TMI Blog2022 (1) TMI 1257X X X X Extracts X X X X X X X X Extracts X X X X ..... sents. Furthermore, sub-section 4 of section 25A provides that the Authorized Representative shall file with the Committee of Creditors any instructions received from Financial Creditors to ensure that appropriate instructions of the financial creditors he represents is correctly recorded by the Resolution Professional. The import of sub-sections 3 and 4 of section 25A is very clear that the views of financial creditors in class should be sought in an appropriate manner by the Authorized Representative prior to the CoC Meeting - the use of word prior' also implies that the financial creditors in class shall have sufficient time to consider collectively the issue/s before them and after voting which is recorded by the Authorized Representative, the result is conveyed to the Committee of Creditors. The homebuyers/allottees could not have had access to either the registered office of the corporate debtor or the principal place of business at Faridabad since both were closed. Moreover, without the meeting/getting together by the homebuyers/allottees, it was not easy for them to discuss and convey their views to the Authorized Representative who would then represent their views ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) No. 925/2021, which have been filed under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 (hereafter called IBC ) assailing the judgment dated 14.7.2021 passed in CA No. 371/2019 in Company Petition No. 322/ALD/2018 (hereafter referred to as Impugned Order ) by the Adjudicating Authority (National Company Law Tribunal, Allahabad Bench). All the three appeals have been filed against and assailing the common Impugned Order. Therefore, these appeals are being disposed off through this common judgment. 2. By the Impugned Order dated 14.7.2021, the Adjudicating Authority has approved the resolution plan submitted by Mr. Naveen Kumar Gupta as lead member of the consortium of Maya Buildcon Private Ltd., Geotech Homz Private Ltd. and Naveen Kumar Gupta, which is the successful resolution applicant. 3. The brief facts of the case as presented and argued by the appellants is that CIRP was initiated with respect to the corporate debtor Piyush Shelters India Pvt. Ltd. vide order of Adjudicating Authority on 03.12.2018 and Shri Swami Deen Gupta was appointed as the IRP. In August 2019 the final resolution plan was submitted and before the e-voting could take place on 25.08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion plan in CoC thereby flouting the provision of section 25A in letter and spirit and as a result, the interests of the majority of homebuyers/allottees have been compromised. 6. The Appellants in the three appeals have assailed the Impugned Order on the following grounds:- (i) The Learned Adjudicating Authority has passed the Impugned Order in CA No. 371/2019 while an earlier CA No. 282/2019 filed by the Resolution Applicant for consideration of his resolution plan was pending before the Adjudicating Authority. Since no orders have been passed in CA No. 282/2019, the Committee of Creditors (CoC) could not have considered the resolution plan submitted by the consortium. (ii) In the ninth meeting of CoC held on 1.11.2019, the CoC failed to consider the circumstances under which the earlier resolution plan of the Maya Group was withdrawn and revised resolution plan was being considered (iii) Section 25-A of the IBC clearly stipulates that the authorized representative of the financial creditors in class (in this case homebuyers) shall attend the meeting of CoC on their behalf and vote in accordance with prior instructions of the financial creditors in class. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeals have argued that the authorized representative of financial creditors in class did not follow the provision of Section 25A of the IBC in letter and spirit and so he held the e-voting for financial creditors in class alongwith e-voting on the resolution plan in the CoC, which did not allow the homebuyers/allottees to consider and discuss between themselves various aspects of the proposed resolution plan as a class of financial creditors. They have also argued that CoC, in the ninth meeting, while considering the revised resolution plan submitted by the resolution applicant, issued notice on 5thNovember 2019 for e-voting to take place on 6th and 7th November 2019, and thus there was insufficient time provided to the financial creditors in class for giving due consideration to various aspects of the resolution plan. He has also argued that the resolution plan is based on liquidation value of Rs. 40 Crores, which is approximately 30% of the total resolution debt and, therefore, insufficient to cover the amount owed to financial creditors in full and any payments to operational creditors or other creditors, including statutory due holders would be nil. Such meager or no paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled their claims before the RP while the claims of 251 allottees could not be