Anjali Rawat And Ors vs Akash Shinghal

Page 1 of 14 JUDGMENT

(Date: 25.11.2022)

[Per.: Dr. Alok Srivastava, Member (Technical)]

1. The Appellants, Anjali Rawat and eighteen other

homebuyers, have filed this appeal under section 61 of the

Insolvency and Bankruptcy Code, 2016 (in short 'IBC') aggrieved

by the order dated 8.6.2021 (hereinafter called 'Impugned Order')

passed by the Adjudicating Authority (National Company Law

Tribunal, New Delhi) in CA (AT) (Ins) No. 914 of 2019 and I.A No. 5

of 2020 filed in Company Petition No. IB (401) (ND)/2017.

2. The Appellants have stated and argued that a resolution

plan was submitted by M/s. Alpha Corp. Development Private

Limited (Respondent No.2) in the Corporate Insolvency Resolution

Process (in short 'CIRP') of the corporate debtor Earth

Infrastructure Ltd. The Appellant has claimed that this resolution

plan, which was approved by the Adjudicating Authority vide

Impugned Order dated 8.6.2021, was non-compliant with the

provisions of section 30(1) and 30(2) of the IBC and suffers from

serious irregularities due to various revisions and amendments

and insertions made at a very late stage, prior to e-voting, which

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 2 of 14 are prejudicial to the genuine and legitimate interests of the

homebuyers.

3. The Appellants have further stated that the proposed

resolution plan does not make any provision regarding payment of

debt to 56% of the financial creditors (homebuyers), who either

voted against the resolution plan or who did not vote at all and this

fact is admitted by Respondent No. 2 (Successful Resolution

Applicant) in its reply to the appeal, wherein it has clearly

admitted that Successful Resolution Applicant was under no

obligation to provide exit plan for financial creditors who did not

vote in favour of the Resolution plan. The Appellants have further

stated that the Resolution Professional did not provide them

sufficient notice before convening the CoC meeting as 24 hours'

notice before the start of e-voting mandated under the Insolvency

and Bankruptcy Board of India (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016 (in short 'CIRP Regulations'),

and hence the members of CoC were unable to properly examine

the revisions/modifications/amendments made in the submitted

resolution plan. The Appellants have also claimed that the

Resolution Plan was approved by the CoC for four projects and not

for three projects and the Adjudicating Authority has erred in

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 3 of 14 presuming in its order in para 12 that the Resolution plan has

been approved for three projects.

4. We heard the arguments advanced by the Learned Counsels

for the Appellants and the Respondents and perused the record.

5. The Learned Counsel appearing for Respondent No. 2, has,

at the outset, challenged the maintainability of the appeal, on the

ground that a similar matter has been dismissed by the Hon'ble

Chairperson Bench of this Tribunal in the appeal bearing CA (AT)

(Ins.) No. 283 of 2021 by an order dated 12.10.2022 and since this

appeal is squarely covered by the said decision, it is not

maintainable on the same grounds as were taken in CA (AT) (Ins)

No. 283 of 2021.

6. The Learned Counsel for Appellant was, therefore, first heard

on the issue of maintainability of the appeal. She has argued that

the appeal is maintainable because the Adjudicating Authority has

not touched upon various aspects relating to non-compliance of

section 30(1) and (2) of the IBC while examining and approving the

Resolution plan filed by Respondent No. 2 and since there are

material irregularities in the Resolution Plan, it is necessary that

this appeal be heard and the order approving the resolution plan Company Appeal (AT) (Ins.) No. 824 of 2021

Page 4 of 14 be examined for non-compliance of section 30 of the IBC. She has

also argued that the locus standi of the homebuyers was

considered and upheld in the judgment dated 27.4.2022 of this

tribunal in Company appeal (AT) (Ins) No. 1112 of 2020 and the

same principle is applicable in the present appeal too.

7. The Learned Counsel for Respondent No. 2 has argued that

section 25-A (3A) of the IBC provides that the allottees in a

housing project shall be represented in the CoC meeting through

their "Authorised Representative', who will represent the views of

the homebuyers who are financial creditor in class as expressed by

simple majority i.e. more than 50% of the homebuyers voting for a

resolution/proposal. He has further stated that after the

homebuyers have, as financial creditors in class, submitted their

views through the Authorised Representative in the CoC meeting,

the individual homebuyers do not poses any independent right to

differ with the action taken by the Authorised Representative or

challenge it, if such an opinion has been obtained in accordance

with the requirements of section 25-A (3A).

8. The Learned Counsel for Respondent No. 2 has claimed that

out of nineteen Appellants in the present appeal, four abstained in

voting before the Authorised Representative, five homebuyers voted Company Appeal (AT) (Ins.) No. 824 of 2021

Page 5 of 14 to reject the plan and ten homebuyers did not file claim (they are

not members of financial creditors in class. Thus, the dissenting

members are five in number, which is a miniscule number from

among the homebuyers who are not entitled to now move an

appeal. Four appellants who abstained in voting before the AR

cannot challenge the majority decision taken with 99.97% vote in

favour of approving the plan and the remaining 10 appellants, who

have not filed their claims are not members of CoC, so not entitled

to vote.

