2024 (2) TMI 975 - AT - Insolvency and Bankruptcy

Withdrawal of application which was admitted earlier for CIRP - Manner of computation of voting with regard to application under Section 12A - proposal under Section 12A of the Code permitting withdrawal of the CIRP accepted - voting summary and opinion minuted by the Resolution Professional rejected. Resolution Professional has challenged the order of the Adjudicating Authority dated 24.05.2023 by which order the Adjudicating Authority has rejected the voting summary and opinion minuted by the Resolution Professional holding that 12A proposal is not approved since it was not approved by 90% votes. HELD THAT - The Appellant Resolution Professional whose summary of voting holding that 12A application was not approved has been set aside by the Adjudicating Authority. The Resolution Professional is duty bound to ensure that the CIRP process is conducted in accordance with provisions of IBC and Regulations. In the facts of the present case where opinion of the Resolution Professional who was Chairman of the CoC holding that 12A proposal is not approved has been overturned by the Adjudicating Authority the Resolution Professional is an aggrieved person from the said decision since the decision of the Adjudicating Authority directly overturns the decision of the Resolution Professional. In so far as judgement of the Hon ble Supreme Court in Regen Powertech Private Limited vs. Giriraj Enterprises Anr. 2023 (9) TMI 1406 - SUPREME COURT relied by the Respondent No.4 the judgment of the Hon ble Supreme Court held that The Resolution Professional should have maintained a neutral stand. It is for the aggrieved parties including the Committee of Creditors of Regen Powertech Private Limited (RPPL) and Regen Infrastructure and Services Private Limited (RISPL) to take appropriate proceedings or file an appeal before this Court. Recording the aforesaid the present appeals preferred by the Resolution Professional are dismissed as not entertained. - on looking into the above judgment it is clear that the said judgment was in the facts and circumstances of that case where the Supreme Court held that the Resolution Professional should have maintained a neutral stand and could not have filed an appeal. The present is a case where the Resolution Professional is required to conduct the proceeding of the CoC according to the IBC and take a decision on the result of voting. There can be no question of Resolution Professional taking in the present case any sides. Computation of votes - HELD THAT - The Resolution Professional is required to compute the votes as per the statute. Hence the judgment of the Hon ble Supreme Court in Regen Powertech Private Limited vs. Giriraj Enterprises Anr. 2023 (9) TMI 1406 - SUPREME COURT which was in the facts of the said case cannot be said to be applicable in the present set of facts - the appeal could not be held to be not maintainable at the instance of the Resolution Professional. It is relevant to the notice that the said order has also been challenged by Homebuyer Mr. Vijay Saini in Company Appeal (AT) (Ins.) No.982 of 2023 with regard to which there is no issue of maintainability. The proposal under Section 12A having not been approved by 90% vote share of the CoC the order dated 24.05.2023 has to be set aside reviving the CIRP of the Corporate Debtor. The order passed by the Adjudicating Authority is set aside - CIRP of the Corporate Debtor- Sidhartha Buildhome Pvt. Ltd. is revived which proceeding shall confine to Project Estella - The Project NCR Green be kept out of the CIRP which henceforth commences. The promoter/director is solely responsible to complete and handover all units of the Project NCR Green to the unit holders and in event there is any failure on the part of the Respondent No.4 to handover the units to all unit holders it shall be open for the Financial Creditors in class to make an application before the Adjudicating Authority for appropriate relief including relief of revival of CIRP with regard to NCR Green Project also - The Resolution Professional shall issue fresh Form G with regard to Estella Project and complete the CIRP within a period of 90 days from the date of issuance of Form G. Resolution Professional before issuing Form G with regard to Estella Project shall constitute the CoC for the Project Estella and proceed further as per decision of the CoC so constituted. Appeal filed by Resolution Professional of the Corporate Debtor and Homebuyer allowed.

Summary

Issues Involved:

1. Approval of Withdrawal Proposal under Section 12A.
2. Computation of Voting Shares for Homebuyers.
3. Maintainability of Appeal by Resolution Professional.
4. Revival and Scope of CIRP for Corporate Debtor.

Summary:

Issue 1: Approval of Withdrawal Proposal under Section 12A

The primary issue was whether the withdrawal proposal under Section 12A, submitted by the promoter/director, was validly approved. The Adjudicating Authority approved the proposal, interpreting that the votes of homebuyers, as a class, should be considered as 100% in favor if more than 50% of them voted 'Yes'. However, the Appellate Tribunal found this interpretation incorrect, emphasizing that Section 12A requires a 90% vote share for approval. The Tribunal concluded that the proposal had only received 52.57% and thus was not approved.

Issue 2: Computation of Voting Shares for Homebuyers

The Adjudicating Authority's method of calculating homebuyers' votes as a single block based on the majority was challenged. The Tribunal clarified that according to the proviso to Section 25A(3A), each homebuyer's vote should be counted individually in proportion to their voting share, especially for Section 12A applications. The Tribunal found that the Adjudicating Authority erred in its computation, leading to the incorrect approval of the withdrawal proposal.

Issue 3: Maintainability of Appeal by Resolution Professional

The maintainability of the appeal by the Resolution Professional was questioned. The Tribunal held that the Resolution Professional was an aggrieved party since the Adjudicating Authority's decision directly overturned his computation of the voting results. The Tribunal distinguished this case from the Supreme Court's decision in "Regen Powertech Private Limited vs. Giriraj Enterprises & Anr.," where the Resolution Professional was expected to remain neutral.

Issue 4: Revival and Scope of CIRP for Corporate Debtor

The Tribunal decided that the CIRP should be revived but confined to the Estella Project, excluding the NCR Green Project, which was almost complete. The promoter/director was held responsible for completing and handing over all units in the NCR Green Project. The Tribunal directed the Resolution Professional to issue a fresh Form G for the Estella Project and complete the CIRP within 90 days, forming a new CoC for the Estella Project.

Conclusion:

The Tribunal allowed the appeals, set aside the Adjudicating Authority's order approving the Section 12A proposal, and revived the CIRP for the Estella Project while keeping the NCR Green Project out of CIRP. The Resolution Professional was instructed to proceed with the CIRP as per the Tribunal's directions.