filed in time leading to the extinguishing of their claims in the resolution plan. He has also claimed that the e-voting of the financial creditors in class has taken place along with e-voting on the resolution plan on 6th and 7th of November 2019, which is not in accordance with the requirement of Section 25-A of the IBC, where financial creditors in class have to be consulted 'prior' to the actual voting in the CoC, where the Authorized Representative has to present the views of the financial creditors in class. Since all the financial creditors voted alongside the CoC members, a legal fiction was created which was against the spirit of Section 25A. Therefore, grave injustice will be caused to the large number of homebuyers/allottees, who have more than 79% vote share in the CoC, and hence the Impugned Order should be set aside. 13. In arguments, the Learned Counsel for RP has claimed that the appeals have been filed after the stipulated period of 30 days after passing of the Impugned Order on 14.7.2021 and, therefore, they are barred by limitation. The Learned Counsel for the Resolution Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Maya Group as has been alleged by the Appellant, and hence no special favour is being shown to the Maya Group. 16. The Learned Counsel for the Resolution Professional has with regard to appeals CA Nos. 761 of 2021 and 925 of 2021, stated that the CoC, which includes real estate allottees being creditors in class has approved the resolution plan by giving more than 50% votes in e-voting held on 6/7th November 2019, and so the creditors in class do not now have any locus to challenge the approved plan as has been held by Hon'ble Supreme Court in the matter of JP Kensington Boulevard Apartments Welfare Association and Others versus NBCC (India) Limited and Others (Civil appeal no. 3395 of 2020). Moreover, the Learned Counsel has urged that the real issue before the Resolution Professional was to avoid liquidation of the Corporate Debtor as that would mean certain corporate death of the Corporate Debtor, and therefore the Resolution Professional took quick steps to obtain a workable resolution plan and get it approved by the CoC and thereafter put it up before the Adjudicating Authority for final approval before the extended CIRP would be over on 13 November 2019. 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cating Authority's order for permission to participate in the resolution process, the Resolution Professional decided on his own to obtain resolution plan from a consortium which had not through the EOI route in time and place it before the CoC for consideration. This plan was later approved by the CoC vide voting on 6th and 7th November 2019. Thus we do not think that the way this entire process was carried out was in accordance with legal provisions. We feel that a new round of Expressions of Interest should have been invited, which should have been done after wide publicity with sufficient time for resolution applicants to apply. Short-circuiting the process to include an applicant who did not apply in the EOI stage is not in accordance with legal provisions. 20. We also consider the objections raised by the Learned Counsel for Resolution Professional regarding there being no locus or entitlement of the suspended director Amit Goel, who is Appellant in CA No. 700 of 2021, in preferring the appeal. We feel that a suspended director of the former Corporate Debtor does have interest in the successful resolution of the corporate debtor with which he was earlier connected. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the Appellants that the provisions of Section 25A were not complied with in letter and spirit of the IBC. Section 25A of the IBC is as hereunder- Section 25A: Rights and duties of authorized representative of financial creditors. 25A. (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 financial creditor he represents and shall always act in accordance with their prior instructions: Provided that if the authorised representative represents several financial creditors, then he shall cast his vote in respect of each financial creditor in accordance with instructions re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keep the voting window open for at least twelve hours. 19. (1) Subject to this Regulation, a meeting of the committee shall be called by giving not less than five days' notice in writing to every participant, at the address it has provided to the resolution professional and such notice may be sent by hand delivery, or by post, but in any event, be served on every participant by electronic means in accordance with Regulation 20. 