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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 ..... ants in the Committee of Creditors ("CoC"). 2. Before going on to the specific pleadings of the parties, it is necessary that a background of the matter is discussed to provide a context to the present application. The main application IB-401/ND/2017 was filed by one Deepak Khanna against the CD which is a real estate company. Deepak Khanna had booked a unit in one of the upcoming projects of the CD under the Flexi Payment Plan, which meant that the CD was to pay Rs. 56,613/- (Rupees Fifty-Six Thousand Six Hundred and Thirteen Only) per month to Deepak Khanna as commitment amount/assured return with effect from November 2015 in return for upfront payment of the price of the unit by Deepak Khanna. In light of the decision of the Hon'ble National Company Law Appellate Tribunal ("NCLAT") 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 finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulation and Development) Act, 2016 (16 of 2016);' 6. Thus, by virtue of the above amendment home buyers or real estate allottees also qualify as financial creditors under the Code. It was also understood that generally such allottees exist in huge numbers and thus, a method has to be devised to ensure proper and convenient participation and representation of such allottees on the CoC. Thus, amendments were also introduced to enable creditors belonging to a class to appoint an authorized representative on the committee of creditors. The amendments introduced with effect from 06.06.2018 to this effect are as follows: "21. Committee of creditors. - (6A) Where a financial debt- (a) is in the form of securities or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulation (1) in the committee, the interim resolution professional shall identify three insolvency professionals who are- (a) not his relatives or related parties; (b) eligible to be insolvency professionals under regulation 3; and (c) willing to act as authorised representative of creditors in the class. (3) The interim resolution professional shall obtain the consent of each insolvency professional identified under sub-regulation (2) to act as the authorised representative of creditors in the class in Form AB of the Schedule. " "6. Public announcement. xxx xxx &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers vested in him and in an utmost arbitrary manner constituted CoC of only 207 financial creditors out of admittedly 1000 claims under the category of financial creditors. The IRP has not provided a plausible justification for this action. c. The IRP by way of notification dated 21.07.2018 convened the first CoC meeting on 27.07.2018 at 10 a.m. The AR was obliged in terms of Regulation 16A(9) to circulate the agenda to the creditors in a class and announce the voting window at least 24 hours before the window opens for voting instructions and thereafter, keep the voting window open for at least 12 hours. However, the authorized representative failed and neglected to comply with the regulations prior to the first CoC meeting. Inspite of the Applicants approaching the AR to give instructions, he refused to take instructions from the Applicants on the pretext that he would take instructions only from those that the IRP had named as members of CoC. d. Further, Regulations 20 and 21(3) were absolutely ignored by the IRP as neither any notice was served on the Applicants nor contents as prescribed were contained in the agenda e. When the first meeting was held on 27.07.2018 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proofs of claims in form of numerous individual pages instead of consolidated documents. v. Claimants submitted their claims through multiple e-mails. d. The IRP had to spend a lot of time and resources in sifting through the various e-mails and in explaining the defects to the claimants. Further, due to the lack of access to proper records of the CD the RP had to spend more time in thoroughly checking all the documents submitted by the claimants. e. With respect to Applicant 1, the RP states that the Applicant 1 made a claim of Rs. 9,39,60,000/- and after certain clarification the entire claim was admitted on 02.08.2018. f. With respect to Applicant 2, it is stated that the Applicant 2 sent an e-mail on 26.07.2018 with 55 different attachments of individual pages of the form and the proofs. The RP asked the Applicant to consolidate the different attachments and also address point No. 7 in Form C but the Applicant 2 has failed to do the same. g. With respect to Applicant 3, the RP states that the claim has been partially admitted and the same has been communicated to the claimant vide email dated 12.08.2018. h. With respect to claims of Applicant 4, the RP states that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state the last date for submitting the claims by creditors and has to offer names of three insolvency professionals to act as authorized representative [Reg. 6(2)]. The last date for submitting the claims according to the public announcement is fourteen days from the date of appointment of the interim resolution professional [Reg. 6(3)]. 16. A creditor has to submit claim with proof on or before the last date mentioned in the public announcement [Reg. 12(1)]. If a creditor fails to submit the claim with proof within the time stipulated in the public announcement, the creditor may submit the claim with proof on or before the ninetieth day of the insolvency commencement date [Reg. 12(2)]. The RP can call from a creditor for such other evidence or clarification as be may deem fit for substantiation of a claim [Reg. 10]. 17. The RP shall verify every claim as on the insolvency commencement date within seven days from the last date of the receipt of the claims. The RP is required to maintain a list of the creditors along with amount claimed by them and update the list from time to time [Reg. 13], It has also been provided that where due to any contingency or other reason the claim mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation 13 of the CIRP Regulations i.e. whether the time period of seven days for verification of claims prescribed in Reg. 13 is mandatory or directory. The question whether a statute is mandatory or directory is to be decided on the basis of the intent of the legislature and not on the language in which the intent is clothed. Further, the consequence of the non-compliance of the statute is also to be seen. These are well settled principles of interpretation repeatedly upheld by the Hon'ble Supreme Court (Administrator, Municipal Committee, Charkhi Dadri v. Ramji Lal Bagla) and the high courts (Chingangbang Kunjo Singh v. State of Manipur). 23. Although Reg. 13 states that the IRP 'shall' verify every claim within seven days of last date of receipt, Reg. 14 of the CIRP Regulations states that if due to any reason the amount is not certain or precise then the IRP is free to make a best estimate of the claim for the time being and then as soon as may be practicable revise the amount admitted when additional information is received/discovered. Further, the last date for submission of claims stated in the public announcement is not the final date for submission of claims, Reg. 12 (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewspapers on 13.06.2018 and the last date for submission of claims was stated to be 26.06.2018. Thus, the public announcement was not made within three days from the date of appointment of the IRP but after 6 days of his appointment. The IRP states that he found out about his appointment only on 11.06.2018 through the website of this Tribunal and thereafter made the public announcement. 29. The IRP states that it received 600 claims from financial creditors and 30 claims from operational creditors till the last date of the claim. The IRP then filed the list of creditors, the report confirming constitution of CoC and the application to appoint the authorized representative on 09.07.2018, which is four days later than the date on which it was ideally required to be filed. On 18.07.2018 this Tribunal appointed based on an Application in CA. No. 182/C-III/ND/2018 filed by the IRP Mr. Gulshan Gauba as the authorized representative for the class of creditors termed as Allottees of Real Estate Projects as at the time of publication of public announcement on 13.06.2018 choice was not given to the creditors in terms of Regulation 6 of the CIRP Regulations of the name of three Authorized Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IRP and AR state before this Tribunal that with a view to enable the IRP and thereby the Corporate Debtor whose interest the office of the IRP is required to protect, an advocate is sought to be engaged which does not warrant voting. Further a security guard to protect the assets/projects of the CD which also enures to the benefit of Financial Creditors, like that of the applicants had been engaged and that no major decision had been taken other than the above. 34. However at this stage we would also like to highlight that the AR appointed to represent the Financial Creditors in this matter is required to act diligently and independently of the office of the IRP behoving his status as an AR. The AR in his reply has failed to provide satisfactory answers for the lapse on his part to circulate the agenda and obtain voting instructions. Further both the IRP and the AR cannot be seen to form a caucus amongst themselves and act in a veil of secrecy to give an impression that they are trying to exclude the interest of the creditors, primarily for whose benefit the CIRP has been initiated apart from the protection of the other stakeholders and which apprehension had forced the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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