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 realistic time limits for claim submission. Financial creditors' views in class must be obtained before CoC meetings in compliance with Section 25A of the IBC. The entire process should be completed within 90 days from the date of the order to ensure fairness and maximize the value of the assets of the Corporate Debtor.

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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 Consideration of circumstances under which the earlier resolution plan was withdrawn.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 Consideration of circumstances under which the earlier resolution plan was withdrawn: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.

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