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Judgment
Ashok Bhushan, J.
We have heard Shri Arun Kathpalia, Senior Advocate with Shri Abhijeet Sinha, Learned Counsel for the Appellant, Shri Krishnendu Datta, Senior Advocate for Respondent No.1, Shri Dhruv Mehta, Senior Advocate for the Applicant in IA No.4103 of 2023, Shri Hardeep Sachdeva, Learned Counsel for the Applicant in IA No.3875 of 2023, Shri Vijay Nayar, Learned Counsel for ‘Zenius Global’, Shri Gaurav Mitra, Learned Counsel for the IRP, Shri Gaurav H. Sethi and Shri Deeptanshu Chandra, Learned Counsel for Homebuyers.
This Appeal has been filed by the Appellant- Suspended Director of the Corporate Debtor- ‘M/s. Sequel Buildcon Private Limited’ challenging the order dated 16.06.2023 passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi Bench, Court III, by which order Section 7 Application filed by Mr. Neerav Bhatnagar (Respondent No.1) and 79 other homebuyers has been admitted. The Appeal was heard by this Tribunal on 07.07.2023, on which date, following interim order was passed:-
“In the meantime, the IRP shall continue to collate the claims, however, he shall not constitute the CoC till the next date.”
In the Appeal filed by the Appellant, the Appellant has come up with the case that Appellant under the supervision of the IRP are desirous of completing the construction and a Strategic Project Partner- ‘EKA Life Limited’ has offered to provide interim finance of Rs.75 Crores which shall be utilized for construction of project. It was contended that with the introduction of Strategic Partner, Corporate Debtor shall complete the project under the supervision of the IRP in a time bound manner which shall be beneficial to the homebuyers/allottees and to the creditor without having to undergo any haircut. It is useful to extract the case set up by the Appellant in the Appeal. In very synopsis of the Appeal, following has been stated at page 6:-
“It is pertinent to mention that the appellant has arranged for KGK reality (India) Private Limited through its associate company EKA Life Limited as a Strategic Project Partner("Eka") for settlement of creditors, completion of the project "The Belvedere and for revival of the Corporate debtor company. The strategic partner shall infuse investment of upto maximum of Rs. 75 Crores as interim finance, over a period of 6 to 9 months, for meeting the Project Cost for completion of the Project and provide its expertise and support to the corporate debtor for completion of the Project. The introduction of strategic partner enables the corporate debtor to complete the project in a time-bound manner, that eventually results in the homebuyers/ allottees being benefitted, along with the creditors of the corporate debtor without having to undergo any hair-cut.”.
An Affidavit was filed by the Appellant dated 14.07.2023 annexing Memorandum of Understanding dated 12.07.2023 between the Suspended Director of ‘M/s. Sequel Buildcon Private Limited’, ‘Belvedere Welfare Association’ and ‘M/s. EKA Life Limited’. The consent of the homebuyers and the letter dated 10.07.2023 of ‘Belvedere Welfare Association’ has also brought on record. Another Affidavit dated 20.07.2023 where Addendum to Memorandum of Understanding dated 12.07.2023 was also brought on record. This Tribunal heard the parties and passed a detailed order on 25.07.2023 issuing various directions including the direction to the IRP to ensure that constructions be carried out as per MoU and Status Report be submitted in the Court after eight weeks. The order also mentions that the agreement recorded in the MoU also noticed that ‘EKA Life’ shall deposit a sum of Rs.20 Crores within 30 days from the order. Other directions in the order were to facilitate start of the construction and completion. IRP was also directed to keep the Corporate Debtor as a going concern. The order dated 25.07.2023 is to following effect:-
“25.07.2023: In this Appeal, an Interim Order was passed on 07th July, 2023 staying the constitution of Committee of Creditors. An Affidavit has been filed in compliance of order passed on 07th July, 2023 where a Memorandum of Understanding dated 12th July, 2023 has entered with the home-buyers and the M/s. Eka Life Services which is strategic financer, detailing the terms and conditions under which construction shall be carried out by the IRP with the cooperation of the Suspended Director and their officers and employees. We take the MoU as well as Addendum on record and issue further directions for carrying out the construction:
i. IRP shall ensure that constructions are carried out as per MoU and Status Report be submitted in the Court after eight weeks.
