Deepak Sakharam Kulkarni & Anr. Vs Manoj Kumar Agarwal (NCLAT Delhi)
Summary: The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, in Deepak Sakharam Kulkarni & Anr. v. Manoj Kumar Agarwal, Resolution Professional of D.S. Kulkarni Developers Ltd. & Ors., decided a batch of 11 appeals challenging approval of the resolution plan of D.S. Kulkarni Developers Limited. The appeals arose from the NCLT Mumbai orders dated 23 June 2023 and 1 August 2023 and were filed by promoters, related entities, homebuyers, operational creditors and employees. The corporate insolvency resolution process commenced on 26 September 2019 following an application by Bank of Maharashtra under Section 7 of the Insolvency and Bankruptcy Code, 2016. The resolution plan submitted by the consortium of Ashdan Properties Pvt. Ltd., Classic Promoters and Builders Pvt. Ltd. and Atul Builders India Pvt. Ltd. was approved by the Committee of Creditors and subsequently by the Adjudicating Authority.
The promoters, including Deepak Sakharam Kulkarni and Hemanti Deepak Kulkarni, challenged the resolution plan on grounds of alleged undervaluation, improper treatment of assets and inclusion of properties belonging to persons or entities other than the corporate debtor. They contended that assets having a book value exceeding ₹1,900 crore were being transferred for approximately ₹826.30 crore, with only ₹30 crore payable upfront. They also questioned the inclusion of properties previously attached under the Prevention of Money Laundering Act, 2002. The NCLAT examined the objections concerning valuation, the commercial wisdom of the Committee of Creditors, the scope of judicial review under the IBC and the effect of proceedings under other laws. It declined to interfere with the approved resolution plan merely on the basis of the promoters’ valuation objections and dismissed their appeals.
The related entities raised separate objections concerning ownership of land and existing contractual rights. D.S. Kulkarni and Company contended that land measuring 89.35 acres at Village Bavdhan had been included in the resolution plan despite the firm’s ownership rights. DSK Global Education and Research Pvt. Ltd. challenged provisions purporting to extinguish rights arising from a registered 99-year lease of approximately 19 acres, on which substantial educational infrastructure had been constructed. The NCLAT distinguished between assets belonging to the corporate debtor and independently established rights of third parties. It partly allowed the appeal of D.S. Kulkarni and Company by excluding the area of 0H41R recorded in its name from the relevant resolution-plan schedule. It also partly allowed the appeal of DSK Global Education and Research Pvt. Ltd., deleting Clauses 13.4, 13.5 and 13.6 and protecting its leasehold rights and building from extinguishment under those provisions.
The homebuyers challenged rejection of their claims by the Resolution Professional, particularly where allotment letters, registered agreements and supporting records established their interests in the projects. Certain claims had been rejected because payments were not reflected in the corporate debtor’s books or because they were submitted after the prescribed period. Some applications challenging rejection remained undecided when the resolution plan was approved and were subsequently dismissed as infructuous. The NCLAT examined the relevant allotment records, payment evidence and the Resolution Professional’s obligations in the claims-verification process. It held that the homebuyers in Company Appeal (AT) (Insolvency) Nos. 1361, 1385 and 1660 of 2023 were entitled to recognition as allottees and that the rejection of their claims could not stand.
The Tribunal also granted relief to the appellants in Company Appeal (AT) (Insolvency) Nos. 1050 and 1051 of 2023, whose allotments were supported by registered deeds dated 30 June 2017 and payments reflected in the corporate debtor’s ledger. It directed the successful resolution applicant to treat these appellants in the same manner as other admitted homebuyers and provide their allotted units in accordance with the resolution plan. However, the Tribunal refused relief to the operational creditors and employees in Company Appeal (AT) (Insolvency) Nos. 1223 and 1226 of 2023. In examining the competing claims, the NCLAT applied the statutory framework governing resolution plans, the limits of interference with commercial decisions and the need to protect legally established third-party rights.
Accordingly, by its judgment dated 1 July 2024, the NCLAT dismissed Company Appeal (AT) (Insolvency) Nos. 63 of 2024 and 1142, 1223 and 1226 of 2023; partly allowed Nos. 1307 and 1308 of 2023; and granted relief to the homebuyers in Nos. 1361, 1385, 1660, 1050 and 1051 of 2023. Subject to the specified modifications and directions, it upheld the NCLT’s approval of the consortium’s resolution plan. The Tribunal also granted liberty to appellants whose appeals were partly allowed to seek further directions in the event of non-compliance. The decision illustrates that while the commercial wisdom underlying an approved resolution plan ordinarily receives judicial deference, a plan cannot automatically extinguish independently established property and leasehold rights, and genuine homebuyers’ claims require consideration in accordance with the applicable legal framework.
The NCLAT allowed the homebuyers’ appeals, directing acceptance of their allottee claims and treatment under the approved resolution plan on the same footing as other admitted homebuyers. Subject to these modifications and directions, the Tribunal upheld the resolution plan approved on 23 June 2023, permitted applications for implementation directions in the event of non-compliance, and directed parties to bear their own costs.
Cases Discussed
- State Tax Officer v. Rainbow Papers Ltd. — 2022 SCC OnLine SC 1162: Cited by the employees in connection with treatment of government dues and statutory claims under an insolvency resolution plan.
- Puneet Kaur v. K.V. Developers Pvt. Ltd. & Ors. — Company Appeal (AT) (Insolvency) No. 390 of 2022 (NCLAT): Considered regarding the Resolution Professional’s duty to account for homebuyers’ claims supported by records of the corporate debtor.
- Ramkrishna Forgings Ltd. v. ACIL Ltd. (Resolution Professional) — (2024) 2 SCC 122: Considered on judicial interference with valuation and the approval of a resolution plan.
- Committee of Creditors through its Representative, Jaga Ath Kar v. Anil Tayal, Resolution Professional of Horizon Buildcon Ltd. — Company Appeal (AT) (Insolvency) No. 1633 of 2023, decided 16 February 2024 (NCLAT): Cited concerning objections to valuation reports obtained during CIRP.
- Dr. K.A. Dhairyawan & Ors. v. J.R. Thakur & Ors. — AIR 1958 SC 789: Considered regarding ownership of buildings constructed on leased land and the contractual rights of lessors and lessees.
- Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Ltd. & Ors. — (2022) 1 SCC 401: Considered on the permissible scope of resolution plans and treatment of assets or rights belonging to third parties.
- Greater Noida Industrial Development Authority v. Roma Unicon Designex Consortium — 2023 SCC OnLine NCLAT 1612: Cited regarding treatment of leasehold and other property rights under a resolution plan.
- UCO Bank v. Sudip Bhattacharya, Resolution Professional of Reliance Naval & Engineering Ltd. — 2021 SCC OnLine NCLAT 3047: Considered in connection with the legal limits on extinguishing rights through a resolution plan.
- Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain, Resolution Professional of S.K. Wheels Pvt. Ltd. — (2022) 2 SCC 583: Considered regarding termination of contractual arrangements and the jurisdiction of insolvency adjudicating authorities.
