Priya Puri And Ors vs Mr.Debashis Nanda (Resolution ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT)(Insolvency) No. 906 of 2022 [Arising out of order dated 30.05.2022 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench-V in IA 324 of 2022 and I.A. No. 572 of 2022 in C.P.(IB)-923 (PB)/2019] IN THE MATTER OF:

1. Piya Puri 77B, Tatvan Villas, Sector 48 Sohna Road, Gurgaon - 122018. .... Appellant No.1

2. Pradeep Arora R-325, East of Kailash, New Delhi - 110065. ....Appellant No.2

3. Satyadeep Bishnoi C-2001, Oberoi Woods, Mohan Gokhale Road, Oberoi Garden City, Goregaon East, Mumbai. .... Appellant No.3

Versus

1. Mr. Debhashish Nanda Resolution Professional of Venta Realtech Private Limited CS-14, Ansal Plaza Mall, Vaishali,Ghaziabad, Uttar Pradesh - 201010. .... Respondent No.1

2. Adani Infrastructure & Developers Pvt. Ltd. 10th Floor, Shikhar, Near Adani House, Mithakhali Six Road, Navrangpura, Ahmedabad-380009. ....Respondent No.2

3. Mr. G. Satya Narayana Guddeti Authorised Representative of Financial Creditors in Class of Venta Realtech Private Limited Plot No. 23, First Floor, Durganagar Colony, Punjagutta, Hyderabad - 500082. ....Respondent No.3 Company Appeal (AT)(Insolvency) No. 906 of 2022 1 Present:

For Appellants: Mr. Abhishek Anand, Mr. Nipun Gautam, Advocates

For Respondents: Mr. Sumant Batra and Ms. Ruchi Goyal, Advocates for RP.

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

1. The present appeal, filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as 'IBC') by the Appellant arises

out of order dated 30.05.2022 (hereinafter referred to as 'Impugned Order')

passed by the Adjudicating Authority (National Company Law Tribunal, New

Delhi-V Bench) in IA No. 324 of 2022 and IA No. 572 of 2022 in Company Petition

No.(IB)-923(PB)/2019. By the impugned order, the Adjudicating Authority

allowed I.A. No. 324/2022 and approved the Resolution Plan of the Corporate

Debtor submitted before it by the Resolution Professional under Section 31(1) of

the IBC while dismissing IA No. 572/2022 filed by the present Appellants in their

capacity as members of Financial Creditors in class of Corporate Debtor

challenging the material irregularities committed by the Resolution Professional

of the Corporate Debtor and the Authorised Representative of Financial Creditors

in class in the Corporate Insolvency Resolution Process ('CIRP' in short).

Aggrieved by the said impugned order, the instant appeal has been preferred by

the Appellant with the prayer that the impugned order be set aside and the Company Appeal (AT)(Insolvency) No. 906 of 2022 2 Resolution Professional and Authorised Representative be directed to follow the

due process of law and place the revised Resolution Plan before the Committee

of Creditors('CoC' in short) in terms of the provisions of IBC and regulations

framed thereunder.

2. The Learned Counsel for the Appellants has also filed I.A. No. 2562 in

Company Appeal (AT)(Ins.) No. 906 of 2022 seeking condonation of eleven days

in filing this Appeal. The grounds of delay appear to be bonafide, the I.A. is

allowed and the delay in filing the appeal is condoned.

3. The brief facts of the case are that one of the Financial Creditors, Oriental

Bank of Commerce of the Corporate Debtor, M/s Venta Realtech Private Limited

had preferred an application under Section 7 of the IBC for initiation of CIRP

which was admitted by the Adjudicating Authority on 20.05.2019. Following

initiation of the CIRP process, Mr Debashis Nanda, Respondent No 1 in the

present case, was initially appointed as the Interim Resolution Professional('IRP'

in short) and later confirmed as the Resolution Professional on 17.06.2019.

4. The IRP made a Public Announcement and invited claims from the

creditors of the Corporate Debtor. The IRP also constituted a CoC of the

Corporate Debtor which included Homebuyers as Class of Creditors represented

by Mr G Satya Narayana Guddeti, Authorised Representative, Respondent No 3

in the present case.

