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2024 Supreme(Online)(NCLAT) 1256

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
ASHOK BHUSHAN, J
Deepak Sakharam Kulkarni & Anr. – Appellant
Versus
Manoj Kumar Agarwal, Resolution Professional of D.S. Kulkarni Developers Ltd. – Respondent
Company Appeal (AT) (Insolvency) No. 63 of 2024 | Company Appeal (AT) (Insolvency) No. 1142 of 2023 | Company Appeal (AT) (Insolvency) No. 1307 of 2023 | Company Appeal (AT) (Insolvency) No. 1308 of 2023 | Company Appeal (AT) (Insolvency) No. 1223 of 2023 | Company Appeal (AT) (Insolvency) No. 1226 of 2023 | Company Appeal (AT) (Insolvency) No. 1660 of 2023 | Company Appeal (AT) (Insolvency) No. 1050 of 2023 | Company Appeal (AT) (Insolvency) No. 1051 of 2023 | Company Appeal (AT) (Insolvency) No. 1361 of 2023 | Company Appeal (AT) (Insolvency) No. 1385 of 2023

Advocates:
For the Appellants/Petitioners:Mr. Krishnendu Dutta, Sr. Advocate, Akshay Gosavi, Mr. Kumar Anurag Singh, Mr. Kartik Sandal, Ms. Raveena Devan, Mr. Avaneesh Jaiswal, Mr. Zain A. Khan, and Mr. Anish Ahlawat
For the Respondents:Mr. Abhijeet Sinha, Sr. Advocate, Varun Kalra, Samir Malik, Akash Chatterjee, Pranav Khanna, Neeraj Kishan Kaul, Arvind Nayar, Puneet Singh Bindra, Akshay Doctor, Parag Sawant, Akshay Sharma, Akshay Joshi, Rishabh Gupta, Mehreen Garg, Sameer Sethi, and Kushal Choudhary.

The court established that properties owned by third parties cannot be included in the Resolution Plan, reaffirming that only assets belonging to the corporate debtor can be managed under the Insolvency and Bankruptcy Code.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 18, 30(2), 31 - Corporate Insolvency Resolution Process (CIRP) - Approval of Resolution Plan - Challenges to the approved plan based on undervaluation of assets, inclusion of personal properties of promoters, and rejection of homebuyers' claims - Appeals by promoters, homebuyers, operational creditors, and employees lead to different outcomes based on claims, adaquacies of included properties, and compliance with legal provisions. (Paras 1-224)

(B) The court held that inclusion of properties in Resolution Plan must adhere to ownership rights, necessitating exclusion of third-party assets not belonging to the corporate debtor. The court set aside parts of the plan affecting properties of appellants, affirming their claims as homebuyers. Appeals regarding approval of the plan were dismissed due to lack of merit based on statutory compliance failure. (Paras 128-175)

Facts of the case:
Multiple appeals challenging Resolution Plan approval after CIRP initiation due to financial irregularities, under PMLA attachments, and homebuyers' claims. Proclamations of asset ownership and operational obligations raised substantive discourse on legal interpretations of the IBC regarding asset management, ownership, and creditor rights amid ongoing insolvency. (Paras 1-90)

Findings of Court:
The court distinguished between claims of homebuyers and original asset owners, determining rightful inclusion in Resolution Plan must conform to statutory requirements, ruling in favor of homebuyers based on acknowledgment of their allotments. (Paras 114-215)

Issues: The main issues addressed include whether the CIRP complied with statutory requirements, adequacy of valuation procedures, legitimacy of asset ownership claims in the plan, and the admissibility of homebuyer claims. (Paras 90-108)

Ratio Decidendi: The court found that assets not owned by the corporate debtor could not be included in the Resolution Plan, therefore necessitating adjustments to the original asset listings while affirming the validity of homebuyers' claims, contingent upon sufficient proof of acknowledgment by the corporate debtor. (Paras 175-189)

Result: Appeals partly allowed and certain clauses of the Resolution Plan set aside. Order of the Adjudicating Authority dated 23.06.2023 approved but modified to exclude non-corporate debtor properties. Homebuyer claims recognized and entitled for relief as per the approved plan. (Paras 219-224)

Table of Content
1. overview of appeals filed against approval of resolution plan (Para 1 , 2 , 3)
2. arguments regarding undervaluation of corporate debtor's assets (Para 14 , 15 , 20)
3. court upholding certain claims of appellants (Para 61 , 206)
4. provisions for treatment of assets owned by third parties under ibc (Para 162 , 166)
5. dismissal of appeals concerning finalization of resolution plan (Para 223 , 224)

JUDGMENT

ASHOK BHUSHAN, J.

