Information Memorandum prepared based on Resolution Plan Submitted & Approved by CoC cannot be modified: NCLAT

The New Delhi bench of National Company Law Appellate Tribunal ( NCLAT ) has held that the Information Memorandum prepared by the Resolution Professional based on which the Resolution Plan approved by the CoC, cannot be modified.

Mrs. Supriya Singh, the appellants/homebuyers whose Application before the NCLT was rejected. The appellant sought equitable treatment with that of other creditors in class. The applicant sought to set aside the Impugned Order.

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The Appellants were sent an email with the Information Memorandum, wherein they found that their names in the list of allottees whose units have been cancelled but these units are still vacant. The Appellant contended that, it was for the first time when the Appellants were made aware that their units had been cancelled.

The RP intimated the Appellants, through the authorised representative, that their units were found cancelled in the books of accounts of Corporate Debtor, prior to the CIRP initiation and hence the same cannot be restored. It was further informed by the RP that the Appellants cannot be treated at par with other 15 homebuyers whose units were not cancelled, despite them being on the same boat.

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The final approved Resolution Plan of Clause 6 provides that the allottees whose units have been cancelled shall be allotted a unit at base selling price (BSP) of INR 4200 per sq feet of super area. Additionally, it was provided that 100% of their admitted principal amount shall be adjusted against the freshly allotted unit.

It was submitted that the Information Memorandum which was used to determine the Resolution Plan contained incorrect facts regarding the Appellant's unit.Had correct information been provided, the CoC may not have approved the Resolution Plan.

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Per contra, RP/Respondent No. 1 submitted that after initiation of CIRP, the Applicants filed their respective claims with the Resolution Professional for full amount without deducting the amount of part payment received by them from their Corporate Debtor.

It was argued that RP carried out the verification of their claims as per the records of the Corporate Debtor and it was found that the units allotted to the Applicants were cancelled by the Corporate Debtor even prior to the initiation of CIRP period.Respondent No. 1/RP admitted the balance amount to be paid to them and kept them in a separate category of creditors in a class of homebuyers.

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The Tribunal found that Information Memorandum was prepared by the RP on the basis of records of the Corporate Debtor. The Resolution Professional carried out their verification as per the records of the Corporate Debtor. It was found by the RP that the units allotted to the Applicants were cancelled by the Corporate Debtor, much prior to the initiation of CIRP against it.

The bench found that even though the allotment were cancelled by erstwhile management of the Corporate Debtor, the Resolution Plan had provided treatment to the said cancelled allottees. And this Resolution Plan was approved by the CoC with 100% majority in their 12th CoC meeting held on 03.08.2023.

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The tribunal observed that Resolution Plan was prepared and filed by the Resolution Applicant in compliance with Section 30 of the Code and later it has been duly approved by the CoC in its commercial wisdom.

It is well settled position of law that the Resolution Plan, duly approved by the COC as per their commercial wisdom has a very limited scope of judicial review and which is circumscribed by the provisions contained in Section 31 of the Code.

It was found that the appellants have contended that there is a violation of the UPRERA Decree. The Appellants contend that as per UPRERA Decree, only partial payment was made and therefore the Corporate Debtor has not complied with the Orders of the UPRERA.

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The bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) observed that the decree was prior to institution of insolvency and part payment was also made by the erstwhile management. The CoC, RP could not have revoked the cancellation as it was beyond their jurisdiction. In fact, they had gone ahead as per the information collated from the records of the Corporate Debtor. The contention of the Appellant that there is a failure to comply with the UPRERA Decree cannot be accepted.

While dismissing the appeal, the NCLAT held that the Information Memorandum contained the information and CoC could not have revoked the cancellation and acted within its commercial wisdom approving the Resolution Plan.

To Read the full text of the Order CLICK HERE

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