIL out of Rs. 750 Crore.

¶1302

It is further submitted by the Applicant/IRP in its written submissions that during the course of the hearing, on the request of the parties, this Adjudicating Authority, vide orders dated 15.12.2021 and

¶1303

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1304

P a g e 15 | 107

¶1305

17.12.2021, has directed the parties i.e., “IRP of JIL” and “JAL” to explore the possibility of mutually resolving the transactions relating to the disputed amount of Rs. 10.97 Crore on account of the Running Account bills ( referred to as ‘RA Bills’ at Sl. No. 1 of the GT Table) with the participation of GT and the project management consultant of the CD namely, Mott Mac Donald (‘PMC’). The relevant extracts of the order dated 15.12.2021 passed by this Adjudicating Authority are reproduced below:

¶1306

“In so far as the report of the M/s. Grant Thornton LLP (GT) is concerned, after perusing Page 14 of the final report, it has come to the notice of this tribunal that with regard to RA Bills for Construction amounting to Rs. 10.97 Cr. GT has recorded as follows;-

¶1307

“The Adjudicating Authority may direct JAL to provide additional documentation to the satisfaction of Mott Mac Donald. IRP of JIL should pay the amount certified by Mott MacDonald basis its revised COP(s). In the absence of any documentation, JAL may reverse this amount….”

¶1308

This calls for verification of RA Bills with supporting vouchers running into hundreds of pages, which may not be possible for this tribunal. Therefore, it is submitted by the RP, Counsel representing JIL and the Ld. Sr. Counsel representing JAL that they are exploring possibility of resolving the issue relating to Rs. 10.97 Crore with the participation of Mott MacDonald and GT together. It is submitted that they would soon submit their joint statement as to the outcome of such an endeavour in order to resolve the issue if it is possible.”

¶1309

It is further submitted by the Applicant/IRP that in compliance of the aforesaid directions, a joint meeting of the IRP/Corporate Debtor (JIL), JAL, GT, and PMC were held on 24.12.2021 and the three issues

¶1310

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1311

P a g e 16 | 107

¶1312

pertaining to Rs. 10.97 Crore, Rs. 1.14 Crore and Rs. 0.15 Crore were mutually resolved between the parties and an Additional Affidavit dated 18.04.2022 to that effect has been filed on record by the Applicant/IRP vide filing no.0710102009642022/7 dated 18.04.2022. The record of the minutes of the meeting dated 24.12.2021 has been placed through the aforesaid Affidavit, the relevant extracts of which are reproduced below:

¶1313

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1314

P a g e 17 | 107

¶1315

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1316

P a g e 18 | 107

¶1317

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1318

P a g e 19 | 107

¶1319

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1320

P a g e 20 | 107

¶1321

From the perusal of the aforesaid minutes, it is observed that the dispute with regard to the Transactions relating to “RA Bills for Construction of Rs. 10.97 Crore & Rs. 1.14 Crore” and “Facility Management Bills raised by JAL on JIL of Rs. 0.15 Crore” have been mutually resolved to be shared in the equal ratio between the parties. The minutes of the meeting dated 24.12.2021 is taken on record. The said issues are resolved as per the agreement above and, Ordered accordingly.

¶1322

Thus, the issues, which emerge from the GT Report and post-joint meeting of the parties held on 24.12.2021 for adjudication before this Adjudicating Authority are the following -

¶1323

Issues emerging from GT Report

¶1324

a) Whether in view of the provision of IBC 2016, can JAL claim an adjustment of Rs. 49.63 Crore (advanced against construction extended by JIL) on the basis of RA Bills pertaining to the period prior to the insolvency commencement date of JIL.

¶1325

b) Whether JAL is entitled to a claim arising out of the Bank Guarantees amounting to Rs. 212 Crore issued on behalf of JIL and subsequently, invoked by the lenders of JIL.

¶1326

c) Whether an advance of Rs. 106.90 Crore recovered from homebuyers towards IFMD is recoverable by JIL from JAL.

¶1327

d) Whether JAL can claim adjustment of Rs. 2.33 crore towards the facility management bills, from JIL.

¶1328

e) Whether JAL can claim/recover, Rs. 1.19 crore towards providing hospitality services, from JIL.

¶1329

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1330

P a g e 21 | 107

¶1331

Both parties have filed their detailed objections and written submissions with respect to the abovementioned issues on record.

¶1332

Before dealing with each of the issues individually, we notice that the Applicant/IRP of the Corporate Debtor (JIL) has raised a common contention in the context of issues listed at serial no. (a), (b), (d), and (e) above, that the dues claimed by JAL pertain to the pre-CIRP period and these cannot be claimed from the Corporate Debtor (JIL), which is undergoing CIRP, within the framework of IBC 2016.

¶1333

The submissions made by the Applicant/IRP of the Corporate Debtor (JIL) in this regard are summarised below -

¶1334

Submissions of Applicant/IRP of JIL that pre-CIRP dues are outside the purview of the Reconciliation Process

¶1335

16.1. It is submitted by the Applicant/IRP that the dues of the creditors pertaining to the pre-CIRP period and arising from the CIRP have to be verified and paid in accordance with the provision of the IBC, 2016. It has stated that the liability towards JAL arising under the construction contracts during the CIRP period has been paid by JIL after verification of bills submitted by JAL as “CIRP costs”.

¶1336

16.2. That the bills of JAL amounting to Rs. 49.63 Crore [issue (a)], Rs. 2.33 Crore [issue (d)] and Rs. 0.15 Crore [issue (e)] are the operational debt pertaining to the pre-CIRP period. The Applicant/IRP has further submitted that the claim of JAL arising out of invocation of the bank guarantees (hereinafter, BGs) amounting to Rs. 212 Crore also pertains to the pre-CIRP period. It is contended that as per Section 15 of the IBC,

¶1337

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1338

P a g e 22 | 107

¶1339

2016 read with Regulation 6 of CIRP Regulations, operational creditors are

¶1340

required to submit their claim in Form B pursuant to the public announcement made by the IRP.

¶1341

16.3. Pursuant to the public announcement made by the IRP of the CD (JIL) on 10.08.2017, JAL had submitted a claim for Rs. 261.73 Crore towards the work stated to have been done during the pre-CIRP period as an ‘Operational Creditor’ in Form B dated 24.08.2017, which, inter alia, included the said RA Bills of Rs. 49.63 Crore (stated as Rs. 48.54 Crore in Form B) towards construction related expenses. It is submitted that JAL is not entitled to seek an adjustment of these RA Bills amounting to Rs 49.63 Crore out of Rs 750 Crore as they pertain to the pre-CIRP period, which has to be dealt in accordance with the provisions of the Code.

¶1342

16.4. After verification of Form B submitted by JAL, the Applicant/IRP did not admit the said claim and vide letter dated 01.05.2018, it communicated to JAL that the claim cannot be admitted, as the JIL has a gross receivable balance from JAL of approximately Rs. 994 Crore and a gross payable balance of approximately Rs. 30 Crore only as on 09.08.2017 and therefore, there is no liability of the JAL that stands payable as on the insolvency commencement date and the claim filed by JAL is not admissible . The copy of the said letter is reproduced overleaf, for the immediate reference:

¶1343

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1344

P a g e 23 | 107

¶1345

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1346

P a g e 24 | 107

¶1347

16.5. The JAL did not challenge the aforesaid decision of the IRP by filing an appropriate application under Section 60(5) of the Code. In response to the argument of JAL that they did not file any application before this Tribunal challenging the decision of IRP as they did not construe the letter dated 01.05.2018 as a rejection of their claim, the Applicant/IRP has further submitted that the said letter clearly shows that the claim of JAL was not admitted.

¶1348

16.6. Subsequently, pursuant to the directions of the Hon’ble Supreme Court in the case of Chitra Sharma & Ors. Vs. UOI & Ors ordering recommencement of CIRP of the Corporate Debtor (JIL) , JAL again filed the revised claim as an 'operational creditor' under Form B on 28.08.2018. The Applicant/IRP has stated that since JAL did not agitate the same before this Tribunal, the communication dated 01.05.2018 sent by the IRP to JAL attained finality. Further, the JAL did not challenge the said decision of the IRP even at the stage of the resolution plan of NBCC being considered for approval by this Tribunal.

¶1349

16.7. Hence, this claim cannot be re-opened in the present reconciliation process. It is submitted that JAL cannot seek backdoor entry to get what is not permissible under the provisions of the Code directly. The reconciliation exercise is to be carried out in accordance with the provisions of law read with the directions of the Hon’ble SC in Jaypee Kensington (Supra).

¶1350

16.8. The Hon’ble Supreme Court in Jaypee Kensington (Supra) has nowhere directed payment of pre-CIRP dues under the garb of

¶1351

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1352

P a g e 25 | 107

¶1353

reconciliation, on the contrary, no claim from the pre-CIRP period can be admitted in terms of Para 225.3 of the Jaypee Kensington (Supra), which reads as follows:

¶1354

“225.3. It is made clear that the IRP shall not entertain any expression of interest by any other person nor shall be required to issue any new information memorandum. The said resolution applicants shall be expected to proceed on the basis of the information memorandum already issued by IRP and shall also take into account the facts noticed and findings recorded in this judgment…”

¶1355

16.9. In Para 349 of the Jaypee Kensington (Supra), the Hon’ble Supreme Court has noted that due adherence to the timelines provided in the Code and the related Regulations is fundamental to the entire process of resolution; and if a claim is not made within the stipulated time, the same cannot become a part of the Information Memorandum to be prepared by IRP. Therefore, no variation can be made in the Information Memorandum by including any claim. The said para is reproduced below:

¶1356

“349. Due adherence to the timelines provided in the Code and the related Regulations and punctual compliance of the requirements is fundamental to the entire process of resolution; and if a claim is not made within the stipulated time, the same cannot become a part of the Information Memorandum to be prepared by IRP and obviously, it would not enter into consideration of the resolution applicant as also of the Committee of Creditors. In the very scheme of the corporate insolvency resolution process, a resolution applicant cannot be expected to make a provision in relation to any creditor or depositor who has failed to make a claim within the time stipulated and the extended time as permitted by Regulation 12. In Essar Steel (supra), while dealing with the topic Extinguishment of Personal Guarantees and

¶1357

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1358

P a g e 26 | 107

¶1359

Undecided Claims this Court disapproved that part of the NCLT judgment which held that other claims, that might exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal, could be decided in an appropriate forum in terms of Section 60(6) of the Code. This Court specifically held that a resolution applicant cannot be made to suddenly encounter undecided claims after resolution plan submitted by him has been accepted; and in the scheme of the Code, all claims must be submitted to, and decided by, the resolution professional so that the resolution applicant could proceed on a fresh plate. This Court, inter alia, held as under: -

¶1360

107. For the same reason, the impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed^._ out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count….”

¶1361

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1362

P a g e 27 | 107

¶1363

16.10. If any claim is admitted at this stage, the information memorandum will have to be updated to enable the resolution applicant to deal with the admitted claims in its resolution plan. The Hon’ble Supreme Court has prohibited such an exercise by the aforesaid direction. The attempt by JAL to include the pre-CIRP dues is an after-thought. If the understanding of JAL was that these claims ought to be admitted and made part of set-off of Rs. 750 Crore, it could have asked the Resolution Applicants to include these amounts in the Resolution Plan.

¶1364

16.11. By including the said amounts claimed by JAL for the pre-CIRP period would amount to admitting JAL’s claim at this stage, which will open a Pandora's box, as the other creditors, whose claims were rejected but not challenged, will come forward to seek the similar relief. It is therefore, submitted that the pre-CIRP claims need to be dealt in accordance with the provisions of the Code. Payment to the creditors can only be made in accordance with Section 30 (4) read with Section 53(1) of the Code.

¶1365

16.12. Even assuming that without admitting, if the claims of Rs. 49.63 Crore, Rs. 2.33 Crore and Rs 0.15 Crore pertaining to the bills of the preCIRP period, have to form part of the present reconciliation process, their payment has to be made in accordance with the resolution plan by treating JAL as an operational creditor. The JAL cannot be allowed to receive any payment in priority to the financial creditors of JIL. If the same is permitted, it will be contrary to the law. The JAL, being an operational creditor, has to stand in queue to be paid any such amount (if payable) as per Section 53 of the Code.

¶1366

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¶1367

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¶1368

16.13. It is necessary to re-iterate that JAL cannot seek indirectly, what cannot be sought directly as per the Doctrine of colourable legislation. The JAL, as operational creditor, had filed a claim form dated 24.08.2017 for Rs. 261.73 Crore, out of which Rs. 48.54 Crore is towards the construction related expenses arising prior to commencement of CIRP of JIL (i.e., before 09.08.2017). This liability being operational in nature needs to be dealt as per the provisions of the Code. The JAL cannot, under the garb of reconciliation, seek admission of the claim and ask for preferential payment ahead of other creditors in defiance of the mechanism provided under Section 53 of the Code.

¶1369

16.14. Admittedly, IRP accepted the claim of Rs. 30.89 Crore against the JAL’s claim of Rs. 49.73 Crore. However, since JIL had a receivable balance of Rs. 994 Crore from JAL as on the insolvency commencement date, no liability of JAL was admitted. JAL never challenged this rejection, which was duly communicated to them. In terms of para 178.1.4 of the Jaypee Kensington (Supra), only reconciliation pertaining to the CIRP period can be offset against balances receivable from JAL related to construction contracts. Payment to Financial Creditors and Operational Creditors have to be made in accordance with Section 30(4) r/w 53(1) of IBC. The JAL cannot bypass the waterfall mechanism to rank higher than other creditors of the Corporate Debtor.

¶1370

16.15. Even if these amounts are found payable by JIL to JAL as part of the reconciliation (although JIL contests them), these amounts cannot be adjusted/set off from Rs. 750 Crore. Pre-CIRP expenses claimed by JAL

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¶1372

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¶1373

shall have to be treated as an operational debt/claim and paid in the same manner as the other operational creditors, as specified in Suraksha’s Resolution Plan.