Company Appeal (AT)(Insolvency) No. 906 of 2022 3

5. The 180 day time period for completion of CIRP expired on 16.11.2019

following which the Resolution Professional filed an application with the

Adjudicating Authority for allowing extended period for CIRP completion. The

Adjudicating Authority on 06.02.2020 allowed the CIRP period to be extended

by another 90 days which ended on 14.02.2020 and subsequently the 330 day

period also ended on 14.04.2020. Adani Infrastructure and Developers Private

Ltd., Respondent No. 2 in the present case, submitted the sole Resolution Plan

which was approved by the CoC on 29.07.2020 with 98.58% votes in favour and

thereafter placed by the Resolution Professional before the Adjudicating

Authority for approval. The date of submission of the Resolution Plan was

beyond the 330 days CIRP period. The Adjudicating Authority noted that time

period of CIRP was enlarged with the passing of 107 days exclusion order by the

Appellate Authority on 25.06.2021 by which time the 330 days period for

completion of CIRP had already expired. The Adjudicating Authority, therefore,

held that as the CIRP period had already expired and time exclusion order having

not been granted prior to expiry of CIRP period, it was not inclined to approve

the Resolution Plan.

6. Be that as it may, the Adjudicating Authority instead of rejecting the

Resolution Plan, after considering the exceptional circumstances since the

matter related to Homebuyers, in the interest of justice, directed on 06.01.2022

that the Resolution Plan be remanded to the CoC for fresh reconsideration

including the issue of cash infusion by the Resolution Applicant for effective

Company Appeal (AT)(Insolvency) No. 906 of 2022 4 implementation of the Resolution Plan. The Adjudicating Authority further

ordered that this exercise to be completed by 18.01.2022 and till then the CIRP

period was extended by the Adjudicating Authority.

7. In compliance to these directions, the Resolution Applicant submitted the

revised Resolution Plan on 11.01.2022 after adding the clause of initial cash

infusion. Pursuant to receipt of the revised Resolution Plan by the Resolution

Professional, notice was issued for holding the CoC meeting (8th in series) on

14.01.2022 for approval of the revised Resolution Plan. In turn, the Authorised

Representative of Homebuyers issued a notice alongwith the agenda of the CoC

meeting to all the Homebuyers for a meeting on 12.01.2022 to seek their

preliminary views on the revised Resolution Plan for voting and approval.

8. As per the voting instructions received by the Authorised Representative

of the Homebuyers, out of a total of 26 Homebuyers, 19 Homebuyers voted in

the matter with 89.80% voting in favour of the amended Resolution Plan. As per

above voting instructions received from the Homebuyers as Creditors in class,

the Authorised Representative, therefore, took cognizance of the fact that

majority of the Homebuyers (being more than 50%) having decided in favour of

the amended Resolution Plan, he accordingly cast his vote in favour of the

amended Resolution Plan on behalf of the Creditors in class, representing

50.93% share of voting rights in the CoC. The amended Resolution Plan, as

approved by the CoC was placed before the Adjudicating Authority by the

Company Appeal (AT)(Insolvency) No. 906 of 2022 5 Resolution Professional under Section 30(6) of the IBC and was approved by the

Adjudicating Authority vide impugned order dated 30.05.2022.

9. Aggrieved by this impugned order, the Learned Counsel for the Appellants

has submitted that the Respondents No 1 and 3 committed material

irregularities by not following the due process of law as prescribed under the IBC

and regulations framed thereunder while submitting the amended Resolution

Plan and that the Adjudicating Authority failed to consider these gross

irregularities while approving the Resolution Plan of the Corporate Debtor.

10. Elaborating on the said material irregularities, it has been submitted by

the Learned Counsel for the Appellants that though the Authorised

Representative had sent an email dated 10.01.2022 keeping a meeting of the

Homebuyers as Creditors in class on 12.01.2022 to seek their preliminary views,

however, no such meeting was later conducted. It has been argued that the

Financial Creditors in class were not called by the Authorised Representative to

submit their preliminary views on the Resolution Plan though mandated under

Regulation 16-A(9) of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP' in short)

and, thus, the Authorised Representative had failed to follow the prescribed

procedure. It is further argued that the first proviso to the said Regulation 16-

A(9) mandates that creditors shall have a time window of at least 12 hours to

submit the preliminary views and the said window opens at least 24 hours after Company Appeal (AT)(Insolvency) No. 906 of 2022 6 the Authorised Representative seeks preliminary views, which was again not

followed in the present case, and thus amounted to be an irregularity.

