Tribunal: Individual Voting Shares Mandatory under Insolvency Law

The Tribunal held that the voting shares specified under the Insolvency and Bankruptcy Code (IBC) are mandatory and not directory. It emphasized that each financial creditor must vote individually according to their share, rejecting the notion of class-wise voting within the Committee of Creditors (COC). The Tribunal also clarified that abstaining from voting does not imply support for the majority decision. The case outcome mandated the COC to function as a unified entity without class-wise segmentation for voting, ensuring decisions are based on actual votes cast and not assumptions.

---

---

Issues Involved:
1. Whether the various threshold voting share fixed for the decision of the Committee of Creditors (COC) under various sections of the Insolvency and Bankruptcy Code (IBC) needs to be followed literally or are only directory.
2. The procedure to be followed in determining the voting percentage among the COC to pass a particular resolution.

Issue-Wise Detailed Analysis:

1. Threshold Voting Share: Literal or Directory
The Tribunal examined whether the threshold voting shares specified under the IBC are mandatory or directory. The Tribunal concluded that the voting shares prescribed under the IBC are mandatory. This conclusion is based on the judgment of the Hon'ble Supreme Court in K. Sashidhar vs. Indian Overseas Bank & Ors, which emphasized that the requisite threshold of voting share is essential and cannot be treated as merely directory. The Tribunal noted that treating certain threshold limits as mandatory and others as directory would do violence to legislative intent.

2. Procedure for Determining Voting Percentage
The Tribunal analyzed the procedure for determining the voting percentage among the COC. It was argued by the Home Buyers that their class should be treated distinctly, and the majority vote within the class should represent the entire class's voting share. However, the Tribunal rejected this argument, stating that the IBC does not envisage class-wise segmentation of financial creditors for voting purposes. The Tribunal emphasized that each financial creditor must vote in accordance with their individual voting share and preferences, and the majority vote of a class cannot be extrapolated to represent the entire class.

The Tribunal also addressed the issue of abstaining votes. It was noted that abstaining from voting is a conscious choice and cannot be presumed as support for the majority decision. The Tribunal cited the Supreme Court's decision in Shailesh Manubhai Parmar v. Election Commission of India, which held that the right to vote includes the right to remain neutral.

Submissions by Stakeholders:
- Home Buyers: Argued for a majority rule within their class to be applied to the COC decisions, citing difficulties in voting participation due to various reasons.
- Lenders: Opposed the Home Buyers' argument, emphasizing that decisions should be based on the actual votes cast and not on assumptions regarding abstaining votes.
- IBBI: Suggested that non-participation should be deemed as assent to prevent decision stalling.
- Central Government: Advocated for an outcome-based approach to facilitate resolution over liquidation, suggesting the principle of 'present and voting' for deciding the voting share.

Conclusion:
The Tribunal concluded that:
1. The COC must comprise all financial creditors as one entity without class-wise segmentation for voting purposes.
2. The voting shares prescribed under the IBC are mandatory and not directory.
3. Class-wise voting and extrapolation of majority votes within a class to represent the entire class in the COC are not acceptable.

The Tribunal's conclusions were returned to the Hon'ble President, NCLT, for onward transmission to the Division Bench of NCLT, Allahabad, for pronouncement in open court.

---