¶1374

16.16. It has been held by the Hon’ble Supreme Court in the Committee of Creditors of Essar Steel India Limited Through Authorised Signatory Vs. Satish Kumar Gupta & Ors., 2019 SCC OnLine SC 1478 that there cannot be any discrimination within the Creditors in the same class:

¶1375

“72. Quite clearly, secured and unsecured financial creditors are differentiated when it comes to amounts to be paid under a resolution plan, together with what dissenting secured or unsecured financial creditors are to be paid. And, most importantly, operational creditors are separately viewed from these secured and unsecured financial creditors in S.No.5 of paragraph 7 of statutory Form H. Thus, it can be seen that the Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court's judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational , ”

¶1376

16.17. In fact, even in Chitra Sharma (Supra), the Hon’ble Supreme Court noted as follows:

¶1377

“48. As we have stated earlier, an amount of Rs 750 crores is lying in deposit before this Court pursuant to the interim directions, on which interest has accrued. The homebuyers have earnestly sought the issuance of interim directions to facilitate a pro rata disbursement of this amount to those of the homebuyers who seek a refund. We are keenly conscious of the fact that the claim of the homebuyers who

¶1378

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¶1379

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¶1380

seek a refund of monies deserves to be considered with empathy. Yet, having given our anxious consideration to the plea and on the balance, we are not inclined to accede to it for more than one reason.

¶1381

48.1. Firstly, during the pendency of the CIRP, it would as a matter of law, be impermissible for the Court to direct a preferential payment being made to a particular class of financial creditors, whether secured or unsecured. For the present, we leave open the question as to whether the homebuyers are unsecured creditors (as was urged by Mr Tripathi) or secured creditors (as was urged by the counsel appearing for them). Directing disbursement of the amount of Rs 750 crores to the homebuyers who seek refund would be manifestly improper and cause injustice to the secured creditors since it would amount to a preferential disbursement to a class of creditors. Once we have taken recourse to the discipline IBC, it is necessary that its statutory provisions be followed to , facilitate the conclusion of the resolution process…”

¶1382

16.18. The JAL is seeking indulgence of this Adjudicating Authority on the grounds of equity. It is submitted that the reconciliation of accounts has to be guided by the provisions of law and not on equity. It is a settled principle of law that the NCLT is not an equity court and it is required to follow the law within the ambit of IBC. The Hon’ble Supreme Court in K Sashidhar

¶1383

Vs Indian Overseas Bank and Ors., 2019 SCC Online SC 257 has observed as under:

¶1384

“58. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other

¶1385

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¶1386

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¶1387

inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters —other than enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers…”

¶1388

16.19. The Hon’ble Supreme Court reiterated the same proposition in Pratap Technocrats Private Ltd. & Ors. Vs. Monitoring Committee of Reliance Infratel Ltd. and Anr., (2021) 10 SCC 623 and held as under:

¶1389

“45 Certain foreign jurisdictions allow resolution/reorganization plans to be challenged on grounds of fairness and equity. One of the grounds under which a company voluntary arrangement can be challenged under the United Kingdom 's Insolvency Act, 1986 is that it unfairly prejudices the interests of a creditor of the company. The United States' US Bankruptcy Code provides that i f a restructuring plan has to clamp down on a dissenting class of creditors, one of the conditions that it should satisfy is that it does not unfairly discriminate, and is fair and equitable. However, under the Indian insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity based jurisdiction on the Adjudicating Authority other than the statutory requirements laid down under sub Section (2) of Section 30 of the IBC…”

¶1390

16.20. The Hon’ble Supreme Court in the National Spot Exchange Limited Vs. Mr. Anil Kohli, Resolution Professional for Dunar Foods

¶1391

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¶1393

Limited, 2021 SCC OnLine SC 716 have clearly held that equity can

¶1394

only supplement the law while observing as under:

¶1395

“24. It is true that in a given case there may arise a situation where the applicant/appellant may not be in a position to file the appeal even within a statutory period of limitation prescribed under the Act and even within the extended maximum period of appeal which could be condoned owing to genuineness, viz., illness, accident etc. However, under the statute, the Parliament has not carved out any exception of such a situation. Therefore, in a given case, it may cause hardship, however, unless the Parliament has carved out any exception by a provision of law, the period of limitation has to be given effect to. Such powers are only with the Parliament and the legislature. The courts have no jurisdiction and/or authority, to carve out any exception. If the courts carve out an exception, it would amount to legislate which would in turn might be inserting the provision to the statute, which is not permissible.

¶1396

XXXX

¶1397

26. In the case of Mishri Lal & Others (supra), it is observed that the law prevails over equity if - there is a conflict. It is observed further that equity can only supplement the law and not supplant it.

¶1398

XXXX

¶1399

28. In the case of Popat Bahiru Govardhane & Others (supra), this Court has observed and held that it is a settled legal position that the law of limitation may harshly affect a particular party but it has to be applied with all its rigour when the Statute so prescribes. The Court has no power to extend the period of limitation on equitable grounds. It is further observed that the statutory provision may cause hardship or inconvenience to a particular party but the Court has no choice but to enforce it by giving full effect to the same.

¶1400

29. It is also required to be noted that even Shri Maninder Singh, learned senior counsel appearing on behalf of the appellant has, as

¶1401

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¶1402

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¶1403

such, fairly conceded that considering Section 61(2) of the IB Code, the Appellate Tribunal has jurisdiction or power to condone the delay not exceeding 15 days from the completion of 30 days, the statutory period of limitation. However, has requested and prayed to condone the delay in exercise of powers under Article 142 of the Constitution of India, in the facts and circumstances of the case and submitted that the amount involved is a very huge amount and that the appellant is a public body. We are afraid what cannot be done directly considering the statutory provisions cannot be permitted to be done indirectly, while exercising the powers under Article 142 of the Constitution of India….”

¶1404

Per contra, the JAL has denied all the submissions and contentions of the Applicant/IRP of the Corporate Debtor (JIL) and made the following submissions.

¶1405

Submissions of JAL that pre-CIRP dues are within the purview of Reconciliation Process and IBC, 2016

¶1406

17.1. It is submitted by the JAL that the Hon’ble Supreme Court has applied the equitable considerations to the present issue, which is clear from the following extracts of the Jaypee Kensington (Supra ):

¶1407

191.1. “……….that ordinarily, the equitable considerations do not directly come into play in corporate insolvency process but the matter concerning this amount of INR 750 crores and accrued interest thereupon in a convoluted and stand-alone issue, having the peculiarities of its own and hence, we have adopted the course, as contemplated above ” .

¶1408

Hence, it is clear that even though the Hon’ble Supreme Court was conscious of the fact that equitable consideration does not come into play in the CIRP, the reconciliation process must be carried out between JIL & JAL outsides the confines of the IBC in order to balance the equities.

¶1409

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¶1410

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¶1411

17.2. The Jaypee Kensington (supra) makes it clear that the entire process of reconciliation is not meant to be governed by the IBC. As stated in Para 191.1 of the Judgement, the reconciliation “process is otherwise not of determination of the claims of individual stakeholders, be it operational creditors or financial creditors”. Further, the Hon’ble Supreme Court in Para 189.3 of the same Judgement has, inter alia, noted that “ …. Having regard to all the relevant features of this case, it appears appropriate that the process of reconciliation of accounts between JAL and JIL be taken up under the supervision of NCLT” . If the reconciliation process was to take place under the IBC, there was no question of the Hon’ble Supreme Court’s applying its mind and concluding that this Tribunal ought to supervise .

¶1412

17.3. While holding in para 189.2 of the Jaypee Kensington (Supra) that it was not “ inclined to countenance the other claims against JAL in these proceedings ”, the Hon’ble Supreme Court added a footnote no. 89 , in which it stated that “This is because insolvency resolution of JAL itself is looming large and in case of insolvency resolution or liquidation of JAL, such claims against JAL shall have to stand in the queue as per the discipline of IBC . ” This also makes it clear that the reconciliation process was clearly meant to operate outside the IBC. Since “insolvency resolution of JAL is itself looming large”, the Hon’ble Supreme Court has specifically envisaged that the reconciliation process shall be conducted outside the confines of the IBC so that the same may not be vitiated by

¶1413

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¶1414

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¶1415

any restrictions/procedures stipulated under the IBC and shall be conducted as per directions of the Hon’ble Supreme Court.

¶1416

17.4. That the para 189.3 of Jaypee Kensington Judgment makes it clear that this Tribunal is not required to carry out an adjudicatory process, but only to supervise the reconciliation. The IBC does not contemplate that this Tribunal would reconcile accounts between a corporate debtor (i.e., JIL) and a creditor (i.e., JAL) in the manner decided by the Hon’ble Supreme Court. Therefore, it is clear that the directions of the Hon’ble Supreme Court for reconciliation of accounts were made under Article 142 of the Constitution of India.

¶1417

17.5. There are only two types of directions issued by the Hon’ble Supreme Court - one, under Article 141, where it lays down law and the other, under Article 142. The directions under Article 142 are issued by the Hon’ble Supreme Court to mould relief and exempt the application of a statute. The JAL in this regard has relied on the following Judgements:

¶1418

a) State of Punjab v. Rafiq Masih , (2014) 8 SCC 883:

¶1419

“ 12. Article 142 of the Constitution of India is supplementary in nature and cannot supplant the substantive provisions, though they are not limited by the substantive provisions in the statute. It is a power that gives preference to equity over law. It is a justice-oriented approach as against the strict rigours of the law. The directions issued by the Court can normally be categorised into one, in the nature of moulding of relief and the other, as the declaration of law. “Declaration of law” as contemplated in Article 141 of the Constitution: is the speech express or necessarily implied by the highest court of the land. This Court in Indian Bank v. ABS

¶1420

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¶1421

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¶1422

Marine Products (P) Ltd. [(2006) 5 SCC 72], Ram Pravesh Singh v. State of Bihar [(2006) 8 SCC 381: 2006 SCC (L&S) 1986] and in State of U.P. v. Neeraj Awasthi [(2006) 1 SCC 667: 2006 SCC (L&S) 190] has expounded the principle and extolled the power of Article 142 of the Constitution of India to new heights by laying down that the directions issued under Article 142 do not constitute a binding precedent unlike Article 141 of the Constitution of India. They are direction issued to do proper justice and exercise of such power, cannot be considered as law laid down by the Supreme Court under Article 141 of the Constitution of India. The Court has

¶1423

compartmentalised and differentiated the relief in the operative portion of the judgment by exercise of powers under Article 142 of the Constitution as against the law declared . The directions of the Court under Article 142 of the Constitution, while moulding the relief, that relax the application of law or exempt the case in hand from the rigour of the law in view of the peculiar facts and circumstances do not comprise the ratio decidendi and therefore lose its basic premise of making it a binding precedent. This Court on the qui vive has expanded the horizons of Article 142 of the Constitution by keeping it outside the purview of Article 141 of the Constitution and by declaring it a direction of the Court that changes its complexion with the peculiarity in the facts and circumstances of the case. ”

¶1424

(Emphasis Provided)

¶1425

b) Supreme Court Bar Assn. v. Union of India , (1998) 4 SCC 409:

¶1426

“43. The power of the Supreme Court to punish for contempt of court, though quite wide, is yet limited and cannot be expanded to include the power to determine whether an advocate is also guilty of “professional misconduct” in a summary manner, giving a go-by to the procedure prescribed under the Advocates Act. The power to do complete justice under Article 142 is in a way, corrective power, which gives preference to equity over law but it cannot be

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¶1428

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¶1429

used to deprive a professional lawyer of the due process contained in the Advocates Act, 1961 by suspending his licence to practice in a summary manner while dealing with a case of contempt of court.

¶1430

47. The plenary powers of this Court under Article 142 of the Constitution are inherent in the Court and are complementary to those powers which are specifically conferred on the Court by various statutes though are not limited by those statutes. These powers also exist independent of the statutes with a view to do complete justice between the parties. These powers are of very wide amplitude and are in the nature of supplementary powers. This power exists as a separate and independent basis of jurisdiction apart from the statutes. It stands upon the foundation and the basis for its exercise may be put on a different and perhaps even wider footing, to prevent injustice in the process of litigation and to do complete justice between the parties. This plenary jurisdiction is, thus, the residual source of power which this Court may draw upon as necessary whenever it is just and equitable to do so and in particular to ensure the observance of the due process of law, to do complete justice between the parties, while administering justice according to law. There is no doubt that it is an indispensable adjunct to all other powers and is free from the restraint of jurisdiction and operates as a valuable weapon in the hands of the Court to prevent “clogging or obstruction of the stream of justice”. It, however, needs to be remembered that the powers conferred on the Court by Article 142 being curative in nature cannot be construed as powers which authorise the Court to ignore the substantive rights of a litigant while dealing with a cause pending before it. This power cannot be used to “supplant” substantive law applicable to the case or cause under consideration of the Court. Article 142, even with the width of its amplitude, cannot be used to build a new edifice where none existed earlier, by ignoring express statutory provisions dealing with a subject and thereby to achieve

¶1431

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¶1432

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¶1433

something indirectly which cannot be achieved directly. Punishing a contemner advocate, while dealing with a contempt of court case by suspending his licence to practice, a power otherwise statutorily available only to the Bar Council of India, on the ground that the contemner is also an advocate, is, therefore, not permissible in exercise of the jurisdiction under Article 142. The construction of Article 142 must be functionally informed by the salutary purposes of the article, viz., to do complete justice between the parties. It cannot be otherwise. As already noticed in a case of contempt of court, the contemner and the court cannot be said to be litigating parties.

