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Uttar Pradesh State Power Sector Employees Trust, Lucknow v/s Dewan Housing Finance Corporation Limited, Through its Administrator, Mumbai & Another

    Company Appeal (AT) (Insolvency) No. 759 & 760 of 2021

    Decided On, 27 January 2022

    At, National Company Law Appellate Tribunal

    By, THE HONOURABLE MR. JUSTICE M. VENUGOPAL
    By, JUDICIAL MEMBER
    By, THE HONOURABLE MR. V.P. SINGH
    By, TECHNICAL MEMBER & THE HONOURABLE DR. ASHOK KUMAR MISHRA
    By, TECHNICAL MEMBER

    For the Appellant: Divyam Agarwal, Ahsan Allana, Ashish Joshi, Advocates. For the Respondent: Arun Kathpalia, Sr. Advocate, Ashish Bhen, Ketan Gaur, Chitra Rentala, Aayush Mitruka, Kaustub Narendran, Samriddhi Shukla, Lisa Mishra, Vishal Hablani, Raunak Dhillon, Animesh Bisht, Saloni Kapadia, Madhavi Khanna, Shubhankar Jain, Aniruddh Gambhir, Advocates.



Judgment Text

V.P. Singh, Technical Member.

1. The Appellants have filed the present Appeals under Section 61 of the Insolvency and Bankruptcy Code, 2016 ("Code"), impugning the Order dated June 7, 2021 ("Impugned Order") passed by the AA Adjudicating Authority / National Company Law Tribunal, Mumbai Bench in the Miscellaneous Application No. 415 of 2020 ("MA 415") and MA. No. 416 of 2020 ("M.A. 416") (collectively referred as "UP Applications") in C.P.(IB) No. 4285/MB/2019 ("NCLT Petition").

2. FACTUAL BACKGROUND:

2.1 The Appellant in CA (AT) (Ins) No. 759 of 2021 is UP State Power Sector Employees Trust which is a General Provident Fund Trust set up for Uttar Pradesh Power Corporation Limited ("UPPCL"). Since March 2017, the said Appellant had invested Rs. 2631.20 crores in the form of 319 Fixed Deposits ("FD ") with DHFL.

2.2 The Appellant in CA 760/AT/INS /2021 is Uttar Pradesh State Power Corporation Contributory Provident Fund Trust, set up for Uttar Pradesh Power Corporation employees Limited ("UPPCL"). Since March 2017, the said Appellant had invested Rs. 1491.50 crores in the form of Fixed Deposits ("FD Fixed Deposit ") with DHFL Dewan Housing and Finance Company, which in turn, issued fixed deposit receipts thereof.

2.3 On December 3, 2019, the Hon'ble NCLT admitted DHFL into CIRP Corporate Insolvency Resolution Process and appointed Respondent No. 1 as the Administrator. The AA/ NCLT imposed a moratorium under the Code read with the 'FSP Rules' Financial Service Provider Rules in the Admission Order.

2.4 The Appellants submitted their claims to Respondent No.1 concerning the matured FDs, vide 'Form CA'. The Applicant in Miscellaneous Application 415 of 2020 claimed an amount of Rs. 1535,56,68,260/-, out of which a claim of Rs. 1531,68,36,412/- was admitted, and an amount of Rs. 3,88,31,848/- was rejected.

2.5 The Applicant in Miscellaneous Application 416 of 2020 submitted a claim of Rs. 869,21,28,672/-, out of which claim of Rs. 867,92,89,737/- was admitted, and a claim of Rs. 1,28,38,935)- was rejected.

2.6 Vide representations dated December 16, 2019, the Applicants called upon Respondent No. 1 to release the amounts of the matured FDs within 48 hours from the receipt of the said representations. However, vide letters dated December 20, 2019, Respondent No. 1 stated that it could not release the matured FD amounts owing to the moratorium imposed under Section 14 of the Code. Being aggrieved by the same, on January 16, 2020, the Applicants filed their Applications before the AA/ NCLT inter alia seeking payment of the entire amounts of the matured FDs.

2.7 After that, on May 31, 2021, Respondent No. 1 filed an application seeking approval of the Resolution Plan for DHFL. The Applicants were not made a party to that application. On June 7, 2021, the AA/ NCLT pronounced the Impugned Order wherein the NCLT, without considering any of the submissions on behalf of the FD. Holders disposed of the Appellants Applications and directed Respondent No. 2 to consider enhancing the payment percentage made to the FD holders. On the same date, the AA/ NCLT also passed an order approving the Resolution Plan for DHFL.

2.8 Accordingly, Respondent No. 2, during its 20th meeting held on June 17, 2021, deliberated and considered a resolution to revise the amounts allotted to the FD. Holders and treat the FD holders at par with the secured Financial Creditors. Predictably, the said resolution was rejected by Respondent No. 2 with a majority of 89%.

2.9 Being aggrieved by the Impugned Order, the Appellants have approached this Appellate Tribunal. However, pending the hearing of the present Appeal, on September 29, 2021, the Applicant in Miscellaneous Application 415 of 2020 received Rs. 353,57,55,029/- under the approved Resolution Plan against its admitted claim of Rs. 1531,68,36,412/- and the Applicant in Miscellaneous Application 416 of 2020 received Rs. 200,35,36,599/- under the approved Resolution Plan, against its admitted claim of Rs. 867,92,89,737/-. The said amounts were retained by the Appellants/Applicants towards part discharge of the amounts claimed by the Appellants, without prejudice to its rights to receive the entire amount.

3. Appellants Submission

3.1 Monies invested by the FD. Holders are held in Trust by DHFL:

(a) Rule 10 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 ("FSP Rules") provides that Rule 5(b) (Moratorium) of the FSP Rules and Section 14 of the Code does not apply to any third-party assets or properties in custody or possession of the Financial Service Provider, including any funds, securities and other assets required to be held in trust for the benefit of third parties. Further, the Explanation appended to Section 18 of the Code categorically provides that assets for the Section would not include "assets owned by a third party in possession of the Corporate Debtor held under trust or contractual arrangements including bailment".

(b) It is a settled position of law that monies deposited by the FD holders are not like a loan but a deposit to be held in trust by the Company till the time of maturity ( Deepak Insulated Cable Corporation Ltd v. Union of India (2000 SCC OnLine Kar 8311 paragraph 2). Therefore, the monies deposited by the FD holders were not the monies of DHFL but were deposited in trust, as per law, thereby making DHFL liable to repay such deposits in full.

(c) A similar argument made by the National Housing Bank was allowed by the National Company Law Tribunal, Mumbai Bench ("NCLT"). Accordingly, the monies advanced by NHB to DHFL were allowed to be kept aside as an interim arrangement. The arrangement was later made absolute by the NCLT by Order dated June 7, 2021, passed in IA No. 1104 of 2020.

(d) It is also well-settled that there may be a special relationship arising from particular circumstances and requirements of a deposit, which impress it with trust. In such cases, notwithstanding insolvency, the money is to be refunded to the beneficiary in full (see: Reserve Bank of India v. Bank of Credit and Commerce International (1993 (78) Com Cas 207 (Bom) paragraphs 13, 23 and 33). Such special relationship can also be inferred if the deposited amount is earmarked or segregated from the general assets of the recipient.

(e) In the present case:

(i) The deposits are accompanied by special circumstances - the NHB Act prescribes specific circumstances and requirements governing these FDs.

(ii) DHFL is not free to use the funds as it sees fit - the deposits were made with the specific purpose of making investments.

(iii) The deposits are not mixed with the general assets of DHFL - they reflect as independent liabilities in DHFL's balance sheet. Moreover, even if the funds were combined, the same would be immaterial in light of the aforesaid exceptional circumstances attending the deposits and impressing them with trust.

(f) Thus, the deposits are impressed with trust and must be repaid in full.

3.2 NHB Act is the special statute governing the investments of the FD holders:

(a) There is no overlap or contradictions between the Code and the NHB Act. Hence, the overriding clause as contained in Section 238 of the Code doesn't apply. While ordinarily, the Code is a special statute, in the present case, the special statute governing DHFL and, thereby, the deposit holders' investment is under the NHB Act. The same is evident from a plain reading of the provisions of the NHB Act (Chapter V).

(b) It is trite law that is even assuming there was an inconsistency, where a general statute and a specific statute relating to the same subject matter cannot be reconciled, the special or specific statute must prevail. Therefore, the principle is that general law yields to special law provided they operate in the same field, on the same subject, and if there is any inconsistency. In the present case, the subject is deposits made by the FD holders in specifically regulated institutions such as DHFL. In contrast, the subject of the Code is overall debt restructuring, insolvency and bankruptcy for, generally, all corporate persons and individuals, respectively. (Ref: Order dated February 19, 2014, in Commercial Tax Officer, Rajasthan v. M/s Binani Cement Ltd. & Anr. (2014) 8 SCC 3191)

(c) It is also pertinent to note that there can be a situation in law where the same statute is treated as a special statute vis--vis one legislation and again as a general statute vis--vis another legislation. Such situations do arise as held in LIC of India v. DJ Bahadur (Ref: (1981) 1 SCC 315 paragraph 52). It was there observed: "... for certain cases, an Act may be general and for certain other purposes, it may be special and the court cannot blur a distinction when dealing with the finer points of law." Additionally, in the case of two statutes containing non-obstante clauses, the later Act will normally prevail; however, where the former Act is a special statute, and the later Act is a general statute, the special statute will prevail. [Ref: Order dated March 1, 2021, in A. Navinchandra Steels Private Limited v. SREI Equipment Finance Limited & Ors. (2021)4 SCC 435]

(d) The fact that the NHB Act is a particular act has been admitted by Auditors of DHFL as late as April 2018 (even after the enactment of the Code). In addition, the Auditors of DHFL have in their Secretarial Audit Report dated April 30, 2018, for the financial year 2017-2018 stated that:

"6. Based on the nature of business of the Company, the following specific Act / Laws /Rules / Regulations are applicable to the Company:

(a) The National Housing Bank Act, 1987 and all the Rules, Regulations, Circulars, Directions und Guidelines prescribed thereunder and The Housing Finance Companies (NHB) Directions, 2010 and Housing Finance Company Issuance of Non-Convertible Debentures on Private Placements (NHB) Directions, 2014 for Housing Finance Companies."

