Anjali Rawat & Ors. vs Akash Singhal & Anr.

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

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.

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 are prejudicial to the genuine and legitimate interests of the homebuyers.

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 presuming in its order in para 12 that the Resolution plan has been approved for three projects.

We heard the arguments advanced by the Learned Counsels for the Appellants and the Respondents and perused the record.

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.

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 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.

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).

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 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.

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:-

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 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.

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 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.

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 homebuyers taken with 99.47% in favour. This is the scheme of IBC.

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:-

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 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.

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 No. 1112/2020 was dismissed, as the challenge to the approval of the Resolution Plan was rejected.

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:-

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 in any case cannot challenge any decision of CoC as they are not creditors.

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.

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