TMI Blog2021 (8) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... s (and which was duly communicated by the Applicant vide his email dated 10.02.2021 to the Liquidator) and the other 02 shareholders did not participate in the nomination process directly or indirectly. Further, the Regulation 31A(3) does not prescribe any criteria for nomination in terms of value of shareholding. That from perusal of the Regulation 31A(3), which reads as The liquidator may facilitate the stakeholders of each class to nominate their representatives for inclusion in the consultation committee , we observe that the said Regulation is silent on both the criteria as well as process of nomination of a Representative. However, the Regulation 31A(3) has bestowed a duty on the Liquidator to facilitate the stakeholders of each class to nominate their representatives for inclusion in the SCC. Since the Applicant has been nominated by the majority i.e., 3 out of 5 Shareholders as the Representative of the Shareholders-in-class, which was duly communicated by the Applicant to the Respondent No. 1, the question of applicability of the provision under Regulation 31A(4) did not arise. Therefore, we hold that the nomination of the Respondent No. 2 as to represent Sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Logistics Private Limited ( hereinafter referred to as Corporate Debtor /CD). That vide Order dated 04.09.2019, this Adjudicating Authority had initiated CIR Process against the CD and appointed Mr. Mohan Lal Jain as the Interim Resolution Professional. That subsequently vide Order dated 01.11.2019, he was confirmed as RP and vide Order dated 16.12.2020, the Liquidation proceedings were initiated against the CD and Mr. Mohan Lal Jain was appointed as the Liquidator ( hereinafter referred to as Respondent No. 1 ) of the CD. 4. It is averred by the Applicant that he is the Ex-Director and a shareholder, holding 8.33% of the total paid up share capital of the Corporate Debtor. He is seeking reconstitution of the Stakeholders Consultation Committee (hereinafter termed as 'SCC'), constituted by the Respondent No. 1/Liquidator of Corporate Debtor. 5. That the main grievance of the Applicant is that M/s. Global Enterprise Logistics Pte. Ltd. (previously known as 'SBS Logistics Holdings Singapore Pte. Ltd.') (hereinafter referred to as Respondent No. 2 ) has been erroneously included as representative of the Shareholders in the SCC of the Corporate Debtor by R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reliance on Section 25A(3A) of IBC 2016, it is submitted by the applicant that the legislature was faced with a similar situation in case of allottees/financial creditors in a class and their voting during the CIR Process. The same was tackled by inclusion of Section 25A(3A) in the IBC, which enabled voting in the case of a class of creditors to be done with the decision of a 51% majority. That the same principle ought to be read into Regulation 31A(3) of the Liquidation Process Regulations, and the nomination by the majority, either in number or in value, who have voted should be considered as a valid nomination under Regulation 31A(3). That in the present case, it is evident that 03 out of 05 shareholders of the Corporate Debtor holding 24.99% of shares of the CD have participated in the nomination process. 13. That further, the Applicant has made the following averments: 10. That apart, the Respondent No. 1 while including the Respondent No. 2 as the representative of the shareholders in the SCC has completely ignored the factum of gross conflict of interest of Respondent No. 2 with that of the Corporate Debtor on account of pending arbitration proceedings before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 6 of the present application. The answering respondent no. 1 had endeavoured to facilitate the class of shareholders to nominate their representative for inclusion in the consultation committee in terms of regulation 31A(3) of the liquidation regulations. As per the table in regulation 31A(2), only 1 (one) representative is to be included from the class of 'shareholders'. However, the 'shareholders' failed to nominate their representative and in terms of regulation 31A(4), the stakeholder with the highest amount in the class of shareholders was included in the consultation committee. It may be pertinent to state here that in respect of shareholders, all the details of shareholders along with the amount/s of shareholding is very much available in the records of the Corporate Debtor itself, unlike in the cases of other stakeholders like 'financial creditors', 'workmen and employees', 'governments', 'operational creditors' etc. whose stakes are determinable only on the basis of claims submitted by such classes of stakeholders and admitted by the Liquidator. 16. It is further submitted by the Respondent No. 1/Liquidator that nomin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their representative, even if such failure is due to 02 of the 05 shareholders not nominating their representative and accordingly, Regulation 31A(4) has come into play. The shareholding of the Respondent No. 2 being the highest, it has been included in the SCC in terms of Regulation 31A(4). 19. That the Applicant has filed its Rejoinder and has reiterated the same grounds, which are not repeated for the sake of brevity. 20. We have heard Counsels of both the parties. After hearing submissions of both the Parties and perusing averments, reply and documents on the record, we are of the view that the main issue before this Bench is: Whether the nomination of Respondent No. 2 as representative of Shareholders in class made by the Respondent No. 1/Liquidator is in order and is in terms of the provision of Regulation 31A (3) read with Regulation 31A (4) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. For adjudication of this issue, it is necessary to visit the contents of Regulation 31A(3) and 31A(4) of the IBBI (Liquidation Process) Regulations, 2016. The same are reproduced below: 31A. Stakeholders' consultation committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 1 as the Liquidator had also noted that the other 2 shareholders having 75% shareholding had not nominated the applicant as their representative and accordingly, the applicant could not be considered as the representative of the entire 'shareholders' class of stakeholders. It is envisaged in terms of table forming part of Regulation 31A(2) that only 1 representative of all the shareholders is to be included in the SCC. The term 'stakeholders of each class' in Regulation 31A(3) does not mean 'some of the stakeholders in the class' or even 'majority of stakeholders by number in the class'. In the considered view of the Answering Respondent No. 1, this term means 'all the stakeholders in the class'. The Answering Respondent is of the further view that the process of nomination/inclusion in the SCC is not akin to the concept of 'first past the post' by numbers as in general election process. It is the further view of the Answering Respondent that the scheme of these Regulations envisages nomination by all the stakeholders of a particular class and that if some of the stakeholders of the class fail to nominate their representative, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not made unanimously by all the shareholders. 27. Since the Applicant has been nominated by the majority i.e., 3 out of 5 Shareholders as the Representative of the Shareholders-in-class, which was duly communicated by the Applicant to the Respondent No. 1, the question of applicability of the provision under Regulation 31A(4) did not arise. Therefore, we hold that the nomination of the Respondent No. 2 as to represent Shareholders-in-class in the Stakeholders Consultation Committee of the Corporate Debtor made by the Respondent No. 1/Liquidator is not valid in terms of the provision of Regulation 31A (3) read with Regulation 31A (4) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. 28. Accordingly, the nomination of Respondent No. 2 to the Stakeholders Consultation Committee of the Corporate Debtor, made by the Respondent No. 1/Liquidator in terms of Regulation 31A(4) of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, is set aside and the Liquidator is directed to accept the nomination of the Applicant as the Representative of Shareholders-in-class for the purpose of constitution of the Stakeholders Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