ii. The Appellant shall cooperate with the Interim Resolution Professional and arrange to disburse the interim finance amount of Rs. 75 Crore through available interim fund proposer ‘M/s. Eka Life Services or in the absence of them through their own sources over a period of 6 to 9 months as stated in Clause 3 of Terms Sheet and subsequently re-iterated in Clause 3A of the MoU to ensure that the project is completed within the time frame agreed in the aforesaid MoU.
iii. It is further agreed that a sum of Rs. 20 Crore will be deposited by the Interim Fund Proposer or the Appellant in the RERA approved Escrow account of the Corporate Debtor within 30 days from the order of this Hon’ble Appellate Tribunal.
iv. Further, the disbursement of interim fund and funds generated from dues of the Allottees (Financial Creditors) during the Corporate Insolvency Resolution shall be paid in a timely manner as agreed under the MoU and will be deposited in the RERA account of the Company (Corporate Debtor) to keep the Company as a going concern. The amount will be utilized only for the purposes of completion of the ‘Ajnara Belvedere’ project and by issuance of cheques signed by the authorised person of the Company (Corporate Debtor) with counter signature by the Interim Resolution Professional.
v. The flats/apartments in Phase I of the project should be completed within 18 Months in all aspect by January, 2025 and the flats/apartments in the Phase 2 of the project and other common areas to be completed within 30 months in all respect by January, 2026 with an initial grace period of 30 days required to mobilize the project. The construction of both phases will be started simultaneously with a gap, if any, of maximum 30 days.
vi. The Appellant shall re-commence and construct the project under the supervision of the IRP. Further, the Appellant/Promoter to file a status report, not beyond 10th of the immediate next month, regarding progress in terms of MOU, construction update and interim funds every month, with the IRP and the Allottees.
vii. The moratorium will continue to operate on the corporate debtor during the present process and the IRP will continue to keep the CD as a going enterprise and submit his report on the project progress with the Adjudicating Authority on a quarterly basis.
viii. In case of any breach of the MoU by the Appellant/Promoter, the IRP and/or the Homebuyers/Respondent Association will be at liberty to file appropriate application before this Hon’ble Appellate Tribunal for terminating the ‘Reverse Corporate Insolvency Resolution Process’ and continuing with the CIRP process in accordance with the provisions of the IBC.
ix. List this Appeal on 04th October, 2023. Interim Order to Continue. The stay of the Constitution of CoC shall continue.”
IA No. 4103 of 2023 on behalf of ‘Aditya Birla Finance Limited’ was filed on 23.08.2023 where following prayers have been made:-
“In view of the aforesaid facts and circumstances of the present case, it is most respectfully prayed that this Hon'ble Tribunal may be pleased to:
(a) Allow the present application; and
(b) Implead the Applicant to the Company Appeal (AT) (INS) No. 823 of 2023 titled Anoop Kumar Srivastava v. Neerav Bhatnagar & Anr.; and
(c) Pass any other order that this Hon'ble Tribunal may deem fit and proper in the interest of justice.”
On 24.08.2023, IA No. 3875 of 2023 was filed by ‘EKA Life Limited’ praying for extension of 30 days’ time to infuse the interim finance amount of Rs.20 Crores. Certain other prayers were made in the Application. One of the directions was also sought for the IRP and the promoters to apply for and procure renewal/ re-validation of necessary approvals required for resuming construction of the Project and IRP to execute the Definitive Agreements alongside suspended management with the Applicant for the proposed interim financing of the Project of the Corporate Debtor.