¶1434

48. The Supreme Court in exercise of its jurisdiction under Article 142 has the power to make such order as is necessary for doing complete justice” between the parties in any cause or matter pending before it”. The very nature of the power must lead the Court to set limits for itself within which to exercise those powers and ordinarily it cannot disregard a statutory provision governing a subject, except perhaps to balance the equities between the conflicting claims of the litigating parties by “ironing out the creases” in a cause or matter before it. Indeed this Court is not a court of restricted jurisdiction of only dispute-settling. It is well recognised and established that this Court has always been a law-maker and its role travels beyond merely dispute-settling. It is a “problem-solver in the nebulous areas ” (see K. Veeraswami v. Union of India [(1991) 3 SCC 655: 1991 SCC (Cri) 734] but the substantive statutory provisions dealing with the subject-matter of a given case cannot be altogether ignored by this Court, while making an order under Article 142. Indeed, these constitutional powers cannot, in any way, be controlled by any statutory provisions but at the same time these powers are not meant to be exercised when their exercise may come directly in conflict with what has been expressly provided for in a statute dealing expressly with the subject.”

¶1435

(Emphasis Provided)

¶1436

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¶1437

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¶1438

c) MunishKakkar v. Nidhi Kakkar , (2020) 14 SCC 657:

¶1439

“21. The provisions of Article 142 of the Constitution provide a unique power to the Supreme Court, to do “complete justice” between the

¶1440

parties i.e. where at times law or statute may not provide a

¶1441

remedy , the Court can extend itself to put a quietus to a dispute in a manner which would befit the facts of the case. It is with this objective that we find it appropriate to take recourse to this provision in the present case.”

¶1442

(Emphasis Placed)

¶1443

17.6. Without prejudice to the contention that the IBC does not apply, it is important to note that the IBC does recognizes the concept of mutuality. The IRP has argued that allowing pre-CIRP dues as part of the reconciliation process would amount to a preferential transaction. However, this contention ignores the fact that the reconciliation process, by its very nature, involves mutuality and set-off of claims between JIL and JAL. Moreover, even the IBC recognizes that there is a right of set-off and counter claim. The Hon’ble Supreme Court’s Judgement in Swiss Ribbons Pvt. Ltd. v. Union of India and Ors . (2019) 4 SCC 17 (para. 61) makes it clear that set off is contemplated by the IBC:

¶1444

“61. Insofar as set-off and counter claim is concerned, a set-off of amounts due from financial creditors is a rarity. Usually, financial debts point only one way – amounts lent have to be repaid. However, it is not as if a legitimate set-off is not to be considered at all. Such set-off may be considered at the stage of filing of proof of claims during the resolution process by the resolution professional, his decision being subject to challenge before the Adjudicating Authority under Section 60 ...”

¶1445

(Emphasis Placed)

¶1446

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¶1447

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¶1448

17.7. That pursuant to Section 18(g) of IBC, 2016 read with Regulation 13(2)(ca) of the CIRP Regulations, the IBBI has issued a Circular No. IBBI/CIRP/36/2020 dated 27.11.2020, which contains a Form in which the IRP is required to file the list of creditors. That form contains a column for “a mount of any mutual dues that may be set-off ”. The IRP is, therefore, legally required to consider mutuality and set-off, while filing the list of creditors. Therefore, it is clear from the above that the principles of mutuality and set-off are not alien concepts to the IBC, which explicitly allows/contemplates set-off between the corporate debtor and its creditor.

¶1449

17.8. It is further submitted that even the Provincial Insolvency Act,1920 recognized the concept of mutuality while determining claims against insolvent parties. In this regard, JAL has relied on the following Judgements -

¶1450

a. Official Liquidator High Court of Karnataka v. Lakshmikutty , AIR 1981 SC 1483: “1. …

¶1451

Consequently, when the respondent in the present case claimed to prove her debt against the company in liquidation, she was entitled to the benefit of the rule enacted in Section 46 of the Provincial Insolvency Act and she could legitimately claim that since there were admittedly mutual dealings between her and the company in liquidation, an account should be taken in respect of such mutual dealings and only that amount should be payable or receivable by her which is due at the foot of such account.

¶1452

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¶1453

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¶1454

2. It is true that Section 530 provides for preferential payments, but that provision cannot in any way detract from full effect being given to Section 529 and in fact the only way in which these two sections can be reconciled is by reading them together so as to provide that whenever any creditor seeks to prove his debt against the company in liquidation, the rule enacted in Section 46 of the Provincial Insolvency Act should apply and only that amount which is ultimately found due from him at the foot of the account in respect of mutual dealings should be recoverable from him and not that the amount due from him should be recovered fully while the amount due to him from the company in liquidation should rank in payment after the preferential claims provided under Section 530. We find that the same view has been taken by the English courts on the interpretation of the corresponding provisions of the English Companies Act, 1948 and since our Companies Act is modelled largely on the English Companies Act, 1948, we do not see any reason why we should take a different view, particularly when that view appears to be fair and just. We may point out that Gore Browne in his book on Company Law, 43rd Ed., at pp. 34-14 also confirms this view: “ Indeed, all claims provable in the winding up may be the

¶1455

subject of set off, provided that there is mutuality. ”Moreover, we find that the observations of the House of Lords in National Westminster Bank Ltd. v. Halesowen Presswork and Assemblies Ltd. [(1972) 1 All ER 641, 659] are also to the same effect. We may also usefully refer to the observations of Sir Ernest Pollock, M.R. in Re City Life Assurance Co. Ltd. [1926 Ch 191: 1925 All ER Rep 453, 457] where the learned Master of the Rolls after referring to Section 207 of the Companies Act, 1908 (Section 317 of the Companies Act, 1948) which corresponds to Section 529 of Companies Act, 1956 and

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¶1457

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¶1458

Section 31 of the Bankruptcy Act, 1914 which corresponds to Section 46 of the Provincial Insolvency Act, says ...”

¶1459

(Emphasis Placed)

¶1460

b) Keshavji Ravij and Co. And Ors. v. Commissioner of Income

¶1461

Tax , AIR 1991 SC 1806:

¶1462

“10 ... A broad analogy, though in itself may not be conclusive, is furnished by the idea of “mutual dealings” and the principle of set off statutorily recognised in bankruptcy proceedings under Section 46 of the Provincial insolvency Act and attracts also to proceedings for winding up of companies by virtue of Section 529 of the Companies Act, 1956, where the mutual credit clause steps in to avoid the injustice, which would otherwise arise of compelling a creditor to pay the official-assignee the full amount of the debt due from him to the insolvency, while the creditor would perhaps, only receive a small dividend on the debt due from the insolvent to him under a pari passu payment. This principle was recognised by this Court in Official Liquidator v. Lakshmikutty, (1981) 2 SCR 349: AIR 1981 SC.

¶1463

(Emphasis Placed)

¶1464

17.9. That even in the liquidation under Section 36(4)(e) of the IBC, an asset, which is subject to set-off, is not an asset of the Corporate Debtor and will not be included in the liquidation estate and distribution to the creditors under Section 53 of the IBC.

¶1465

17.10. It is further stated that the Mutual dealings and set-off would need to be considered while arriving at the amount payable to an operational creditor under Section 53.

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¶1467

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¶1468

17.11. This position is further clarified by Regulation 29 of the IBBI (Liquidation Process) Regulations 2016 [the “ Liquidation Regulations ”] which states as follows:

¶1469

“29. Mutual credits and set-off.

¶1470

Where there are mutual dealings between the corporate debtor and another party, the sums due from one party shall be set off against the sums due from the other to arrive at the net amount payable to the corporate debtor or to the other party .

¶1471

Illustration: X owes Rs. 100 to the corporate debtor. The corporate debtor owes Rs. 70 to X. After set off, Rs. 30 is payable by X to the corporate debtor.”

¶1472

(Emphasis Placed)

¶1473

Therefore, it is clear from the above that the principles of mutuality and set-off are not an alien concept to the IBC and that the IBC explicitly allows/contemplates set-off between the corporate debtor and a creditor during both, the CIRP and the liquidation process.

¶1474

17.12. An asset, which could not form part of the liquidation estate of the corporate debtor would equally be not form part of the insolvency estate of the corporate debtor. To disallow set-off would render Section 30(2) (b) and Section 36(4) (e) of the IBC otiose, as what these two provisions seek to reconcile is the value permissible to be set-off to an operational creditor. The Section 30(2)(b) of the IBC provides that:

¶1475

“30. Submission of resolution plan:

¶1476

(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan –

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¶1478

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¶1479

(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than –

¶1480

(i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53 ; or

¶1481

(ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53,

¶1482

whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor .… ”

¶1483

(Emphasis Placed)

¶1484

17.13. It is further submitted that the consequence of disallowing setoff would be that the resolution plan in a CIRP would be approved on a fundamentally different basis than the liquidation value of the corporate debtor as a going concern.

¶1485

Observations of the Bench

¶1486

We have gone through the directions passed by the Hon’ble Supreme Court in Jaypee Kensington (Supra) . After hearing detailed submissions of both the parties through VC/physical hearings and going through the pleadings, and primarily the GT Report, the Affidavit dated 18.04.2022 filed by the Applicant/IRP and written submissions of the

¶1487

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1488

P a g e 45 | 107

¶1489

parties placed on the record, this Bench observes that the IRP of JIL has contended that the claims relating to the amounts of Rs. 49.63 Crore, Rs. 2.33 Crore, Rs. 0.15 Crore and Rs. 212 Crore pertain to the pre-CIRP period, and if these are considered within the framework of IBC, 2016, JAL is not entitled to receive these amounts. Per Contra, JAL has submitted that the reconciliation process was never intended to be carried out within the framework of IBC, 2016. However, without prejudice to this argument, JAL has further submitted that the reconciliation process is also possible within the ambit of IBC 2016, without contravening any of its provisions or giving undue preference to JAL over other stakeholders of the Corporate Debtor.

¶1490

It is further argued by the IRP of JIL, that if any of the amounts are paid to JAL out of the Rs.750 Crore, it shall be considered a payment made in priority to the other Financial Creditors of JIL and therefore, shall be contrary to the provisions of the Code. In order to examine the contention of the IRP, we would like to visit the relevant extracts of the Judgement passed by the Hon’ble Supreme Court in the Jaypee Kensington (Supra) towards the treatment to the amount of Rs. 750 Crore. We observe that the Hon’ble Apex Court has included this issue in its points for determination, which is reproduced below –

¶1491

“ Points for determination

¶1492

15…….

¶1493

J. (i) As to whether the amount of INR 750 crores, which was deposited by JAL pursuant to the orders passed by this Court in the case of Chitra Sharma, and accrued interest thereupon, is the property of JAL and stipulation in the resolution plan concerning its usage by JIL or NBCC is impermissible?”

¶1494

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1495

P a g e 46 | 107

¶1496

We further find that this issue has been answered by the Hon’ble Apex Court in Para 188 of the Jaypee Kensington (Supra), which is reproduced below –

¶1497

“188. Accordingly, we hold that the amount of INR 750 crores, which was deposited by JAL pursuant to the orders passed by this Court in the case of Chitra Sharma, and accrued interest thereupon, is the property of JAL ; and stipulation in the resolution plan concerning its usage by the resolution applicant of JIL cannot be approved. The part of the impugned order dated 03.03.2020 placing this amount in the asset pool of JIL is set aside.”

¶1498

(Emphasis placed)

¶1499

On perusal of the above, it is evident that the Hon’ble Supreme Court has clearly held that the amount of Rs. 750 Crore is not the property of the Corporate Debtor/JIL, rather it is the property of the JAL.

¶1500

At this juncture, we would like to refer to Section 36(4) of IBC 2016, which stipulates that the following shall not be part of the Liquidation Estate Asset -

¶1501

“3 6. Liquidation estate. –

1......

2……

3…...

4. The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation : -

¶1506

(a) assets owned by a third party which are in possession of the corporate debtor, including –

¶1507

(i) assets held in trust for any third party;

¶1508

(ii) bailment contracts;

¶1509

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1510

P a g e 47 | 107

¶1511

(iii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund;

¶1512

(iv) other contractual arrangements which do not stipulate transfer of title but only use of the assets; and

¶1513

(v) such other assets as may be notified by the Central Government in consultation with any financial sector regulator;

¶1514

(b) assets in security collateral held by financial services providers and are subject to netting and set-off in multilateral trading or clearing transactions;

¶1515

(c) personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions that may be avoided under this Chapter;

¶1516

(d) assets of any Indian or foreign subsidiary of the corporate debtor; or

¶1517

(e) any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor.”

¶1518

We would further like to refer to Section 53(1) of IBC, 2016, which reads as follows -

¶1519

“53. Distribution of assets. –

¶1520

1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely…...”

¶1521

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1522

P a g e 48 | 107

¶1523

On perusal of Section 53(1) of IBC, 2016, it is seen that only the proceeds of the sales of Liquidation Assets are eligible for distribution in terms of Waterfall Mechanism. Whereas the Section 36(4) gives details of the Assets, which are not only required to be kept out of the Liquidation Estate Assets but also cannot be used for recovery or distribution amongst stakeholders in terms of the Waterfall Mechanism. Thus, from the conjoint reading of Section 36(4) and Section 53(1) of IBC, 2016, it is clear that the assets listed under Section 36(4) cannot form part of the Liquidation Estate Assets.

¶1524

More specifically, when we read the contents of Section 36(4)(c), we observe that personal assets of any shareholder or partner of a corporate debtor as the case may be are not to be included in the Liquidation Estate Assets of the Corporate Debtor and hence, any distribution therefrom cannot be said to have been done in preference to other Financial Creditors.

