Late homebuyer claims, if reflected in corporate debtor records, should be included in disclosure memorandum By Resolution Professional: NCLAT

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The National Company Law Appeal Tribunal (NCLAT) Main bench composed of Judge Ashok Bhushan, Ms Shreesha Merla, Mr. Naresh Salecha in the case of Puneet Kaur v KV Developers Private Limited has held that the claims of homebuyers who could not file their claims within the stipulated time but were on file with the debtor company should have been included in the briefing note and that the resolution seeker should have should have taken note of them and dealt with them in the resolution plan.

NCLAT was ruling on the appeal filed by KV Developers homebuyers (KVD) who lodged their claim after the prescribed deadline or after the approval of the resolution plan by the creditors’ committee (COCs).

Quick facts

LIC Housing Finance Limited filed an insolvency petition against KVD and KVD’s corporate insolvency resolution process was initiated by NCLT in its order dated 28.10.2020. The resolution professional has requested the claims of creditors no later than 11.11.2020.

Resolution plan submitted by a consortium of Sumit Kumar Khanna and Brij Krishore Trading Pvt. ltd. (Successful Resolution Requester/SRA) was submitted to the electronic vote from 13.07.2021 to 19.07.2021 and the same was approved by a 100% vote by the COC on 20.07.2021 and thereafter the resolution professional filed an application with NCLT for approval of the resolution plan.

One of the appellant homebuyers filed his claim on 14.07.2021 (during the vote on the resolution plan) while three appellant buyers filed their claim on 23.07.2021 (after approval of the resolution plan by the COC) and an appellant homebuyer filed his claim on 09.11.2021 (after submission of plan approval application to NCLT).

These homebuyer appellants filed different interlocutory motions before NCLT seeking direction to admit their claims, but the same was denied by NCLT on the grounds that the claims are filed after an interval of eight months and therefore cannot be admitted. and that the COC had also approved the resolution plan. .

Appellant homebuyer disputes

It was argued on behalf of the appellant homebuyers that the thought that the homebuyers had not filed their claims but that the details of their award and payment already existed in the corporate debtor’s file and that, by therefore, the resolution professional could have included the claims of these homebuyers in the information memorandum.

It was further argued that enormous prejudice is being caused to homebuyers due to the failure to include their claim in the information memorandum and that homebuyers will be treated differently from financial creditors.

Litigation of the resolution professional

It was argued on behalf of the resolution professional that all of the homebuyers filed their claims late and after the resolution plan was approved by the COC. It was also argued that no error was made by the resolution professional as the claim was filed beyond the 90 day period prescribed by the code and furthermore there is no obligation for the resolution professional to specifically notify homebuyers to file their claims. outside of publishing.

Conflicts of the successful resolution applicant

The SRA supported Resolution Professional’s submissions and further argued that the resolution plan is being submitted pursuant to the information memorandum and that no new claims can be received after the resolution plan has been approved. It was also argued that the CIRP is a time-limited process and that admitting late claims will delay the CIRP.

Issues framed by NCLAT

The NCLAT formulated two questions of law for its consideration;

Was the resolution professional obligated to include the homebuyers’ details as they appear in the debtor company’s records in the information memorandum, even though they did not file their claim with the resolution professional on time?

Should the resolution seeker also have taken care of the resolution plan regarding the homebuyers, whose names and claims are reflected in the debtor company’s file, although they did not file any claims?

Decision/Analysis by NCLAT

The NCLAT noted that homebuyers have now been recognized as financial creditors under the IBC and that the amendment was made to alleviate the hardship of homebuyers and to give them a CIRP participation of a real estate company.

NCLAT further observed that due to the current procedure regarding the filing of claims by financial creditors, a large number of no. of homebuyers are unable to file their claims on time for a variety of legitimate reasons.

The bench ruled that all documents relating to the homebuyers are on file with the debtor company and that the resolution professional also takes over all of the debtor company’s files.

“19…Although the Interim Resolution Professional/Resolution Professional is not obligated to include the names of those homebuyers, who did not file the claim on time in their list of creditors, but there is no reason not to collect the claims of those homebuyers whose claims are reflected in the debtor company’s records, including their payments and attribution.”

The NCLAT further held that Regulation 36(2) of the CIRP Regulation requires the resolution professional to include details of the debtor company regarding assets and liabilities.

“21…Liability to homebuyers who have not filed their claims exists and should be included in the information memorandum…”

The bench further held that the purpose of the debtor company’s CIRP is to uncover all of the debtor company’s liabilities and take steps toward resolution and unless all of the debtor company’s liabilities are not known. or included in the information memorandum, no CIRP will be completed.

“Failure to consider these claims, which are apparent from the record, leads to an unfair and unfair resolution, as seen in this case.”

NCLAT concluded that;

“23. We are therefore of the view that the circular should have included the claim of these homebuyers, who did not even file their claims to correct the liabilities of the debtor company for its proper resolution…”

The NCLAT decided the appeal by ordering the resolution professional to submit the details of the homebuyers whose details are reflected in the debtor company’s file to the successful resolution applicant and the SRA to prepare an addendum to the resolution plan which may be submitted to the COC for consideration. Bench ordered that this exercise be completed within three months.

Counsel for the Appellant: Me Mahesh Kumar and Me Simran Soni, lawyers.

Counsel for the Respondents: Mr. Abhinav Vasisht, Sr. Advocate with Mr. Rakesh Kumar Bajaj and Mr. Harish Taneja, Advocates for R-1 & 2., Mr. Nitin Kumar and Mr. Gagan Gulati, lawyer for R-3.M. Sumesh Dhawan and Ms. Vatsala Kak, lawyers for R-4.

Click here to read/download the order

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