TaxTMI 
TaxTMI 
2018 (11) TMI 802
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....ularly, the non-inclusion of the Applicants in the Committee of Creditors ("CoC"). 2. Before going on to the specific pleadings of the parties, it is necessary that a background of the matter is discussed to provide a context to the present application. The main application IB-401/ND/2017 was filed by one Deepak Khanna against the CD which is a real estate company. Deepak Khanna had booked a unit in one of the upcoming projects of the CD under the Flexi Payment Plan, which meant that the CD was to pay Rs. 56,613/- (Rupees Fifty-Six Thousand Six Hundred and Thirteen Only) per month to Deepak Khanna as commitment amount/assured return with effect from November 2015 in return for upfront payment of the price of the unit by Deepak Khanna. In light of the decision of the Hon'ble National Company Law Appellate Tribunal ("NCLAT") in Nikhil Mehta v. AMR Infrastructure, this Tribunal held that Deepak Khanna qualifies as a financial creditor and there has been a default by the CD and thus, the CIRP was initiated. 3. On 06.06.2018, the same date as the date of the order in IB-401/ND/2017, the Insolvency and Bankruptcy Code (Second Amendment) Act, 2016 came into effect which introduced i....
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....ressions, "allottee" and "real estate project" shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);' 6. Thus, by virtue of the above amendment home buyers or real estate allottees also qualify as financial creditors under the Code. It was also understood that generally such allottees exist in huge numbers and thus, a method has to be devised to ensure proper and convenient participation and representation of such allottees on the CoC. Thus, amendments were also introduced to enable creditors belonging to a class to appoint an authorized representative on the committee of creditors. The amendments introduced with effect from 06.06.2018 to this effect are as follows: "21. Committee of creditors. - (6A) Where a financial debt- (a) is in the form of securities or deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as authorised representative for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors; (b) is owed to a class of creditors exceeding the ....
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.... (1) On an examination of books of account and other relevant records of the corporate debtor, the interim resolution professional shall ascertain class(s) of creditors, if any. (2) For representation of creditors in a class ascertained under sub-regulation (1) in the committee, the interim resolution professional shall identify three insolvency professionals who are- (a) not his relatives or related parties; (b) eligible to be insolvency professionals under regulation 3; and (c) willing to act as authorised representative of creditors in the class. (3) The interim resolution professional shall obtain the consent of each insolvency professional identified under sub-regulation (2) to act as the authorised representative of creditors in the class in Form AB of the Schedule. " "6. Public announcement. xxx  ....
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....ate the same. This exercise was required to be carried out prior to constituting CoC, however, till 02.08.2018 the IRP has been admitting/rejecting the claims of the financial creditors. b. Section 21(2) of the Code mandates that the CoC shall comprise all financial creditors of the CD but in the present matter the IRP has committed gross abuse of powers vested in him and in an utmost arbitrary manner constituted CoC of only 207 financial creditors out of admittedly 1000 claims under the category of financial creditors. The IRP has not provided a plausible justification for this action. c. The IRP by way of notification dated 21.07.2018 convened the first CoC meeting on 27.07.2018 at 10 a.m. The AR was obliged in terms of Regulation 16A(9) to circulate the agenda to the creditors in a class and announce the voting window at least 24 hours before the window opens for voting instructions and thereafter, keep the voting window open for at least 12 hours. However, the authorized representative failed and neglected to comply with the regulations prior to the first CoC meeting. Inspite of the Applicants approaching the AR to give instructions, he refused to take instruc....
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.... c. More than 95% of the Form Cs submitted by the claimants were not fit to be accepted because of the following common reasons: i. Claimants did not provide the required information given in points Nos. 6, 7 and 8 of Form C. ii. Claimants did not provide the unequivocal answers to points 4 and 5 of the declaration attached to Form C. iii. Claimants had not signed the forms. iv. Claimants sent their proofs of claims in form of numerous individual pages instead of consolidated documents. v. Claimants submitted their claims through multiple e-mails. d. The IRP had to spend a lot of time and resources in sifting through the various e-mails and in explaining the defects to the claimants. Further, due to the lack of access to proper records of the CD the RP had to spend more time in thoroughly checking all the documents submitted by the claimants. e. With respect to Applicant 1, the RP states that the Applicant 1 made a claim of Rs. 9,39,60,000/- and after certain clarification the entire claim was admitted on 02.08.2018. f. With respect to Applicant 2, it is stated that the Applicant 2 sent an e-mail on 26.07.....