9. We reproduce below the relevant sub-sections (1) and (3A) of

section 25-A of the IBC and Regulation 25-A of the IBBI

(Insolvency Resolution Process for Corporate Persons) Regulations,

2016 for better appreciation of the arguments presented by the

Learned Senior Counsel for Respondent No. 1 and Respondent No.

2 and Learned Counsel for Appellant:-

INSOLVENCY AND BANKRUPTCY CODE, 2016:

"Section 25-A: Rights and duties of authorised representative of financial creditors.

25-A. (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.

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 6 of 14 xx xx xx xx

(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:

xx xx xx xx

(3A) Notwithstanding anything to the contrary contained in sub-section (3), the authorised representative under sub-

section (6A) of section 21 shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote:

Provided that for a vote to be cast in respect of an application under section 12A, the authorised representative shall cast his vote in accordance with the provisions of sub-section (3)."

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016:

'25-A. Voting by Authorised Representative - The authorised representative shall cast his vote in respect of each financial creditor or on behalf of all financial creditors he represents in accordance with the provisions of sub-section (3) or sub- section (3-A) of section 25-A, as the case may be."

10. Section 25-A of IBC provides the modality of collecting

opinion/views of the individual members of financial creditors 8in

class through the Authorised Representative and then present the

views in the meetings of CoC on behalf of financial creditors in

class by the Authorised Representative. By sub-section (2) of

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 7 of 14 section 21 of IBC, the CoC comprises of all financial creditors of

the corporate debtor and for financial creditors in class, a

provision is made for their representation through an Authorised

Representative, whose selection is governed by Regulation 16-A of

CIRP Regulations. Once the Authorised Representative is selected

in the stipulated manner in accordance with Regulation 16-A,

she/he shall represent the financial creditors in class (who are the

class of homebuyers/allottees) in the CoC as per section 21 of the

IBC and shall participate in the meeting of the CoC as required

under section 24 of the IBC. The manner of obtaining the views of

the financial creditors in class by the Authorised Representative is

to be done by the Authorised Representative in accordance with

sub-regulation 9 of Regulation 16-A of the CIRP Regulations.

11. A perusal of the provisions relating to selection of Authorised

Representative, the manner and modality of her/his participation

in the CoC meetings to represent the views of the financial

creditors in class is provided quite lucidly in the IBC and the CIRP

Regulations. The Authorised Representative so selected then

participates in the CoC meetings as well as in decision making in

the CoC, and he does so on behalf of all the home

allottees/homebuyers and the view of individual homebuyer is

therefore contained and subsumed in the majority decision coming

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 8 of 14 through that process when the financial creditors in class express

views and voted in any matter. This view is then put up before the

CoC by the Authorised Representative in the final voting on any

resolution/proposal. Thus, the Authorised Representative's

primary duty and responsibility is to present the views of the

financial creditors in class in the CoC meetings.

12. We note that there is no shortcoming or irregularity pointed

out by the Learned Counsel for Appellant in the selection of the

Authorised Representative. It is a fact that the nineteen

Appellants in the present appeal are all homebuyers, but as the

Respondent No. 1 has stated out of these 19 appellants, 5

homebuyers participated in the voting held by the Authorised

Representative and rejected the resolution plan. Their votes are

thus recorded in the voting whereas 4 homebuyers abstained and

did not vote. The views/votes of 5 voting homebuyers are therefore

covered in the voting exercise, where we find that an overwhelming

majority of 99.97% have voted to approve the resolution plan. In

addition, 10 Appellants have not filed claim and one not member of

CoC as financial creditor in class, it is clear that a miniscule

number of homebuyers have come before us as Appellants and

they have to go along with the decision of the majority of

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 9 of 14 homebuyers taken with 99.47% in favour. This is the scheme of

IBC.

13. The Learned Counsel of Respondents have cited the

judgment of the Hon'ble Supreme Court in "Jaypee Kensington

Boulevard Apartments Welfare Association and Ors. vs. NBCC

(India) Ltd. and Ors.- 2021 SCC OnLine SC 253" in support of

their contention that a miniscule minority cannot challenge the

decision of the majority (more than 50% votes) once such a vote is

taken by the Authorised Representative. It is held therein that the

allottees, even if they are not a homogeneous entity, could vote

either to approve the resolution plan or to disapprove it when they

vote to submit their views to the Authorised Representative.