¶1525

It is a matter of fact that the Corporate Debtor/JIL is a wholly owned subsidiary of JAL, which means that JAL is the shareholder of the Corporate Debtor/ JIL. The relationship of JIL and JAL can also be evident from the Judgement of the Hon’ble Supreme Court in the Jaypee Kensington (Supra) and the relevant extracts are reproduced below –

¶1526

“ The parties standing for the resolution plan

¶1527

7……

¶1528

7.1. Jaypee Infratech Limited (JIL):

¶1529

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1530

P a g e 49 | 107

¶1531

“It is the corporate debtor company in whose relation CIRP has been taken up and the resolution plan has been made and approved. This company was essentially set up as a special purpose vehicle after its holding company Jaiprakash Associates Limited (JAL) was awarded the rights for construction of an Expressway from Noida to Agra and a Concession Agreement was entered into with the Yamuna Expressway Industrial Development Authority.”

¶1532

(Emphasis placed)

¶1533

Now, after going through the relevant extracts of Jaypee Kensington (Supra) and Section 36(4) & Section 53(1) of IBC 2016, we would like to sum up our observations/findings as follows:

¶1534

(i) JAL (the holding company) is the shareholder of JIL/Corporate Debtor,

¶1535

(ii) Rs 750 Crore is the property of JAL,

¶1536

(iii) Properties of Shareholders of the Corporate Debtor do not form part of the Liquidation Estate Assets by virtue of provision under Section 36(4)(c) of IBC 2016, and

¶1537

(iv) Further, the Assets covered in Section 36(4) are not eligible to be distributed amongst the Stakeholders of the Corporate Debtor in terms of the waterfall mechanism stipulated under Section 53(1) of IBC, 2016.

¶1538

(v) Hence, Rs 750 Crore being the “asset of the shareholder of JIL” i.e., JAL, is outside the ambit of Section 53(1) of IBC, 2016 and any payment therefrom to JAL cannot be said to be in preference to the Financial Creditors of the Corporate Debtor.

¶1539

28. In the light of aforesaid facts and findings, we are of the considered view that Rs. 750 Crore is the property of JAL, and if any

¶1540

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1541

P a g e 50 | 107

¶1542

amount is found payable to JAL out of the said Rs.750 Crore, it shall not be considered to be the payment made in priority to the Financial Creditors of JIL and it would entirely be in conformity with the provisions of IBC, 2016.

¶1543

Now, we would like to deal with the next major objection raised by JIL/Corporate Debtor and examine whether the JAL can be refrained from receiving any amount on the ground that its claim pertains to the Pre-CIRP Period.

¶1544

At this juncture, we would like to re-visit the Judgment of the Hon’ble Supreme Court in the matter of Jaypee Kensington (Supra) wherein, the scope of the present reconciliation process has been determined and specific directions have been given to this Adjudicating Authority. The relevant extracts of the Judgment are reproduced below:

¶1545

“190.1. After receiving the report from the accounting expert, the NCLT shall pass appropriate orders in the manner that, if any amount is found receivable by JIL/homebuyers of JIL, the same shall be made over to JIL from out of the said amount of INR 750 crores and accrued interest ; and remainder thereof shall be returned to JAL in an appropriate account and that shall abide by the directions of the competent authority dealing with the proceedings concerning JAL

¶1546

191.1. As observed hereinabove, after having found that the said money is the property of JAL, ordinarily, the consequence would have been of directing its refund to JAL but the other entangled features of the case relating to the amount otherwise payable by JAL to JIL cannot be ignored altogether, particularly when it was an admitted

¶1547

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1548

P a g e 51 | 107

¶1549

position on behalf of JAL before NCLT that an amount of INR 274 crores was payable by it to JIL and even before this Court, this obligation to pay has been admitted on behalf of JAL, albeit to the tune of INR 195 crores as on 31.03.2020; and it appears that JAL has been taking steps (maybe crippled steps) to carry out construction and to reduce its liability. We are not determining the extent of amount payable by JAL to JIL because that would be a matter of reconciliation of accounts but, having regard to the background in which, and the purpose for which, JAL made the said deposit pursuant to the orders of this Court and also having regard to the present position of these two companies, adopting this course appears to be in the balance of the legal rights of the respective stakeholders as also in the balance of equities. We would hasten to observe that ordinarily, the equitable considerations do not directly come into play in corporate insolvency resolution process but the matter concerning this amount of INR 750 crores and accrued interest thereupon is a convoluted and stand-alone issue, having the peculiarities of its own and hence, we have adopted the course as contemplated above . This process is otherwise not of determination of the claims of individual stakeholders, be it operational creditors or financial creditors . In the interest of justice, it is also made clear that disposal of the said sum of INR 750 crores shall otherwise not directing its refund to JAL but the other entangled features of the case relating to the amount otherwise payable by JAL to JIL cannot be ignored altogether, particularly when it was an admitted position on behalf of JAL before NCLT that an amount of INR 274 crores was payable by it to JIL and even before this Court, this obligation to pay has been admitted on behalf of JAL, albeit to the tune of INR 195 crores as on 31.03.2020; and it appears that JAL has been taking steps (maybe crippled steps) to carry out construction and to reduce its liability. We are not determining the extent of amount payable by JAL to JIL because that would be a

¶1550

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1551

P a g e 52 | 107

¶1552

matter of reconciliation of accounts but, having regard to the background in which, and the purpose for which, JAL made the said deposit pursuant to the orders of this Court and also having regard to the present position of these two companies, adopting this course appears to be in the balance of the legal rights of the respective stakeholders as also in the balance of equities. We would hasten to observe that ordinarily, the equitable considerations do not directly come into play in corporate insolvency resolution process but the matter concerning this amount of INR 750 crores and accrued interest thereupon is a convoluted and stand-alone issue, having the peculiarities of its own and hence, we have adopted the course as contemplated above. This process is otherwise not of determination of the claims of individual stakeholders, be it operational creditors or financial creditors. In the interest of justice, it is also made clear that disposal of the said sum of INR 750 crores shall otherwise not.

¶1553

224. We also deem it appropriate to clarify that the processing of the modified/fresh resolution plans, as permitted and envisaged by this judgment, is required to be completed within the extended time and for that matter, the other aspects like reconciliation of accounts between JAL and JIL or resolution of the issues related with the financial creditor of the subsidiary of the corporate debtor shall be the matters to be dealt with separately and decision on the resolution plan by the Committee of Creditors need not wait the resolution of those issues.

¶1554

225. Accordingly, while once again exercising our powers under Article 142 of the Constitution of India to do substantial and complete justice to the parties and in the interest of all the stakeholders of JIL, we conclude on these matters with the following order…”

¶1555

(Emphasis Placed)

¶1556

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1557

P a g e 53 | 107

¶1558

31. On perusal of the above-said directions of the Hon’ble Supreme

¶1559

Court, it is evident that the reconciliation process is solely about the distribution of Rs 750 Crore between JAL and JIL. The other stakeholders of both parties, therefore, do not have any rights over the kitty of Rs. 750 Crore. Further, in terms of the directions, the amount payable by JAL to JIL has to be determined, and the remaining proceeds have to be returned through this reconciliation process to JAL. Furthermore, the Hon’ble Supreme Court has observed that this reconciliation process is a convoluted and stand-alone issue, having peculiarities of its own.

¶1560

Since other than JAL and JIL, no other stakeholder has any right in the Rs. 750 Crore, therefore, the issues with respect to its treatment are not a proceeding in rem , rather the present reconciliation process is in personam between the two parties. Further, the Hon’ble Supreme Court has specifically directed that “....if any amount is found receivable by JIL/homebuyers of JIL, the same shall be made over to JIL from out of the said amount of INR 750 crores and accrued interest; and remainder thereof shall be returned to JAL .” Therefore, we are of the considered view that the claim of JAL cannot be rejected merely on the ground that the dues are pertaining to the pre-CIRP period. Hence, we would like to examine each issue on its merits.

¶1561

Now, we would like to deal with the first issue on merit, which is -

¶1562

“ a) Whether in view of the provision of IBC 2016, can JAL claim an adjustment of Rs. 49.63 Crore (advanced against construction extended by JIL) on the basis of RA Bills pertaining to the period prior to the insolvency commencement date of JIL.”

¶1563

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1564

P a g e 54 | 107

¶1565

It is stated by JAL that it is entitled to adjust the amount of Rs.49.63 Crore owing to the RA Bills against the mobilization advance of Rs.450 Crores handed over by JIL to JAL in 2016 for construction purposes.

¶1566

From the records, we notice that vide its letter dated 01.05.2018, the IRP had disallowed the JAL’s claim of Rs.49.63 Crore only on the ground that “...as per records of company, total liability outstanding against such work done is only Rs.30,89,34,359.” According to the IRP, this amount of Rs.30.89 Crore is a pre-CIRP liability, which he allowed by applying the principle of set off against the entire alleged dues of Rs.994 Crore owed by JAL to JIL. IRP's letter dated 01.05.2018 did not specifically mention that rejection was on account of the claim being of the pre-CIRP period.

¶1567

The fact that the IRP did not reject JAL’s claim of Rs.49 crore towards RA bills on the ground it is related to the pre-CIRP period becomes further clear from the fact that both JIL's financial statements and Information Memorandum (IM) (both of which were issued after the rejection letter dated 01.05.2018) treat the amount of Rs.49 crore towards RA bills as due and payable to JAL.

¶1568

Per Contra, the IRP of JIL has submitted that JAL did not challenge the IRP’s decision vide letter dated 01.05.2018 and pursuant to the judgement of Hon’ble Supreme Court in Chitra Sharma (Supra), when the CIR process was started afresh in August 2018 and the JAL again

¶1569

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1570

P a g e 55 | 107

¶1571

raised its claim of Rs. 49 Crore. We observe that the IRP admittedly did not decide or reject the fresh claim filed by the JAL.

¶1572

We observe that the IRP had applied the principle of set-off between JIL & JAL, which is evident from the letter dated 01.05.2018. While perusing the Information Memorandum and the JIL’s Financial Statements, we further observe that the JAL’s claims of Rs.49 crore towards RA bills (pre-CIRP dues) were “to be adjusted against the advance given to JAL”. Further, after the Chitra Sharma (Supra), when the JAL again filed the claim form during the ‘afresh CIRP’ initiated, the IRP opted not to decide the same.

¶1573

We thus, observe that while dealing with the claim of JAL of Rs 49 Crore towards RA Bills, the IRP of JIL has blown hot and cold at the same time. On the one hand he has allowed its set off against its alleged dues against JAL, on the other hand it has shown this amount to be not payable on account of being pre-CIRP dues. GT report too records that this being the pre-CIRP dues, the adjudicating authority may take a view.

¶1574

Hence, the Applicant/IRP of JIL has offered no legal justification other than that the claim of Rs.49.63 Crore is of the pre-CIRP period. As we have already held in para 32 above, the claim of JAL cannot be rejected merely on the ground that these dues pertain to the pre-CIRP period. We are, therefore, of the considered view and conclude that JAL is entitled to retain the amount of Rs. 49.63 crores towards RA Bills against the advance extended against construction by JIL.

¶1575

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1576

P a g e 56 | 107

¶1577

Hence, issue (a) is decided in the favour of the JAL.

¶1578

Now, we would like to examine the next issue (b) “ Whether JAL is entitled to claim the amount of Rs. 212 Crore arising out of Bank Guarantees issued on behalf of JIL and subsequently invoked by the lenders of JIL.”

¶1579

Submissions of JAL

¶1580

In this context, the following is submitted by JAL -

¶1581

43.1. It is submitted by JAL that GT has stated that the amount arising

¶1582

out of the Bank Guarantee is payable to JAL and it had reached its conclusion after hearing objections of both parties. The scanned copy of the observations of the GT Report is reproduced below –

¶1583

43.2. IRP vide its letter dated 01.05.2018 had rejected the claim of Rs.212 crore only on the ground that it was the "promoter's contribution to equity" because a restructuring scheme was being negotiated at the time. Once the negotiations for the restructuring scheme failed after the lenders’ meeting dated 05.05.20'17, JIL again started treating the

¶1584

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1585

P a g e 57 | 107

¶1586

amount of Rs.212 Crore as a financial liability in its Balance Sheets for the years 2017-18, 2018-19, and 2020-21.

¶1587

43.3 JIL’s Information Memorandum admits that an amount of Rs.212 crore is payable to JAL as “ against invocation of corporate guarantee which is considered as other financial liability… ”.

¶1588

Submissions of JIL

¶1589

The IRP of JIL has stated that the claim for reconciliation of Rs. 212 Crore ought to have been rejected by the GT. It is added that the said claim arising out of the encashment of the Bank Guarantee cannot be made by JAL as part of the reconciliation process.

¶1590

44.1. The said Bank Guarantees have no co-relation whatsoever with the construction agreements executed between CD and JAL and hence, the same cannot form part of the reconciliation process.

¶1591

44.2. The following were the Construction Agreements executed between

¶1592

JIL and JAL -

¶1593

a. Contract Agreement dated 01.05.2009 for Land Development at LFD-1 at Noida;

¶1594

b. Contract Agreement dated 09.10.2010 for Land Development at LFD-2 at Jaganpur;

¶1595

c. Contract Agreement dated 09.10.2010 for Land Development at LFD-3 at Mirzapur;

¶1596

d. Contract Agreement dated 06.07.2011 for Land Development at LFD-4 at Tappal;

¶1597

e. Contract Agreement dated 11.04.2011 for Land Development at LFD-5 at Agra;

¶1598

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1599

P a g e 58 | 107

¶1600

f. Construction for Yamuna Expressway entered on 27^th Nov 2007 and further amended on 30th Sep 2008, 22n^d Sep 2009 and 28^th Mar 2011.

¶1601

g. Maintenance agreement of common/shared areas in LFD-1 Noida project entered on 14^th Sep 2016.