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....at this stage to understand the process to be followed by IRP/RP upon the initiation of the CIRP based on the order of the Tribunal and compare it with the actual process followed by the RP in the present matter. 15. Process stipulated by the legal framework: The interim resolution professional appointed by the Adjudicating Authority ("AA") in the order initiating CIRP of the CD is required to make a public announcement within three days from the date of his appointment [Reg. 6(1) of CIRP Regulations]. The public announcement has to state the last date for submitting the claims by creditors and has to offer names of three insolvency professionals to act as authorized representative [Reg. 6(2)]. The last date for submitting the claims according to the public announcement is fourteen days from the date of appointment of the interim resolution professional [Reg. 6(3)]. 16. A creditor has to submit claim with proof on or before the last date mentioned in the public announcement [Reg. 12(1)]. If a creditor fails to submit the claim with proof within the time stipulated in the public announcement, the creditor may submit the claim with proof on or before the ninetieth day of the....
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....spect of the financial debt. A financial creditor, whose claim has not been admitted, is included in the CoC as member, as and when its claim is admitted. Inclusion of a financial creditor in the CoC as a member subsequent to constitution of the CoC does not affect the validity of any decision taken by the CoC prior to such inclusion. This circular is also supported by Regulation 12(3) of the CIRP Regulations. 22. To address the first issue in this application it is necessary to determine the nature of the time period of seven days prescribed in Regulation 13 of the CIRP Regulations i.e. whether the time period of seven days for verification of claims prescribed in Reg. 13 is mandatory or directory. The question whether a statute is mandatory or directory is to be decided on the basis of the intent of the legislature and not on the language in which the intent is clothed. Further, the consequence of the non-compliance of the statute is also to be seen. These are well settled principles of interpretation repeatedly upheld by the Hon'ble Supreme Court (Administrator, Municipal Committee, Charkhi Dadri v. Ramji Lal Bagla) and the high courts (Chingangbang Kunjo Singh v. State of Ma....
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....The IRP was appointed by the AA vide order dated 06.06.2018 for initiating the CIRP of Earth Infrastructure Ltd., a real estate company which had five ongoing real estate projects. The CD, Earth Infrastructure Ltd., had allotted flat to a number of allottees under various schemes. By virtue of the amendment made in the definition of financial debt in Section 5(8) of the Code vide Insolvency and Bankruptcy (Second Amendment) Code, 2016, all the allottees of the CD could submit their claims as financial creditors. 28. The public announcement was made by the IRP in newspapers on 13.06.2018 and the last date for submission of claims was stated to be 26.06.2018. Thus, the public announcement was not made within three days from the date of appointment of the IRP but after 6 days of his appointment. The IRP states that he found out about his appointment only on 11.06.2018 through the website of this Tribunal and thereafter made the public announcement. 29. The IRP states that it received 600 claims from financial creditors and 30 claims from operational creditors till the last date of the claim. The IRP then filed the list of creditors, the report confirming constitution of CoC and ....
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....ocess. The RP has the liberty to make interim estimates of the claims received and then subsequently revise the same when additional information is received. Further, the CIRP Regulations as well as the circular specifies that the validity of any decision taken by the CoC before the inclusion of the new financial creditor or revision of an admitted claim will not be affected. 33. Further in the instant case we do not find any material to show that the first CoC meeting was actually held on 27.07.2018 affecting the interest of the general body of financial creditors, as both the IRP and AR state before this Tribunal that with a view to enable the IRP and thereby the Corporate Debtor whose interest the office of the IRP is required to protect, an advocate is sought to be engaged which does not warrant voting. Further a security guard to protect the assets/projects of the CD which also enures to the benefit of Financial Creditors, like that of the applicants had been engaged and that no major decision had been taken other than the above. 34. However at this stage we would also like to highlight that the AR appointed to represent the Financial Creditors in this matter is required....