Holding The Resolution Plan To Be Discriminatory, The NCLAT Sets Aside The Plan For Piyush Shelters India Pvt. Ltd

The NCLAT in a Bench comprising of Justice Ashok Bhushan (Chairperson), Justice Jarat Kumar Jain (Judicial Member) and Dr. Alok Srivastava (Technical Member) in Amit Goel v. Piyush Shelters India Pvt. Ltd. set aside the Resolution Plan proposed by Maya Group on the ground that there was discriminatory treatment of the 'non-claimant' financial creditors, as compared to the 'claimant' ones. Facts The Appellants, who are homebuyers/ allotees, preferred appeals against the judgment passed by the Adjudicating Authority (AA) approving the resolution plan submitted by the Resolution Applicants. The Corporate Debtor/ Piyush Shelters India Pvt. Ltd. was admitted to CIRP and the Resolution Plan was initially submitted by Maya Buildcon Pvt. Ltd., which was withdrawn due to some defects. The CoC published an Expression of Interest in Jansatta and Financial Express newspapers. Maya Buildcon submitted an application before the AA seeking permission to submit a revised resolution plan. While this application was pending, the Resolution Professional allowed Maya Buildcon to submit a resolution plan and place it before the CoC for consideration. This revised plan was subsequently approved by the CoC by e-voting. While the resolution plan was pending consideration of the Adjudicating Authority, an applicant (homebuyer/allotee) obtained an order from the AA for admission and consideration of his claim, as he could not file his claim in time. The dispute that arose was that the resolution plan which was approved by the Resolution Professional created two separate categories of financial creditors- one, of claimants who filed their claims on time ("claimants") and second, those who could not file their claims in time ("non claimants"). The two categories were allocated different shares in the approved resolution plan, and so while the "claimants" have received possession of the booked properties, the "non-claimants" have got just 10% of their booked amount after verification of their claims within one month, and thereafter all such claims would stand extinguished. Issues Raised And Decision Violation Of Section 25a Section 25A of the Code lays down the rights and duties of the authorized representatives of financial creditors. Section 25A(3) states that the Authorized Representatives shall always act with the "prior instructions" of the financial creditors he represents. Sub-section (4) states that the Authorized Representative shall file with the Committee of Creditors any instructions received from Financial Creditors to ensure that appropriate instructions of the financial creditors he represents is correctly recorded by the Resolution Professional. The Bench observed- "The use of the word 'prior' implies that financial creditors in class shall have sufficient time to consider collectively the issue/s before them and after voting which is recorded by the Authorized Representative, the result is conveyed to the Committee of Creditors." The Bench held that Regulations 19 and 16A (9) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Insolvency Process Regulations) were not followed by the Resolution Professional and the Authorized Representative also failed to comply with Section 25A. Regulation 19 provides that the notice of CoC meeting shall be given five days in advance which was not done in the present case. Regulation 16A (9) requires the authorized representative to circulate the agenda and give voting instructions to creditors in class he represents at least twenty hours in advance and keep the voting window for creditors in class open for at least twelve hours. Neither was Section 25A complied with, nor were the Insolvency Process Regulations complied with in the present case. Simultaneous Voting The e-voting on the proposed resolution plan by the financial creditors was held simultaneously with e-voting on the resolution plan by the members of the CoC. Thus, e-voting of the financial creditors was not in accordance with the Insolvency Process Regulations. It did not provide sufficient time to the financial creditors to together discuss and vote upon it. The Tribunal observed- "Moreso, when the financial creditors in class (homebuyers/allottees) constitute more than 79% of total voting rights in the CoC, following such a slipshod procedure is nothing short of creating a legal fiction without conforming to the letter and spirit of section 25A of IBC and Insolvency Process Regulations." Approval Of The Resolution Plan It was held that since the Resolution Professional decided on his own motion to obtain a resolution plan from a consortium, which did not go through the EOI route in time and was not placed before the COC for consideration, the plan so approved was not in accordance with law. This plan was ...

Holding The Resolution Plan To Be Discriminatory, The NCLAT Sets Aside The Plan For Piyush Shelters India Pvt. Ltd

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