11. The Learned Counsel for the Appellants has further submitted that

seeking of preliminary views and conduct of voting as provided by the CIRP

regulations is mandatory in nature and not directory and in support of his

contention has relied upon the judgement of this Tribunal in the matter of Amit

Goel versus Piyush Shelters India Private Limited in Company Appeal (AT)

(Ins.) No 700 of 2021. The Learned Counsel for the Appellants has further

contended that the Resolution Professional also acted in complete contravention

of CIRP Regulations 25(5), 25(6), 25-A and 26 which, interalia, provides for

voting through electronic means, however, the Authorised Representative on

12.01.2022 sent an email at 3 p.m. informing that there will be no e-voting portal

for Homebuyers and that the Homebuyers were to communicate their decision

on the revised Resolution Plan by 2 p.m. of 15.01.2022 by email. Thus the

conduct of the Respondents No 1 and 3 negated the possibility of any deliberation

and discussion on the revised Resolution Plan which was necessary since the

Resolution Plan was conditional and discriminatory in nature and by virtue of

being non-compliant ought not to have been placed before the CoC for approval

and that such an act was contrary to the ratio laid down by this Tribunal in K.

L. Jute Products Private Limited versus Tirupati Jute Industries Ltd in

Company Appeal (AT) (Ins) No 277 of 2019.

Company Appeal (AT)(Insolvency) No. 906 of 2022 7

12. The Learned Counsel for the Respondent refuted the submissions of the

Appellants that there was any material irregularity on the part of the

Respondents while considering the amended Resolution Plan and argued that

the Adjudicating Authority has correctly held that Authorised Representative

had acted in accordance with the voting instructions received from the Creditors

in class. Further, in terms of Section 25-A(3-A) of IBC, the Authorised

Representative was required to cast his vote on behalf of the Creditors in class

after taking into account what the majority of Homebuyers in class had decided,

and in the present case, the Homebuyers had decided in favour of the Resolution

Plan by 89.80% votes. The Learned Counsel for the Respondent further stated

that the short time period of twelve days that was provided to the Resolution

Professional by the Adjudicating Authority to complete the process of

reconsideration of the revised Resolution Plan needs to be factorised as to why

the procedure of voting by email was adopted.

13. The Learned Counsel for the Respondent also contended that the

objections raised by the Appellants are inconsequential in so far as they

represent Homebuyers in minority and thus bound by the decision taken by the

majority within the class of creditors. In support of his contention that dissenting

minority amongst Creditors in class shall be treated at par with the other

Homebuyers, he relied on the judgement of the Hon'ble Supreme Court in

Jaypee Kensington Boulevard Apartments Welfare Association and Ors. Vs.

NBCC(India) Ltd. and Ors.(2022)1 SCC 401 wherein it held that when Company Appeal (AT)(Insolvency) No. 906 of 2022 8 Homebuyers as a class have voted in favour of the Resolution Plan, any

particular constituent of that class cannot be heard in opposition to the

Resolution Plan by way of objection as there is no concept of dissenting

Homebuyers within Creditors in class.

14. We have considered the submissions of the Learned Counsels for the

parties and carefully perused the records.

15. We do not want to enter into the realm of discussion as to whether the

CIRP Regulations under purview in the present matter is mandatory or directory.

It would, however, suffice to say that we are in agreement with the basic premise

that both the Resolution Professional and the Authorized Representative are duty

bound to act scrupulously in terms of the statutory scheme of the IBC including

the practice rules and regulations framed there-under. If procedural rules are

bypassed or circumvented by them in a manner which stifles the basic canons

of fairness and justice and prejudicially affects the legal rights and entitlements

of party, the said action on grounds of having vitiated the process deserves to be

set aside. Be that as it may, while it is important to maintain the sanctity and

credibility of CIRP proceedings, it is equally important to ensure that hyper-

technicality is not allowed to occupy centre-stage and besiege the proceedings

as it would end up frustrating and defeating the very object and purpose of IBC.

It is against this evaluation parameter that we may now proceed to examine the

acts of omission and commission on the part of Respondents No.1 and 3 in the Company Appeal (AT)(Insolvency) No. 906 of 2022 9 present matter to conclude as to whether there has been any transgression of

the bounds of rules and regulations leading to any serious miscarriage of justice

suffered by the Appellants.

16. For better understanding, we may have a peep into the statutory scheme

of IBC with respect to rights and duties of Authorized Representative of Financial

Creditors including Class of Creditors as laid down in Section 25-A of the IBC

and 16-A(9) of CIRP Regulations is extracted which reads as follows:

25-A. Rights and duties of authorized representative of financial creditors -

(1) The authorized representative under sub-section (6) or sub-section

(6-A) 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.

(2) It shall be the duty of the authorized representative to circulate

the agenda and minutes of the meeting of the committee of creditors to the

financial creditor he represents.