On 18.09.2023, ‘Aditya Birla Finance Limited’ filed an Additional Affidavit. Learned Senior Counsel for the ‘Aditya Birla Finance Limited’ submits that ‘Aditya Birla Finance Limited’ which is the Financial Creditor of the Corporate Debtor is interested in giving a better financial offer to the Corporate Debtor for carrying out the construction. Term Sheet dated 14.09.2023 entered between ‘Eldeco Infrastructure & Properties Ltd.’ and ‘Aditya Birla Finance Limited’ as well as Term Sheet dated 14.09.2023 entered between ‘Wadhawa Group Holding Pvt. Ltd.’ and ‘Aditya Birla Finance Limited’ were also annexed in the Additional Affidavit. Additional Affidavit filed by ‘Aditya Birla Finance Limited’ was replied by the IRP by its reply dated 26.09.2023. In the Reply to Additional Affidavit, IRP has provided a comparison of proposed term sheets.
A reply to the Additional Affidavit of ‘Aditya Birla Finance Limited’ was also filed by ‘EKA Life’. In the Reply, ‘EKA Life Limited’ has pleaded that in pursuance of the order of the Tribunal dated 25.07.2023, ‘EKA Life’ has handed over a Demand Draft drawn on Axis Bank Ltd. dated 14.09.2023 in favour of the Corporate Debtor for an amount of Rs.20 Crores to the Interim Resolution Professional. It was further pleaded that the interim finance agreement was signed by the Promoters and ‘Eka Life’ on 20.09.2023 and has been provided to the IRP for execution.
We by our order dated 27.09.2023 noticed the submission of the IRP that he has received several offers from different entities for financing the Corporate Debtor. We have permitted the Resolution Professional to examine all the offers and submit his comments and notes with Status Report. Our order dated 27.09.2023 is as follows:-
“Learned Counsel for the Resolution Professional submits that he has received several offers from different entities for financing the Corporate Debtor. Resolution Professional may examine all the offers and submit his comments and notes with status report by 3rd October, 2023.
Aditya Birla Finance seeks time to file Replies to the Objection. He may do so by 3rd
Physical copy of Reply may also be filed by Eka by 3rd October, 2023.
List this Appeal on 04th October, 2023.”
In pursuance of our order dated 27.09.2023, IRP had submitted its notes/comments on 03.10.2023. Under the heading ‘cost of interim finance’ with regard to ‘Eka Life Limited’, rate of interest noticed was 18% p.a. simple interest and with regard to ‘Zenius Global Media Private Limited’, rate of interest noted was 15% p.a. simple interest and with regard to ‘Eldeco Infrastructure & Properties Ltd.’ and ‘Wadhwa Group Holding Private Limited’, following comment has been made:-
“No details regarding interest or cost have been provided.”
At page 4 of the notes and comments, details of various other comparison between four finance providers are given, as noted above.
