Case Law Details
Piya Puri Vs Debhashish Nanda Resolution Professional of Venta Realtech Private Limited (NCLAT Delhi)
Conclusion: Since remanding of a resolution plan back to Committee of Creditors (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 and was 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.
Held: OBC (“Financial Creditor”) had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against M/s V Realtech Pvt. Ltd. (“Corporate Debtor”). The petition was admitted and CIRP was initiated by the Adjudicating Authority Accordingly, the Authorised Representative of homebuyers casted his vote in favour of the revised Resolution Plan on behalf of the Creditors in class, representing 50.93% share of voting rights in the CoC. Adjudicating Authority approved the revised Resolution Plan 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 whereby the Resolution Plan was approved. It was submitted that while submitting the revised Resolution Plan, the Resolution Professional and the Authroized Representative of homebuyers committed material irregularities by not following the due process of law given under IBC and its Regulations. Financial Creditors in class were not called by the Authorised Representative to submit their preliminary views on the Resolution Plan though mandated under Regulation 16-A(9) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The first proviso to the said Regulation 16-A(9) mandated that creditors shall have a time window of at least 12 hours to submit the preliminary views and the said window opens at least 24 hours after the Authorised Representative seeks preliminary views, which was not followed and thus amounted to be an irregularity. It was held that while it was important to maintain the sanctity and credibility of CIRP proceedings, it was equally important to ensure that hyper-technicality was not allowed to occupy centre-stage and defeat the very object and purpose of IBC. It was observed that Regulation 16-A(9) stated that the Authroized 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 wilful casualty or miscarriage of justice. The amended Resolution Plan had been approved by 98.58% voting share of the CoC members which was much above the statutory requirement of 66% vote share and this had not been challenged by the Appellants. “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 had been established. It was well recognised 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 had 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.” The Bench dismissed the appeal.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
1. The present appeal, filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘IBC’) by the Appellant arises out of order dated 30.05.2022 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi-V Bench) in IA No. 324 of 2022 and IA No. 572 of 2022 in Company Petition No.(IB)-923(PB)/2019. By the impugned order, the Adjudicating Authority allowed I.A. No. 324/2022 and approved the Resolution Plan of the Corporate Debtor submitted before it by the Resolution Professional under Section 31(1) of the IBC while dismissing IA No. 572/2022 filed by the present Appellants in their capacity as members of Financial Creditors in class of Corporate Debtor challenging the material irregularities committed by the Resolution Professional of the Corporate Debtor and the Authorised Representative of Financial Creditors in class in the Corporate Insolvency Resolution Process (‘CIRP’ in short). Aggrieved by the said impugned order, the instant appeal has been preferred by the Appellant with the prayer that the impugned order be set aside and the Resolution Professional and Authorised Representative be directed to follow the due process of law and place the revised Resolution Plan before the Committee of Creditors(‘CoC’ in short) in terms of the provisions of IBC and regulations framed thereunder.
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