(3) The authorized representative shall not act against the interest of

the financial creditor he represents and shall always act in accordance with

their prior instructions:

Company Appeal (AT)(Insolvency) No. 906 of 2022 10 Provided that if the authorized representative

represents several financial creditors, then he shall

cast his vote in respect of each financial creditor in

accordance with instructions received from each

financial creditor, to the extent of his voting share:

Provided further that if any financial creditor does

not give prior instructions through physical or

electronic means, the authorized representative shall

abstain from voting on behalf of such creditor.

[(3-A) Notwithstanding anything to the contrary contained in sub-section (3), the

authorized representative under sub-section (6-A) 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 12-A, the authorized

representative shall cast his vote in accordance with

the provisions of sub-section (3)].

(4) The authorized representative shall file with the committee of creditors any

instructions received by way of physical or electronic means, from the financial

creditor he represents, for voting in accordance therewith, to ensure that the

appropriate voting instructions of the financial creditor he represents is correctly

Company Appeal (AT)(Insolvency) No. 906 of 2022 11 recorded by the interim resolution professional or resolution professional, as the

case may be.

Explanation - For the purposes of this section, the "electronic means" shall be such

as may be specified.

17. The Insolvency and Bankruptcy Board of India (Insolvency Resolution

Process for Corporate Persons) Regulation 16-A (9) provides that "the Authorized

Representative shall circulate the agenda to creditors in a class and may seek

their preliminary views on any item in the agenda to enable him to effectively

participate in the meeting of the committee........." Regulation 16-A(9) further

provides for certain time window to be allowed for Creditors in a class for

submission of their preliminary views.

18. In the present case, we find that the Authorised Representative sent an e-

mail to the Homebuyers on 10.01.2022 informing them about a meeting of CoC

being convened by the Resolution Professional on 13.01.2022 on the directions

of the Adjudicating Authority. It is also noted that the same e-mail mentions

that a meeting to seek preliminary views of all Homebuyers would be conducted

by him on 12.01.2022. This was followed up by another e-mail on 11.01.2022

communicating the agenda for CoC meeting which, interalia, included

discussion on the revised Resolution Plan of the Resolution Applicant. However,

it is also noted neither the meeting of the Homebuyers on 12.01.2022 nor the

CoC meeting on 13.01.2022 were held. Subsequently vide another e-mail on Company Appeal (AT)(Insolvency) No. 906 of 2022 12 12.01.2022, the Authorized Representative has informed the Homebuyers that

instead of e-voting portal, they may communicate their decision of

acceptance/rejection of the amended Resolution Plan by e-mail by 15.01.2022.

19. The above-cited series of communications issued by the Authorized

Representative makes it abundantly clear that he did not falter in keeping the

Homebuyers informed about the CoC meeting and its agenda. It is also noted

that Authorized Representative had intended to hold a meeting to elicit

preliminary views of the Homebuyers on 12.01.2022 but eventually did not

convene it and instead sought the views of Homebuyers on the amended

Resolution Plan by e-mail on whether they approved or rejected it. It is pertinent

to note that CIRP Regulations 16-A(9) does not appear to make it obligatory to

hold the meeting with Homebuyers to seek their preliminary views as the word

used in the said Regulation is 'may', thereby rendering the decision to seek

preliminary views optional. This is not to deny the fact that with a view to enable

the Authorised Representative to participate effectively in the CoC meeting and

properly represent the interests of the homebuyers, holding such a meeting of

Homebuyers is eminently desirable.

20. It is also an admitted fact that out of 26 Homebuyers, only 19 Homebuyers

voted in the matter and that in terms of Section 25-A(3-A) of the IBC, the

Authorized Representative taking cognizance of the fact that 89.80% of

Homebuyers voted in favour of the amended Resolution Plan, he cast his vote in Company Appeal (AT)(Insolvency) No. 906 of 2022 13 favour of the amended Resolution Plan on behalf of the Creditors in class. It is

also noted that the present Appellants had very much exercised their option of

conveying their decision on the Resolution Plan by e-mail and that they did not

approve the said Resolution Plan but in doing so constituted a very thin

dissenting minority. It is also noted that the Authorized Representative and

Resolution Professional was allowed a tight time-frame of only 12 days (from

06.01.2022 to 18.01.2022) by the Adjudicating Authority to complete the CIRP.

Given the exceptional and stringent time-frame, the Adjudicating Authority has

held that objections raised by the Appellant like the Authorised Representative

not holding the meeting scheduled on 12.01.2022 and instead seeking the views

on the Resolution Plan by email lacks merit. On the whole, we are of the

considered opinion that the procedural compliance by the Resolution

Professional and Authorized Representative appears to be reasonably

substantial and we find no reason to hold that there was any wilful casualty or

miscarriage of justice.

