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TMI Blog2018 (11) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present instance to approach this tribunal. The changes made to the Code as well as attendant regulations in light of the consistent refrain of the Hon’ble Supreme Court taking into consideration the plight of the home buyers in Jaypee’s Case as well as other real estate companies have confronted the IRP’s and the AR’s with a challenging task thereby creating confusion in role clarity, particularly in a case like the instant one, where there are only home buyers who constitute the financial creditors and thereby eligible to be members of CoC as there are no institutional Financial Creditors or bankers who had financed the operations of the CD in order to become part of the COC. However, this should make the role of AR as well as the IRP more onerous and they should perform their duties with utmost diligence as required to be performed by them of which they will be aware and do accordingly. Taking into consideration all of the above we prima facie find no mala fides on the part of the action of Ld. IRP and AR. Thus within a period of two weeks from the date of this order Ld. IRP to process all the claims and categorically admit or reject the claims received from the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in Nikhil Mehta v. AMR Infrastructure, this Tribunal held that Deepak Khanna qualifies as a financial creditor and there has been a default by the CD and thus, the CIRP was initiated. 3. On 06.06.2018, the same date as the date of the order in IB-401/ND/2017, the Insolvency and Bankruptcy Code (Second Amendment) Act, 2016 came into effect which introduced important changes in the definition of financial debt and the conduct of the CIRP. 4. The Code, when it was enacted, defined financial debt as follows: 5. Definitions. - In this Part, unless the context otherwise requires, - (8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as authorised representative for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors; (b) is owed to a class of creditors exceeding the number as may be specified, other than the creditors covered under clause (a) or sub-section (6), the interim resolution professional shall make an application to the Adjudicating Authority along with the list of all financial creditors, containing the name of an insolvency professional other than the interim resolution professional, to act as their authorised representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the committee of creditors; (c) is represented by a guardian, executor or administrator, such person shall act as authorised representative on behalf of such financial creditors, and such authorised representative under clause (a) or clause (b) or clause (c) shall attend the meetings of the committee of creditors, and vote on behalf of each financial creditor to the extent of his voting share, (6B) The remuneration payable to the authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxx (2) The public announcement referred to in sub-regulation (I) shall: xxxx xxxx xxxx (bb) offer choice of three insolvency professionals identified under regulation 4A to act as the authorised representative of creditors in each class; and 16A. Authorised representative. (6) The interim resolution professional or the resolution professional, as the ease may be, shall provide electronic means of communication between the authorised, representative and the creditors in the class. 9. Thus, the CIRP followed in the present matter had to adhere to the new amendments introduced with effect from 06.06,2018. 10. Now, moving to the present application, the Applicants have made the following averments in the application against the RP and the AR and pressed the same before this Tribunal during the hearing: a. Prior to constituting the committee on 06.07.2018 the IRP in terms of Section 21(1) of the Code was obliged to collate all the claims received against the CD and determine the financial position of the CD but the IRP failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g but a mockery as the AR had no instructions in terms of Section 25A of the code or Regulation 16A of the CIRP regulations f. Another averment has been made that although the IRP admitted the claim of Applicant 1, the AR has written an e-mail to the same applicant stating that his name does not appear on the list of financial creditors. It is stated that this shows that there is complete mismanagement in the conduct of the CIRP process. g. It has been further averred that the IRP as well as the AR are not conducting themselves in a transparent manner and are acting malafidely. It is alleged that the IRP and the AR are hand in glove with the ex-directors of the CD. This is demonstrated by the fact that the AR did not take instructions even from the creditors whose names appear on the list of financial creditors. 11. The RP has stated as follows in his reply; a. From 06.06.2018 the allottees are required to use Form C for submitting their claims instead of Form F, which was previously used. The allottees are unaware of this provision and the RP is still explaining this change to the class of creditors which includes the allottees. b. On the initiation of the CIRP the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s more and more claims are being processed. 