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2019 (8) TMI 41 - AT - Insolvency and BankruptcyLiquidation of Corporate debtor - time limitation - Whether in the interest of the Allottees which is of primary importance in this Corporate Insolvency Resolution Process the Jaypee Infratech Ltd. (Corporate Debtor) should be allowed to go for Liquidation on the ground that 270 days has expired on 6th May 2019 or the period from 17th September 2018 to 4th June 2019 during which the matter remained pending for consideration before the Adjudicating Authority relating to voting share of the Allottees should be excluded for the purpose of counting 270 days? HELD THAT - Admittedly no regulation was framed under the Insolvency and Bankruptcy Code as to how the voting share of thousands of Allottees will be counted all of whom come within the meaning of Financial Creditors and thereby are members of the Committee of Creditors . It was in this background the Allottees Association preferred the application before the Adjudicating Authority (National Company Law Tribunal) Allahabad Bench on 17th September 2018 to decide such issue. The two Hon ble Members of NCLT differed on the principle on 13th December 2018 as noticed above and referred the matter to the Principal Bench for placing the matter before Third Hon ble Member who has delivered its decision by the order dated 24th May 2019. In the meantime 270 days lapsed if counted from the date the proceeding was remitted by the Hon ble Supreme Court i.e. 6th May 2019. The period from 17th September 2018 i.e the date of application filed by the Association of the allottees for clarification for the order and till the final decision i.e. 4th June 2019 i.e. the date the matter was finally decided by the Third Hon ble Member (Total 260 days) can be excluded for the purpose of counting the 270 days. However as the matter is pending since long we are not inclined to exclude the total period of 260 days and instead in the interest of the Allottees we exclude 90 days for the purpose of counting the period of 270 days of Corporate Insolvency Resolution Process which should be counted from the date of receipt of the copy of this order. The aforesaid period is excluded to enable the Resolution Professional / Committee of Creditors to call for fresh resolution plans and to consider them if so required after negotiations pass appropriate order under sub-section (5) of Section 30 of the I B Code preferably within a period of 45 days. Rest of the period of 45 days margin is given to remove any difficulty and appropriate order as may be passed by the Adjudicating Authority. Appeal disposed off.
Issues Involved:
1. Calculation of voting percentage of allottees (financial creditors) in the Committee of Creditors (CoC). 2. Exclusion of certain periods from the 270-day timeline for the Corporate Insolvency Resolution Process (CIRP). 3. Eligibility of Jaiprakash Associates Ltd. to participate in the CIRP. 4. Consideration of new resolution plans and rejection of previously submitted plans. Issue-wise Detailed Analysis: 1. Calculation of Voting Percentage of Allottees (Financial Creditors) in the Committee of Creditors (CoC): The primary issue addressed was whether the threshold voting shares fixed for CoC decisions under various sections of the Insolvency and Bankruptcy Code (I&B Code) are mandatory or directory. The NCLT, Allahabad Bench had a split opinion on this matter. The Judicial Member opined that in cases where real estate creditors hold 50% or more of the voting share, the highest number of votes in favor should be considered, except for withdrawal of the petition, approval of the resolution plan, and liquidation. The Technical Member suggested that home buyers should be treated as a class, and their voting pattern should reflect the will of the class. The third Member of the Tribunal concluded that the CoC must comprise all financial creditors as one entity, and the prescribed voting shares are mandatory. 2. Exclusion of Certain Periods from the 270-day Timeline for the CIRP: The Tribunal considered whether the period from 17th September 2018 to 4th June 2019, during which the matter of voting share calculation was pending, should be excluded from the 270-day CIRP timeline. The Tribunal referred to the "Quinn Logistics India Pvt. Ltd. vs. Mack Soft Tech Pvt. Ltd. & Ors." case, which allows for the exclusion of periods in unforeseen circumstances. Given the extraordinary situation where the law was silent and there was no guideline on counting the voting share of thousands of allottees, the Tribunal decided to exclude 90 days from the 270-day timeline to ensure the successful completion of the CIRP. 3. Eligibility of Jaiprakash Associates Ltd. to Participate in the CIRP: Jaiprakash Associates Ltd. (JAL) was found to be ineligible under Section 29A of the I&B Code, as affirmed by the Supreme Court in "Chitra Sharma vs. Union of India." The Tribunal noted that JAL was a related party and could not participate in the CIRP. The Tribunal also observed that JAL's objections to the exclusion of the period were aimed at pushing the Corporate Debtor towards liquidation to gain an advantage during the liquidation process. 4. Consideration of New Resolution Plans and Rejection of Previously Submitted Plans: The Tribunal allowed for the exclusion of 90 days to enable the Resolution Professional and CoC to call for fresh resolution plans and consider them. It was clarified that all earlier resolution plans, including the one submitted by NBCC, could not be considered as they were rejected by the CoC. However, NBCC and other eligible entities were given the opportunity to file fresh or improved resolution plans. The Tribunal emphasized that those ineligible under Section 29A, including Jaiprakash Associates Ltd., were barred from submitting new plans. Conclusion: The Tribunal excluded 90 days from the CIRP timeline to facilitate the submission and consideration of new resolution plans, ensuring the process's viability and feasibility in the interest of the allottees. The Tribunal upheld the mandatory nature of the prescribed voting shares and barred Jaiprakash Associates Ltd. from participating in the CIRP. The appeals were disposed of with these observations and directions.
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