Delhi High Court Sets Aside A.N. Buildwell Revival Scheme; Holds Conditional Investor Votes Cannot Establish Statutory Majority Without Examining Modifications and Allottee Objections
Delhi High Court Sends A.N. Buildwell Revival Back to Single Judge; Fresh Meetings Required If Modified Scheme Is Proposed Under Companies Act Procedure
Facts
The appeals arose from a common judgment dated 17 February 2020 by which a learned Single Judge of the Delhi High Court sanctioned a Scheme of Compromise and Arrangement for revival of A.N. Buildwell Pvt. Ltd. under Sections 391 to 393 of the Companies Act, 1956. Six connected company appeals were decided together.
A.N. Buildwell was engaged in developing real estate projects in Gurugram, including the commercial project Spire Edge and residential project Spire Woods. Various allottees had entered into Builder Buyer Agreements and paid substantial, and in some cases entire, sale consideration for commercial or residential units.
The allottees alleged substantial delay in completion, non-compliance with contractual obligations and disputes regarding possession, statutory approvals, completion or occupation certificates, assured returns, delay compensation and other contractual dues. In the case of Spire Edge, the agreements also contemplated assured returns of 12% per annum until completion and delay compensation of ₹55 per square foot per month in certain circumstances.
Owing to financial difficulties and multiple winding-up proceedings, a Provisional Liquidator was appointed. A revival proposal was thereafter placed before the Company Court and meetings of different classes of stakeholders were convened. The proposed scheme obtained what was treated as the requisite statutory majority, and the Single Judge sanctioned it on 17 February 2020.
The appellants contended that the sanctioned scheme materially differed from what stakeholders had actually approved, failed adequately to protect different categories of allottees and had been sanctioned without the level of judicial scrutiny required by Sections 391 to 393.
Issues
The principal issues were:
- Whether the Revival Scheme had actually obtained the requisite statutory majority under Section 391(2).
- Whether votes cast “for, with modification” could be counted together with unconditional “for” votes as approval of the scheme ultimately sanctioned.
- Whether the modifications attached to those votes were merely incidental objections or substantive conditions affecting financial and contractual rights.
- Whether the Company Court had independently examined the scheme for fairness, legality and reasonableness instead of relying primarily on numerical majority.
- Whether stakeholders were furnished sufficient material to make an informed decision under Section 393.
- Whether individual allottee objections concerning assured returns, compensation, lease charges and statutory approvals required separate judicial consideration.
- Whether the principle of commercial wisdom could prevent appellate interference where the foundational statutory requirements for approval were themselves uncertain.
Appellants’ Arguments
The appellants argued that the Company Court’s role under Sections 391 to 393 was not ministerial. Even where a statutory majority supports a scheme, the Court must independently satisfy itself that the scheme is fair, reasonable, lawful and not oppressive or prejudicial to stakeholders.
A major objection concerned the voting process. The voting mechanism allowed investors to vote “for, with modification.” According to the appellants, many stakeholders had not approved the proposed scheme unconditionally but had expressly conditioned their support upon specified changes. Those votes therefore could not simply be aggregated with unconditional votes.
The appellants also relied upon rights arising from their Builder Buyer Agreements, including:
- assured returns;
- lease commitment charges;
- delay compensation;
- interest;
- lawful and usable possession; and
- statutory approvals.
They contended that such rights could not be altered through the revival process without proper statutory compliance and adequate protection of affected allottees.
They further argued that incomplete or inaccurate disclosures concerning the projects’ status, permissions, licences and implementation feasibility undermined informed voting.
Respondents’ Arguments
The respondents defended the sanctioned scheme on the basis that it had received the support of the requisite majority of stakeholders and constituted the most realistic means of avoiding liquidation and completing the projects.
They invoked the principle of commercial wisdom and argued that the Court should not substitute its own view for the choice made by the majority of investors.
They also pointed to subsequent steps taken toward implementation, including:
- infusion of funds;
- execution of a Joint Development Agreement for Spire Woods;
- steps for licence renewal;
- appointments of consultants and contractors; and
- efforts towards project completion.
The respondents submitted that the appellants represented only a small minority and that setting aside the scheme would prejudice the larger body of allottees awaiting completion.
Analysis of the Law
1. Commercial Wisdom Does Not Replace Statutory Scrutiny
The Division Bench accepted the general principle that a Company Court does not sit in appeal over the commercial wisdom of creditors or members once a scheme has been validly approved.
However, that principle applies only after the Court is satisfied that the statutory preconditions themselves have been met.
The Court must first determine whether:
- the scheme before it is the same scheme actually approved;
- stakeholders had sufficient material for informed voting;
- the relevant class acted bona fide;
- the arrangement is just, fair and reasonable;
- the scheme is lawful and consistent with public policy; and
- in a liquidation context, the arrangement represents a genuine revival rather than a device to postpone liquidation.
The Division Bench emphasised that commercial wisdom cannot cure uncertainty regarding whether the statutory majority ever assented to the scheme being sanctioned.
Conditional Votes: “For, With Modification”
This was the decisive issue.
For Blocks B, C and D of Spire Edge, there were 384 valid votes:
- 22 voted for the scheme without modification;
- 293 voted for the scheme with modification;
- 19 voted against without modification; and
- 50 voted against with modification.
Although 315 votes were counted as being “for” the scheme, 293 of those 315 votes were expressly conditional.
The High Court held that Section 391(2) does not merely require a numerical majority categorised as “for.” The Court must determine whether the requisite majority actually agreed to the specific arrangement ultimately sanctioned.
A vote “for” simpliciter and a vote “for, with modification” are legally different where the condition concerns substantive rights.
The Division Bench therefore held that conditional votes could not automatically be added to unconditional votes and treated as unqualified assent without first determining the effect of the attached modifications.
