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2022 (8) TMI 1111 - AT - Insolvency and BankruptcyApproval of Resolution Plan - CIRP period had already expired and time exclusion order not granted prior to expiry of CIRP period - HELD THAT - If procedural rules are bypassed or circumvented by them in a manner which stifles the basic canons of fairness and justice and prejudicially affects the legal rights and entitlements of party, the said action on grounds of having vitiated the process deserves to be set aside. Be that as it may, while it is important to maintain the sanctity and credibility of CIRP proceedings, it is equally important to ensure that hyper-technicality is not allowed to occupy centre-stage and besiege the proceedings as it would end up frustrating and defeating the very object and purpose of IBC. From the series of communications, it is abundantly clear that Authorized Representative did not falter in keeping the Homebuyers informed about the CoC meeting and its agenda. It is also noted that Authorized Representative had intended to hold a meeting to elicit preliminary views of the Homebuyers on 12.01.2022 but eventually did not convene it and instead sought the views of Homebuyers on the amended Resolution Plan by e-mail on whether they approved or rejected it. It is pertinent to note that CIRP Regulations 16-A(9) does not appear to make it obligatory to hold the meeting with Homebuyers to seek their preliminary views as the word used in the said Regulation is may , thereby rendering the decision to seek preliminary views optional. This is not to deny the fact that with a view to enable the Authorised Representative to participate effectively in the CoC meeting and properly represent the interests of the homebuyers, holding such a meeting of Homebuyers is eminently desirable. It is also an admitted fact that out of 26 Homebuyers, only 19 Homebuyers voted in the matter and that in terms of Section 25-A(3-A) of the IBC, the Authorized Representative taking cognizance of the fact that 89.80% of Homebuyers voted in favour of the amended Resolution Plan, he cast his vote in favour of the amended Resolution Plan on behalf of the Creditors in class - the procedural compliance by the Resolution Professional and Authorized Representative appears to be reasonably substantial and there are no reason to hold that there was any wilful casualty or miscarriage of justice. Whether the CoC decision on the amended Resolution Plan could have been materially any different, had the procedural deviations not taken place? - HELD THAT - The answer seems to be in the negative for the following reasons. The Adjudicating Authority in the impugned order has clearly held that the amended Resolution Plan has been approved by 98.58% voting share of the CoC members which is much above the statutory requirement of 66% vote share and this has not been challenged by the Appellants - It may be safely inferred that even if the alleged procedural omissions had not taken place, the Appellants would still have remained minority Homebuyers in the class of Creditors. 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. Thus, there are no convincing reasons to interfere with the order of Adjudicating Authority approving the revised Resolution Plan of the Corporate Debtor under Section 31(1) of the IBC - appeal dismissed.
Issues Involved:
1. Approval of the Resolution Plan by the Adjudicating Authority. 2. Alleged material irregularities by the Resolution Professional and Authorised Representative. 3. Compliance with CIRP regulations. 4. Voting process and rights of Financial Creditors in class. 5. The impact of procedural deviations on the outcome of the Resolution Plan. 6. Binding nature of the majority decision within a class of creditors. Issue-wise Detailed Analysis: 1. Approval of the Resolution Plan by the Adjudicating Authority: The appeal arose from an order approving the Resolution Plan of the Corporate Debtor under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (IBC). The Adjudicating Authority allowed the Resolution Plan submitted by the Resolution Professional while dismissing the appellants' challenge regarding material irregularities in the process. 2. Alleged Material Irregularities by the Resolution Professional and Authorised Representative: The appellants alleged that the Resolution Professional and Authorised Representative did not follow the due process of law, citing specific irregularities such as not conducting a mandated meeting of Financial Creditors in class and not providing the required time window for submitting preliminary views. The appellants argued that these actions violated Regulation 16-A(9) and other CIRP regulations. 3. Compliance with CIRP Regulations: The tribunal examined whether the actions of the Resolution Professional and Authorised Representative complied with CIRP regulations. It was noted that the Authorised Representative had informed the Homebuyers about the CoC meeting and sought their views via email due to the tight timeframe given by the Adjudicating Authority. The tribunal found that the procedural compliance was substantial and did not result in a miscarriage of justice. 4. Voting Process and Rights of Financial Creditors in Class: The tribunal considered the voting process, noting that 19 out of 26 Homebuyers voted, with 89.80% in favor of the amended Resolution Plan. The Authorised Representative cast his vote according to the majority decision of the Homebuyers, as required under Section 25-A(3-A) of the IBC. The tribunal emphasized that the Authorised Representative acted in accordance with the voting instructions received. 5. The Impact of Procedural Deviations on the Outcome of the Resolution Plan: The tribunal assessed whether the procedural deviations could have materially affected the CoC's decision. It concluded that the deviations did not impact the outcome, as the Resolution Plan was approved by 98.58% of the CoC members, well above the statutory requirement of 66%. The appellants, being a minority within the class of creditors, could not establish a clear nexus between the deviations and any prejudice suffered. 6. Binding Nature of the Majority Decision within a Class of Creditors: The tribunal referred to the Supreme Court's judgment in Jaypee Kensington Boulevard Apartments Welfare Association and Ors. Vs. NBCC (India) Ltd. and Ors., which held that once a decision is taken by a majority within a class of creditors, it binds the entire class, including dissenting minorities. The tribunal affirmed that the decision of the majority Homebuyers was binding on all Homebuyers within the class. Conclusion: The tribunal found no convincing reasons to interfere with the Adjudicating Authority's order approving the revised Resolution Plan. The appeal was dismissed, and the procedural compliance by the Resolution Professional and Authorised Representative was deemed substantial. The tribunal emphasized the importance of maintaining the sanctity and credibility of CIRP proceedings while avoiding hyper-technicality that could frustrate the objectives of the IBC.
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