TMI Blog2022 (6) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... half of the Financial Creditor to the extent of voting share of the Financial Creditor. The Adjudicating Authority in its order has referred to Regulation 16A Sub-regulation (5) of the CIRP Regulations, 2016. Regulation 16A deals with the Authorised Representative. Regulation 16A provides for procedure of choosing an Authorised Representative of creditors of the respective class - The mere fact that the Authorised Representative of a creditor in a class have no role in receipt and verification of the claim of the creditors, it cannot be held to mean that creditors in a class have no right with regard to receipt and verification of their claim. The clarification as contained in Regulation 16A(5) has been read by the Adjudicating Authority to an extent which it never meant. The conclusion recorded by the Adjudicating Authority in paragraph 23 on the basis of erroneous interpretation of Regulation 16A(5) resulted in a wrong conclusion that the creditors in a class have no role in receipt or verification of claims of creditors. Right of impleadment of Appellants in Applications filed by Respondent No. 2 and 3 challenging the rejection of their claim as Financial Creditors - HELD T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Process (CIRP) of the Corporate Debtor commenced vide order dated 28.02.2020 passed by the Adjudicating Authority on an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as Code ) filed by three individual Financial Creditors. (ii) Interim Resolution Professional (IRP) did not take charge in pursuance of the order dated 28.02.2020. The Appellant were constraint to file application seeking replacement of the IRP being I.A. No. 3371 of 2020. (iii) The Appellant also filed an appeal in this Tribunal being Company Appeal (AT) (Insolvency) No. 166 of 2021 seeking direction to the NCLT to appoint new IRP which Appeal was disposed of by order dated 08.03.2021. (iv) Subsequently, the Adjudicating Authority appointed the Respondent No. 3 as IRP by order dated 05.04.2021. The Committee of Creditors (CoC) comprises of the Homebuyers (99.85%) and Members of the Appellant No.1 constitutes 70% of the CoC. (v) Respondent No. 2 and 3 filed their claim before the IRP. Respondent No. 2 and 3 filed I.A. No. 2167 of 2021 seeking direction against the IRP to admit the claim of Respondent No. 2 and 3. The said application was hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irection to the IRP to admit the claim. At the time of hearing of I.A. No. 2275 of 2021 and 2286 of 2021 serious allegations were made against the Appellants alleging that there is collusion between the Appellants and the IRP. Appellants have right to be heard so that they are able to refute the baseless allegations of collusion with IRP. The Adjudicating Authority has wrongly taken the view that since Authorised Representative has no right with regard to claim of the Financial Creditors, Appellants shall also have not right to be heard in hearing of the Applications filed by the Respondent No. 2 and 3 challenging the order rejecting their claim. The Appellants have independent right to protect their right and interest and they are necessary party being Financial Creditors to be heard in opposing the claim of Respondent No. 2 and 3. 4. Learned counsel for the RP submits that Appellants were heard by the Adjudicating Authority in the earlier round when Respondent No. 2 and 3 has filed I.A. No. 2167 of 2021 seeking direction to IRP to admit their claim and an active role has been placed by the Appellants in the CIRP of the Corporate Debtor. 5. Shri Virender Ganda, learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of claim of Financial Creditor. 6. Learned counsel for the parties have placed reliance on the judgment of Hon ble Supreme Court in support of their respective submissions which shall be referred to while considering submissions in detail. 7. We have considered submissions of learned counsel for the parties and perused the record. 8. From the submissions of learned counsel for the parties and materials on the record following are the issues which arise for consideration in this Appeal:- (i) Whether the application for impleadment filed by the Appellants before the Adjudicating Authority seeking impleadment in I.A. Nos 2275 of 2021 and 2286 of 2021 deserve rejection on the ground that Authorised Representative of Homebuyers who are creditors in class is not representing the creditors in a class before the Adjudicating Authority? (ii) Whether the Appellants have no right to participate in adjudication of the claim of the Financial Creditors whose claim has been rejected by the IRP? (iii) Whether the Adjudicating Authority committed error in rejecting impleadment application filed by the Appellants? 9. All the three questions as noted above being inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administrator, such person shall act as authorised representative on behalf of such financial creditors, and such authorised representative under clause (a) or clause (b) or clause (c) shall attend the meetings of the committee of creditors, and vote on behalf of each financial creditor to the extent of his voting share. 