From the above, it is clear that the NHB Act would be a special statute in a matter concerning the fixed deposits, even when compared to a latter act, i.e. Companies Act, 2013.

(e) Therefore, the Code is a general law in the present case, and the NHB Act is a special law. In this regard, Section 2(b) of the Code makes it abundantly clear that the provisions of the Code would apply, inter alia, to any other companies governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act. Therefore, the Code itself accepts that it will not apply where its provisions are inconsistent with the provisions of the special Act. The relevant extract of Section 2(b) of the Code is set out below:

"2. Application.

The provisions of this Code shall apply to-

(a) any company incorporated under the Companies Act, 2013 (18 of 2013) or under any previous company law;

(b) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act: ..."

(emphasis supplied)

3.3 The Impugned Orders are passed without keeping in mind the going concern status of DHFL

(a) The acceptance of public deposits and servicing them when repayments become due is an essential part of a housing finance institution's ordinary course of business. Therefore, for DHFL to maintain its status as a going concern, DHFL needed to discharge its liability towards public depositors like the Appellants as and when it arose.

(b) DHFL, in blatant violation of Sections 29 (a)A(6) and 29 A(4)(a) of the NHB Act, is continuing its Lending Business without repaying the public depositors. Section 29 (A) of the NHB Act categorically provides that to continue carrying on its business, a housing finance institution ought to be able to pay its present or future depositors in full as and when their dues arise. This specific requirement also forms part of the license granted by NHB to DHFL and thus, ought to have been complied with.

(c) Following Section 23(2) read with 17(2)(e) of the Code, Ist Respondent Administrator ought to have taken actions to ensure that DHFL had complied with the requirements under any law for the time being in force. Therefore, the Code itself mandates that if there are any other laws applicable to a Corporate Debtor/Financial Service Provider, the same ought to be complied with. Further, Clause 39 of the NHB Directions states that a housing finance company (like DHFL), which fails to pay a public deposit upon maturity, is prohibited from making loans or investments until the public depositors are repaid. Similarly, Clause 39 of the RBI Master Directions on 'Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions', 2016, provides that a non-banking financial company (like DHFL), which fails to pay a public deposit upon maturity, is prohibited from making loans or investments till the public depositors are repaid.

(d) Given the above, DHFL could not have continued its lending business without paying public deposits as the same would violate the NHB Act read with the NHB Directions that govern DHFL. Therefore, it was imperative that the obligations of DHFL to its deposit holders, including the Appellant, were met before continuing its operations.

(e) Further, the principles of justice and equity required Respondent No. 1 to order the release of and continue payment of matured amounts to the Appellants as part of its ongoing business. In any event, the dues payable to the Appellants form part of the liabilities of DHFL. As such, the release of the dues would help reduce the liabilities of DHFL and improve its financial health.

3.4 The AA/ NCLT failed to consider the repayment obligations under the National Housing Bank Act, 1987

(a) DHFL is a deposit receiving housing finance company that provides financial services in terms of the license granted by National Housing Bank and RBI. As per the terms of the said license, DHFL is bound by the directions of the NHB and RBI. Further, the payment made to the FD holders falls within the definition of current dues' arising for the use of continuation of the license issued by the NHB. Therefore, it was incumbent on DHFL to repay the FD holders in full as per the terms of their deposit. The fact that the FD. Holders ought to have been paid as per the terms of their deposit forms parts of the 'Notes forming part of the consolidated financial statement for the year ended March 31, 2018, of DHFL.

(b) In addition, DHFL was required to maintain the entire cover of the FDs under the NHB and RBI Directions. Despite the said cover and the security provided to the FD Holders, they were not extended. Being a public deposit holder, the Appellant has a statutory right to be repaid by DHFL and such right overrides any other right, contractual, or otherwise.

(c) Section 36 of the NHB Act provides for a non-obstante clause that states that the NHB Act provisions have an overriding effect on any other inconsistent law or instruments. Further, Section 36A of the NHB Act provides that every deposit by a housing finance company is required to be repaid by the terms and conditions thereof. Thus, as per the provisions of the NHB Act, the interest of the deposit holders is paramount, and the financial service provider is obligated to repay the public deposits under the NHB Act, notwithstanding any other law.

(d) Thus, it is the statutory obligation of DHFL to continue repaying its deposit holders as and when their dues have matured. A similar commitment is cast on the financial service provider even under Section 45QA of the RBI Act. In this regard, the minuscule allotment to public depositors under the approved Resolution Plan is nothing but a naked attempt to ensure that losses/haircut is shifted from the other creditors of DHFL to the shoulders of the public depositors. It is tantamount to a brazen theft of the property of FD holders/ public depositors.

(e) Further, the Banning of Unregulated Deposit Schemes Act, 2019 (for brevity "BUDSA") (enacted on July 19, 2019) deals with banning unregulated deposit schemes and is wholly irrelevant in the present context. A bare perusal of the 'BUDSA' makes it abundantly clear that it does not apply to deposits made with an entity registered under the NHB Act. Therefore, the legislative intent of the NHB Act cannot be drawn from an entirely unconnected legislature, such as the 'BUDSA'. It is trite law that each legislation is to be read and interpreted independently unless otherwise stated in the legislature.

(f) In this regard, the commercial wisdom of the CoC finds no place. The commercial wisdom of the CoC cannot override applicable law, which, in the present case, is the NHB Act read with the NHB Directions. The Appellants did not seek to challenge the approved Resolution Plan in the Applications filed before the Adjudicating Authority. Still, they had sought that the FD holders be repaid in full in accordance with the applicable law, as set out hereinabove.

3.5 The Hon'ble NCLT ought to have appreciated that the public depositors are separate from secured / unsecured creditors

(a) Public depositors are neither secured nor unsecured creditors but constitute the third class of creditors who stand on a higher footing than secured/unsecured creditors with a statutory right to repayment. In this regard, it is pertinent to note that even the form prescribed for public depositors to make their claim is distinct and separate from the other creditors of DHFL.

(b) Given the above, the claim of the public deposit holders ought not to be equated with that of any other creditor of DHFL and ought to be repaid in full as statutorily mandated. However, in complete violation of the statutory requirement, the approved Resolution Plan allotted Rs. 1300 - 1500 crores, despite having an admitted aggregate claim of Rs. Five thousand three hundred seventy-five crores constitute merely 23% to 26% of their claim amount. The said payment is only marginally higher than the liquidation value that the public holders would be entitled to in the event of liquidation of DHFL.

(c) Without prejudice to the rights and contentions of the Appellants that the Appellants ought to have been paid 100% of its claimed amount, the Appellants submit that the Respondents submitted that the public deposit holders were nothing but financial creditors of DHFL. However, despite the admission that the public deposit holders were financial Creditors of DHFL, the public depositors were given the same treatment as the other financial creditors', including the debenture holders. The unjust ill-treatment of Respondent No. 2 towards the public deposit holders is evident from the fact that, under the approved Resolution Plan, the other financial creditors were allotted around 40% to 45% of their claim, and the public depositors were allotted merely 23% to 26% of their claim. This ill-treatment is also clear that even the NCLT had requested the CoC to treat the public deposit holders at par with the financial creditors in the Impugned Order. In any event, it was inappropriate on the part of the Learned AA/ NCLT to make a 'request', and the same ought to have been, at the very least, a binding direction. Respondent No. 2 promptly and overwhelmingly rejected the suggestion/ request made by the AA/ NCLT when the same was put to the vote.

3.6 Implementation of the approved Resolution Plan:

(a) Merely because the approved Resolution Plan is implemented does not mean that the Appellants has lost its statutory right to appeal. In any event, the implementation of the approved Resolution Plan does not bear the relief sought by the Appellants in the present Appeal, which is to set aside the Impugned Order to the extent of non-repayment to the extent FD holders in total. Therefore, DHFL is still able to repay the FD Holders in full as mandated by the NHB Act and the NHB Directions.

3.7 The Resolution Plan ought not to have been put to the vote before the CoC:

(a) The approved Resolution Plan could have never been put to the vote before the CoC, as the said plan was in contravention of the provisions of the NHB Act and the NHB Directions. Section 30(2)(e) of the Code expressly states that the resolution professional (Administrator in this case) ought to have confirmed that the plan so submitted conformed with the requirements as set out in Section 30(2)(a) to (e). Section 30(2)(e) of the Code states,

"(e) does not contravene any of the provisions of the law for the time being in force."

(c) As the approved Resolution Plan is in contravention of the provisions of the NHB Act, the same ought not to have been put forth before the CoC for voting. Furthermore, Section 30(2)(e) provides that the Code's provisions are read harmoniously with the requirements of the other laws in force (i.e. NHB Act and its directions) and not in supersession.

3.8 The Resolution Plan has been implemented, and a new entity has been formed:

(a) During arguments, the advocates for the erstwhile Corporate Debtor contented that under the Order passed by the Hon'ble NCLT approving the Resolution Plan, the same was implemented. By way of a reverse merger, the Successful Resolution Applicant merged into the Corporate Debtor. Thus, a new entity, namely, Piramal Capital & Housing Finance ("PCHF") was formed. Basis this development, PCHF contended that the mandatory obligations under the NHB Act, which arose due to the failure of the Corporate Debtor, did not apply to SRA' PCHF'.