¶1602

44.3. On 29.12.2012, the JIL/Corporate Debtor (CD) entered into a Facility Agreement with a consortium of lenders led by the IDBI Bank Limited for refinancing the outstanding existing Facility of Rs. 6,600 Crore, which was availed earlier for the financing of the toll road of Yamuna Expressway project. As per Clause 10.10.3 of the Facility Agreement, JIL/Corporate Debtor (CD) was required to maintain a stipulated fund balance in its Debt Service Reserve Account ("DSRA") or issue letters of credit of bank guarantees in lieu of DSRA. The scanned copy of the said clause is reproduced below –

¶1603

44.4. Further, as per Clause 8.2.1 (vii) of the Facility Agreement, the holding company of JIL/Corporate Debtor (CD) i.e., JAL was required to

¶1604

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1605

P a g e 59 | 107

¶1606

execute a 'Promoter Support Agreement' from the promoters to ensure infusion of funds, in a manner acceptable to lenders of JIL/Corporate Debtor (CD). Clause 8.2.1 (vii) of the Facility Agreement as extracted from the GT Report is reproduced below:

¶1607

44.5. The Facility Agreement defines the 'Debt Service Reserve Sub-Sub Account or DSRSA' as under:

¶1608

“ Debt Service Reserve Sub-Sub Account or DSRSA shall mean a sub-account o designated as such and established with the Account Bank in accordance with the Trust and Retention Account Agreement”.

¶1609

44.6. Further, the 'Trust and Retention Account Agreement' is defined as follows:

¶1610

"Trust and Retention Account Agreement" shall mean the amended and restated trust and retention account agreement dated March 26, 2013 entered into among the Borrower, the Account Bank, IDBI Bank Limited (as the lenders' agent for the Existing Rupee Lenders) and IDBI Trusteeship Services Limited (as the security trustee and agent for the Existing Rupee Lenders), as proposed to be amended by an amendment agreement to be entered into among the Borrower, the Account Bank, IDBI Bank Limited (as the Lenders' Agent and the lenders'

¶1611

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1612

P a g e 60 | 107

¶1613

agent for the Existing Rupee Lenders, the Refinancing Lenders and the Lenders) and IDBI Trusteeship Services Limited (as the Security Trustee and the security trustee and agent for the Existing Rupee Lenders, the Refinancing Lenders and the Lenders), in relation to the credit and application of monies and revenues of the Project and providing for the detailed mandates, terms and conditions and operating procedures for the Trust and Retention Account."

¶1614

44.7. Pursuant to the Clauses 10.10.3 & 8.2.1 of the Facility Agreement,

¶1615

a Promoter Support Agreement (hereinafter, termed as "Promoter Support Agreement" ) was entered between JAL, JIL, and IDBI Bank Limited on 29.09.2015 . The relevant clauses of the said Promoter Support Agreement as submitted by JIL in its written submissions are reproduced below:

¶1616

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1617

P a g e 61 | 107

¶1618

44.8. It is clear from the Promoters Support Agreement that JAL undertook to provide funds to meet the shortfall in DSRA and also to meet any shortfall in the means of financing of the Expressway/Project by the CD. Pursuant to the terms of the Facility Agreement, the JAL furnished five BGs aggregating to Rs. 212 Crore in favour of the Consortium of Lenders led by IDBI Bank Limited. As JIL/Corporate Debtor (CD) could not meet the obligations to its lenders and there was a shortfall in DSRA, these BGs were encashed by the lenders of the JIL/Corporate Debtor (CD) in the financial year 2016-17.

¶1619

44.9. As per Clause 2.1(i), (v) & (x) of the Promoter Support Agreement, it becomes abundantly clear that the amount of Rs. 212 Crore was infused by JAL to service the debt availed by the JIL/Corporate Debtor (CD) from the IDBI Bank Limited led Consortium, and the same was not for the purpose of construction or under the Construction Agreements. The BGs were issued on behalf of JAL to meet the obligations under the Facility Agreement and Promoter Support Agreement and were encashed by the lenders of CD in accordance with their rights under those Agreements. In the view of IRP of JIL, the Facility Agreement and Promoter Support Agreement were not construction or construction-related agreements. They were agreements between the borrower (JIL/CD), the lender (CD's lenders), and the borrower's promoter (JAL ).

¶1620

44.10. GT has stated in its report, the following regarding the invocation of guarantees by the lenders -

¶1621

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1622

P a g e 62 | 107

¶1623

44.11. As per the terms of the Promoter Support Agreement referred to

¶1624

above, any amount infused by JAL to meet the shortfall in the payment

¶1625

of debt servicing by JIL/Corporate Debtor, shall be by way of infusion

¶1626

of equity into JIL/Corporate Debtor and/or by way of advancing

¶1627

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1628

P a g e 63 | 107

¶1629

interest-free subordinated debt to JIL/Corporate Debtor. Therefore, when BGs were invoked by the lenders of JIL/Corporate Debtor, this amount could either be treated as a subscription amount towards equity or as a debt but subordinated to the debt of lenders of JIL/Corporate Debtor. Accordingly, the amount of Rs. 212 Crore was treated by both the JIL/Corporate Debtor and JAL as Promoters’ Equity contribution in JIL and accordingly, reflected as Equity in the books of accounts for the financial year 2016-2017, as also in the first three quarters of FY 201718 by both JAL and JIL.

¶1630

44.12. The treatment of Rs. 212 Crore in the Balance Sheet as Liability is a mere accounting treatment and does not have the effect of converting “advance against equity” into a “debt”. It certainly cannot be treated as financial debt within the meaning of Section 5(8) of the Code as there was no debt disbursed by JAL to CD against the consideration of time value of money having the commercial effect of borrowing. JAL was fully aware of this and therefore, did not file a claim under Form C. Rather, JAL filed its claim for Rs. 212 Crore in Form B on 24.08.2017 claiming an amount of Rs. 261 Crore , which included the amount of Rs. 212 Crore towards the BGs . Further, in Form B, JAL has admitted that it had asked Consortium of lenders of CD to consider invocation of BGs as JAL's 'equity contribution'. Even in 2018, when JAL filed the consolidated claim afresh for an amount of Rs. 326 Crore (which included the claim arising out of BGs), it was again filed in Form B as an operational creditor.

¶1631

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1632

P a g e 64 | 107

¶1633

44.13. The JAL is prohibited from seeking a set off or adjustment of Rs. 212 Crore in terms of Clause 4.2 of the Promoter Support Agreement. The relevant clauses are reproduced below –

¶1634

REBUTTAL BY JAL

¶1635

JAL had rebutted this and stated that the lenders gave JIL, a loan of Rs.6,600 Crore under the Facility Agreement dated 30.04.2015 for construction of the integrated Yamuna Expressway project including development of the land parcels. Therefore, this is a liability discharged by JAL in connection with the construction.

¶1636

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1637

P a g e 65 | 107

¶1638

45.1. The Facility Agreement dated 30.04.2015 makes it clear that without DSRA, the financing for the construction would have collapsed. In support of its contentions, JAL has relied upon the following two clauses:

¶1639

Cl. 10.10.3 of the Facility Agreement dated 30.04.2015 -

¶1640

“The Borrower shall within a period of 30 (thirty) days from the Initial Disbursement Date create and maintain at all times till the Final Settlement Date, the DSR in the DSRA [out of the cash accruals of the Project]”

¶1641

Cl. 10.10.4 of the Facility Agreement dated 30.04.2015

¶1642

“The Borrower and/or the Promoter may in lieu of the DSR, procure and furnish to the Lenders’ Agent/ Security Trustee, an unconditional and irrevocable bank guarantee/letter of credit from a ban acceptable to the Lenders, in a form, manner and on terms and conditions acceptable to the Lenders (hereinafter referred to as the “DSR Bank Guarantees”). Such DSR Bank Guarantees, shall, among other terms, entitle the Account Bank/ the Lenders’ agent/the Security Trustee to make a demand at any time, if there is a shortfall in the DSRSA or if the bank guarantee is not renewed prior to its expiry”.

¶1643

45.2. The Hon’ble Supreme Court was fully aware of Rs. 212 Crore as being an amount owned by JIL to JAL, which was adjusted against the mobilization advance for construction and the IFMD advance. This fact was set out in the affidavit dated 15.05.2020 filed before the Hon’ble NCLAT in Company Appeal (AT) (Ins.) 478/2020 and was noted by the Hon’ble Supreme Court in the Jaypee Kensington Judgment at para. 178.1.4.

¶1644

45.3. The recitals to the Promoters Support Agreement dated 29.09.2015 (as well as its Clause 2.1) make it clear that JAL’s financial support to JIL was for construction. The same is reproduced overleaf -

¶1645

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1646

P a g e 66 | 107

¶1647

“ A. Yamuna Expressway Industrial Development Authority (earlier known as Taj Expressway Industrial Development Authority) (“Authority”) had shortlisted and selected Jaiprakash Industries Limited, now known as Jaiprakash Associates Limited (a company incorporated and registered under the provisions of the Companies Act, 1956 (1 of 1956) and having its registered office at Sector-128, NOIDA -201 304 Uttar Pradesh (India) hereinafter referred to as “JAL” to develop, design, engineer, finance, construct and upon completion manage, operate and maintain the expressway comprising of 6 (six) (extendable to 8 (eight) lanes, 165.537 (one hundred and sixty five decimal five three seven) kilometer long expressway between NIODA and Agra with service roads and associated facilities (“Expressway”) including the acquisition and development of land admeasuring 6175 (six thousand one hundred and seventy five) acres, i.e., 25 (twenty five) million square meters situated at 5 (five) or more locations of which one location shall be Noida or Greater Noida in the state of Uttar Pradesh, for real estate development and to use the toll road (about 25 (twenty five) kilometers) between Noida toll bridge and Greater Noida (“Greater NOIDA Expressway”) on leave and license basis (hereinafter collectively referred to as the “Project”), on the terms and conditions set out in the concession agreement dated February 7, 2003 (“Concession Agreement”) read with the letters darted April 9, 2009, October 26, 2009 and July 09, 2013, September 03, 2014, October 10, 2014 and February 11, 2015 issued by the Authority with respect to the extension of time for completion of the Expressway (“Concession”)

¶1648

C. F or the purposes of part financing the cost of the Expressway, the Borrower had availed rupee term loans from certain banks and financial institutions, which loans were re-financed by the Existing Lenders by way of rupee term loans of an aggregate principal amount not exceeding Rs. 66,00,00,00,000 (Rupees Six Thousand and Six Hundred Crores Only) (“Existing Facility”) on the terms and conditions as set out in the financing and security documents entered into amongst others, between the Borrower and the Existing Lenders, on December 29, 2012, details of which are as set out in Existing Financial Documents.

¶1649

B. It is one of the conditions of the Loan Agreements that in order for the Borrower to avail the financial assistance provided by the Lenders towards the Expressway , the Promoter is required to undertake to extend support to the Borrower and/or the Expressway, as prescribed in the Agreement.

¶1650

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1651

P a g e 67 | 107

¶1652

2.1 PROMOTERS CONTRIBUTION AND OTHER UNDERTAKINGS

¶1653

(i) In the event of any shortfall in the resources of the Borrower for completing the Expressway due to any circumstances whatsoever it shall promptly provide to the Borrower, additional funds in such form and manner and upon such terms and conditions as may be acceptable to the Lenders , without recourse to the Lenders the assets of the Borrower and the Secured Property;

¶1654

(ii) in the event of any shortfall in the means of financing of the Expressway/Project or in case of any further cost overrun in relation to the Expressway/Project, the Promoter shall provide to the Borrower additional funds by way of Promoters’ Subordinated Debt in such form and manner and upon such terms and conditions, as may be acceptable to the Lenders, without recourse directly or indirectly to the Borrower, the Security the Lenders and the Project assets and in amounts such that at such times the Borrower is able to meet the shortfall in means of financing/meet the further cost overrun of the Expressway/Project ”.

¶1655

( Emphasis Placed )

¶1656

45.4. Therefore, it is clear from the above, that JAL’s financial support to

¶1657

JIL in the form of BGs to JIL’s Lenders (aggregating to Rs.212 Crore) was towards the Facility Agreement dated 30.04.2015, which was obtained by JIL for construction of the entire “integrated” Yamuna Expressway project including development of the land parcels & construction of residential projects/homes. Hence, the said amount squarely falls within the scope of reconciliation envisaged under Para 190.2 of the Jaypee Kensington Judgment.

¶1658

OBSERVATIONS OF THE BENCH

¶1659

After hearing submissions of both parties and perusing the documents placed on record, this Bench observes that it is necessary to visit the observations made by the GT in its report on this issue. The same is reproduced below, for the sake of convenience.

¶1660

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1661

P a g e 68 | 107

¶1662

It is undisputed and admitted position from the pleadings and GT Report that the Bank Guarantees were enchased. In view of this, the limited issue which remains for adjudication is Whether the Bank Guarantees were in the nature of Equity infusion by the promoters i.e., JAL or it was a debt given by JAL to the JIL/Corporate Debtor in relation to construction.

¶1663

As per the GT Report, in their assessment, the amount of Bank Guarantees was in the nature of financial debt and not equity and they have recommended that the Adjudicating Authority may provide direction to

¶1664

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1665

P a g e 69 | 107

¶1666

release the amount in line with the provisions of IBC, 2016 / or relevant statutes.

¶1667

JIL in its arguments has contended that the said BGs had no corelation whatsoever with the construction agreements executed between JIL and JAL. JIL has given details of all the construction agreements executed between JIL and JAL. It is argued by JIL that these Bank Guarantees were executed for some other purposes.

¶1668

In support of its contentions, it has been stated by the IRP of JIL that:

¶1669

(i) For financing of the Yamuna Expressway Project, one Facility Agreement was executed between JIL and a Consortium of lenders led by IDBI Bank Limited, and as per Clause 10.10.3 of the said Agreement, the Corporate Debtor was required to maintain a stipulated fund balance in its Debt Service Reserve Account ("DSRA") or issue letters of credit of bank guarantees in lieu of DSRA.