Individual allottees can certainly hold different views within their

own class, but after they have internally voted as members of the

financial creditor in class, and the Authorised Representative votes

in the Committee of Creditors in accordance with the majority view

of the financial creditors, they cannot press their individual views

to challenge the majority decision. Hon'ble Supreme Court has

held in paragraphs 426 and 427 of this judgment as follows:-

"426. Having regard to the scheme of IBC and the law declared by this Court, it is more than clear that once a decision is taken, either to reject or to approve a particular Company Appeal (AT) (Ins.) No. 824 of 2021

Page 10 of 14 plan, by a vote of more than 50% of the voting share of the financial creditors within a class, the minority of those who vote, as also all others within that class, are bound by that decision. There is absolutely no scope for any particular person standing within that class to suggest any dissention as regards the vote over the resolution plan. It is obvious that if this finality and binding force is not provided to the vote cast by the authorized representative over the resolution plan in accordance with the majority decision of the class, he is 6 Company Appeal (AT) (Insolvency) No. 283 of 2022 authorised to represent, a plan of resolution involving large number of parties (like an excessively large number of homebuyers herein) may never fructify and the only result would be liquidation, which is not the prime target of the Code. In the larger benefit and for common good, the democratic principles of the determinative role of the opinion of majority have been duly incorporated in the scheme of the Code, particularly in the provisions relating to voting on the resolution plan and binding nature of the vote of authorized representative on the entire class of the financial creditor/s he represents.

427. To put it in more clear terms qua the homebuyers, the operation of sub-section (3A) of Section 25A of the Code is that their authorized representative is required to vote on the resolution plan in accordance with the decision taken by a vote of more than 50% of the voting share of the homebuyers; and this 50% is counted with reference to the voting share of such homebuyers who choose to cast their vote for arriving at the particular decision. Once this process is carried out and the authorized representative has been handed down a particular decision by the requisite majority of voting share, he shall vote accordingly and his vote shall bind all the homebuyers, being of the single class he represents."

14. Learned Counsel for Respondent No. 1 has placed reliance

on judgments passed by the Hon'ble Supreme Court of India, in

the matter of Ghanshyam Mishra and Sons Pvt. Ltd. vs.

Edelweiss Asset reconstruction Company (2021)

166/SC/L/237 (SC), Committee of Creditors vs. Satish Kumar Company Appeal (AT) (Ins.) No. 824 of 2021

Page 11 of 14 Gupta & Ors. (SCC ONLINE SC 147), wherein it is held that

approved resolution plan is binding on all the stakeholders and is

required to be implemented by the Successful Resolution Applicant

without any modification or amendment.

15. We note that in Company appeal (AT) (Ins) No. 1112 of 2020,

the challenge in appeal before this tribunal was that since Ms.

Rashmi Saxena who was a director of the Successful Resolution

Applicant was ineligible to submit a Resolution Plan since she was

also a director in a company whose account had been declared

NPA. Since this Resolution Plan was eventually approved by the

Adjudicating Authority, hence it was claimed by the Appellant in

Company appeal (AT) (Ins) No. 1112 of 2020 that the Resolution

Plan's approval was not legally tenable. On this ground of a basic

illegality in the submission of the Resolution Plan the Appellants

had been found to maintain the appeal. In the present appeal, no

such ground has been taken about illegality or irregularity in the

Resolution Plan and the Appellants have challenged the decision of

financial creditors in class which they are not entitled to do, once

they have voted for or against the Resolution Plan. Thus, the

grounds of appeal in Company Appeal (AT) (Ins) No. 1112 of 2020

cannot be said to apply in the present appeal. In any case, the

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 12 of 14 Company Appeal No. 1112/2020 was dismissed, as the challenge

to the approval of the Resolution Plan was rejected.

16. We also adopt the judgment in CA (AT)(Ins) No. 283/2022

dated 12.10.2022 of Hon'ble Chairperson Bench of NCLAT wherein

the Resolution Plan relating to the same corporate debtor M/s.

Earth Infrastructure Limited was under challenge. The Hon'ble

Bench noted as follows:-

"11. To the similar effect is the Resolution Plan with regard to other two projects, the plan clearly mention that Resolution Applicant proposes to satisfy all the admitted claims in respect of the project by completing the pending construction activities and handing over possession to the allottees, in the manner as proposed, and subject to terms and conditions mentioned in the Resolution Plan.

12. The above clause of the Resolution Plan does substantial justice with the homebuyers-allottees. After taking aforesaid clauses on the record, we are of the view that no good grounds have been made out to interfere with the impugned order approving the Resolution Plan. Subject to above, the Appeal is dismissed."

17. We find that the appellants, five of whom exercised their

right to vote, and four who did not care to exercise their right to

vote form a miniscule minority, opposing the approval of resolution

plan. Having done so, they now do not possess an independent

right to challenge the majority vote (99.97%) of the homebuyers.

The rest ten homebuyers are not even members of the financial

creditors in class, since they have not filed their claims, and they Company Appeal (AT) (Ins.) No. 824 of 2021

Page 13 of 14 in any case cannot challenge any decision of CoC as they are not

creditors.

18. Thus, we are of the opinion that even if some of the

homebuyers have not voted in favour of the plan, but the majority

(more than 50%) have voted in favour of the resolution plan

approving the same, the dissenting homebuyers who are in clear

minority have to go along with the views of the majority. They are,

therefore, not entitled to prefer this appeal. This appeal is

therefore, disposed of on the ground of non-maintainability.

19. In the facts of this appeal, there is no order as to cost.

(Justice Rakesh Kumar Jain) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical)

New Delhi 25th November, 2022

/aks/

Company Appeal (AT) (Ins.) No. 824 of 2021

Page 14 of 14