Nature of the Modifications
The modifications were not minor drafting suggestions.
They concerned substantive matters such as:
- assured returns;
- financial commitments;
- payments;
- treatment of Blocks B, C and D;
- historical litigation;
- charges;
- indemnities; and
- continued supervision of the revival process.
The actual Modification Slip reproduced on pages 21–22 of the judgment expressly stated that the voter was against the scheme “as currently proposed” but was voting for it subject to deletion and addition of identified terms. That language made the assent unmistakably conditional.
The Court therefore rejected the characterization of these modifications as merely requests for better commercial terms.
Contractual Rights of Allottees
The Court clarified that it was not holding that contractual rights can never be compromised through a scheme under Sections 391 to 393.
Nor did it decide whether individual allottees were ultimately entitled to assured returns, compensation, lease charges or other amounts.
Its point was narrower: where investors condition their votes upon modifications dealing with those contractual rights, the Company Court must determine the legal effect of the conditions before treating the votes as approval of the scheme.
The Single Judge had failed to conduct this analysis.
Informed Decision and Disclosure Under Section 393
The Division Bench also emphasised that Section 393 requires stakeholders to receive the material necessary to make an informed decision.
Here, the scheme involved two separate projects—Spire Edge and Spire Woods—with different stages of construction, categories of allottees and contractual arrangements.
The Court was therefore required to assess whether voters had sufficient information to understand how the scheme would affect their particular rights and liabilities.
The impugned judgment did not disclose adequate substantive examination of this question. The Court held that numerical voting results could not substitute for the statutory requirement of informed approval.
Fairness to the Class as a Whole
The respondents strongly relied upon the high percentage of support.
In Blocks B, C and D, approximately 82% of valid votes were categorised as favouring the scheme. In Spire Woods, 358 out of 364 valid votes were recorded in favour, though 292 of those were also “with modification.”
The High Court accepted that substantial majority support was relevant but held that it was not conclusive.
The statutory test requires the scheme to be just, fair and reasonable to the class as a whole. Numerical superiority does not dispense with scrutiny of whether the scheme fairly addresses existing rights and whether the supposed majority genuinely approved the arrangement in its sanctioned form.
Precedent Analysis
Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K. Samiti
This Supreme Court decision formed the principal legal framework.
The Court relied upon it for the proposition that before sanctioning a compromise or arrangement, the Company Court must determine whether:
- the statutory procedure was followed;
- the requisite majority validly approved the scheme;
- voters received sufficient material;
- the class acted bona fide;
- the arrangement was fair to the class;
- the scheme was lawful and consistent with public policy; and
- the scheme as a whole was just and reasonable.
Only after those requirements are satisfied does the Court defer to commercial wisdom.
J.I.K. Industries Ltd. v. Amarlal V. Jumani
This authority was relevant to clauses of the revival scheme seeking to interfere with pending criminal proceedings.
The Single Judge had already declined to approve portions purporting to affect criminal cases, and the Division Bench found no reason to disturb that approach.
Krishna Texport Industries Ltd. v. DCM Ltd.
This judgment was similarly referred to on the impermissibility of using a company arrangement to obstruct criminal proceedings. The Division Bench did not base its ultimate conclusion upon this aspect because the Single Judge had already dealt with it appropriately.
Court’s Reasoning
The Court found a foundational defect in the sanction process.
The question was not whether revival was commercially better than liquidation. Nor was it whether the majority preferred revival.
The question was whether the majority had actually and lawfully approved the same scheme that the Single Judge ultimately sanctioned.
Where 293 of 315 supporting votes for a major class were expressly conditional, the Court could not simply treat those votes as unconditional approval without examining the attached modifications.
The Single Judge had effectively conflated two separate questions:
- whether the requisite statutory majority agreed to the arrangement; and
- whether the arrangement, once validly approved, deserved judicial sanction.
Commercial wisdom applies principally to the second stage. It cannot be used to bypass the first.
The Court also found that individual allottee objections had not been independently examined with sufficient rigour. Those objections involved contractual rights capable of being materially affected by the revival scheme and could not simply be dismissed as attempts to obtain more favourable terms.
Subsequent implementation steps did not cure these defects. Even infusion of funds, appointment of consultants, or progress toward licences could not retrospectively validate a sanction order if the statutory process was defective when the order was passed.
Conclusion
The Delhi High Court held that the judgment sanctioning the A.N. Buildwell Revival Scheme could not be sustained.
The Division Bench allowed the appeals, set aside the judgment dated 17 February 2020 and remanded the matter to the learned Single Judge for fresh consideration.
On remand, the Single Judge was directed specifically to examine:
- the legal effect of votes cast “for, with modification”;
- the modifications attached to those votes;
- the objections of individual allottees and other stakeholders; and
- all other issues arising under Sections 391 to 393.
If a fresh or modified scheme is proposed, the statutory procedure must be followed, including fresh meetings wherever legally required and proper disclosure of material necessary for informed voting.
The Division Bench expressly left all individual claims for refund, assured returns, lease commitment charges, penalty, interest and compensation open before the competent forums. Criminal investigations and other statutory proceedings were also left unaffected.
Case Details
Case: Vineet Goel v. A.N. Buildwell Private Ltd. & Ors. with connected company appeals
Court: Delhi High Court
Case Number: Company Appeal No. 11 of 2020 with Company Appeal Nos. 12/2020, 13/2020, 4/2021, 5/2021 and 7/2021
Judge: Justice Anil Kshetarpal and Justice Shail Jain
Date: 13 August 2026
Result: Appeals allowed; 2020 sanction of A.N. Buildwell Revival Scheme set aside; matter remanded for fresh scrutiny of conditional votes, modifications, disclosures and allottee objections