Learned Counsel for the Appellant as well as Learned Counsel for the ‘EKA Life’ contends that this Tribunal has already passed an order on 25.07.2023 issuing various directions which specifically noticed the agreement of ‘EKA Life’ to provide interim finance of Rs.75 Crores out of which Rs.20 crores was agreed to be paid within 30 days. It is submitted that the order dated 25.07.2023 was passed after noticing the MoU between the Promoters of ‘Belvedere Welfare Association’ as well as ‘M/s. EKA Life Limited’. Homebuyers have also given consent. Office bearer of ‘Belvedere Welfare Association’ which included Neerav Bhatnagar, Joint Secretary who was Applicant 1 under Section 7 Application has also signed the MoU. Order dated 25.07.2023 was passed after considering all aspects of the matter and the construction could have been started which could not be started due to IA filed by ‘Aditya Birla Finance Limited’ being IA No.4103 of 2023. Learned Counsel for the Appellant submitted that ‘Aditya Birla Finance Limited’ is a Financial Creditor of the Corporate Debtor who had initially not shown any interest in reviving the Corporate Debtor and now two term sheets of ‘Eldeco Infrastructure & Properties Ltd.’ and ‘Wadhawa Group Holding Pvt. Ltd.’ have been submitted on behalf of ‘Aditya Birla Finance Limited. ‘Aditya Birla Finance Limited’ has already brought once ‘Eldeco Infrastructure & Properties Ltd.’ as a development management in the year 2021 which was prior to initiation of CIRP but appointment of ‘Eldeco Infrastructure & Properties Ltd.’ brought additional financial burden. The project could not be completed with ‘Eldeco Infrastructure & Properties Ltd.’ and it left after six months. It is submitted that the Appellant as well as ‘EKA Life’ has approached ‘Aditya Birla Finance Limited’ to give its consent for carrying out the project which was not responded by ‘Aditya Birla Finance Limited’. ‘Aditya Birla Finance Limited’ has now come up to bring two entities to give interim finance when it has seen that project is to commence with the finance of ‘EKA Life’. It is submitted that the application filed by ‘Aditya Birla Finance Limited’ is wholly with object to delay the completion of the project. It is submitted that dues of ‘Aditya Birla Finance Limited’ shall be taken due care in the project. It is submitted that the Appellant has already indicated that the dues of the Financial Creditor shall be cleared without any haircut.
Shri Dhruv Mehta, Learned Senior Counsel appearing for ‘Aditya Birla Finance Limited’ reiterated the submission that the term sheet of ‘Eldeco Infrastructure & Properties Ltd.’ and ‘Wadhawa Group Holding Pvt. Ltd.’ which has been submitted by ‘Aditya Birla Finance Limited’ is better term sheet and project can be completed by taking interim finance as suggested by the Appellant.
We may also notice that at the time when ‘EKA Life’ has not deposited Rs.20 Crores interim finance within 30 days, promoters have suggested another interim finance i.e. ‘Zenious Global Media Pvt. Ltd.’ which has also given its term sheet.
From the sequence of the events and submissions made by Learned Counsel for the parties, it is clear that the project of the Appellant which is ‘Belvedere’, Sector-79, Noida having an area of 30,000 Sq. Mtr. is a project which can be very well revived under the supervision of the IRP with the assistance and co-operation of the promoters and the strategic finance provider. ‘EKA Life’ a strategic project partner has offered to provide finance even before filing of this Appeal and the ground taken in the Appeal is that ‘EKA Life’ the strategic project partner is ready to provide interim finance of Rs.75 Crores which shall sufficient to carry out the completion of the project which will be beneficial to both homebuyers as well as the Financial Creditor.
Noticing the submissions and facts of the case, we have passed a detailed order on 25.07.2023 for carrying out the construction of the project as per MoU. In the order dated 25.07.2023, it was noticed that ‘EKA Life’ shall deposit Rs.20 Crores within 30 days. However, before expiry of 30 days, an Application was filed by ‘EKA Life’ being IA No.3875 of 2023 seeking extension of time to deposit which was also noticed by our order dated 28.08.2023.
‘EKA Life’ having already deposited Rs.20 Crores by Bank Draft dated 14.09.2023, we are of the view that the extension of time prayed in IA No.3875 of 2023 needs to be granted from 25.08.2023 to 14.09.2023 when the Bank Draft of Rs.20 Crores was deposited.
Much emphasis has been given by Shri Dhruv Mehta, Learned Senior Counsel on IA No.4103 of 2023 where ‘Aditya Birla Finance Limited’ has offered to provide a better term sheet and finance the entire project. We have already noticed above that ‘Eldeco Infrastructure & Properties Ltd.’ who is now suggested by ‘Aditya Birla Finance Ltd.’ to provide interim finance was already engaged in the project prior to CIRP at the instance of ‘Aditya Birla Finance Limited’ but could not complete the project.
After considering the relevant facts and submissions, we having already passed a detailed order on 25.07.2023 for carrying out the construction in the project as per directions contained therein, we see no reason to modify the said direction and now permit any other interim finance provider who has now come up offering to provide interim finance to the project.