(b) The Appellants submit that the said argument is flawed and untenable as admittedly, by way of a reverse merger, the Successful Resolution Applicant merged into the Corporate Debtor; thus, the Corporate Debtor is till date in existence and thus, the obligations of the Corporate Debtor to comply with the provisions of the NHB Act exist. Furthermore, the Appellants Applications were filed before the reverse merger and before the approved Resolution Plan was placed before the CoC. Thus, any steps taken by the Respondents despite the pendency of the UP Applications were subject to the orders of the Tribunal.

3.9 Prejudice caused to the Appellant:

(a) The Appellants are bona fide investors, and these investments were made on behalf of the employees of UPPCL while keeping their best interests in mind. The non-release of the payments due to the Appellants will severely impact the employees' financial well-being and the public at large since UPPCL is a public utility.

(b) For most of the employees of UPPCL, the investment made through the Appellants are their only form of savings - which would serve them in good stead during times of old age, medical emergency and other necessities. As such, the livelihood and welfare of around 25,000 employees of UPPCL are at stake. Consequently, these employees and their families are gravely concerned about their future.

(c) Non-interference with the Impugned Order is likely to have a domino effect that may lead to several other large entities being pushed into insolvency. Any disruption in power supply will adversely impact UPPCL's 2.70 crore consumers and the 23-crore population of Uttar Pradesh. By way of the Impugned Order, the same yardstick is being applied to strategic investors and FD holders under the Code without regard to the fact that the nature and purpose of their investments differ vastly.

(d) If the Impugned Orders are upheld, grave injustice will be caused to the FD holders being low- and middle-income individuals, resulting in complete unrest and loss of confidence. It is submitted that serious prejudice will be caused to the Appellants and the other public depositors if entire amounts qua the matured fixed deposits are not paid.

4. Ist RESPONDENTS SUBMISSIONS

4.1 By of the captioned Appeal Nos. 759 of 2021 and 760 of 2021 (collectively to be referred to as "Appeals"), the Appellants are essentially seeking a complete payment of their deposits with the erstwhile Corporate Debtor ("Erstwhile CD").

4.2 On 07.06.2021, under Section 31 of the Insolvency & Bankruptcy Code, 2016 ("IBC/Code"), the Ld. National Company Law Tribunal ("Ld. NCLT") approved the Resolution plan dated 22.12.2020 (Resolution Plan") vide Order passed in Interlocutory Application No. 449 of 2021 in Company Petition No. 4258 of 2019 ("Plan Approval Order"). An overwhelming majority had approved the said Resolution Plan of 93.65% of the Committee of Creditors ("CoC") of the Erstwhile CD. In contrast, the distribution mechanism (which was a separate voting item was approved by 86.95% of the voting share of the CoC. Further, vide the Plan Approval Order, the Ld. NCLT directed the CoC to reconsider the amount payable to fixed deposit ("FD ") holders. Under the said direction, in its 20h meeting dated 17.06.2021, the CoC put to the vote the resolution for maintaining parity between the Appellants/F.D. Holders and secured Financial Creditors. However, this resolution was rejected by 89% (approx.) of the voting members of the CoC.

4.3 Notably, the Appellants participated in the Corporate Insolvency Resolution Process ("CIRP") in the Capacity of Financial Creditors and were treated as such. They were represented as a class of Financial Creditors through an authorised representative of their choice. Contrarily, they now approach this Appellate Tribunal seeking untenable reliefs in law and militate against their actions since the admission of the Erstwhile CD into insolvency.

5. The Appellants do not possess the locus-standi to file the Appeals

5.1 The Appellants are admittedly trusts registered under the Indian Trusts Act, 1882, filed the Appeals in their name. It is settled that trust, not being a legal person, is not entitled to sue in its name (Case 1: Kishorelal Asera v. Haji Essa Abba Salt Endowments & Ors., 2003 SCC OnLine Mad 443 [Para 14]). Only trustees of a trust are legally entitled to sue on its behalf. In this case, the Appellants' trusts are not even a party to the present Appeals.

6. The claims of the Appellants are governed by the IBC alone.

6.1 Due to significant mismanagement of the Erstwhile CD, the Reserve Bank of India ("RBI") itself stepped in and initiated insolvency proceedings of the Erstwhile CD under the IBC, read with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Services Providers and Application to Adjudicating Authority) Rules, 2019 ("FSP Rules"). It is a settled position of law that once a company is admitted into insolvency, the IBC is a complete and exhaustive code that governs the entire process after that. As described in the preamble of the IBC, it is an "Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons". As such, it is evident that the legislature, in its wisdom and complete awareness of statutory provisions that existed at the time of enactment of the IBC, set the law for governing the insolvency process.

6.2 Despite such a statutory mandate under IBC, the Appellants contend that the manner of distribution towards FD holders must uniquely be governed in accordance with the National Housing Bank Act, 1987 ("NHB Act") and the Reserve Bank of India Act, 1934 ("RBI Act"). On the contrary, it is submitted that while the IBC is a self-contained code exclusively dealing with insolvency, the NHB Act and the RBI Act operate in ordinary circumstances when a company is not undergoing insolvency. As such, creditors of a company under insolvency cannot seek to enforce the NHB Act and the RBI Act. In any event, it is amply clear that neither the requirements of the NHB Act nor the RBI Act guarantees full repayment of deposits.

7. Provisions of the IBC prevail over the NHB Act and the RBI Act by the non-obstante clause contained in Section 238 of the Code.

7.1 The Appellants erroneously argue that the NHB Act and RBI Act provisions prevail over IBC due to the latter being a general statute and the former two statutes being special statutes. As such, the Appellants seek full repayment of deposits under the NHB Act and RBI Act, notwithstanding the provisions of the IBC. This argument is incorrect and in ignorance of the unique field occupied by the IBC.

7.2 At the outset, the argument of the Appellants directly contradicts their pleading (Appeal No. 759 of 2021, Para D, Pg. 32-33; Appeal No. 760 of 2021, Para 33-34), wherein it is pleaded that there is no inconsistency between the IBC and the NHB Act.

7.3 Further, it is submitted that the IBC is the singular law governing the entire insolvency process, irrespective of obligations that may exist between debtors and creditors under any other statute, contract or otherwise. On the other hand, the RBI Act and the NHB Act have not dedicated statutes meant for the rights of depositors but rather constitute the institutions, i.e., the RBI and the NHB. In any event, this same issue on the interplay between IBC and another statute was considered by the Hon'ble Supreme Court in the case of Pioneer Urban Land & Infrastructure Limited & Anr. v. Union of India, (2019) 8 SCC 416 [Para 29-30]. In this judgment, the Hon'ble Supreme Court considered whether provisions of the Real Estate (Regulation and Development) Act, 2016 ("RERA") prevail over provisions of the IBC. It was held therein that the provisions of RERA and IBC can co-exist, but in the event of a clash, RERA must give way to the IBC. In this regard, the Hon'ble Supreme Court further held that RERA operates in the realm of protecting the interests of individual investors in real estate projects.

7.4 In contrast, IBC contemplates rehabilitation of the Corporate Debtor, and in the event of a conflict, the IBC will prevail. Similarly, it is submitted that the NHB Act, which establishes the NHB and the RBI Act, which constitutes the RBI, cannot override the IBC. As is apparent from the preambles of the two statutes, they occupy different fields altogether.

7.5 Moreover, a settled principle of law that a subsequent enactment prevails over former legislation. The RBI and NHB Act pre-date the IBC and the FSP Rules. (Ref: Life Insurance Corporation of India v. DJ Bahadur & Ors., (1981) 1 SCC 315 [Para 112-113]; Allahabad Bank v. Canara Bank & Anr., (2000) 4 SCC 406 [Para 40]). By the non-obstante clause contained in Section 238 of the IBC, the IBC shall prevail over any inconsistent provisions contained in the NHB Act and the RBI Act; Innoventive Industries Limited v. ICICI Bank & Anr., (2018) 1 SCC 407 [Para 34])

8. The Appellants were not entitled to payment of matured FDs during CIRP.

8.1 The Appellants have erroneously argued that the erstwhile Administrator ("Administrator") of the Erstwhile CD was obligated to repay deposits of the Appellant and other FD holders during the pendency of CIRP, as part and parcel of the Administrator's obligation to keep the Erstwhile CD as a "going concern". The response to this argument is two-fold:

(i) The FDs formed part of the Erstwhile CD's assets and therefore could not be alienated throughout CIRP.

8.2 The Appellants argue that an FD, like a "trust", cannot be considered part of the Erstwhile CD's assets, and the Appellants are not technically financial creditors. Further, they erroneously argue that under Rule 10 of the FSP Rules, the obligation to repay FD holders is not hit by the effect of Section 14 of the IBC as the amount of the deposit to third-party assets. It is to be noted that these arguments were advanced for the first time during oral submissions without any basis in pleadings. This argument is flawed for the following reasons.

8.3 Firstly, FD holders are classified strictly as Financial Creditors, i.e., persons to whom a "financial debt" is owed within the term's meaning under Section 5(8) of the IBC. Time and again, the Hon'ble Supreme Court of India has restated and cemented the position that an FD holder is a Financial Creditor within the strict sense of the phrase. Accordingly, an FD holder is entitled to initiate insolvency proceedings against a company and is also entitled to participate in CoC meetings; Pioneer Urban Land and Infrastructure Ltd. & Anr. v. Union of India & Ors. (2019) 8 SCC 416 [Para 43); Orator Marketing Pvt. Ltd. v. Samtex Desinz Pvt. Ltd., AIR 2021 SC 4040 (Para 14); Insolvency Law Committee for Notification of FSP Sub-Committee Report dated 04.10.2019 [Para 17]). Moreover, Appellants themselves filed a claim before the Administrator in the capacity of Financial Creditors.