¶1670

(ii) Pursuant to Clause 8.2.1 of the Facility Agreement dated 29.12.2012, one Promoters Support Agreement was executed on 29.09.2015 between JIL, JAL, and IDBI (on behalf of lenders).

¶1671

(iii) Pursuant to the Promoters Support Agreement, JAL undertook to provide funds to meet the shortfall in DSRA and any shortfall in the means of financing the Expressway/Project by CD. Accordingly, the JAL had furnished five Bank Guarantees aggregating to Rs. 212 Crore in favour of the Consortium of lenders.

¶1672

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1673

P a g e 70 | 107

¶1674

(iv) As JIL/CD could not meet the said obligations to its lenders, there was a shortfall in DSRA, and therefore, Bank Guarantees were encashed by the Consortium of lenders of CD in the FY 2016-17.

¶1675

(v) As per Clause 2.1(i), (v) & (x) of the Promoters Support Agreement, it becomes abundantly clear that the amount of Rs. 212 Crore was infused by JAL to service the debt availed by CD from IDBI Bank Limited led consortium, and the same was not for the purpose of construction per se or under the construction agreements executed between JIL and JAL.

¶1676

Per Contra, JAL has contended that the Consortium of lenders gave JIL/CD, the loan of Rs.6,600 Crore under the Facility Agreement dated 30.04.2015 for construction of the integrated Yamuna Expressway Project including development of the land parcels. Hence, the Bank Guarantees aggregating to Rs. 212 Crore executed in favour of the Consortium of lenders and their subsequent encashment is a liability discharged by JAL in connection with construction.

¶1677

In the above backdrop, we would like to examine the contentions of both the parties. First, we peruse the Facility Agreement dated 30.04.2015 signed between the parties for the purpose of financing the Expressway Project, wherein the Clause 9.13 reads as overleaf:

¶1678

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1679

P a g e 71 | 107

¶1680

Thus, it is amply clear that the amount of Facility advanced by the consortium of lenders was for the Construction of the Yamuna Expressway Project.

¶1681

As per the GT Report in regard to the Facility Agreement dated 29.12.2012 and also relied by JIL, one Promoters Support Agreement was also executed to maintain adequate balance or meet shortfall in DSRA. We would now, therefore, like to refer to the Promoters Support Agreement dated 29.09.2015 executed between JIL, JAL and IDBI (on behalf of lenders), the Clause 2.1 of which reads as below –

¶1682

On perusal of the abovesaid clause, it is clear that the Promoters Support Agreement was executed to provide ‘ additional funds ’, by way of Subordinated Debt to the borrower (i.e., JIL) to meet the shortfall in means of financing/ meet the further cost overrun of the Expressway/project .

¶1683

Since the loan/Facility of Rs.6,600 Crore was procured from IDBI led consortium vide Facility Agreement dated 29.12.2012 for the purpose of “construction of the Expressway Project” and the Promoters Support Agreement 2015 was executed in furtherance of the said Facility

¶1684

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1685

P a g e 72 | 107

¶1686

Agreement, pursuant to which the Bank Guarantees of Rs. 212 Crore were advanced by the Promoters/JAL; therefore, we find no force in the contention of JIL that the said Bank Guarantees were executed for the purpose other than construction.

¶1687

Since, it is an admitted fact by all the parties that the Bank Guarantees amounting to Rs. 212 Crore advanced by the JAL, in terms of its contractual obligations, were encashed by the lenders of JIL for recovering their dues, here we consider it appropriate to refer to Section 140 of the Indian Contract Act, 1872, which reads as below:

¶1688

Section 140: Rights of surety on payment or performance.

¶1689

“140 . Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.”

¶1690

As we have noted earlier, on the execution of Bank Guarantees of Rs. 212 Crore, JAL has performed its obligations for which JIL was liable for, hence by virtue of Section 140 of the Indian Contract Act, 1872, it gets invested with all the rights which the IDBI led consortium/lenders had against JIL. In other words, the JAL, to the extent of the amount of Bank Guarantees of Rs. 212 Crore discharged by it to the Financial Creditors of JIL stepped into the shoes of the Financial Creditors prior to the initiation of CIR Process and the claim for which was crystalized and filed with the IRP. Hence, in our considered view, the amount of Bank Guarantees of Rs. 212 Crore discharged by JAL is a Debt.

¶1691

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1692

P a g e 73 | 107

¶1693

57. Further, we also take note of the Balance Sheets of JIL, which reflects the treatment of the Rs. 212 Crore as “Other Financial Liabilities” from 2017-18 to 2020-21. For reference, we refer to one of the Balance Sheets of FY: 2018-19, the relevant extract of which is reproduced below:

¶1694

From the above, it is clear that JIL in its Balance Sheet, (which relates to

¶1695

the period prior to the initiation of the Reconciliation process) has

¶1696

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1697

P a g e 74 | 107

¶1698

acknowledged the “ Invocation of BG’s by Company’s lender provided by JAL’s lenders ” as and under the heading of “ Other Financial Liabilities ”.

¶1699

Other than the above, it is contended by the JIL, that JAL is prohibited from recovering this amount in terms of Clause 4.2 of the Promoters Support Agreement, whose contents are reproduced below -

¶1700

We observe that the aforesaid clauses of the Promoters Support Agreement, restraining one party to claim a certain amount from the Corporate Debtor/JIL, during the insolvency proceedings, are inconsistent with the provisions of Section 238 of IBC, 2016, which reads as below:

¶1701

“238. Provisions of this Code to override other laws. –

¶1702

The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

¶1703

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1704

P a g e 75 | 107

¶1705

Hence, in view of the discussion above and the facts that the JAL, to the extent of the amount of Bank Guarantees of Rs. 212 Crore discharged by it to the Financial Creditors of JIL stepped into the shoes of the Financial Creditors prior to the initiation of CIR Process and the claim for which was crystalized and preferred before the IRP, and JIL in its Balance Sheet of the period prior to the initiation of the Reconciliation process acknowledged the “ Invocation of BG’s by Company’s lender provided by JAL’s lenders ” under the heading of “ Other Financial Liabilities ”, we agree with the recommendation of GT that the Bank Guarantee amount of Rs. 212 Crore is a debt. Accordingly, JAL is entitled to retain this amount out of Rs.750 Crore. Issue (b) is decided accordingly . We would, however, clarify that here we have decided the issue only in the context of the reconciliation process on the directions of the Hon’ble Supreme Court and the same should not be quoted as a precedent elsewhere.

¶1706

Now, we would like to examine the issue (c) “Whether an advance of Rs. 106.90 crore is recoverable for IFMD by JIL from JAL.”

¶1707

SUBMISSIONS OF JIL

¶1708

61.1 It is stated by JIL, that on 14.09.2016, the Corporate Debtor issued a letter to JAL having on the subject "Contract Agreement dated 01.05.2009 for development of Land at Noida - Request for maintenance (shared common areas)". As per the letter, the Corporate Debtor had paid one-year Interest-Free Maintenance Deposit (hereinafter, termed as ‘IFMD’ ) received/receivable from the homebuyers on various subprojects to JAL, which JAL shall maintain as per the provisions

¶1709

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1710

P a g e 76 | 107

¶1711

contained in the Maintenance Agreement. On request of the JAL, the JIL/Corporate Debtor provided the IFMD advance aggregating to Rs. 380.60 Crore to JAL on 31.03.2016.

¶1712

61.2. This advance was recoverable by the JIL/Corporate Debtor from its homebuyers before giving physical possession of the residential units. Till 31.03.2021, the JIL/Corporate Debtor had recovered an amount of Rs.106.90 Crore from its homebuyers, which was adjusted from the IFMD advance already paid to JAL. The JIL/Corporate Debtor has claimed a refund of the said IFMD amount from JAL on the ground that Rs. 106.90 Crore was the money belonging to the homebuyers and the JAL has no right to retain that sum in view of Clause 22.3 of the Resolution Plan dated 07.06.2021 read with addendum dated 09.06.2021 submitted by Suraksha Realty Limited & Lakshdeep Investment and Finance Private Limited ("Resolution Plan") after approval by the CoC on 26.06.2021. Clause 22.3 of the Resolution Plan stipulates as under:

¶1713

“The current development, construction and maintenance contracts or any other contract with Jaiprakash Associates Limited, (VAL") which are on .cast plus basis, shall stand terminated upon Approval Date, without any consequence whatsoever on JIL and I or the Resolution Applicants, and enter into fresh construction contracts with the vendors as may be selected by the Resolution Applicant in accordance with its policies and such contracts shall be entered into on arms' length basis as per the market standard.”

¶1714

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1715

P a g e 77 | 107

¶1716

61.3. The GT has erroneously held that maintenance of common areas and facilities is the JAL's responsibility as a Designated Maintenance Agency (DMA) until it is handed over to the Residents Welfare Association ("RWA") and thus, the IFMD of Rs. 106.90 Crore received from homebuyers/real-estate allottees should be available with JAL/DMA as long as the letter/ agreement between the Corporate Debtor and the JAL is valid.

¶1717

61.4. If the Resolution Plan is approved by this Adjudicating Authority, JAL shall cease to be the contractor or the Designated Maintenance Agency (“ DMA” ). Therefore, the IFMD of Rs. 106.90 Crore cannot be allowed to be retained by the JAL. This amount should be deducted from Rs. 750 Crore and be kept in an interest-bearing escrow account so that the new maintenance agency/RWA, whichever is the case, may be transferred with this amount. It is crucial to safeguard the Corporate Debtor and homebuyers in this regard as the JAL itself is in financial distress, and is facing an insolvency petition “CP IB No. 330/Ald/2018” under Section 7 of the Code filed by the ICICI Bank Limited before the Allahabad Bench of NCLT. In case, the CIRP is initiated in respect of the JAL, complications will arise insofar as this amount of Rs. 106.90 Crore is concerned. Thus, the said amount is ought to be returned to JIL/Corporate Debtor or deposited in an escrow account to be operated by Corporate Debtor till it is transferred to the RWA in accordance with the agreements with homebuyers.

¶1718

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1719

P a g e 78 | 107

¶1720

SUBMISSIONS OF JAL

¶1721

On 16.09.2016, the Corporate Debtor/JIL appointed the JAL as the Designated Maintenance Agency (DMA) under a maintenance agreement between JAL and Homebuyers.

¶1722

62.1. Out of the total amount of Rs. 380.60 Crore transferred by JIL/Corporate Debtor to JAL in 2016 by way of advance towards IFMD, a total of Rs. 106.90 was realized towards IFMD by 31.03.2021. It is not disputed by JAL that an amount of Rs. 273.70 crores not so far realized from homebuyers should be refunded to JIL.

¶1723

62.2. Under Clause 5 of the maintenance agreement between JAL and the homebuyers, JAL is liable to homebuyers for proper maintenance of common/shared areas and facilities. Clause 5 further states that JAL is required to refund the IFMD not to JIL but to the homeowners themselves after adjusting their dues, if any. The contents of Clause 5 read thus –

¶1724

“5. Creation of Maintenance Fund:

¶1725

5.1. In order to ensure proper maintenance of the Shared Areas & Facilities of Jaypee Greens Wish Town including maintenance/repairs/replacement of plants /machines / equipments, a maintenance fund (the “ Fund ”) shall be set up.

¶1726

5.2. The Allottee has deposited Rs. 1,21,295/-@Rs. 1076.40/per sq. mtr (Rs. 100/-- per sq. ft.) towards the said Fund being the share of the Allottee to the Fund as a Refundable Interest Free Maintenance Deposit before taking over physical possession of the Residential Unit. The said Fund shall be refunded by the Company upon transfer of ownership of the Residential Unit by the Allottee after adjusting the pending dues payable by the Allottee to the Company and/or the DMA ”

¶1727

(Emphasis Placed)

¶1728

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1729

P a g e 79 | 107

¶1730

62.3. JIL cannot interfere with third-party contracts. Further, as long as the agreement dated 01.05.2009 between JIL and JAL is in force and JAL remains the designated DMA and it remains liable under the maintenance agreement with the homebuyers. Thus, the IFMD must remain with the JAL. Since the JAL (being the current DMA) requires funds for carrying out the maintenance of the Shared Areas & Facilities (including maintenance/ repairs/ replacement of plants/ machines/ equipment etc.), the IFMD must remain with the JAL in accordance with the maintenance agreements until the next DMA is appointed or till the Association of Apartment Owners is constituted.

¶1731

We have heard the submissions of both parties and perused the documents placed on record. We would first like to visit the observations of the GT on this issue, which are reproduced below:

¶1732

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1733

P a g e 80 | 107

¶1734

On perusal of the above, it is seen that maintenance of the common areas and facilities is the JAL’s responsibility as DMA until these are handed over to the RWA. It is further mentioned that JAL may consider returning the advance recoverable of Rs. 273.70 Crore to JIL since it had neither accrued nor recovered from the home buyers.

¶1735

It is observed that the main reason for the IRP of JIL to claim this amount is that there is a threat of initiation of CIRP proceedings looming large on JAL and if the JAL goes into CIRP, then complications will arise. Further, the Resolution Plan approved by CoC, pending adjudication, seeks termination of the maintenance contracts executed with JAL.

¶1736

We further observe that in terms of clause 5.2 of the Maintenance Agreement dated 06.06.2016 “ The said Fund shall be refunded by the Company upon transfer of ownership of the Residential Unit by the Allottee after adjusting the pending dues payable by the Allottee to the Company and/or the DMA”.

¶1737

In our view, the amount of Rs. 106.90 Crore is the money of Home Buyers of JIL and in any case, it has to be returned/refunded by the JAL upon transfer of ownership of the residential units to the Allottees.

¶1738

As brought to our notice by the IRP of JIL during the hearing, we cannot overlook the fact that there is a pending Application against JAL for initiation of the CIR Process against it. Therefore, we are of the view that the money of the Home Buyers and maintenance of the Common areas and facilities cannot be put at any risk.