24. As the provision under sub-section 3 of section 25A clearly lays down, the Authorized Representative shall always act with the 'prior instructions' of the financial creditors he represents. Furthermore, sub-section 4 of section 25A provides that the Authorized Representative shall file with the Committee of Creditors any instructions received from Financial Creditors to ensure that appropriate instructions of the financial creditors he represents is correctly recorded by the Resolution Professional. The import of sub-sections 3 and 4 of section 25A is very clear that the views of financial creditors in class should be sought in an appropriate manner by the Authorized Representative prior to the CoC Meeting. Provision for receiving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion plan by the financial creditors in class was held simultaneously with the e-voting on the resolution plan by the members of the CoC, as is clear from pp. 238 - 240 of the Appeal paperbook in Company Appeal of 700/2021. The e-voting among homebuyers/allottees was thus carried out but not in accordance with the provisions of Insolvency Process Regulations, in a fashion which can be called vitiated and against the letter and spirit of law. It did not provide sufficient time to the financial creditors to consider the various aspects of the proposed resolution plan, meet together to discuss and vote upon it and thereafter for the Authorized Representative to present the views of financial creditors in class to the CoC. Moreso, when the financial creditors in class (homebuyers/allottees) constitute more than 79% of total voting rights in the CoC, following such a slipshod procedure is nothing short of creating a legal fiction without conforming to the letter and spirit of section 25A of IBC and Insolvency Process Regulations. 27. We now turn our attention to the allegation of the Appellants that due to inadequate publicity regarding the initiation of CIRP of the Corporate Debtor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected the Resolution Professional to accept the claim of the Applicants and consider them on merits subject to proper verification. He has further claimed that since this order was not appealed against, it has become final, and therefore it was incumbent upon the Resolution Professional to admit claims which had been submitted with delay for consideration. The Learned Counsel has also contended that the approved resolution plan considers such financial creditors in class who have filed claim within the prescribed time limit and those financial creditors in class who could not, for various reasons, file their claims inside as claimants and non-claimants and such a discrimination is not in keeping with the judgment passed by this Hon'ble Tribunal in the matter of Rajputana Properties Pvt. Ltd. versus Ultratech Cements Ltd. and Others [Company Appeal AT INS No. 188 of 2018] wherein it is held that the resolution plan that discriminates some of the financial creditors were equally situated and not balance the other stakeholders, such as operational creditors is discriminatory and, therefore liable to be rejected. 30. A perusal of the order dated 3.2.2020 in CA No. 12 of 2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d but thereafter the 'claimants' and 'non-claimants' have been accorded different treatment under the resolution plan. If the claims filed with delay had been admitted and considered in the spirit of order dated 32.2020 in CA No. 12/2020, different treatment of two different categories i.e. claimants and non-claimants in the approved resolution plan would not have resulted. The judgment of this Hon'ble Tribunal in the matter of Rajputana Properties Pvt. Limited (supra) also lays down that there should be no discrimination between financial creditors belonging to the same class. Hence, once the question of filing claims even with delay is accepted, there should not be two different categories of claimants and non-claimants. This issue also gains significance because only 222 out of 473 homebuyers/allottees have filed their claims in time, whereas 251 allottees have seen their claim being extinguished with the approval of the resolution plan as their claims were either not filed or filed with delay. When more than 53% of homebuyers/allottees are thus left out, we cannot consider the resolution of the Corporate Debtor to be done in the spirit of the IBC. 33. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Hon'ble Supreme Court in Ghanshyam Mishra and Sons Private Limited (supra)cited by the Ld. Counsel for RP wherein it is held that all statutory dues etc. would stand extinguished once the resolution plan is approved. In the present case since we are looking at the way that the Section 25A was operationalized and submission of claims by financial creditors took place, leading to simultaneous e-voting on the final resolution by the financial creditors in class and the members of CoC, we feel that due procedure was not followed. Thus the process was vitiated and what has resulted out of such vitiated procedure as approved resolution plan cannot be termed as fair and just to the creditors. 36. The Ld. Counsel for RP has also cited the judgment of Hon'ble Apex Court in Maharashtra Seamless Limited vs Padmanabhan Venkatesh Ors (Civil Appeal no. 4242 of 2019) wherein it is held as follows: 28. .....Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final ..... 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