8.4 An amount held by a person cannot be classified as being a "debt" and being held in "trust" simultaneously. Furthermore, it is settled law that a depositor and bank relationship is not equivalent to one between a beneficiary and trustee. Instead, it is a relationship of a creditor and debtor. ; Commissioner of Income Tax v. Hindusthan Welfare Trust, 1991 SCC OnLine Cal 361 [Para 12-15, 19); Shanti Prasad Jain & Anr. v. Director of Enforcement, FERA & Anr., AIR 1962 1764 [Para 37]) Further, the Appellants have failed to provide a single factual or legal basis for stating that their deposits were like a trust.

8.5 Secondly, in furtherance of the argument that the deposits are like trust, the Appellants attempted to argue that since FDs with the Erstwhile CD are governed by the NHB Act and the RBI Act, there is a statutory guarantee of full repayment. In doing so, the Appellants primarily rely upon Sections 36A of the NHB Act and Section 45QA of the RBI Act. It is submitted that FDs cannot be like a trust merely because before CIRP, the Erstwhile CD was governed by NHB Act and the RBI Act. Section 36A of the NHB Act and Section 45QA of the RBI Act both clearly state that every deposit shall be repaid "by the terms and conditions of such deposit". Notably, the Appellants have failed to point out a single term within their arrangement with the Erstwhile CD, which guarantees full repayment of their FDs. Section 36A of the NHB Act and Section 45 QA of the RBI Act are no different, in essence, from Section 73(3) of the Companies Act, 2013, which states that every deposit shall be repaid "by the terms and conditions of the agreement referred to in that sub-section." There is absolutely nothing unique within the NHB Act or the RBI Act, which elevates the status of an FD with a housing finance company over and above any other FD. The NHB Act itself contemplates a redressal mechanism where Section 36A is violated, i.e., under Section 36 A(2) read with Section 49 (2A)(c). On a cumulative reading of the provisions, it is apparent that the statute itself does not guarantee complete repayment of deposits.

8.6 Furthermore, nothing is contained in the NHB Act or the RBI Act that accords an FD's trust status with a housing finance company. Although the legislator intended to identify a trust under the NHB Act, they unequivocally expressed this within the provision's language. For instance, Section 16B of the NHB Act speaks of amounts and securities "to be held in trust". There is no such equivalent stipulation for depositors such as the Appellants.

(ii) The supposed terms of the license under the NHB Act and RBI Act do not, and cannot, govern the functioning of the Erstwhile CD during CIRP.

8.7 The Appellants have argued that as a part of its operations as a going concern, the Erstwhile CD needed to repay deposits by the terms of its license. In this regard, the Appellants primarily rely upon Sections 29 A(4)(a), 29 A(6) of the NHB Act, Section 45-1A of the RBI Act, Directions 18, 39 of the Housing Finance Companies (NHB) Directions, 2010, and Directions 38, 39 of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016. However, at the outset, it is clarified that none of these provisions contemplates survival of the terms of the license where the Company is undergoing CIRP as per IBC.

8.8 The provisions referenced by the Appellants are myopic. They do not contemplate that a company undergoing CIRP may not fulfil the conditions of the license to keep afloat as a going concern. For instance, Section 29 A of the NHB Act requires a housing finance company to have "adequate capital structure and earning prospects". In consideration of such terms and conditions of a license that an FSP (such as the Erstwhile CD) may be unable to fulfil, the FSP Rules specifically state in Rule 5(b)(ii), that "the license or registration which authorises the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled during the interim-moratorium and the corporate insolvency resolution process." The only reason for including such a provision within the FSP Rules is in contemplation of a scenario where the terms of the original license cannot be fulfilled, and yet, the FSP must carry on as a going concern.

8.9 Given those above, it is stated that the deposits were hit by the operation of Section 14 of the IBC. Therefore, alienation of the same militates against the objective of having a calm period where the Corporate Debtor's assets remain untouched. Further, to say that Corporate Debtor undertaking actions to its benefit must also undertake activities to its detriment would be contrary to the principle of maximisation of the value of the Corporate Debtor's assets. It is submitted that repayment of deposits to FD holders cannot fall within the ambit of the "ordinary course of business." As such, on a harmonious construction of Sections 14, 20 and 25 of the IBC, it is stated that the Administrator was obligated to keep the Company as a going concern while ensuring that the Erstwhile CD's assets remain protected. ; Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd., 2017 SCC OnLine Del 12189 [Para 10]; Case 10: P. Mohanraj & Ors. v. Shah Brothers Ispat Private Limited, (2021) 6 SCC 258 [Para 30])

9. The Appellants are not entitled to full payment under the Resolution Plan, which is entirely compliant with the law.

9.1 As dissenting financial creditors, under Section 30(2) of the IBC, the Appellants are only entitled to an amount not less than the amount they would receive by Section 53 of the IBC in the event of liquidation of a Corporate Debtor. Clause 1.2 of the Financial Proposal of the Resolution Plan provides for the same.

9.2 Further, the Appellants, being Financial Creditors, cannot demand preferential treatment under the Code or any allied rules and regulations. No exception has been carved out for FD holders under the Code or otherwise to claim preference or better rights of payments. Therefore, allowing a full refund to one class of Financial Creditors will not be in the overall interest of the composite resolution/ revival of the Corporate Debtor under the Scheme of the Code. It would be contrary to the Code to accord such a superior status to FD holders alone. It would be untenable to grant different treatment to FD holders, as this would create a separate sub-class of creditors. ( Chitra Sharma v Union of India, (2018) 18 SCC 575 (Para 48.1, 48.2]). The Appellants had been aware of the risks associated with their investment with the Erstwhile CD. When making their investments, the Appellants were informed that their deposits are unsecured and pari-passu with other unsecured liabilities (except the floating charge created under Section 29 B of the NHB Act) repayment of deposits is guaranteed by RBI or NHB.

10. The instant case does not warrant any interference of the Appellate Tribunal in law or equity.

10.1 Under the framework of the IBC, the commercial wisdom of the CoC reigns supreme. In view of this, the Hon'ble Supreme Court held that the Ld. NCLT does not have the power to modify the terms of the Resolution Plan but can direct the CoC to reconsider the terms of the Resolution Plan. (Jaypee Kensington Boulevard Apartments v. NBCC India Ltd. & Ors., 2021 SCC OnLine SC 253). Vide the Plan Approval Order, the Ld. NCLT has already acted in line with the decision of the Hon'ble Supreme Court and directed the CoC to reconsider repayment in full. However, the Coc, in its commercial wisdom, was not inclined to do so. Without prejudice to the preceding, even if there appear to be equitable considerations in the instant case, it is well settled that neither the Ld. NCLT, nor this Appellate Tribunal ought to act as a court of equity. This is more so where there has been a resounding decision of the CoC, as in the instant case. ( K. Sashidhar v Indian Overseas Bank & Ors., (2019) 12 SCC 150 (Para 55-56]). Moreover, the mismanagement of the Erstwhile CD has caused hardship to several stakeholders who have expended time and effort in the CIRP of the Erstwhile CD. Such other parties' legitimate expectation is that the culminated CIRP is not reopened after implementing the approved Resolution Plan.

11. The Resolution Plan is compliant with Rule 5(1)(d) of the FSP Rules

11.1 The erstwhile Successful Resolution Applicant, by Rule 5(1)(d) of the FSP Rules, has comprehensively showcased its expertise and experience in engaging in the business of a financial service provider as contained in the

Analysis

12.1 Learned Counsel for the Appellant submits that Rule 5(d) of Financial Service Providers Rules, 2019 mandates that the Resolution Plan include a statement explaining how the Resolution Plan satisfies or intends to satisfy the requirements of engaging in the business of the FSP. Resolution Plan fails to include a message explaining how it plans to meet the needs of engaging in the business of an FSP, especially concerning the repayment of deposits. Further, the plan should comply with existing laws governing the entity's actions —further, the interest as per the terms of the deposit made by the FD Holders.

12.2 Further, the Resolution Plan must contain provisions for complete repayment to poor and helpless depositors; otherwise, it would be held for any oblique purpose, which cannot be countenanced in law. The Hon'ble Supreme Court has held that the provisions of the RBI Act requiring payments to be made to depositors in total are a mandatory provision of law, which cannot be contracted out. The Ld. Counsel refers to the case of Integrated Finance Co. Ltd. v. RBI, reported in (2015) 13 SCC 772 wherein at para 52 and 56 Hon'ble Supreme Court has observed that;

"52. We, therefore, endorse the opinion expressed by the High Court that the Scheme has been introduced only with a view to avoid repayment to the small depositors as it contemplates that instead of repaying of amount in accordance with the terms and conditions of the deposit, such amount shall be considered as convertible debentures with interest @ 6%, which would be converted into equity shares within a period of one year. Such a provision is clearly contrary to the mandatory requirements under Section 45-QA(1) which requires that:

"45-QA. (1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit."

This ingenious effort by the appellants in fact justifies the insertion of the amendment, which has been obviously incorporated with a view to protect the depositors and to avoid exploitation of these hapless and poor depositors from exploitation by the non-banking financial institutions, such as the Appellant. It is for this reason that Chapter III-B clearly provides that the provisions contained therein shall override all other laws, which are inconsistent with the same. This will also be applicable to Sections 391-394 of the Companies Act.

56. We are unable to accept the aforesaid submission. The aforesaid observations reiterate the settled position of law that a scheme duly sanctioned after fulfilling all the legal formalities would be binding on all the shareholders. In the present case, the Scheme is in the teeth of Section 45-Q and it has rightly not been approved by the High Court. This apart, the Scheme has been rightly held to be lacking bona fides, as well as being contrary to public policy. It has been proposed with the oblique purpose of avoiding the mandate of Section 45-QA(1) of the RBI Act."

