Commercial Space Allotted By Corporate Debtor Through Unregistered Allotment cannot Excluded From Resolution Plan: NCLAT

The New Delhi bench of National Company Law Appellate  Tribunal ( NCLAT) has held that allotment of commercial spaces by the corporate debtor through unregistered documents like allotment letter, lease deed etc.cannot divest the CD of their ownership. They would continue to remain the assets of the CD therefore they cannot be excluded from the Resolution Plan.

The Corporate Debtor, IP Construction Pvt. Ltd., a real estate company, involved in development of Project. The Corporate Debtor (“CD”) has issued an allotment letter in favour of Appellant, Praveen Arya in Company Appeal (AT) allotting the office spaces Nos.GF-08, GF-09 and GF-10 on the ground floor, each admeasuring 47.93 sq. mt. in the Project Coral Brio situated at C5, Sector-18, Vasundhara, Ghaziabad.

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Similarly, the Appellant in Company Appeal (AT) was allotted Commercial space/ office vide allotment letter dated 31.03.2013. On 07.05.2014, Nupur Garg issued a letter to the CD requesting cancellation of commercial spaces/ Office Nos. SF-02 and SF03 and sought refund of the booking amount.

The CIRP against the Corporate Debtor commenced on an application filed under Section 7 by the Union Bank of India. The Adjudicating Authority vide order dated 11.01.2019 initiated the CIRP by admitting Section 7 application.

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The Appellant(s) filed their claims on 02.12.2019. The RP verified the claim of Appellant and has issued a List of Financial Creditors in the class of Commercial Space Buyer, which included the name of the Appellants of Company Appeal (AT) (Ins.) No.40 of 2024 at Sl. No.21 and Appellant – Nupur Garg at Sl. No.17, admitting their claims.

In the CIRP of the Corporate Debtor, Resolution Plan was submitted by individual of consortium. The Committee of Creditors (“CoC”) on 16.01.2020/ 30.10.2020 approved the Resolution Plan with 87.49% vote shares. The Resolution Plan offers payment of 50% of the principal amount to the class of commercial space buyers and in alternate permitted them to opt for equivalent commercial space at alternate places on rates as mentioned in the Resolution Plan.

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It was submitted that the Appellants being commercial space buyers, who had paid substantial amount to the CD, were entitled for execution of Sale Deed for commercial spaces. In the Resolution Plan the claim of the Appellants for execution of the Deed has not been accepted and there were initial proposal only of 50% of principal amount in the Resolution Plan.

Per contra, the respondent/RP submitted that the Resolution Plan having been approved by majority by 87.49%, the Plan is binding on all stake holders of the CD, including the Appellant(s). The Appellant(s) as dissenting Financial Creditors were entitled to the liquidation value as per Section 30, sub-section (2).

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The SRA submitted that the Appellant(s) being dissenting Financial Creditors are entitled only for the liquidation value as per Section 30, sub-section (2). The liquidation value of both the Appellant(s) are 'zero', however, the SRA has proposed to pay the Appellant 100% of principal amount of claim admitted in the CIRP.

The tribunal found that the allotment letter and Lease Deed executed in favour of the Appellant is an unregistered document. The transfer of title is contemplated by registered documents. It was well settled that allotment which is a contract between parties at best lead to as specific performance of contract. However, the allotment itself does not transfer any title in favour of the Appellant(s).

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In Jaypee Kensingston Boulevard Apartment Welfare Association & ors. Vs. NBCC (India) Ltd. & Ors. – (2022) , the Supreme Court has held that Resolution Plan has to comprehensively deals with all the assets and liabilities of the Corporate Debtor and no housing project could be segregated for the reason that the same has been completed or is nearing completion.

In light of the judgement, the bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) held that by virtue of allotment of commercial space in favour of the Appellant(s), including the Lease Deed dated 24.12.2014 in favour of Nupur Garg, the Appellant(s) cannot claim to have become owners of the commercial spaces. The CD continues to own the assets and the plea of the Appellant(s) that assets be excluded from CIRP of the CD, or the Appellant(s) are owners of the commercial space/ units allotted to them, cannot be accepted.

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A perusal of result of voting on Resolution Plan, indicate that Financial Creditors in case of commercial space buyers have dissented. The Appellant(s) are also part of Financial Creditors in class of commercial space buyers. Financial Creditors being a dissenting Financial Creditors are entitled as per Section 30, sub-section (2) sub-clause (b),the tribunal noted.

It was observed that the Appellant(s) under Section 30, sub-section (2)(b) were entitled for only liquidation value, which according to the Resolution Plan is 'zero'. However, the SRA having offered 100% refund of the principal amount with alternative proposal for commercial space, the entitlement of Appellant(s) as per the Resolution Plan is of 100% refund of the principal amount or the option for alternate commercial space.

The bench found that the claims, which were admitted pertained to the claim of the Appellant upto the date of commencement of the CIRP. There has been no consideration of the claim of the rent by the Appellant from July 2019, which was one of the prayers made in the application, therefore ends of justice will be served in granting liberty to the Appellant to file an appropriate application for claim of rent subsequent to commencement of CIRP.

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