2022 (1) TMI 1257 - AT - Insolvency and Bankruptcy

Tribunal orders restart of process under IBC with enhanced creditor participation & strict time limits

The Tribunal set aside the impugned order and directed a restart of the process with a new round of Expressions of Interest, proper publicity, and ... Rejection of approved Resolution Plan - defects in the lease deed that would hamper the execution of the resolution plan, if approved - it is also alleged that Homebuyers/allottees, who are financial creditors in class did not seek the views of the allottees prior to CoC meeting as is required in Section 25A, but the voting by allottees took place alongside the e-voting on the resolution plan in CoC - HELD THAT:- 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 - 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 in the CoC - It is also felt that the providing 10% of the claimed amounts to homebuyers/allottees who could not file their claims in the circumstances of this case is an unfair and inadequate treatment of the financial creditors. A perusal of the resolution plan shows that the MoU/agreement holders who could not file their claim within the prescribed time have been labeled as 'non-claimants' whereas those that have filed their claims in time have been labeled as 'claimants'. It is also clear that both these categories of financial creditors in class (homebuyers/allottees) have been treated differently in that the claimants have been offered possession of the allotted premises, whereas non-claimants have been given only 10% of their total amount deposited, that too after due verification and within one month of the approval of the resolution plan. It is directed that the process be started afresh with claims of homebuyers/allottees accepted by the Resolution Professional by giving them realistic time limit for submission of claims, in keeping with the order of the Adjudicating Authority, leading to a revised information memorandum, which should then be used for inviting Expressions of Interest. In the CIRP, the views of the financial creditors in class should be elicited by the Authorized Representative prior to CoC meetings in letter and spirit of section 25A of IBC. Thereafter, the CoC shall consider the resolution plans so received in accordance with the provisions laid down in law. For this entire exercise, we allow a period of 90 days to the CoC from the date of this order to complete the entire exercise. Appeal disposed off. Issues Involved:1. Approval of the resolution plan by the Adjudicating Authority while an earlier application was pending.2. Consideration of circumstances under which the earlier resolution plan was withdrawn.3. Compliance with Section 25A of the IBC regarding prior instructions from financial creditors in class.4. Maximization of value of the assets of the Corporate Debtor.5. Claims of homebuyers/allottees not filed in time due to inadequate publicity.Issue-wise Detailed Analysis:1. Approval of the resolution plan by the Adjudicating Authority while an earlier application was pending:The appellants argued that the Adjudicating Authority approved the resolution plan submitted by the consortium led by Naveen Kumar Gupta while an earlier application (CA No. 282/2019) by Maya Buildcon was pending. The Tribunal noted that the Resolution Professional (RP) went ahead with seeking CoC approval for the resolution plan despite the pending application and without inviting a new round of Expressions of Interest (EOI). The Tribunal found that the process was not in accordance with legal provisions and should have involved wide publicity and sufficient time for resolution applicants.2. Consideration of circumstances under which the earlier resolution plan was withdrawn:The appellants contended that the CoC failed to consider the circumstances under which the Maya Group withdrew its resolution plan. The Tribunal observed that the RP allowed a consortium, which included Maya Buildcon, to submit a resolution plan without going through the EOI route in time. This was seen as a deviation from the legal process, and the Tribunal emphasized the need for a new round of EOI with adequate publicity and time.3. Compliance with Section 25A of the IBC regarding prior instructions from financial creditors in class:The appellants argued that the authorized representative of financial creditors in class did not follow Section 25A, which requires prior instructions from the financial creditors. The Tribunal found that the e-voting instructions were sent only 25.5 hours in advance, which did not comply with the requirement of at least five days' notice. The Tribunal concluded that the process was vitiated as the financial creditors in class did not have sufficient time to consider and discuss the resolution plan.4. Maximization of value of the assets of the Corporate Debtor:The appellants claimed that the RP did not consider the maximization of the value of the assets of the Corporate Debtor. The Tribunal noted that the resolution plan was based on a liquidation value of Rs. 40 Crores, which was insufficient to cover the amounts owed to financial creditors and other creditors. The Tribunal emphasized the need for a fair and just resolution process that maximizes the value of the assets.5. Claims of homebuyers/allottees not filed in time due to inadequate publicity:The appellants argued that inadequate publicity regarding the initiation of CIRP led to more than 50% of homebuyers/allottees not filing their claims in time. The Tribunal found that the public announcement was made in newspapers with limited circulation in the relevant areas. Consequently, many homebuyers/allottees were unaware of the CIRP, leading to their claims being extinguished in the resolution plan. The Tribunal directed that the process be restarted with realistic time limits for submission of claims and proper publicity.Conclusion:The Tribunal set aside the impugned order dated 14.7.2021 and directed that the process be restarted with a new round of EOI, proper publicity, and realistic time limits for submission of claims. The views of financial creditors in class should be elicited by the authorized representative prior to CoC meetings in compliance with Section 25A of the IBC. The entire exercise was to be completed within 90 days from the date of the order.