12.3 The Appellants contended that the Hon'ble Supreme Court in the case mentioned above has held that Sections 45Q and 45QA, Reserve Bank of India Act, 1934, overrides Sections 391 and 394 of the Companies Act, 1956. Hon'ble Supreme Court has held that Chapter IIIB of RBI Act inserted by Act No. 55 of 1963 w.e.f. December 1 1964, being a later enactment, clearly has to prevail over the Companies Act, 1956. Hon'ble Supreme Court has further held that there is no justification for lessening the scope of the applicability of the non-obstante clause in Section 45Q of the RBI Act.

12.4 The overriding effect extends to any other law for the time being in force and to any instrument having effect by such law. The reasons for giving such categorical overriding effect are evident from the objects and reasons given in the amendment Act viz. the magnitude of the exploitations of the poor sections of the society, leading to utter destruction of innumerable families was the underlying impetus to bring NBFC under strict control of Companies Act, 1956. Accordingly, Hon'ble Supreme Court has held that Chapter III B of the RBI Act is a self-contained Code.

12.5 Hon'ble Supreme Court has further held that submissions of the Appellant that Section 45QA of the RBI Act is in pari materia if not identical with Section 58A of the Companies Act cannot be accepted. Further, suppose a scheme of arrangement is not prohibited under the latter Section in that case; it cannot be prohibited under the former, i.e. Section 45QA of the RBI Act cannot also be accepted.

12.6 The allocation of the Resolution Amount is contrary to law, and the Resolution Plan/resolutions passed by the CoC to the extent that the FD. Holders are not required to be paid by the terms of their deposit are illegal. Any stipulation under the Resolution plan or as per the approved minutes of the CoC provides that the FD's claims. Holders shall be extinguished upon payment as per the Resolution Plan, are entirely illegal, violative of law, and cannot be sustained.

12.7 Appellants submit that the relevant parts of the Resolution Plan extinguish the resolution applicant's liability to repay the depositors in full are illegal and liable to be set aside. It was the statutory obligation of the RBI and the National Housing Bank to ensure that the deposits of the Appellants were protected. The newly inserted Sections 45-ID, 45-IE and 45-MBA of the RBI Act empowers the RBI to secure the general public interest and take action in the public interest. Importantly, to ensure the public interest, by Section 45-MBA of the RBI Act, the RBI was also empowered to resolve an NBFC without prejudice to the powers already existing other laws, including not limited to the IBC. This power of the RBI under the Finance Act, 2019 was included after the enactment of the IBC in part II-B of the RBI Act, which contains a non-obstante clause. Thus, the statutory power of the RBI was coupled with a duty to protect the small investors, being the Appellants herein, overriding anything to the contrary in IBC.

12.8 Relevant provisions of the RBI Act is given here for ready reference;

"45-Q. Chapter III-B to override other laws 45QA and 45QB inserted by Act No.23 of 1997 w.e.f. 09.01.1997.—The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

[45-QA. Power of Company Law Board to order repayment of deposit.—(1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit.

(2) Where a non-banking financial company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under Section 10-E of the Companies Act, 1956 (1 of 1956) may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the Company, the depositors or in the public interest, direct, by Order, the non-banking financial Company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the Order:

Provided that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the non-banking financial Company and the other persons interested in the matter.

[45-MB. Power of Bank to prohibit acceptance of deposit and alienation of assets.—(1) If any non-banking financial company violates the provisions of any section or fails to comply with any direction or Order given by the Bank under any of the provisions of this Chapter, the Bank may prohibit the non-banking financial Company from accepting any deposit.

(2) Notwithstanding anything to the contrary contained in any agreement or instrument or any law for the time being in force, the Bank, on being satisfied that it is necessary so to do in the public interest or in the interest of the depositors, may direct, the non-banking financial Company against which an order prohibiting from accepting deposit has been issued, not to sell, transfer, create charge or mortgage or deal in any manner with its property and assets without prior written permission of the Bank for such period not exceeding six months from the date of the Order.]

[45-MBA. Resolution of non-banking financial Company.—(1) Without prejudice to any other provision of this Act or any other law for the time being in force, the Bank may, if it is satisfied, upon an inspection of the Books of a non-banking financial company that it is in the public interest or in the interest of financial stability so to do for enabling the continuance of the activities critical to the functioning of the financial system, frame schemes which may provide for any one or more of the following, namely—

(a) amalgamation with any other non-banking institution;

(b) reconstruction of the non-banking financial Company;

(c) splitting the non-banking financial Company into different units or institutions and vesting viable and non-viable businesses in separate units or institutions to preserve the continuity of the activities of that non-banking financial company that are critical to the functioning of the financial system and for such purpose establish institutions called "Bridge Institutions".

Explanation.—For the purposes of this sub-section, "Bridge Institutions" mean temporary institutional arrangement made under the Scheme referred to in this sub-section, to preserve the continuity of the activities of a non-banking financial company that are critical to the functioning of the financial system.

(2) Without prejudice to the generality of the foregoing provisions, the Scheme referred to in sub-section (1) may provide for—

(a) reduction of the pay and allowances of the chief executive officer, managing director, chairman or any officer in the senior management of the non-banking financial Company;

(b) cancellation of all or some of the shares of the non-banking financial Company held by the chief executive officer, managing director, chairman or any officer in the senior management of the non-banking financial Company or their relatives;

(c) sale of any of the assets of the non-banking financial Company.

(3) The chief executive officer, managing director, chairman or any officer in the senior management of the non-banking financial Company whose pay and allowances are reduced or the shareholders whose shares are cancelled under the Scheme shall not be entitled to any compensation.]

[45-MC. Power of Bank to file winding-up petition.—(1) The Bank, on being satisfied that a non-banking financial company—

(a) is unable to pay its debt; or

(b) has by virtue of the provisions of Section 45-IA become disqualified to carry on the business of a non-banking financial institution; or

(c) has been prohibited by the Bank from receiving deposit by an order and such Order has been in force for a period of not less than three months; or

(d) the continuance of the non-banking financial Company is detrimental to the public interest or to the interest of depositors of the Company, may file an application for winding up of such non-banking financial Company under the Companies Act, 1956 (1 of 1956).

(2) A non-banking financial company shall be deemed to be unable to pay its debt if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the Bank certifies in writing that such Company is unable to pay its debt.

(3) A copy of every application made by the Bank under sub-section (1) shall be sent to the Registrar of Companies. (4) All the provisions of the Companies Act, 1956 (1 of 1956) relating to winding-up of a company shall apply to a winding-up proceeding initiated on the application made by the Bank under this provision.]

*******

12.9 According to the Appellant stand of the RBI in other proceedings is not relevant before this Appellate Tribunal. The RBI's stand in washing away its obligation to repay the depositors in full and follow its mandate under the RBI Act to protect depositors is contrary to law. The RBI is obligated by its duty coupled with its power to ensure that the depositors are protected.

12.10 The Appellants contends that Section 238 does not override any requirement that the law governing the actions of DHFL must be followed. The CoC seeks to evade repayment to FD. Holders are claiming exemption under the IBC and claiming that in terms of Section 238 of the IBC, the provisions of IBC will override the other provisions of law. However, there is no provision in the IBC that FD Holders are not required to be paid as per the terms complying with the provisions of law. Therefore, there is no inconsistency between the provisions of the IBC and other provisions of law requiring repayment to deposit holders as per the terms and conditions of their deposit.

12.11 As such, the provisions of the NHB Act, 1987 and the RBI Act, 1935 expressly stipulate that every deposit taken by a housing finance institution or a non-banking financial institution has to be repaid according to the terms and conditions of the deposit. There is no provision in the IBC that provides to the contrary, and therefore, there is no overlap in the requirements for section 238 of the IBC to kick in. In any case, the Court would first endeavour to give a harmonious construction to the seemingly inconsistent provisions (MCGM v. Abhilash Lal, Civil Appeal No. 6530 of 2019 dated 15.11.2019 (p. 838, para 45 at p.892)]

12.12 The Appellant contended that the Money of the Appellants was deposited in trust with the Respondent. The FD. Holders have entrusted their money with DHFL, which assets belong to the FD. Holders, which are in the custody and possession of DHFL. The amounts held in trust for the benefit of the Appellants cannot be illegally misappropriated. They cannot be subjected to the moratorium or the resolution process (Rule 10, FSP Rules). A deposit by the depositor is not a sum lent to the Company but is a sum deposited with the Company to be held in trust until maturity. Therefore, it is not a loan in the strict sense of the term. (Deepak Insulated Cable v. UOI, 2000 SCC Online Kar 831 (at p. 1288, para 9 at p. 1289 of compilation); Vijay Mills Co v. State of Gujarat, 1989 SCC OnLine Guj 122 ( para 4).

12.13 In response to the argument of the Appellant, the Learned Senior Counsel for Respondent CoC submits that there is no provision in the RBI Act, the NHB Act, or any other law that mandates that depositors have to be paid in full.

12.14 A plain reading of Sections 29 A(6), Section 29 A(4)a), 36 and 36 A of the National Housing Bank Act, 1987 ("NHB Act"), read with para 39 of the Housing Finance Companies (NHB) Directions, 2010 ("NHB Directions"), as well as sections 45Q and 45QA of the RBI Act read with para 39 of RBI Master Direction on Non- Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 ("RBI Directions") makes it amply clear that none of the enactments guarantees full payment to the FD. Holders.

12.15 RBI also acknowledged the same in its replies to the Writ Petitions filed by FD. Holders before the Hon'ble Delhi High Court and the Hon'ble Bombay High Court.