¶1739

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1740

P a g e 81 | 107

¶1741

Further, we would like to reiterate the findings of Hon’ble Supreme Court in the Jaypee Kensington (Supra), wherein the following was held:

¶1742

“190.1. After receiving the report from the accounting expert, the NCLT shall pass appropriate orders in the manner that , if any amount is found receivable by JIL/homebuyers of JIL, the same shall be made over to JIL from out of the said amount of INR 750 crores and accrued interest ; and remainder thereof shall be returned to JAL in an appropriate account and that shall abide by the directions of the competent authority dealing with the proceedings concerning JAL….”

¶1743

69. In view of the aforesaid discussion, in our considered view, the amount of Rs 106.90 Crore arising on account of IFMD is an amount, belonging to Home Buyers of JIL, and is receivable by the JIL/homebuyers of JIL out of Rs. 750 Crores. Accordingly, we direct that Rs. 106.90 Crores shall be paid out of the Rs. 750 Crores and deposited in an escrow account to be opened for the purpose of maintenance to be operated by the IRP of JIL/Corporate Debtor (or by Monitoring Committee, in the case and once the Resolution Plan is approved) till this amount is finally transferred to the RWA of the homebuyers of JIL in accordance with the agreements with the homebuyers.

¶1744

The next issue which emerges for consideration at serial (d) is Whether JAL can claim an adjustment of Rs. 2.33 Crore towards the facility management bills, from JIL. In order to examine this issue, we would like to visit the contents and recommendations of the GT Report first, which is reproduced below -

¶1745

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1746

P a g e 82 | 107

¶1747

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1748

P a g e 83 | 107

¶1749

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1750

P a g e 84 | 107

¶1751

From the GT’s Report, it is observed that there is only objection taken by the IRP of JIL/Corporate Debtor is that the claim of Rs. 2.33 Crore pertains to the pre-CIRP period, and therefore, the JAL cannot claim this amount. Per Contra, JAL has claimed that it being the DMA for the dwelling units of JIL/CD, it is entitled to claim this amount.

¶1752

We have already held in para 32 above that the claim of the JAL cannot be rejected merely on the ground that the dues are pertaining to the pre-CIRP period. In light of no other material objection taken by the JIL in respect of the Facility and Management Bills, we hold that the JAL is entitled to receive/retain the amount of Rs.2.33 Crore out of the Rs.750 Crore.

¶1753

Now, we come to the next issue listed at serial e) Whether JAL

¶1754

can recover Rs. 1.19 crore from JIL for providing hospitality services.

¶1755

In order to examine the issue, we would like to visit the findings of

¶1756

GT Report the same, which are reproduced below –

¶1757

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1758

P a g e 85 | 107

¶1759

From the perusal of the above, it can be seen that GT after perusing the accounts of both JIL and JAL, reached to the conclusion that there was no difference, regarding the amount claimed and payable, in the ledger balances of both parties.

¶1760

The IRP of JIL/Corporate Debtor has contended that the said amount is not payable on the ground that it pertains to the pre-CIRP period. Per contra, JAL has contended that its claims cannot be rejected merely on the point that the same pertains to the pre-CIRP period.

¶1761

77. We have already held in para 32 above, that the claim of the JAL cannot be rejected merely on the ground that the dues are pertaining to the pre-CIRP period. In the light of no other objection taken by JIL in respect of the Hospitality services, we hold that JAL is entitled to receive/retain the amount of Rs.1.19 Crore out of the Rs.750 Crore.

¶1762

While we have dealt with all the issues identified in Para 13 of this order, the JIL in its objections filed to the GT Report has raised another issue regarding its claim of Rs. 70.89 Crore due to JAL on account of the Land Swap Deal .

¶1763

At this stage, we would like to visit the findings of GT on this objection raised by JIL, which is reproduced overleaf for the sake of convenience:

¶1764

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1765

P a g e 86 | 107

¶1766

On perusal of the abovesaid finding, it is observed that GT did not consider the issue/claim of Rs. 70.89 Crore towards the Land Swap Deal, as it did not appear to be a part of the construction contracts. Hence, the GT treated the issue beyond the scope of the reconciliation process.

¶1767

SUBMISSIONS OF JIL

¶1768

While raising objection to the abovesaid observation of the GT report, JIL has contended in its Written Submissions, the following:

¶1769

81.1. To explain the background of the demand of Rs 70.89 Crore, it is stated by JIL that JAL had availed loans through various facility agreements from ICICI Bank. In order to repay the said facilities availed by JAL from ICICI Bank, JIL executed 11 separate Sub-lease deeds in F.Y. 2016-17 to transfer 84.5 acres of its land at Mirzapur and Jaganpur to ICICI Bank for the total consideration of Rs. 643.50 Crore as part of swapping of the debt owed by JAL to ICICI Bank. In other words, JIL took over the liability of JAL and repaid the said liability of JAL by transferring JIL’s 84.5 acres of land at Mirzapur and Jaganpur to the JAL’s lender, IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited P a g e 87 | 107

¶1770

ICICI Bank for a total consideration of Rs. 643.50 Crore, out of which Rs. 277 Crore was given as interest-free advance to JAL towards designing, construction, development of land parcels at LFD-1 Noida. The said advance of Rs. 277 Crore is reduced to Rs. 164.29 Crore as at the Insolvency Commencement Date of 09.08.2017, which is further reduced to 70.89 Crores as of 31.03.2021 (i.e., the date of appointment of GT).

¶1771

81.2. JIL has further referred to Clause XIV and XV of the Sub-Lease Deed dated 24.06.2016 executed between the Corporate Debtor (JIL), JAL, and ICICI Bank Limited for 35.03 acres of land situated at Jaganpur, which reads as under:

¶1772

“XIV. The Sub-Lessor and JAL have entered an agreement for designing, construction and development of land parcels at LFD-1 Noida (the “Inter-Corporate Agreements’) in terms of which the Sub-Lessor is liable to pay amounts in the excess of INR 183,00,00,000 to JAL (as actual and accrual payments).

¶1773

XV. In the above premises, the Sub-Lessor and JAL has offered that the Sub-Lessor shall sub-lease, transfer and assign all its right, title and interest iJ.1 and over the Demised Plot in favor of the SubLessee, for a consideration of Rs.1,82,85,66,000.00(hereinafter referred to as the “Consideration, for a period upto 19.08.2099, in lieu of part discharge of (1) JAL’s liabilities under any of the Loans (“Outstanding Dues”) and (ii) to such extent of the, Sub-Lessor’s liabilities towards JAL under the Inter-Corporate Agreements.”

¶1774

81.3. JIL has also referred to other three 3 sub-lease deeds dated 27.04.2016 executed in favour of ICICI by JIL, through which land admeasuring 11.42 acres (for a consideration of Rs. 132.71 Crore) and 150 residential plots in Mirzapur admeasuring 6.71 acres (for a consideration

¶1775

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1776

P a g e 88 | 107

¶1777

of Rs. 73.50 Crore) were transferred. The total consideration under these 03 sub-lease deeds was Rs. 206.21 Crore.

¶1778

81.4. JIL has further submitted that JAL agreed to repay the amounts under the aforesaid four sub-lease deeds by setting off against JIL’s liability towards JAL under the construction agreements. It is relevant to mention that JIL and JAL, as on the date of execution of the sub-lease deeds dated 27 April 2016, had the following construction agreements:

¶1779

a) Contract Agreement dated 1 May 2009 for Land Development at LFD-1 at Noida;

¶1780

b) Contract Agreement dated 9 October 2010 for Land Development at LFD-2 at Jaganpur;

¶1781

c) Contract Agreement dated 9 October 2010 for Land Development at LFD-3 at Mirzapur;

¶1782

d) Contract Agreement dated 6 July 2011 for Land Development at LFD-4 at Tappal;

¶1783

e) Contract Agreement dated 11 April 2011 for Land Development at LFD-5 at Agra;

¶1784

f) Contract Agreement dated 27 November 2007 for construction of Yamuna Expressway;

¶1785

g) Maintenance Agreement dated 14 September 2016 for maintenance at LFD-1 at Noida.

¶1786

81.5. Being the contractor appointed by JIL for the construction of its various projects, JAL raised RA bills on JIL from time to time. The intention was to adjust the liability of JIL under these RA bills from the liability of JAL to JIL under four sub-lease deeds.

¶1787

81.6. It is submitted by JIL that as of 31.03.2021, inter-alia, a sum of Rs.

¶1788

70.89 Crore is payable by JAL to the CD (JIL) towards the advance of construction under the sub-lease deeds executed with ICICI for debt-land

¶1789

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1790

P a g e 89 | 107

¶1791

swap. As regards the contention of JAL that the amount of Rs. 182.85 Crore received against the sub-lease deed dated 24.06.2016 has been fully settled as of 31.03.2017 as shown in the ledger of CD bearing General Ledger Code (“GL Code”) 101112, JIL maintains that the amount was never paid and there is still a recoverable balance of Rs. 70.89 Crore under the construction contract and therefore, ought to have been included in the GT Report.

¶1792

81.7. GL Code 01112 showing one bullet - single voucher adjustment is simply an accounting entry made in the pre-CIRP period by both the related parties i.e., JIL and JAL. No construction work has been carried out by JAL for which the payment of Rs. 182.85 Crore is sought to be adjusted/made by GL Code 01112. In fact, for all the construction work that JAL has carried out in Noida (LFD-1), it has been raising R.A. Bills from time to time which were paid in cash and those that were adjusted otherwise under construction agreements are referred to in other General Ledger Codes.

¶1793

81.8. Further, GL Code 101112 cannot be considered in isolation and it has to be considered with GL Code 101113 pertaining to the sub-lease deeds between JIL, JAL & ICICI together and holistically. The entry related to the sale of land for a consideration of Rs. 182.85 Crore has been posted through a single voucher number 8200005831 as closing entry as of 31.03.2017 and through the same voucher, the entry related to the sale of other land parcels as per sub-lease deeds at Serial No. 1-10 in Chart A of total consideration of Rs 460.6 Crore (Rs. 254.4 Crore towards sub-lease

¶1794

deeds dated 26.04.2016 at Sr. No. 1-7 in Chart A plus Rs. 206.2 Crore

¶1795

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1796

P a g e 90 | 107

¶1797

towards sub-lease deeds dated 27.04.2016 at Sr. No. 8-10 in Chart A) were posted under GL Code 101113 on 31.03.2017 as closing entry.

¶1798

81.9. It is a matter of fact that various payments made by JAL under GL Code 101112 and 101113 were done before 31.03.2017. Thereafter, on some ad-hoc basis, the account related to Rs. 182.85 Crore was shown as NIL as on 31.03.2017 as none of the adjustments made under GL Code 101112 pertains to consideration defined under the sub-lease deed dated 24.06.2016 i.e., JIL’s liabilities towards JAL under LFD-I contract for construction.

¶1799

81.10. The alleged adjustment of the amount of Rs. 182.85 Crore was made against voucher number 8200005831 as an accounting treatment. This was done whimsically and without any due process. There are no supporting vouchers to establish that the liability of JAL to the extent of Rs. 182.85 Crore towards construction was satisfied as of 31.03.2017. There are no documents to show whether JAL completed the designing and construction of LFD-1 at Noida as of 31.03.2017. It is an undisputed position that a separate advance of Rs. 450 Crore was paid by JIL to JAL, which was to be adjusted against the construction bills to be submitted by JAL from time to time. All the construction bills produced by JAL were paid in cash. JAL could not have completed the construction on LFD-1 at Noida by 31.03.2017.

¶1800

81.11. Further, payments related to construction were adjusted from GL Code 101113 during the period prior to initiation of CIRP, when JIL was under the control of JAL. After the initiation of CIRP for JIL on 9 August

¶1801

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1802

P a g e 91 | 107

¶1803

2017, the IRP during the CIRP period only made adjustments pertaining to sale consideration received under the sub-lease deeds at Sr. No. 8 to 11 in Chart A, which pertained to the liabilities of JAL under various construction agreements. Under the GL Code 101113, below is the summary of adjustments/payments till date:

¶1804

81.12. The IRP of JIL has given the Summary of adjustments/payments

¶1805

as below:

¶1806

Sl. No.	Particulars	Pre CIRP i.e., before 09.08.2017 (INR Crores)	During CIRP i.e., from 09.08.2017 till date (INRCrores)	Amount (in INR Crores)
1.	Bank receipt from JALto JIL	(81.22)	-	(81.22)
2.	JAL settled liabilities related to JIL Home Buyers at LFD I	(38.18)	(64.49)	(102.67)
3.	JAL settled liabilities related to JIL Home Buyers atLFD3	-	(24.41)	(24.41)
4.	JAL paid Income Tax on behalf of JIL	(4.61)	-	(4.61)
5.	JAL paid Interest to JIL lenders on behalfofJIL	(97.72)	-	(97.72)
6.	Adjustments related to Cement consumption at LFD 1construction and Yamuna Expressway project	(65.11)	-	(65.11)
7.	JV Rectification	(13.50)	-	(13.50)
8.	Miscellaneous Exp.	-	(0.51)	(0.51)
9.	Sales Consideration T	460.64 otal	-	460.64 70.89

¶1807

[Figures in bracket depicts the payments/ adjustments made by JAL]

¶1808

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1809

P a g e 92 | 107

¶1810

81.13. JIL has prayed that the matter be referred back to GT to decide this issue again.

¶1811

SUBMISSIONS OF JAL

¶1812

The amount in question (towards sub-leasing of land in Agra to ICICI Bank by JIL at the request of JAL) was a ‘trade receivable’ (with no connection to construction) and it was not advance. JIL has consistently treated this amount of Rs.70.89 Crore as a “ trade receivable ” in its own financial statements. The amount of Rs.70.89 Crore being a ‘trade receivable’ is not the subject matter of reconciliation as directed by the Hon’ble Supreme Court.

