Resolution Professional

Ans: The assets of the other projects of the builder cannot be maximised for the benefits of the buyers under the project for which the CIRP has been initiated. In the case of secured creditors and unsecured flat buyers, the preference shall be given to the buyers for allotment of the flats and secured creditors cannot have preference over the assets of the builder.  1)  The ‘unsecured creditors’ have a right over the assets of the Corporate Debtor i.e. flats/apartments, assets of the Company and also the secured creditors would not like to take the flats/ apartments in lieu of the money disbursed by them. Hence the assets of the Corporate Debtor which is the Infrastructure is to be transferred in their favour (‘Unsecured Creditors’) and not to the ‘Secured Creditors’ such as Financial Institutions/ Banks/ NBFCs.  2) In the case of allottees (Financial Creditors), there cannot be a haircut of assets/ flats/apartments. x

Ans: In the case of Flat Buyers Association Vs.Umang Realtech Pvt. Ltd through IRP & Ors, the following observations and judgements were held by the NCLAT-  1) The concept of Reverse CIRP was introduced in this case in which the Promoter will remain outside the CIRP but will play the role of a Lender (Financial Creditor) to ensure that the CIRP reaches success and the allottees take possession of their flats/apartments during the CIRP without any third party(Resolution applicants) intervention. 2) CIRP against a real estate company (Corporate Debtor) is limited to a project as per approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans are approved.  FOR EXAMPLE- If the same real estate company (Corporate Debtor herein) has any other project in another town such as Delhi or Kerala or Mumbai, they cannot be clubbed together nor the asset of the Corporate Debtor (Company) for such other projects can be maxim...

Ans: The homebuyers are covered under the definition of the financial creditors hence they have the same rights as the financial creditors such as to be a member in the committee of creditors, participation and voting rights in the meeting, participation in the distribution of assets. However, as the RPs and home allottees do not possess such technical expertise and knowledge which are required for managing the affairs of the corporate debtor and to ascertain the vaiability of the business during the moratorium period by the financial creditors which various other creditors such as banks, FIs have. After initiation of the CIRP, it is the duty of the RP to keep the company a going concern. In the case of a real estate infrastructure company to keep the company going concerned, the flats/ apartments are to be completed. x

Ans: The Delhi high court relying on the above judgement in  M/s M3M India Pvt. Ltd. v. Dr Dinesh Sharma and Anr case held that “remedies available to the Homebuyers under the CPA and RERA are concurrent, and there is no ground for interference with the view taken by the NCDRC in these matters. In case of conflict arises between the RERA, CPA and the IBC, the IBC would prevail.”

Ans: In Pioneer Urban Land and Infrastructure Limited v. Union of India, it was explicated that the Homebuyers can invoke the remedies under the CPA and the RERA along with IBC, 2016.  x

Ans: In the case of  Alka Agarwal Vs. Parsvanath landmark Developers Pvt. Ltd and Neeraj Gupta Vs. Emmar MGF Land Ltd, the Principal Bench of the NCLT held that a delay in handing over a residential unit will amount to default as defined under the Code. x

Ans: In the case of  Anil Kumar Tulsiani v. Rakesh Kumar Gupta , NCLAT observed that  allottee cannot allege default on the part of Corporate debtor if the allottee does not pay the whole amount whereas, when the Corporate debtor did not complete the work within time and the allottee has been agreeing to pay the total amount or has already paid the whole amount, the default can be alleged by the allottee. Again, the allottee can claim the default on the part of the Corporate Debtor when he finds that the project has not been completed by the Corporate Debtor on time and on the failure to refund the amount paid to the Corporate Debtor.

Ans: The Hon’ble Supreme Court in the Unitech Residential Resorts case directed for the deposition of Rs. 17 crores by Unitech, to the respondents who had been waiting for over seven years for the flats. On the same lines, in another case, the Supreme Court asked Jaypee Associates to pay ten Homebuyers Rs 5 lakh each, who received their flats with the delay of 5 years.

Ans: It was already held in the Nikhil Mehta & Sons (HUF) & Ors. v. AMR Infrastructures Ltd case that investors who had been promised an “assured return” by real estate companies would fall within the category of financial creditors since the monies owed to them is ‘debt’ as defined under Section 3(11)  of the IBC. Homebuyers, therefore, were considered as financial creditors in those cases where assured returns were guaranteed. Keywords used: monies: पैसा

Ans: The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 inserted an Explanation under Section 5(8) (f) which clarified that payments made by an allottee under a real estate project would be deemed to be a financial debt i.e. a homebuyer will be considered as a financial creditor.

Ans: The legislature in different cases, allowing the Creditors to submit their claims until approval of Resolution plan. The Principal Bench of the NCLT of New Delhi inom the case of M/s Edelweiss Asset Reconstruction company Private ltd Vs Adel Landmarks Ltd, it was held that the rejection of claim on the ground of delay is not sustainable because the provisions has been held to be directory. It was held that all insolvency Professionals shall make a note of these repeated orders passed by NCLT clarifying that claim of an applicant like the present and one could not be rejected on the ground of delay as the provisions has been held to be directory. Because once the resolution process is approved, it will bind on Creditors, Corporate debtor, employees, workers, Govt agencies, guarantor etc. The question is the Creditor who has not submitted any claim is not a stake holder and hence the resolution plan whether it is binding him or not is to be examined. Before amendment as per regulati...