12.16 The RBI Act and the NHB Act merely provide that the license of an HFC Housing Finance Company or NBFC Non Banking Finance Company may be cancelled if the deposit holders are not paid, and such a decision can be taken only after allowing the concerned Housing Finance Companies or NBFC to present its case. None of the legislation provides that the FD. Holders are required to be paid in full, and hence the Appeals proceed on an incorrect interpretation of law with a view to mislead this Tribunal.

12.17 Further, the Banning of Unregulated Deposit Schemes Act, 2019 ("BUDSA") enacted on July 19, 2019, to protect the interests of the depositors also gives primacy to the Code and clearly states that that the rights of the FD Holders will have priority save otherwise as provided under the Code.

12.18 The Learned Senior Counsel for Respondent No. 3 submits that amounts deposited by the FD Holders were not held in trust by DHFL. The legal position of the FD Holders with DHFL are not akin to the National Housing Bank. The FD Holders has not taken the said argument before the NCLT. They are agitating an entirely new argument that ought not to be permitted by this Tribunal.

12.19 Rule 10 of the FSP Rules9 is only applicable in situations where the assets of third parties are held in trust by the Corporate Debtor. The Holders of FD have failed to produce any documentation or law which shows that FD Holders deposited the funds are assets held in trust. Consequently, there is no legal justification whatsoever given by the Appellants / FD Holders. Instead, holders failed to show that the money deposited by them was held in trust by DHFL or that the amounts held by DHFL were not assets of DHFL. Thus Rule 10 of the 'FSP Rules' is inapplicable about the amounts deposited by FD Holders.

12.20 Further, the Appellants' reliance on the Orders passed by the NCLT in the IA 1104/2020 filed by the National Housing Bank ("NHB") is misplaced. The Appellant contends that Section 16B of the NHB Act creates a statutory trust favouring the NHB for the amounts advanced by NHB to DHFL as Section 16B states that the amounts are being held in trust.

12.21 Further, Section 16B of the NHB Act is completely inapplicable to FD Holders. Therefore, the Appellants have made a baseless claim.

12.22 Respondent No.3 represented the amounts deposited by the FD. Holders in DHFL are shown as liabilities in the balance sheet of DHFL and the FD. Holders are financial creditors of DHFL and have been treated accordingly. Thus, the bald, unsupported and misleading contention of the Appellants that the amount payable to FD Holders are held in trust by DHFL is entirely fictional and ought not to be entertained.

12.23 It is pertinent to mention that there is no provision in either the RBI Act, the NHB Act, or any other law that mandates that depositors have to be paid in full. Sections 29 A(6), 29 A(4)(a), 36 and 36 A of National Housing Bank Act, 1987. The relevant statutory provision is given below for ready reference:

"[29-A. Requirement of registration and net owned fund.—

[(1) Notwithstanding anything contained in this Chapter or in any other law for the time being in force, no housing finance institution which is a company shall commence housing finance as its principal business or carry on the business of housing finance as its principal business without—

(a) obtaining a certificate of registration issued under this Chapter; and

(b) having the net owned fund of ten crore rupees or such other higher amount, as the Reserve Bank may, by notification, specify.

(2) Every housing finance institution which is a company shall make an application for registration to the Reserve Bank in such form as may be specified by the Reserve Bank:

Provided that an application made by a housing finance institution which is a company to the National Housing Bank and pending for consideration with the National Housing Bank as on the date of commencement of the provisions of Part VII of Chapter VI of the Finance (No. 2) Act, 2019, shall stand transferred to the Reserve Bank and thereupon the application shall be deemed to have been made under the provisions of this sub-section and shall be dealt with accordingly:

Provided further that the provisions of this sub-section shall not apply to the housing finance institution which is a company and having a valid registration certificate granted under sub-section

(5) on the date of commencement of the provisions of Part VII of Chapter VI of the Finance (No. 2) Act, 2019, and such housing finance institution shall be deemed to have been granted a certificate of registration under the provision of this Act.]

[* * *]

(4) The [Reserve Bank], for the purpose of considering the application for registration, may require to be satisfied by an inspection of the books of such housing finance institution or otherwise that the following conditions are fulfilled:—

(a) that housing finance institution is or shall be in a position to pay its present or future depositors in full as and when their claims accrue;

(b) that the affairs of the housing finance institution are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors;

(c) that the general character of the management or the proposed management of the housing finance institution shall not be prejudicial to the public interest or the interests of its depositors;

(d) that the housing finance institution has adequate capital structure and earning prospects;

(e) that the public interest shall be served by the grant of certificate of registration to the housing finance institution to commence or to carry on the business in India;

(f) that the grant of certificate of registration shall not be prejudicial to the operation and growth of the housing finance sector of the country; and

(g) any other condition, fulfilment of which in the opinion of the [Reserve Bank], shall be necessary to ensure that the commencement of or carrying on the business in India by a housing finance institution shall not be prejudicial to the public interest or in the interests of the depositors:

[Provided that the Reserve Bank may, wherever it considers necessary so to do, require the National Housing Bank to inspect the books of such housing finance institution and submit a report to the Reserve Bank for the purpose of considering the application.]

(5) The [Reserve Bank] may, after being satisfied that the conditions specified in sub-section (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.

(6) The [Reserve Bank] may cancel a certificate of registration granted to a housing finance institution under this Section if such institution—

(i) ceases to carry on the business of a housing finance institution in India; or

(ii) has failed to comply with any condition subject to which the certificate of registration had been issued to it; or

(iii) at any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (4); or

(iv)

(a) fails to comply with any direction issued by the [Reserve Bank or the National Housing Bank] under the provisions of this Chapter; or

(b) to maintain accounts in accordance with the requirement of any law or any direction or Order issued by the 60[Reserve Bank or the National Housing Bank] under the provisions of this Chapter; or

(c) to submit or offer for inspection its books of account and other relevant documents when so demanded by an inspecting authority of the 61[Reserve Bank or the National Housing Bank];

Or

(v) has been prohibited from accepting deposit by an order made by the National Housing Bank under the provisions of this Chapter and such Order has been in force for a period of not less than three months:

Provided that before cancelling a certificate of registration on the ground that the [housing finance institution which is a company] has failed to comply with the provisions of clause (ii) or has failed to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (4), the [Reserve Bank], unless it is of the opinion that the delay in cancelling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the [housing finance institution which is a company], shall give an opportunity to such institution on such terms as the [Reserve Bank] may specify for taking necessary steps to comply with such provision or fulfilment of such condition:

Provided further that before making any order of cancellation of certificate of registration, such institution shall be given a reasonable opportunity of being heard.

(7) A housing finance institution aggrieved by the Order or rejection of application for registration or cancellation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which such Order of rejection or cancellation is communicated to it, to the Central Government and the decision of the Central Government where an appeal has been preferred to it, or of the 66[Reserve Bank] where no appeal has been preferred, shall be final:

Provided that before making any order of rejection of Appeal, such institution shall be given a reasonable opportunity of being heard.

Explanation.—For the purposes of this Section,—

(I) "net owned fund" means—

(a) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the housing finance institution after deducting therefrom—

(i) accumulated balance of loss;

(ii) deferred revenue expenditure; and

(iii) other intangible assets; and

(b) further reduced by the amounts representing—

(1) investments of such institution in shares of—

(i) its subsidiaries;

(ii) companies in the same group;

[(iii) all other housing finance companies; and]

(2) the book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with,—

(i) subsidiaries of such Company; and

(ii) companies in the same group, to the extent such amount exceeds ten per cent of (a) above;

[(II) the expressions "subsidiaries" and "companies in the same group" shall have the meanings respectively assigned to them in the Companies Act, 2013 (18 of 2013): Provided that the National Housing Bank shall, in consultation with the Reserve Bank, specify the companies to be deemed to be in the same group.]

29(4) The [Reserve Bank], for the purpose of considering the application for registration, may require to be satisfied by an inspection of the books of such housing finance institution or otherwise that the following conditions are fulfilled:—

(a) that housing finance institution is or shall be in a position to pay its present or future depositors in full as and when their claims accrue;

36. Chapter V to override other laws.—The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

[36-A. Power to order repayment of deposit.—(1) Every deposit accepted by a housing finance institution which is a company unless renewed, shall be repaid in accordance with the terms and conditions of such deposit.

(2) Where a housing finance institution which is a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, such officer of the National Housing Bank, as may be authorised by the Central Government for the purpose of this Section (hereinafter referred to as the "authorised officer") may, if he is satisfied, either on his own motion or on any application of the depositor, that it is necessary so to do to safeguard the interests of the housing finance institution, the depositors or in the public interest, direct, by order, such housing finance institution to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the Order:

Provided that the authorised officer may, before making any order under this sub-section, give a reasonable opportunity of being heard to the housing finance institution and the other persons interested in the matter."

12.24 Further, it is necessary to point out that RBI Act and the NHB Act merely provide that the licence of a Housing Finance Corporation and Non-Banking Finance Corporation may be cancelled if the deposit holders are not paid. Such a decision can be taken only after giving the concern HFC or NBFC and the opportunity to present its case. None of the legislation provides that FD. Holders are required to be paid in full. Hence the Appellant's contention is based on an incorrect interpretation of the law.

12.25 The Learned Senior Counsel for the Appellant represented that the amount deposited by FD. Holders were held in trust by DHFL. In response to the above contentions, the Ld. Sr. Counsel for CoC submits that Rule 10 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of FSPs and Application to Adjudicating Authority) Rules, 2019 FSP Rules only applicable in situations where assets of third parties are held in trust by the Corporate Debtor.

12.26 FD Holders have not filed any documents to show that amount deposited by the FD. Holder was assets held in trust. Therefore, there is no legal justification whatsoever given by the Appellant/FD Holder to show that the money deposited by them was held in trust by DHFL and the amount held by DHFL were not assets of DHFL. Thus, Rule 10 of FSP Rules is inapplicable about the amount deposited by FD Holder.