The Appeal(s) have been filed against the – (i) Order dated 23.06.2023 passed by National Company Law Tribunal, Mumbai Bench-I in IA No.1950 of 2021 filed by the Resolution Professional (“RP”), by which order Resolution Plan submitted by Ashdan Properties Pvt. Ltd.; Classic Promoters and Builders Pvt. Ltd. and Atul Builders India Pvt. Ltd. (in Consortium) have been approved by the Adjudicating Authority in respect of the Corporate Insolvency Resolution Process (“CIRP”) of D.S. Kulkarni Developers Ltd. (the Corporate Debtor); and (ii) Orders dated 01.08.2023, rejecting the IA’s filed by Homebuyers as infructuous consequent to order dated 23.06.2023.

2. The above Appeal(s) have been filed by Promoters of the Corporate Debtor; other Group Entities; Operational Creditors; Employees and Homebuyers of the Corporate Debtor. For convenience, the Appeal(s) can be divided in three groups namely – Group-I, Group-II and Group-III.

Group-I (1) Company Appeal (AT) (Insolvency) No. 63 of 2024 - Deepak Sakharam Kulkarni & Anr. (Promoter);

(2) Company Appeal (AT) (Insolvency) No. 1142 of 2023 - Shirish Deepak Kulkarni (Promoter);

(3) Company Appeal (AT) (Insolvency) No. 1307 of 2023 - DS Kulkarni and Company (Related Entity);

(4) Company Appeal (AT) (Insolvency) No. 1308 of 2023 - DSK Global Education and Research Pvt. Ltd. (Related Entity)

Group-II - (Homebuyers)

(1) Company Appeal (AT) (Insolvency) No. 1361 of 2023 - Jiten S. Gada & Ors.

(2) Company Appeal (AT) (Insolvency) No. 1385 of 2023 - Viraj Sham Jadhav (Homebuyers)

(3) Company Appeal (AT) (Insolvency) No. 1050 of 2023 - Piyuja Suresh Singhvi & Anr.

(4) Company Appeal (AT) (Insolvency) No. 1051 of 2023 – Priyash Suresh Singhvi & Anr.

(5) Company Appeal (AT) (Insolvency) No. 1660 of 2023 - Bharat Vitthal Jadhav & Ors.

Group-III

(1) Company Appeal (AT) (Insolvency) No. 1223 of 2023 - Sri Umiyaa Construction Pvt. Ltd. & Ors. (Operational Creditor);

(2) Company Appeal (AT) (Insolvency) No. 1226 of 2023 - Dhanaji Mohan Nikam & Ors. (Employees)

3. Before we notice facts and pleadings in above Appeal(s), it is necessary to notice certain facts with regard to DSK Group, which consists of the Corporate Debtor – D.S. Kulkarni Developers Ltd. and other Group Entities, partnership firms, engaged in different business, primarily real estate development. The CIRP proceedings culminated into the Resolution Plan, which has been approved by the impugned order dated 23.06.2023. There has been several proceedings including the proceedings under Prevention of Money Laundering Act, 2002 (hereinafter referred to as the “PLMA Act”) against the Corporate Debtor and its Promoters, Related Entities, which also need to be noticed.

4. The D.S. Kulkarni Developers Ltd. and Group Companies have been in the business of residential and commercial construction since last several decades. Deepak Sakharam Kulkarni, Appellant No.1 in one of the Appeals is founder of the Group. Appellant No.2 – Smt. Hemanti Deepak Kulkarni is wife of Deepak Sakharam Kulkarni. Shri Shirish Deepak Kulkarni, Appellant in Another Appeal is son of Deepak Sakharam Kulkarni and Smt. Hemanti Deepak Kulkarni. On 31.12.1984, Deepak Sakharam Kulkarni, Hemanti Deepak Kulkarni and Shirish Deepak Kulkarni, as Partners, constituted a Partnership Firm namely - D.S. Kulkarni & Company. On 18.05.1987 Deepak Sakharam Kulkarni with Hemanti Deepak Kulkarni and Shirish Deepak Kulkarni constituted another Partnership Firm namely – D.S. Kulkarni & Associates. On 20.09.1991, D.S. Kulkarni Developers Ltd. was incorporated as Public Limited Comp

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2024 Supreme(Online)(NCLAT) 1256

The court established that properties owned by third parties cannot be included in the Resolution Plan, reaffirming that only assets belonging to the corporate debtor can be managed under the Insolvency and Bankruptcy Code.

Cases Referred (3)