11. Section 25-A deals with rights and duties of Authorised Representative of financial creditors, which is to the following effect:- 25-A. Rights and duties of authorised representative of financial creditors. (1) The authorised representative under sub-section (6) or sub-section (6A) of section 21 or sub-section (5) of section 24 shall have the right to participate and vote in meetings of the committee of creditors on behalf of the financial creditor he represents in accordance with the prior voting instructions of such creditors obtained through physical or electronic means. (2) It shall be the duty of the authorised representative to circulate the agenda and minutes of the meeting of the committee of creditors to the financial creditor he represents. (3) The authorised representative shall not act against the interest of the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larifications, which is to the following effect:- 16A(5). The interim resolution professional or the resolution professional, as the case may be, shall provide an updated list of creditors in each class to the respective authorised representative as and when the list is updated. Clarification: The authorised representative shall have no role in receipt or verification of claims of creditors of the class he represents. 13. The clarification under Regulation 16A(5) is that the Authorised Representative shall have no role in receipt or verification of claims of creditors of the class he represents. The Authorised Representative is to be chosen after claims of Financial Creditors in a class is submitted in Form-CA. The stage of choosing an Authorised Representative of a creditor in a class is much after receipt of a claim under Chapter IV of the Regulation and after verification of a claim under Regulation 13. After verification of claim under Regulation 13, list of creditors is made available for inspection by the person who have submitted proof of claim and is available for inspection by others as enumerated under Regulation 13. The clarification appended to Regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 3. 16. Learned counsel for the Appellant places reliance on the judgment of Hon ble Supreme Court in Phoenix Arc Private Limited vs. Spade Financial Services Limited Ors. , (2021) SCC OnLine SC 51. In the above case Phoenix Arc Pvt. Ltd. and the Yes Bank were the Financial Creditors of the Corporate Debtor. The claim of two other entities i.e. AAA Landmark Pvt. Ltd. and Spade Financial Services Pvt. Ltd. claiming to the members of CoC was rejected by NCLT. In Para 12, 13, 14 and 15 of the Judgment facts pertaining to the proceedings before NCLT have been noticed, which are to the following effect:- 12. The application moved on behalf of YES Bank under Section 60(5), on 28 June 2018, sought the following reliefs: (i) A direction to the IRP to reconstitute the CoC in terms of the Insolvency and Bankruptcy (Amendment) Ordinance 2018 ( IBC Ordinance 2018 ); and (ii) A direction prohibiting the IRP from allowing AAA and Spade to participate and vote in the meeting of the COC. 13. The applications filed under Section 60(5) by Phoenix also sought similar reliefs for: (i) The removal of Spade and AAA from the CoC; and (ii) Directing the constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP. 35. Eventually, the NCLT concluded that the applications filed by YES Bank and Phoenix would have to be allowed. Its conclusion is extracted below: 13. Before parting with this application, we would like to observe that the affairs of the CD as well as the Group of Arun Anand companies are deeply entangled and it is difficult for the Tribunal in a summary jurisdiction to unravel-the same. Considering that the CD and Spade and AAA were Registrar of Companies since 2016, we have no hesitation in allowing the instant applications filed by Yes Bank Limited and Phoenix ARC Private Limited. 18. Hon ble Supreme Court observed that claim of one Financial Creditor to keep out other Financial Creditor from CoC need to be examined and order passed without opportunity to financial creditors shall not operate as res judicata. 19. In the present case the claim of Respondent No. 2 and 3 to be member of CoC has been rejected by the IRP challenging which order Applications I.A. No. 2275 of 2021 and I.A. No. 2286 of 2021 have been filed by Respondent No. 2 and 3 before the Adjudicating Authority. The Appellants, before the Adjudicating Authority who are Financial Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 021: Heard the Ld. Counsel appearing for the Applicants Mr. Vierender Ganda, Mr. Arun Kathpalia, Sr. Counsle assisted by Mr. Gaurav Mitra as well as Mr. A. Makhija Counsel for the IRP and Mr. K. Dutta Sr. Counsle appearing for the allottees. The IRP accepts the notice and submits that he has received the copy of the application. The IRP is directed to file the reply on or before 14th May, 2021. List the matter on 17th May 2021 for hearing. During the period, no COC meeting would be held by the IRP. All the parties are requested to file a short synopsis on or before 16th May 2021. Mr. Dutta is also at liberty to file a short synopsis on behalf of allottees. 20. In pursuance to the above liberty granted by the Adjudicating Authority, the Appellants had also filed written submissions. When the Adjudicating Authority itself has heard the Appellants in the earlier adjudication where Respondent Nos. 2 and 3 came before the Adjudicating Authority seeking direction to admit their claim, we fail to see any reason in not giving opportunity to the Appellants when subsequently Applications - I.A. No. 2275 of 2021 and I.A. No. 2286 of 2021 were filed by the Respondent No. 2 and 3 af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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