Ans: In the Insolvency and Bankruptcy Code 2016, the concept of Claim comes into picture when the Corporate Insolvency Resolution Process will commence from the date of appointment of Interim Insolvency Professional immediately after appointment and the Interim insolvency Professional as per section 15 (1) and make a Public announcement immediately. Immediately means within 3 days. In the Public announcement, the details of CD, the Register with which the entity is registered and the last date of submission of claims and other details will be there. As per Section  15 (1) (C) and as per regulation 6(2) (C) the Creditors have to submit their claims within 14 days from the date of appointment of Interim Resolution Professional. But as per regulation 12(2),  the Creditors who fails to submit the claims with proof within 14 days can submit their claims within 90 days from the Insolvency Commencement date. The regulation 12(2) was amended. Before amendment, the Creditors who f...

Ans: Claims are a very important concept in IBC regime. The Word ‘Claim’ has been defined in the code under section 3(6) . As per this section, the claim means a right to payment and also right to remedy. Thus claim comes into picture only if there is a right to payment and if no right to payment, no claim at all. Hence right to payment will underline the concept of claim whether such right is reduced to judgement, fixed, disputed, undisputed, legal, equitable, secured or unsecured. Similarly, the right to remedy also comes under the category of claim. The right to remedy will give to right to payment whether or not such right is reduced to judgement, fixed, disputed, undisputed, matured, unmatured, secured or unsecured .

Ans: The Supreme Court in Brilliant Alloys Pvt. Ltd. v. S. Rajagopal and Others had held that Regulation 30A (pre-amendment) is only directory and that withdrawal applications may be allowed in exceptional cases at any stage of the CIRP. x

Ans: The NCLT in Satyanarayan Malu v. SBM Paper Mills Ltd., had allowed withdrawal of the CIRP at the stage where the resolution plan was accepted by the committee of creditors and was pending approval of the NCLT.

Ans: Rule 11 of the NCLT Rules, 2016 entails the inherent powers of the tribunal. However, the NCLAT held that Rule 11 cannot be applied for reopening or modifying an approved resolution plan by the NCLT. After approval of the plan, the powers of the NCLT are confined to Section 60 of the I&B Code. Pressing on the limited powers of the NCLT after approval of the resolution plan, the NCLAT held as follows:- “Since rectification of the resolution Plan does not involve the question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code, therefore it is not permitted to modify the Resolution Plan under the guise of inherent powers of the Tribunal.” Hence the NCLAT held that the NCLT does not have the jurisdiction to amend an approved resolution plan and hence set aside the order of the NCLT in QVC Exports Pvt. Ltd Vs. R.P. Deloitte Touche Tohmatsu In...

Ans: In QVC Exports Pvt. Ltd. vs RP Deloitte Touche Tohmatsu India LLP, 28th January 2020, a resolution plan was submitted jointly by the appellants during the CIRP, which was approved unanimously by the CoC and subsequently by the NCLT. The resolution plan provided for the percentage of shareholding of each of the applicants and accordingly, fresh equity shares were issued to applicants. After a period of thirteen months, one of the joint applicants approached the NCLT to obtain orders for rectification of a mistake in the resolution plan, regarding the shareholding of both the applicants. The NCLT passed orders to rectify the said resolution plan and for re issuance of the equity share capital according to the rectified resolution plan. Aggrieved by the order, the other joint resolution applicant approached the National Company Law Appellate Tribunal (NCLAT). Allowing the appeal the NCLAT made the following observations:- * NCLT did not hear both parties before passing the order The ...

Ans: Under the Insolvency and Bankruptcy Code, 2016 (“I&B Code”), a Corporate Insolvency Resolution Process (“CIRP”) is initiated with an order of the Adjudicating Authority (“NCLT”) admitting an application by a creditor or debtor. As soon as the application under relevant sections of the I & B Code is admitted, a Resolution Professional (“RP”) is appointed by the NCLT. The RP then constitutes the Committee of Creditors (“CoC”) as provided under the I&B Code. Further, prospective resolution applicants are invited to submit a resolution plan and thereafter, the plan is voted and approved by the CoC and the NCLT respectively. Once approved, the resolution plan is binding on all the stake holders. x

Ans: The Adjudicating Authority shall admit the application filed by either a financial creditor or an operational creditor or corporate applicant, if it is satisfied that the application complies with the provisions of the Insolvency and Bankruptcy Code, 2016 ('Code' for short). On admission the Adjudicating Authority shall by an order appoint an interim resolution professional ('IRP' for short) and order for public announcement and call for the submission of claims. The IRP shall cause public announcement within 3 days from the commencement of corporate insolvency resolution process. x

  Appointment of RP: Since an RP is someone who is appointed by a Committee of Creditors (hereafter, referred to as “CoC”) before its constitution an Interim RP is appointed because committee of creditors take all the important decisions in corporate insolvency resolution process from appointment of resolution professional to termination of resolution professional. The interim RP acts in the same way an RP would and manages the affairs of the CD till the appointment of an RP. As per section 22 of the Insolvency and Bankruptcy Code, 2016 (hereafter, referred to as the “Code”) within seven days of the CoC’s formation it must hold its first meeting and decide whether it would like to appoint the Interim RP as the RP or it can select a new RP. The outcome of the same must be communicated to the RP, the Corporate debtor and the NCLT.  The NCLT is a tribunal here for RP and CoC and it was constituted under section 408 of companies act, 2013.  NCLT is a quasi judicial body and i...

Ans: A Resolution Professional (hereafter, referred to as “RP”) is an insolvency professional who is appointed by the creditors of the company collectively. The RP takes over control of the Corporate Debtor (hereafter, referred to as “CD”) from its management and manages their affairs and takes into custody the assets of the CD. An RP is a professional who has qualified an insolvency course and is registered with the Insolvency and Bankruptcy Board of India ( hereafter, referred to as “IBBI”) and is governed by the IBBI (Insolvency Professional) Regulation, 2016. x