Case Law Details

Case Name : Nikhil Mehta & Sons (HUF) & Ors vs M/s AMR Infrastructure Ltd (NCLT, New Delhi)
Appeal Number : CA No. 811(PB/2018 in IB-02(PB)/2017
Date of Judgement/Order : 29/09/2018
Related Assessment Year :
Courts : NCLT

Nikhil Mehta & Sons (HUF) & Ors vs M/s AMR Infrastructure Ltd. (NCLT, New Delhi)

In a memorable and consequential judgement, in the matter of Nikhil Mehta & Sons (HUF)& Or’s vs M/s AMR Infrastructure Ltd (CA No. 811(PB/2018 in IB-02(pb)/2017, it has been upheld that the voting threshold in the IBC are merely directory in nature and that preference can be taken to decision taken by the largest percentage in the Committee of Creditors in case of a deadlock. For a homebuyer or commercial property buyer, both of them involved in this case, the judge made an eventful judgement which approved the appointment of Interim Resolution Professional as Resolution Professional and that agenda items 4, 6 to 9 were also deemed to have been approved by majority of Committee of Creditors.

Let us look into details of this case which opens up new vistas of resolution for home buyers/commercial buyers and save their investments in Real Estate.

(Kindly refer my earlier article on Committee of Creditors for its role, selection of its members and how to become its members by following proper procedure laid down in Insolvency and Bankruptcy Code, 2016).

Brief details of the case:

  • A short question of law arose in the application filed under section60(5) of IB&C, 2016 regarding the dead lock on low percentage of votes cast by new category of financial creditors, in this case, prospective buyers under Real estate (Commercial) and Real Estate (Residential) who were newly approved as financial creditors by I&B Code, 2016 by Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 of 06/06/2018.
  • The case under discussion was admitted for Corporate Insolvency Resolution Process on 10/05/2018 and Insolvency Resolution Professional was appointed.
  • IRP duly followed the process of law, by due announcement, collection of claims, collation of them and finally formed the Committee of Creditors (CoC).
  • Detailed report in this regard was submitted to the court on 05/07/2018.
  • In this case, there were only prospective buyers of Commercial and Residential Real Estate property as financial creditors and there were a desperate group of investors spread over the country and to help them, IRP appointed two representatives for class of creditors, as they are called. These representatives are supposed to represent the creditors, listen to their demands, inform about the meetings of CoC (date, timing and agenda).
  • The first meeting of CoC was held on 25/08/2018. The members of the committee were informed by e mail on 17.08.2018 the date of meeting, the agenda and the facility available for electronic voting /participation.
  • The representatives were given a list of 906 financial creditors, full details of meeting as explained above, the electronic Id of the creditors for electronic communication etc.
  • The representatives did their job commendably well. The electronic window was kept opened for 48 hours for easy facilitation of voting and understanding the agenda with clarifications.
  • The results of the voting were counted and it was found that only 236 persons in the Real Estate (Residential) forming 16.4% of voting share and 227 persons of Real Estate (Commercial) constituting 36.4% voted in the CoC meeting. Overall, 463 financial creditors consisting of 52.8% voted up to 10.00 AM on 25.08.2018. Obviously, the rest were not voting or abstained though eligible. This stands far less than 66% of voting share requirement to pass the resolutions of the CoC as amended recently by IB&C, 2018.
  • The agenda items that needed approval in above meeting included confirmation of IRP to become RP (his consent enclosed), verification of the cost of IRP already incurred, expenses to be incurred in future for approval, raising an interim finance to fund CIP cost, the change of present management by a new Board of Directors and banking arrangements for the borrower (AMR).
  • The minutes of the CoC showed that a majority of financial creditors gave their consent for approving the agenda items but unfortunately, none of the agenda items got 66%, the threshold percentage required for approval as per IB&C, 2018.

Further developments    

Due to above development, IRP had no option to proceed in view of current regulations which need 66% approval. But he requested the court to favorably consider the developments and approve the agenda with various details which were earlier put up to CoC.

Court’s observations and judgement

The judge quoted the following earlier judgements of Honorable Supreme Court in validation of his final ruling.

  1. Delhi Transport Corporation vs D.T.C. Mazdoor Congress & Ors (1991 Supp (1) SCC 600
  2. Tinsukia Electrical Supply Co. Ltd vs State of Assam (1989) 3 SCC 709.

Finally quoting “The provision of statute must be so construed as to make it effective and operative on the principle “Ut Res Magis Valeat Quam Pereat” (Meaning: It is better for a thing to have effect than to be made void), the judge observed that the threshold voting share for the decision of the CoC at 66% would not be mandatory, rather directory, in the case of creditors consisting of  only prospective buyers of Real Estate (Commercial & Residential). He therefore confirmed IRP as RP and allowed the agenda items Nos, 4, 6 to 9 as approved.

Our observation and conclusion

From the above case, one can easily understand that AMR Infrastructure Ltd collected money for construction of Real Estate (Residential and Commercial) for 906 prospective buyers and failed to deliver and the case came under consideration of I&B Code, 2016 amended by 2018 and IRP was appointed. He formed the CoC and proposals were sent for approval. Normally, under section 28(3) it has been stated that no action under sub-section 1 shall be approved by CoC unless approved by a vote of 66% of voting shares. If this section of the laws would have been strictly followed, the whole case would have gone for dissolution of the firm which would result in disaster for the whole investors. But the proper interpretation by the judge has set a new vista for the IRP to continue the work as RP and protect the interest of the investors.

The above case clearly portrays I &B Code, 2016 with further amendments as one of the most progressive acts which has undergone enormous changes to serve the society in a meaningful way as guided by Supreme Court in many cases.

But, still I feel that the financial creditors could have served themselves by proper participation in the CoC and got the required 66% of voting share for smooth revival of the unit and complete the construction of Real Estate properties.  


  • Insolvency and Bankruptcy Code, 2016 and amended in 2018.
  • Sections referred 12A, 12(2), 22(2), 27(2), 28(3), 30(4), 33(2), 21(8) of above Code.
  • My earlier article on Committee of Creditors was published in on 22/09/2018 which will be useful in understanding the current article.
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