Learned IRP in his notes and comments has submitted a comparison with regard to cost of finance between all four interim finance providers, rate of interest claimed by ‘EKA Life’ is 18% p.a. whereas ‘Zenious Global Media Pvt. Ltd.’ has offered 15% p.a.
Shri Arun Kathpalia, Learned Senior Counsel during the course of submission has submitted insofar as rate of interest of ‘EKA Life’ is concerned 3% interest which is in excess of one provider by ‘Zenious Global Media Pvt. Ltd.’ shall be borne by the promoter.
We accept the above submission and thus, are of the view that cost of interim finance as offered by ‘EKA Life’ is now equal to the one offered by ‘Zenious Global Media Pvt. Ltd.’. We, thus, are satisfied that there are no grounds made out to issue any modification of our order dated 25.07.2023 and we are of the view that the construction of the project need to be proceeded further as per our direction on 25.07.2023.
‘Aditya Birla Finance Limited’ being a Financial Creditor has undoubtedly interest in the project so that it is able to realize its dues from the Corporate Debtor. IRP along with his notes and comments filed on 03.10.2023 has brought on record a Master Agreement dated 19.09.2023 between promoters, Directors of ‘M/s Sequel Buildcon Private Limited’ and the IRP. In the agreement with regard to amount received in the escrow account i.e. 30% was contemplated to utilize as per paragraph 5.2 in following manner:-
“The amount so received in the Escrow Account i.e., 30%, shall be utilised towards
(a) CIRP cost,
(b) Admin Costs (all project cost, overheads and as per RERA),
(c) If ABFL consent is obtained towards sharing of security in favour of Eka and sale of unsold units, then toward the repayment of ABFL loan for a period of 18 months from the date of this Agreement, and thereafter the fund from the aforesaid account shall be used towards the repayment of ABFL's Principal amount and the Minimum Guarantee of Eka/ Third Party Lender on a proportionate basis.
Provided, however, if ABFL consent is not obtained within 12 months from the date of this Agreement, then the repayment of the IF Facility including the Minimum Guarantee Amount shall commence immediately after the expiry of 12 months from the date of this Agreement in priority to the existing lenders of the Developer. The existing lenders shall be paid only once the IF Facility including the Minimum Guarantee is paid in full to Eka and Third Party Lender.”
After commencement of the construction in the project, receivables in the project have to be deposited in the RERA designated account i.e. 70% and 30%. Although in the Master Agreement, as noted above, certain clauses have been indicated with regard to payment of dues of ‘Aditya Birla Finance Limited’, we are of the view that the promoters, IRP and interim finance provider in consultation with the ‘Aditya Birla Finance Limited’ need to submit a fresh proposal as to how and in what manner the dues of ‘Aditya Birla Finance Limited’ shall be cleared out of the project.
We, having taken into consideration the facts of the present case as noted above, are of the view that the commencement of the project is needed to serve the interest of homebuyers as well as creditors. In continuation of the order dated 25.07.2023 as noted above, we issue following further directions:-
(i) IA No.4103 of 2023 is disposed of impleading ‘Aditya Birla Finance Limited’ as Respondent No.4 (EKA Life having already impleaded as Respondent No.3).
(ii) Order dated 25.07.2023 does not need any modification (3% interest reduction to be borne by promoter).
(iii) All concerned to take steps to act in pursuance of our order dated 25.07.2023. IRP with the assistance of promoter to take steps for renewal of registration of the project and obtain all other necessary permission to start the construction which may be completed within 30 days from today. The construction of the project may commence immediately thereafter.
(iv) The IRP and the promoter may file Status Report by 10th of every month. IRP after consultation with the promoter, interim finance provider and ‘Aditya Birla Finance Limited’ may submit a proposal for commencing the repayment towards a facility obtained from ‘Aditya Birla Finance Limited which proposal may be submitted within 6 weeks from today.
List the Appeal on 04.12.2023.