NCLAT: Remanding a resolution plan back to CoC on the grounds of the procedural deviations would render the CIRP a never ending process
The bench comprised of Justice Ashok Bhushan (Chairperson), Justice M. Satyanarayana Murthy (Judicial Member) and Mr. Barun Mitra (Technical Member).
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, held that remanding a resolution plan back to Committee of Creditors on the grounds of the procedural deviations raised by a dissenting minority in class of creditors, would render the CIRP a never ending process and is against the time bound resolution objective of the IBC. The Bench declined to remand back the revise Resolution Plan to CoC over hyper-technical grounds raised by minority dissenting creditors.
A petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") was filed by Oriental Bank of Commerce ("Financial Creditor") seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against M/s Venta Realtech Pvt. Ltd. ("Corporate Debtor"). The petition was admitted and CIRP was initiated by the Adjudicating Authority on 20.05.2019. Mr. Debashis Nanda ("Respondent No. 1") was appointed as the Interim Resolution Professional and later confirmed as the Resolution Professional.
A Committee of Creditors was constituted by the IRP which included Homebuyers as Class of Creditors represented by Respondent No. 3. The 330 day time period for completion of CIRP expired on 14.02.2020, beyond which Adani Infrastructure and Developers Pvt. Ltd. ("Respondent No. 2") submitted the sole Resolution Plan which was approved by the CoC on 29.07.2020 with 98.58% votes and an application was filed before Adjudicating Authority under Section 30(6) of IBC for approval of Plan. The Adjudicating Authority directed the Respondent No. 2 to revise the Plan.
Consequently, the Resolution Professional issued a notice for holding a CoC meeting on 14.01.2022 for approval of the revised Resolution Plan. In turn, the Authorized Representative of Homebuyers issued a notice 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. Out of a total of 26 Homebuyers, 19 Homebuyers voted in favor of the revised Resolution Plan. Accordingly, the Authorized Representative of homebuyers casted his vote in favor of the revised Resolution Plan on behalf of the Creditors in class, representing 50.93% share of voting rights in the CoC.
The Adjudicating Authority approved the revised Resolution Plan on 30.05.2022 in the interest of justice, after considering the exceptional circumstances since the matter was related to Homebuyers. The homebuyers filed an appeal before NCLAT challenging the order dated 30.05.2022 whereby the Resolution Plan was approved.
The Bench observed that 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 defeat the very object and purpose of IBC.
It was observed that Regulation 16-A(9) states that the Authorized Representative "may" seek preliminary views of creditors on any item in the agenda to enable him to effectively participate in the meeting of the committee. The requirement to seek preliminary views was not mandatory.
The Bench held that the procedural compliance by the Resolution Professional and Authorized Representative were reasonably substantial and there was no willful casualty or miscarriage of justice.
Further, it was opined that the CoC's decision on the amended Resolution Plan would not have been materially any different, had the procedural deviations not taken place. 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. Also, it has neither been disputed by the Appellants that they constitute a minority in the Creditor of class as Homebuyers had voted in favor of the amended Resolution Plan with 89.80% vote share.
"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 recognized 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."