21. We now look at the two judgements of this Tribunal referred to by the

Learned Counsel for the Appellants. There is no dispute with regard to these

case laws. However, as each case has its own merits, it is necessary to examine

the relevance of these case laws against the facts and circumstances of the

present case. In the matter of Amit Goel Vs. Piyush Shelters India Private

Ltd., the facts are clearly distinguishable, in that the Financial Creditors in

class constituted more than 79% of total voting rights in the CoC and there was Company Appeal (AT)(Insolvency) No. 906 of 2022 14 an issue of unequal treatment meted out to two separate categories within

financial creditors in class. Hence, the context being different, applying this ratio

in the present matter does not appear to be in order. The other judgement is

K.L. Jute Products Private Ltd. Vs. Tirupati Jute Industries Ltd. regarding

the Resolution Plan being conditional and discriminatory and thus non-

compliant has been found to be misplaced by the Adjudicating Authority in so

far that it meets the requirements of Section 30(2) of IBC. We find no reasons

to disagree with the Adjudicating Authority. We tend to agree with the view

that the above mentioned two judgements do not provide support to the

contention of the Appellants.

22. More importantly, the question before us, is whether the CoC decision on

the amended Resolution Plan could have been materially any different, had the

procedural deviations not taken place. The answer seems to be in the negative

for the following reasons. The Adjudicating Authority in the impugned order has

clearly held that the amended Resolution Plan has been approved by 98.58%

voting share of the CoC members which is much above the statutory requirement

of 66% vote share and this has not been challenged by the Appellants.

Furthermore, we find that it has neither been disputed by the Appellants that

they constitute a minority in the Creditor of class as Homebuyers had voted in

favour of the amended Resolution Plan with 89.80% vote share.

Company Appeal (AT)(Insolvency) No. 906 of 2022 15

23. It may be safely inferred that even if the alleged procedural omissions had

not taken place, the Appellants would still have remained minority Homebuyers

in the class of Creditors. That being so, no clear nexus between the alleged

material irregularity in the procedure followed and resultant prejudice caused to

the interest of the minority Homebuyers in the class of creditors has been

established. It is well recognised that rules of procedure being handmaid of

justice, the object and intent of such procedures should be to advance the cause

of justice and not become a tool to manipulate the process. The CIRP

proceedings in the present case has already been a protracted affair. Remanding

the matter back to CoC on the grounds of the procedural deviations raised by a

dissenting minority in class of creditors would render the CIRP a never ending

process. This would militate against the core objective of the IBC to ensure

insolvency resolution in a time bound manner.

24. Most importantly, we find substance in the submission made by the

Learned Counsel for the Respondent that the minority Homebuyers have to

necessarily flow with the majority within the class and the decision of Hon'ble

Supreme Court in Jaypee Kensington Boulevard Apartments Welfare

Association and Ors. Vs. NBCC(India) Ltd. and Ors.(2022)1 SCC 401 is indeed

fully attracted in the present case. The relevant extracts of this judgement are

reproduced below:-

xxx xxx xxx

Company Appeal (AT)(Insolvency) No. 906 of 2022 16 "164.4 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 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

authorize representative over the resolution plan in

accordance with the majority decision of the class he is

authorized to represent, a plan or resolution involving

large decision of the class he is authorized to represent,

a plan or 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 Company Appeal (AT)(Insolvency) No. 906 of 2022 17 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.

xxx xxx xxx

170. To sum up this part of discussion, in our view,

after approval of the resolution plan of NBCC by CoC,

where homebuyers as a class assented to the plan, any

individual homebuyer or association cannot maintain

any challenge to the resolution plan nor could be treated

as carrying any legal grievance.

xxx xxx xxx

171. Once we have held that these dissatisfied

homebuyers and associations are not entitled to put

up any challenge to the resolution plan contrary to the

decision of the requisite majority of their class, all

their objections are required to be rejected outright...."

25. In view of the above discussions, facts and circumstances, we are of the

considered opinion that there are no convincing reasons to interfere with the Company Appeal (AT)(Insolvency) No. 906 of 2022 18 order of Adjudicating Authority approving the revised Resolution Plan of the

Corporate Debtor under Section 31(1) of the IBC. We, thus, find that the appeal

is devoid of merit and find no reasons to entertain it. In the result, the appeal is

dismissed. There is no order as to costs.

(Justice Ashok Bhushan) Chairperson

(Justice M. Satyanarayana Murthy) Member(Judicial)

(Barun Mitra) Member(Technical)

Place: New Delhi Date: 24.08.2022

shashi

Company Appeal (AT)(Insolvency) No. 906 of 2022 19