Resolution Professional Can't Exclude Voting Share Of Members Who Abstain From Voting When Calculating Requisite Majority: NCLT Mumbai

The National Company Tribunal (NCLT), Mumbai Bench comprising of Ms. Lakshmi Gurung (Member (Judicial) and Shri Anil Raj Chellan (Member (Technical) disposed a Section 60(5) application filed by the Applicant against the approval of the Resolution Plan, stating that the same lacked the desired voting percentage to be approved as a resolution plan. Background The following case has filed by the Applicant, who is the Shareholder and Suspended Director of the Corporate Debtor, under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The Applicant, namely, Mr. Rohit Jindal, is the suspended director of the Corporate Debtor (Shree Bhimeshwari Ispat Private Limited). Oriental Bank of Commerce filed a Section 7 application before the Adjudicating Authority for the initiation of Corporate Insolvency Resolution Process ('CIRP') of the Corporate Debtor. At the 5th meeting of the CoC, the resolution plan submitted by Khatav Man Taluka Agro Processing Ltd came up for consideration, and a decision was taken by the CoC to invite the Prospective Resolution Applicant to make a presentation on the Resolution Plan in the next CoC meeting. After several presentation and discussions done on the Resolution Plan, at the 8th CoC meeting, the Resolution Plan submitted by Khatav Man Taluka was put for voting. After the voting, a total of 61.31% of the financial creditors voted in the favor of the Resolution Plan with SBI abstaining from voting. According to Section 30(4) of the Code, the CoC may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors. In January, 2021, the RP filed an IA before the NCLT u/s 30 and 31 of the Code for approval of the Resolution Plan of Khatav Man Taluka. Appellant's Contentions The Applicant contends that the RP has failed to calculate the correct voting percentage of the e-voting results on the Resolution Plan of Khatav Man Taluka. According to Section 30(4) of the Code, the CoC may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors. The appellant states that the e-voting result submitted by the RP states that the said resolution plan is approved by 6131 votes of the members of the CoC, the correct voting percentage is 61.31% and not 67%. The Appellant has cited the judgment of National Company Law Tribunal, Chennai Bench vide Order dated 22.07.2022 in I.A. (IBC) No. 649/CHE/2022 in IBA/386/2020, in support of his case. Respondent's Contentions The Respondent argued that in the e-voting three options namely 'Approve', 'Reject' and 'Abstain' were given to the creditors. All the creditors, except for the State Bank of India, constituting 8.32 % of the CoC, participated in the voting and opted for either of these options. The respondent stated that the voting share of the member(s) who did not cast a vote cannot be taken into account in the denominator while computing the e-voting results. The denominator will depend upon the creditors actually exercising the vote, either in the category of approval or rejection, or exercising the option of 'abstain'. The Resolution Plan garnered 66.87 % (61.31 / 91.68 x 100 = 66.87), it was declared that it crossed the minimum threshold of 66% as mandated under Section 30(4) of the Code. The Respondent also cited the order of Hon'ble NCLAT in the matter of IDBI Bank Ltd. v. Anuj Jain, Company Appeal No.536 of 2019, which is based on the judgment of Hon'ble NCLAT in Tata Steel Ltd. Vs. Liberty House Group Pte. Limited & Ors.'- Company Appeal (AT) (Insolvency) No. 198 of 2018. NCLT Judgment The Tribunal while examining the issue of percentage of vote, examined the judgments cited by the Respondents. The Tribunal stated that in the case of Tata Steel, the voting rights of members who are not present in the meeting either directly or through Video Conferencing are not counted, whereas in the matter of IDBI Bank the voting percentage of Financial Creditor who remains absent from voting are held not to be counted. State Bank of India, whose voting percentage has been excluded, was present in the CoC meeting. Therefore, the law laid down in Tata Steel is not applicable in the present case. The Tribunal also highlighted that there is no presence of any clause in the CIRP regulation wherein it has been stated that the voting share of the member who did not cast their vote should be excluded when calculating the percentage prescribed under the Code. The Tribunal relied on the judgment of the the Hon'ble Supreme Court in K. Sashidhar v. Indian Overseas Bank & Ors. (2019) 12 SCC 150 for the purpose of computing the required percentage of voting share. The Apex Court in in its judgment stated that; “The fact that substantial or majority percent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by...

Resolution Professional Can't Exclude Voting Share Of Members Who Abstain From Voting When Calculating Requisite Majority: NCLT Mumbai

Pratham Kapoor

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