12.27 The Learned Senior Counsel representing CoC submits that no full payment right exists under the NHB Act, the RBI Act, or any other subordinate legislation. Moreover, even if it exists, any such request would be wholly repugnant to provisions of the Code, which provide for a specific manner and priority of payment; hence will not be applicable in terms of S. 238 of the Code. The minimum amount a creditor is mandatorily required to be paid in a Resolution Plan, i.e. liquidation value.

12.28 Further, it is well-established law that when two special statutes contain a non-obstante clause, the latter will prevail over the earlier statute. In case of any inconsistency between the provision of the Code and any other enactment, the provision of the Code will prevail. Therefore, provisions of the Insolvency and Bankruptcy Code enacted later will override effect over the NHB Act and the RBI Act by the non-obstante clause.

12.29 In the case of Innoventive Industries Limited vs ICICI Bank (2018) 1 SCC 407, the Hon'ble Supreme Court has held that in case of any inconsistency between the provisions of Code and any other law, the provisions of the Code shall prevail. Therefore, Insolvency & Bankruptcy Code which was enacted later, will override the NHB Act and RBI Act by the non-obstante clause of Section 238 of the Code.

12.30 The Learned Counsel for the Appellant refers to the case of Integrated Finance Company Vs Reserve Bank of India (2015) 13 SCC 772 wherein at para 49,50 Hon'ble Supreme Court has observed that;

"49. In our opinion, Chapter III-B has been given an overriding effect over all other laws including the Companies Act by incorporating Section 45-Q with a clear intention to ensure that in a case of NBFC, a Scheme under Section 391 of the Companies Act cannot be entertained unless it is in conformity with the provisions of Section 45-QA of the RBI Act.

50. We may briefly notice here the judgments relied on by the learned counsel for the Appellant in support of the submission that the non obstante clause in Section 45-Q of the RBI Act will not have an overriding effect over Sections 391-394 of the Companies Act. Reliance was placed on Aswini Kumar Ghose [AIR 1952 SC 369] ; Madhav Rao Jivaji Rao Scindia [(1971) 1 SCC 85] ; A.G. Varadarajulu [(1998) 4 SCC 231] ; Icici Bank Ltd. [(2006) 10 SCC 452] ; RS Raghunath [(1992) 1 SCC 335 : 1992 SCC (L&S) 286 : (1992) 19 ATC 507] and JIK Industries Ltd. [(2012) 3 SCC 255 : (2012) 2 SCC (Civ) 82 : (2012) 2 SCC (Cri) 125] The said cases undoubtedly reiterate the settled law on the manner in which a particular non obstante clause ought to be interpreted. In Aswini Kumar Ghose [AIR 1952 SC 369] , this Court held that:

"16. … a non obstante clause [must be construed strictly and] the Court must try to find the extent to which the legislature had intended to give one provision overriding effect over another provision." (A.G. Varadarajulu case [(1998) 4 SCC 231], SCC p. 236, para 16).”

12.31 The above case relates to the period before the I & B Code's enactment and pertains to the Scheme and arrangements under the Companies Act, 2013; hence not applicable to the present case.

12.32 Appellants case that the amount of fixed deposit held by the Bank as a trustee is the property of the customer held by the Bank as a trustee is negated by the recent observation in para 44 of the Judgment of the Hon'ble Supreme Court in the case of N. Raghavender v state of Andhra Pradesh, CBI reported in 2021 SCC online SC 1232.

12.33 In this case, Hon'ble Supreme Court has observed that;

"As already clarified by us, to prove the charge under Section 409 IPC, the prosecution need not prove the exact manner of misappropriation. Once the 'entrustment' is admitted or proved, as has been done in the present case, the onus lies on the Accused to prove that the entrusted property was dealt by him in an acceptable manner. Thus, misappropriation with this dishonest intention is one of the most important ingredients of proof of 'criminal breach of trust'. The offence under Section 409 IPC can be committed in varied manners, and as we are concerned with its applicability in the case of a bank officer, it is fruitful to point out that the banker is one who receives money to be drawn out again when the owner has occasion for it. Since the present case involves a conventional bank transaction, it may be further noted that in such situations, the customer is the lender and the Bank is the borrower, the latter being under a super added obligation of honouring the customer's cheques up to the amount of the money received and still in the banker's hands. The money that a customer deposits in a bank is not held by the latter on trust for him. It becomes a part of the banker's funds who is under a contractual obligation to pay the sum deposited by a customer to him on demand with the agreed rate of interest. Such a relationship between the customer and the Bank is one of a creditor and a debtor. The Bank is liable to pay money back to the customers when called upon, but until it's called upon to pay it, the Bank is entitled to utilise the money in any manner for earning profit."

(emphasis supplied)

12.34 Further, in the case of Jaypee Kensington Boulevard Apartments Welfare Association v NBCC(India) Ltd ..., 2021 SCC OnLine SC 253 in Paragraphs 56 to 59 Hon'ble Supreme Court has observed that;

"56. ICICI Bank Counsel has argued that money is fungible therefore unless money has gone out from JAL for repayment, it can't be said as money deposited by JIL is the money payable to JIL homebuyers.

57. No doubt money is fungible, but obligation to repay is not fungible, therefore when money is deposited or clawed back to repay it to the creditor, the money being fungible and there being an obligation for repayment, it can no more be considered as money owned by the debtor. Though JAL is per se not a debtor to the Homebuyers, when money has come on behalf of the debtor in relation to a debt obligation or for discharge of an obligation, the person deposited it towards that obligation cannot subsequently say that he is the owner of the money, therefore entitled for return of it.

58. If trust concept is examined, we will know that trust is a relationship where property/money held by one party for the benefit of another party. Trustee holds the property/money for the benefit of the trust beneficiaries. Trustee is under fiduciary duty to ensure that the property of the owner is maintained and the benefit thereof is reached to the persons to whom it is intended to. In the case of trust, the owner is under no obligation to pass on the benefit to the beneficiary, therefore, the owner/settler being the owner of the property, he is entitled to take it back in the event it is not utilised for the purpose the owner intended to. But that is not the case when money from the debtor or on behalf of the debtor has gone out towards discharge of an obligation. In the case of trust, ownership of that property or money remains with the owner as long as it is not utilised for the purpose intended to. That owner has no obligation to part with his property/money.

59. In case of homebuyers' issue, once homebuyers entered into an agreement with a developer and when their relations entered into turbulence and not in a position to become normal, the relation in between them will become creditor and debtor and the person under obligation shall refund the money of the homebuyers. In the given case, JAL deposited money on behalf of JIL for utilisation of the same to the homebuyers of the Corporate Debtor. Therefore, it is evident that this deposit is made towards an obligation. When any money is received towards an obligation, it can neither be construed as trust money nor construed as governed by constructive trust, therefore we have not found any merit to say that this money is governed by trust concept."

12.35 Therefore, it is clear that the relationship between the customer and the Bank is the creditor and debtor and not a trustee. The Bank is not a trustee of money deposited by customers. In this case, the Corporate Debtor, i.e. DHFL, took a fixed deposit from their customers on the agreed interest on the amount invested in fixed deposits. Therefore, the relationship of the DHFL with the fixed deposit holders is that of a creditor and debtor and not of a trustee. The money so deposited becomes a part of the DHFL's funds which is under a contractual obligation to pay the sum deposited by a customer to him and on maturity or as per the terms of the contract they were getting agreed rate of interest. Such a relationship between the DHFL & the fixed deposit holders is one of the creditor and debtor and not of a trustee."

12.36 Hon'ble Supreme Court in the Committee of Creditors of Essar steel v Satish Kumar Gupta and others reported in (2020) 8 SCC 531 has reinforced the position that the COC is the key decision-maker in the rehabilitation of Corporate Debtors. For the approval of the Resolution Plan, the Committee of Creditors is to take a business decision based on ground realities by a majority, which binds all the stakeholders, including dissentient creditors. The Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors. The limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the Corporate Debtor needs to keep going as a going concern during the Insolvency Resolution Process; it needs to maximise the value of its assets; and that the interest of all stakeholders including Operational Creditors has been taken care of.

12.37 Therefore, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept the Resolution Plan, which may involve differential payment in different classes of creditors, together with negotiating with the prospective Resolution Applicant for better or different terms which may also involve differences in the distribution of amounts between the different classes of creditors.

12.38 Having participated in the CIRP, the Appellant's cannot challenge the action of the COC to approve the Resolution Plan, which is otherwise in compliance with the provisions of the IBC. In the light of the Hon'ble Supreme Court decision in Essar Steel (supra), it is unequivocally clear that the CoC members have the critical task of not only running the resolution process but also working towards maximisation of value of the Corporate Debtor for all the stakeholders, not fixed deposit holders alone, and providing for the manner of distribution of funds as obtained by way of a Resolution Plan. By seeking payment outside the resolution process, the appellants who are also CoC members (other CoC members being banks, etc. are acting in a silo for obtaining funds at the outset, which is not only against the interest of all the stakeholders but also against a holistic resolution for maximisation of value & distribution of funds between different classes of creditors.

12.39 As per the decision of the Hon'ble Supreme Court in Rajendra K Bhutta v Maharashtra Housing and Area Development Authority and others reported in 2020 SCC online SC 292 (para 26), it is settled that provisions of section 14 of the IBC must be strictly observed. Section 14 of IBC inter alia prohibits alienation, transfer, disposal of any asset of the Corporate Debtor. Since IBC is a time-bound process, every delay is the death knell for the Corporate Debtor. The object behind imposing moratorium under Section 14 is to maintain the status quo for the Corporate Debtor so maximisation of value of assets and laws of recovery to the creditors of the Corporate Debtor. Therefore, any payment to the Appellant during the moratorium regarding fixed deposits or interest would violate Section 14 of IBC.

