The matter was referred to the New Delhi Bench after both the judges of the Allahabad Bench of the NCLT gave differing views on the matter of voting rights of the financial creditors in the CoC meetings.
One of the judicial members of the Allahabad Bench of the NCLT, in his observation, said: “Due to the non-participation of home buyers, the deadlock has been created in the CIRP that may eventually lead to the liquidation of the corporate debtor.”
One of the members was of the opinion that all creditors including home buyers should be considered together, while the other member wanted home buyers to be treated as a different class.
One of the members said: “In cases where the CoC comprises the real estate class of creditors up to 50 per cent of voting share or more, then the highest number of voting shares in favour of resolution has to be taken into consideration — when there is a deadlock in passing the resolutions — without looking at threshold limit prescribed under the IBC (insolvency and bankruptcy code).”
The other judicial member of the Allahabad bench of NCLT, however, said, “Lasting solution to the problem of deadlock can only be found by treating home buyers as a class and their voting pattern be taken with reference to the total voting share of the class, to reflect the will of the class.”
The homebuyers have 58.10 per cent voting share of the total debt to the debt given by the corporate debtor, whereas lenders have 41.8 per cent voting share.
Apart from withdrawal of the insolvency plea, which requires a 90 per cent approval of the CoC, most of the major resolutions brought under the CIRP require a 66 per cent voting in favour of the resolution to be passed.
However, apart from one of the resolutions brought in by the IRP in the Jaypee Infratech insolvency case, nine out of the ten resolutions have been rejected as none of the resolutions got the required votes to be passed.
This is because of the poor response in voting of the home buyers as compared to the en-masse participation by the lenders.
To address this, the IRP took a view that only the votes that are actually cast will be considered and the abstained votes will disregarded.
But the home buyers’ association opposed this, saying this will defeat the purpose of including the home buyers as financial creditors.
The New Delhi Bench, in its order, has stated that the government and the IBBI have to take a view on the matter, taking into consideration the larger public interest involved as well as the interpretation of the provisions of the IBC, given this is going to have wider ramifications not only on the ongoing case but also on other matters under the IBC.