12. The AR has substantially made the same averments as the RP in his reply and the submissions made exclusively made by the AR are as follows: a. Regarding non-circulation of the agenda the AR states that for the first CoC meeting to be held on 27.07.2018, the notice and agenda were received by the AR on 21.07.2018 and the updated list of class of creditors was received on 24.07,2018 and thus, the first CoC meeting was adjourned. b. Regarding receipt of voting instructions, the AR has stated that the AR did not receive any voting instructions from any of the creditors for the first CoC meeting. c. For the first CoC meeting the AR states that only those matters were discussed which required no voting and then the meeting was adjourned in light of the various complaints made by the claimants who had not been included in the list of class of creditors. 13. We have considered the arguments presented by the parties and framed the following issues for adjudication of the present application: a. Whether prior to constituting the CoC the IRP is obliged to verify every claim as on insolvency commencement date within 7 days from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors of the respective class. Thereafter, within two days of the verification of claims the RP shall apply to the AA for appointment of the chosen insolvency professional as the authorized representative. 19. The RP has to file a report certifying constitution of the committee to the AA within two days of the verification of the claims [Reg. 17(1)]. According to Section 21(2) the committee of creditors (CoC) shall comprise all financial creditors of the CD. A financial creditor shall be included in the CoC from the date of admission of such claim and such inclusion shall not affect the validity of any decision taken by the committee prior to such inclusion [Reg. 12(3)]. 20. The RP shall hold the first meeting of the CoC within seven days of filing of the report of constitution of CoC. 21. It is also important to take note of Circular No. IBBI/CIRP/018/2018 dated 14.09.2018 released by IBBI under clauses (aa) and (p) of Section 196 of the Insolvency and Bankruptcy Code, 2016 which explains the process of verification of claims and subsequent addition of financial creditors to the CoC. According to the circular the verification is a continuous and staggered process. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed that not verifying all the claims received within seven days of the last date of receipt of claims will lead to a procedure irregularity that is fatal to the process of insolvency resolution of the CD. 25. Thus, not only there is an absence of consequence for non-compliance of the time period specified in Reg. 13, but a reading of the other regulations shows that the Legislature was aware of the fact that verification of all claims received within a period of seven days may not be practical in certain cases, such as the present case where the sheer number of the creditors as well as the general unawareness of the creditors about the correct process has made verification within such a short time span an impossible task. The Legislature s intention could not have been to compromise on the participation of the creditors in the resolution process for the sake of adhering to the timelines specified in the Reg. 13. Thus, if the IRP if faced with a situation where verification of all claims is received is not possible in seven days, the IRP should have the option to continue verifying the claims even after seven days and keep including new financial creditors to the CoC as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admit. In relation to the rest of the applicants it appears that the forms submitted by the applicants to the RP in relation to their claims with proof were not in order and were defective due to lack of signatures or declarations required by the said forms etc. The RP has placed on record e-mail conversations to show that it has been processing these claims and has also pointed out the defects to the applicants. The applicants have not placed anything on record to show that the defects have been rectified. 32. In light of the CIRP regulations, the circular released by IBBI and the conclusion of this Tribunal stated above that the time period of seven days prescribed in Reg. 13 is not mandatory, it appears that the IRP is not required to constitute the CoC after verification of all the claims submitted to it or constitute a CoC consisting of all the claims received. The CoC will consist only of financial creditors whose claims have been admitted. The RP is free to constitute the CoC consisting of financial creditors whose claims have been admitted within the time frame specified by the CIRP Regulations and in the interim keep processing the claims and add new financial creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, particularly in a case like the instant one, where there are only home buyers who constitute the financial creditors and thereby eligible to be members of CoC as there are no institutional Financial Creditors or bankers who had financed the operations of the CD in order to become part of the COC. However, this should make the role of AR as well as the IRP more onerous and they should perform their duties with utmost diligence as required to be performed by them of which they will be aware and do accordingly. Taking into consideration all of the above we prima facie find no mala fides on the part of the action of Ld. IRP and AR. 35. In light of all the above the following directions are issued: a. Within a period of two weeks from the date of this order Ld. IRP to process all the claims and categorically admit or reject the claims received from the home buyers as of the date of this order including the claims of the applicants and publish the updated list. b. Update the list of creditors whose claims have been admitted in order to enable them to participate in the voting process in the CoC through their Authorized Representative as envisaged under the code of the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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