12.40 Further, there is no rationale for treating the deposit holders as separate classes and providing them preferential treatment. IBC already contains various safeguards for the public deposit holders, including an Authorised Representative who can effectively represent that class of creditors. The Hon'ble Supreme Court has already examined the validity of the provisions relating to the Authorised Representative and upheld the same. The ILC report dated October 4 2019 (para 17) contains that the depositors in an FSP are to "be classified as financial creditors and be treated accordingly".

12.41 The Public Deposit Holders stand on an equal footing with other Financial Creditors of DHFL. Suppose relief, as sought by the Appellant, seeking a refund in repayment of fixed deposits, are granted; in that case, similar claims regarding repayment of dues will be made on behalf of NCD holders and other creditors, which would be detrimental to the corporate insolvency process of DHFL. Even otherwise, any monies raised during the Resolution Process is towards keeping the business alive as a going concern and not for out of turn or pre-resolution process claims, that too outside the Scheme of the IBC. Moreover, if payments were to be made to fixed deposit holders whose fixed deposits have matured, it would result in a situation where matured fixed deposit holders would obtain a preference as a special dispensation, as opposed to fixed deposit holders, whose fixed deposits have not matured, thereby resulting in the differential an unequivocal treatment within similarly situated creditors. Therefore no special dispensation ought to be granted outside the mechanism/process envisaged under the IBC, which provides for the commercial wisdom of the COC to reign supreme for the distribution of funds.

12.42 Further, Hon'ble Supreme Court in case of Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Ltd ..., 2021 SCC OnLine SC 253 has observed that;

"210. To put in a nutshell, the Adjudicating Authority has limited jurisdiction in the matter of approval of a resolution plan, which is well-defined and circumscribed by Sections 30(2) and 31 of the Code read with the parameters delineated by this Court in the decisions above-referred. The jurisdiction of the Appellate Authority is also circumscribed by the limited grounds of Appeal provided in Section 61 of the Code. In the adjudicatory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by the CoC. Within its limited jurisdiction, if the Adjudicating Authority or the Appellate Authority, as the case may be, would find any shortcoming in the resolution plan vis--vis the specified parameters, it would only send the resolution plan back to the Committee of Creditors, for re-submission after satisfying the parameters delineated by Code and exposited by this Court.

12.43 Further, in the case of Ebix Singapore (P) Ltd. v. Committee of Creditors of Educomp, 2021 SCC OnLine SC 707 Hon'ble Supreme Court has observed that;

115. A reading together of the UNCITRAL Guide and the BLRC Report clarifies, in no uncertain terms, that the procedure designed for the insolvency process is critical for allocating economic coordination between the parties who partake in, or are bound by the process. This procedure produces substantive rights and obligations. For instance, the composition of the CoC, the method and percentage of its voting, the timelines for CIRP, the obligation on the RP to f

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ile specific forms after every stage of the process and the obligation to explain to the Adjudicating Authority reasons for any deviations from the timeline while submitting a Resolution Plan, and other such procedural requirements create a mechanism which tightly structures the conduct of all participants in the insolvency process. This process invariably has an impact on the conduct of the Resolution Applicant who participates in the process and consents to be bound by the RFRP and the broader insolvency framework. An analysis of the framework of the statute and regulations provides an insight into the dynamic and comprehensive nature of the statute. Upholding the procedural design and sanctity of the process is critical to its functioning. The interpretative task of the Adjudicating Authority, Appellate Authority, and even this Court, must be cognizant of, and allied with that objective. The UNCITRAL Guide has echoed this position by noting the interplay between the procedural design of the insolvency law and the corresponding institutional infrastructure by observing: "27. While the institutional framework is not discussed in any detail in the Legislative Guide, some of the issues are touched upon below. Notwithstanding the variety of substantive issues that must be resolved, insolvency laws are highly procedural in nature. The design of the procedural rules plays a critical role in determining how roles are to be allocated between the various participants, in particular in terms of decision-making. To the extent that the insolvency law places considerable responsibility upon the institutional infrastructure to make key decisions, it is essential that that infrastructure be sufficiently developed to enable the required decisions to be made." 116. Any claim seeking an exercise of the Adjudicating Authority's residuary powers under Section 60(5)(c) of the IBC, the NCLT's inherent powers under Rule 11 of the NCLT Rules 2016 or even the powers of this Court under Article 142 of the Constitution must be closely scrutinised for broader compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms which have been specifically created by the statute, have a narrowly defined role in the process and must be circumspect in granting reliefs that may run counter to the timeliness and predictability that is central to the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers, but also run the risk of altering the delicate coordination that is designed by the IBC framework and have grave implications on the outcome of the CIRP, the economy of the country and the lives of the workers and other allied parties who are statutorily bound by the impact of a resolution or liquidation of a Corporate Debtor. 12.44 Hon'ble Supreme Court has observed that while exercising the interpretative task by the Adjudicating Authority and the Appellate Authority, the powers are limited, to the extent that infrastructure under the Code is sufficiently developed to enable to take critical decisions for maximisation of the value of the Corporate Debtor and to keep it as a going concern. 12.45 The Hon'ble Supreme Court has further crystallised the powers of the NCLT/NCLAT by specifying that under Section 60 (5) (c) of the IBC or Rule 11 of NCLT Rules, powers are limited to the extent relating to the border compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms that have and must be cautious in granting reliefs may run counter to the timelines and centre to the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged raised by the statute would violate the principles of separation of powers and run the risk of altering the delicate coon designed by the IBC framework. 12.46 It is important to mention that the RBI Act and the NHB Act merely provides that the license of an HFC or NBFC may be cancelled if the deposit holders are not paid. Such a decision can be taken only after allowing the concerned HFC or NBFC to present its case. None of the legislation provides that FD holders are required to be paid in full. Therefore, it is not the case of the Appellant's that RBI is not empowered to act under the RBI Act or the FSP Rules. The Appellants acknowledges that statutory mandate made available to the RBI under the RBI Act and the FSP rules. However, the Appellant wishes to advise the regulator as to the course of action that ought to have been followed by the regulator. This is legally impermissible, misconceived and untenable. 12.47 In the instant case, the RBI's exercise of its administrative discretion under Section 45-IE of the RBI Act superseded the board of DHFL and appointed Administrator. Accordingly, it decided to initiate the resolution proceedings concerning DHFL under the IBC and not the RBI Act. Appellant's contention is mainly about the obligation of the Administrator and the successor in the interest of the DHFL to ensure full repayment of deposit to have FD holders under the RBI and NHB Act. It is further contended that there is no inconsistency between the provisions of the IBC and other provisions of law requiring repayment to deposit holders as per the terms and conditions of the deposit. 12.48 The RBI Act and the NHB Act merely provides that the license of an HFC or NBFC may be cancelled if the deposit holders are not paid. Such a decision can be taken only after allowing the concerned HFC or NBFC to present its case. None of the legislation provides that FD holders are required to be paid in full. Therefore, it is not the case of the Appellant's that RBI is not empowered to act under the RBI Act or the FSP Rules. It Therefore, in the circumstances Section, 238 of the IB Code does not override any requirement of law governing the actions of the DHFL must be followed. 12.49 Further, in case of Pratap Technocrats Private Limited ,2021 SCC Online SC 569, Hon'ble Supreme Court has held; 58. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters "other than" enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers." 12.50 Based on the above discussion, it is clear that NCLT or NCLAT have been endowed with limited jurisdiction as specified under the Code and cannot act as a court of equity or exercise plenary powers. Therefore, the fixed deposits of the Appellant's made from the lifetime earnings of the employees invested by the Provident Fund Trust with the Corporate Debtor, i.e. Financial Service Providers, is of no consequence. Accordingly, it can not be a condition authorising interference with the commercial wisdom of the CoC. 12.51 Therefore, even if the contribution of hard-earned money by Employees and further its investment by 'Provident Fund Trust' in FD's is there, it will have no impact on the resolution approved by the requisite majority under the Code. Accordingly, NCLT or NCLAT cannot exercise equity jurisdiction to prevail over the commercial wisdom exercised by the creditors' committee. 12.52 It is pertinent to mention that the Appellant in civil appeal 759 of 2021 in Uttar Pradesh State Power Sector Employees Trust, and Appellant in civil Appeal 760 2021 is Uttar Pradesh Power Corporation Contributory Provident Fund Trust which had invested money in the Financial Service Provider DHFL as fixed deposits. The Corporate Debtor defaulted in making its payment obligations; therefore, RBI as a regulator itself stepped in and initiated insolvency proceedings of the erstwhile Corporate Debtor under the IBC read with FSP rules. It is a settled position of law that once a company is admitted into insolvency, the IBC is a complete and exhaustive code that governs the entire process. Despite such a statutory mandate under IBC, the Appellant contends that the manner of distribution towards F D holders must uniquely be handled according to the National Housing Bank Act, 1987 and Reserve Bank of India Act 1934. The NHB and RBI Act operate in ordinary circumstances when a company is not undergoing insolvency. As such, creditors of the Company under insolvency cannot seek to enforce the NHB Act and RBI act provisions. In any event, it is amply clear that neither the provisions of the NHB Act nor the RBI act guarantees full repayment of deposits. 12.53 Based on the above discussion, we think that impugned Order regarding the payment to the Appellants against their FD's as per the approved Resolution Plan with the requisite majority as required under law needs no interference, and both the appeals deserve to be dismissed. ORDER Impugned Order dated June 7, 2021, passed by the National Company Law Tribunal in Miscellaneous Application No's 416 and 417 of 2020 in Company Petition No. 4258/MB/2019, needs no interference. Civil Appeals CA/AT/INS 759 of 2021 and 760 of 2021 is disposed of accordingly. No Order as to costs.
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