¶1813

The IRP’s argument that the sub-leases provide that the amount paid under the land swap was towards construction and therefore, any amounts due from JAL should be made part of the reconciliation is factually incorrect:

¶1814

a. There are 11 sub-lease agreements, which are divided in two sets: 10 of them were executed on 26^th /28^th April 2016 and another one was executed on 24.6.2016.

¶1815

b. The clause in question i.e., Clauses XIV and XV pointed out by the IRP’s counsel, which speaks inter alia of construction is present only in the sub-lease deed dated 24.06.2016. None of the other 10 sub-lease agreements contain such a clause.

¶1816

c . The amount of Rs.182.85 crore in relation to the lease deed dated 24.6.2016 has been settled as of 31.3.2017 based on JIL’s own ledger account.

¶1817

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1818

P a g e 93 | 107

¶1819

The IRP, in its Affidavit dated 14.03.2022, has admitted that the JIL’s ledger account (regarding the settling of Rs.182.85 Crore) produced by JAL in its Affidavit dated 04.03.2022 has been duly recorded in the books of JIL.

¶1820

JAL has further relied upon the Judgement of the Hon’ble Supreme Court in “ Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal ,” (2021) 6 SCC 36 holding as follows:

¶1821

“ 35. A perusal of the aforesaid sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgments made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills [Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115] , that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis

¶1822

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1823

P a g e 94 | 107

¶1824

to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act. ”

¶1825

IRP’s argument against the ledger account produced by JAL that JIL’s ledger account was prepared ad-hoc or that they were prepared at the behest of JAL – is clearly an argument of desperation. Accounting entries cannot be recorded without supporting vouchers - if this were true, the statutory auditors would have pointed it out in their report.

¶1826

The IRP always had the power to rectify the accounts under Section 131 of the Companies Act, 2013. Further, (contrary to the IRP’s allegation) it is not correct that the ledger account (re: Rs.182.86 Crore) shows one bullet single voucher adjustment and is unsupported by any vouchers. The same ledger account shows eight accounting transactions bearing separate voucher numbers aggregating to Rs.182.85 Crore. Thus, the said entry per voucher no.8200005831 being referred by the IRP is a separate accounting entry for sales i.e., recognition of revenue for the year forming part of the profit & loss account of JIL for F.Y. 2016-17.

¶1827

OBSERVATIONS OF THE BENCH

¶1828

After hearing submissions of both parties, the issue which emerges for our consideration is “ Whether JIL can recover an amount of Rs.70.89 Crore from JAL on account of the Land Swap Deal .”

¶1829

We would, therefore, like to examine the contention of both parties. It is contended by JAL that the clause related to construction is present

¶1830

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1831

P a g e 95 | 107

¶1832

only in the sub-lease deed dated 24.06.2016 and none of the other 10 sublease deeds contain such a clause. Per Contra, JIL had contended that other than the sub-lease deed dated 24.06.2016, the other 3 sub-lease deeds dated 27.04.2016 contained the clause that JAL’s liability would be adjusted on account of construction.

¶1833

We would, therefore, first like to visit the contents of the sub-lease deed dated 24.06.2016, the relevant extracts of which are reproduced

¶1834

below:

¶1835

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1836

P a g e 96 | 107

¶1837

From perusal of the sub lease deed dated 24.06.2016 ( ibid ), it is observed that the clause XIV recognizes the term designing, construction and development of land, against which liability was ought to be adjusted.

¶1838

Now, we would like to refer to the relevant clauses of the other three sub lease deeds dated 27.04.2016, whose reference has been given by the IRP in its Additional Affidavit dated 14.03.2022. The relevant clauses are reproduced overleaf:

¶1839

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1840

P a g e 97 | 107

¶1841

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1842

P a g e 98 | 107

¶1843

On perusal of the above, we do not find the word construction unlike the sub-lease deed dated 24.06.2016. Rather, the Sub-Lease Deeds dated 27.04.2016 speak about the “adjustment of liability towards JAL under the arrangement”. The said term “arrangement” is referred to as below:

¶1844

From the above, it is observed that the Sub-Lease Deeds dated 27.04.2016 nowhere specify that the term arrangement/agreement is used in the context of construction. Therefore, we are unable to accept this plea that the liability of JAL with respect to construction was required to be adjusted. Hence, except for the sub-lease deed dated 24.06.2016, we find that none of the sub-lease deeds had any relation to construction.

¶1845

JAL has contended that the amount of Rs 70.89 Crores is a “trade receivable” and it has nothing to do with the construction. To support its contention, it has relied upon the Balance Sheet of JIL for the Financial Year 2020-2021, the relevant extract of which is reproduced below –

¶1846

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1847

P a g e 99 | 107

¶1848

Further, the JAL has placed on record the ledger of JIL for the FY 2016-17, which reflects that the entire transaction was adjusted with the entry of “ICICI Bank JAL” - Rs. 182.85 Crore and there is no amount payable by JAL to JIL. The relevant extracts of the Ledger are reproduced below –

¶1849

–

¶1850

Though the IRP of JIL has not denied the existence of the aforesaid Ledger, the justification given by him is that the entry was made prior to the initiation of CIRP, when JIL was under the control of JAL. He has additionally stated that no construction work was carried out by JAL, for which the payment of Rs. 182.85 Crore is sought to be adjusted/made by GL Code 01112. In fact, all the construction work that JAL carried out was in Noida (LFD 1), for which it has been raising R.A. Bills from time to time which were paid in cash. Further, these adjustments are also considered in the Books of Accounts of the JIL.

¶1851

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1852

P a g e 100 | 107

¶1853

If IRP’s contention is taken to be true, we fail to understand why he has not filed any application for challenging the said transaction. It is a matter of record that no application for avoidance, preferential or fraudulent was preferred under Section 43,45,50,66 for challenging the transaction/payment of Rs. 182.85 Crore by the IRP of JIL. Hence, we have no option but to consider this as payment made by JAL.

¶1854

Moreover, the liability of Rs. 70.89 Crore is reflected in the Ledger No. 01113 of JIL, the relevant extracts of which are reproduced below –

¶1855

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1856

P a g e 101 | 107

¶1857

From the perusal of the above, it is observed that the closing balance of JIL’s Ledger 01113 is Rs. 70.89 Crores. However, when we peruse the Balance Sheet of the Corporate Debtor, it is evident that the same is reflected as ‘Trade Receivable’.

¶1858

Hence, it cannot be said beyond doubt that the said amount is arising out of ‘Construction’. We find no error committed by GT by treating JIL’s claim of Rs. 70.89 Crores outside the realm of the reconciliation process and therefore, JIL cannot recover this amount from JAL under the current reconciliation process. The issue of Land Swap Deal is decided accordingly.

¶1859

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1860

P a g e 102 | 107

¶1861

Conclusion

¶1862

Having decided all the issues, now we would like to set out the manner and distribution of the amount to the parties, post-reconciliation.

¶1863

As we have noted earlier, it is stated in the GT Report, that the distribution of Rs. 536.49 Crores amongst the parties is “undisputed” and the same is receivable by JIL/Home Buyers of JIL.

¶1864

We have also taken note of the fact in Para 11 and 12 of this order that the parties herein have mutually resolved another amount of Rs. 12.26 Crores to be shared in the equal ratio between them vide minutes of the joint meeting between the parties dated 24.12.2021.

¶1865

As regards the “disputed amount/issues”, we have decided in the

¶1866

previous paragraphs, as follows –

¶1867

Sl. No.	Nature Transaction	of	Decision	Amount Rece (Rs. inCro	ivable re)
				By JIL/ Homebuyers of JIL	By JAL
1.	RA Bills Construction (Rs 49.63 Cr)	for	JAL is entitled to retain the amount	--	49.63
2.	Bank Guarantees (BGs) issued JAL, l invoked Lenders of JI	by ater by L	JAL is entitled to retain the amount	--	212.00
3.	Advance recoverable	for	Homebuyers of JIL are entitled to	106.90 (to be kept in the	--
	IFMD by from JAL	JIL	receive the amount	Escrow account on behalf of homebuyers)
4.	Facility Management		JAL is entitled to retain the amount	--	2.33

¶1868

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1869

P a g e 103 | 107

¶1870

	Bills raised by JAL on JIL
5.	Claim of JAL towards	JAL is entitled to retain the	--	1.19
	Hospitality Services	amount

¶1871

As regards the manner and distribution of the amount to the parties, we would like to refer to the Hon’ble Supreme Court’s Order dated 27.07.2021 in M.A. 769 of 2021, which held that -

¶1872

“The adjudicating authority shall decide the objections, including on the draft report, within two weeks, as has been directed in terms of paragraph 190.1 of the judgment dated 24.03.2021 in Civil Appeal No.3395 of 2020 .

¶1873

All contentions in that regard are left open.”

¶1874

(Emphasis placed)

¶1875

Since the aforesaid order refers to Para 190.1 of the Jaypee Kensington (Supra), therefore, at the cost of repetition, we again refer to Para 190.1, wherein the Hon’ble Supreme Court specifically held that:

¶1876

“190.1. After receiving the report from the accounting expert , the NCLT shall pass appropriate orders in the manner that, if any amount is found receivable by JIL/homebuyers of JIL, the same shall be made over to JIL from out of the said amount of INR 750 crores and accrued interest; and remainder thereof shall be returned to JAL in an appropriate account and that shall abide by the directions of the competent authority dealing with the proceedings concerning JAL. The NCLT would be expected to pass appropriate orders within 2 weeks of submission of report by the accounting expert.”

¶1877

(Emphasis placed)

¶1878

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1879

P a g e 104 | 107

¶1880

At this stage, we also refer to Para 188 of the Jaypee Kensington (Supra), wherein the Hon’ble Supreme Court held that -

¶1881

“188. Accordingly, we hold that the amount of INR 750 crores, which was deposited by JAL pursuant to the orders passed by this Court in the case of Chitra Sharma, and accrued interest thereupon, is the property of JAL; and stipulation in the resolution plan concerning its usage by the resolution applicant of JIL cannot be approved. The part of the impugned order dated 03.03.2020 placing this amount in the asset pool of JIL is set aside”. (Emphasis placed)

¶1882

From the conjoint reading of Para 188 and 190.1 of the Jaypee Kensington (Supra) above, we find that the Hon’ble Supreme Court has held that –

¶1883

(a) Rs. 750 Crore is the Asset of JAL;

¶1884

(b) The NCLT shall pass appropriate orders in the manner that if any amount is found receivable by JIL/homebuyers of JIL, the same shall be made over to JIL from out of the said amount/ Asset of Rs. 750 Crores and accrued interest (in other words, only JIL/Homebuyers of JIL’s claim can be set off from the Asset of Rs.750 Crore), and

¶1885

(c) Only the remainder thereof shall be returned to JAL (in other words, any claim of JAL cannot be set off from Rs 750 Crore being its own Asset, since as per the directions of Hon’ble Supreme Court, JAL is only entitled to receive the remainder after setting off the amount receivable by JIL/Homebuyers’ of JIL).

¶1886

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

¶1887

P a g e 105 | 107

¶1888

Thus, as per the directions of the Hon’ble Supreme Court contained in Para 190.1 of the Jaypee Kensington (Supra), this Adjudicating Authority is required to pass orders in the manner that, if any amount is found receivable by JIL/homebuyers of JIL, the same shall be made over to JIL from out of the said amount of Rs 750 crore and accrued interest; and the remainder thereof only shall be returned to JAL. Accordingly, when we aggregate both the undisputed and adjudicated entitlements of JIL /Corporate Debtor & Homebuyers of JIL, the position emerges as follows:

¶1889

Sl. No.	Amount receivable by JIL/ Home Buyers of JIL	Amount (Rs. in Crore)
	(A) Amount Receivable by	JIL
1.	Undisputed amount through the GT Report.	536.49
2.	Mutually resolved by the Parties in terms of the direction of this Tribunal.	6.13
	(B) Amount Receivable by Home B	uyers of JIL
3.	The disputed amount of Rs. 106.90 Crore on account of IFMD adjudicated vide this order in favor of Homebuyers of JIL (which shall be kept in the escrow account for maintenance till it is transferred to the RWA of Home Buyers of JIL)	106.90
	Total	649.52

¶1890

We have noted above that the Hon’ble Supreme Court has specifically directed that only the remainder of Rs. 750 Crores (i.e., after excluding the amount receivable by JIL/homebuyers of JIL) along with

¶1891

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

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P a g e 106 | 107

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the proportionate amount of interest (on the remainder) shall be returned to JAL. Accordingly, we direct the Registrar NCLT through Registry of NCLT, Allahabad that out of the total amount of Rs. 750 Crores and accrued interest thereon, an amount of Rs. 649.52 Crores along with proportionate interest shall be paid to the JIL/Homebuyers of JIL and the remaining amount of Rs.100.48 Crores (i.e., Rs. 750 Crore Less Rs 649.52 Crore) along with proportionate interest shall be returned to JAL,

¶1894

on receipt of such request from the parties. The IA-2593/PB/2021 is

¶1895

disposed of accordingly.

¶1896

Since we have already dealt with the objections filed by the Applicant/IRP as well as JAL to the final report of Grant Thornton Bharat LLP dated 13.08.2021 in the IA-2593/PB/2021 , the question of allotting separate application no. to the objections does not arise. In view of this,

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the IA-631/PB/2022 is dismissed, being infructuous.

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Sd/-

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(RAMALINGAM SUDHAKAR) PRESIDENT

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Sd/(L. N. GUPTA) MEMBER (TECHNICAL)

¶1901

IA. No. 2593/PB/2021 & IA. No. 631/PB/2022 in (IB)-77/ALD/2017 IDBI Bank Vs. Jaypee Infratech Limited

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P a g e 107 | 107