Jaypee Infratech homebuyers must be treated as one class, says NCLT

The matter was referred to a third judge by NCLT chairperson after two Allahabad NCLT gave differing views on voting rights of financial creditors in CoC meetings

A reference Bench of the National Company Law Tribunal (NCLT) has held that homebuyers in the Jaypee Infratech case should be considered a part of the committee of creditors (CoC) and “must be construed as one and cannot be segmented class-wise, particularly for computation of voting share”.

The reference Bench was formed on the instructions of the NCLT President Justice M M Kumar after two judges of the Allahabad Bench of the NCLT had given differing views on voting rights of the financial creditors in the CoC meetings of Jaypee Infratech. 

While the judicial member had held that all creditors, including homebuyers should be considered together, the other technical member was of the view that homebuyers should be treated as a different class.

Jaypee Infratech 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 corporate insolvency resolution process require a 66 per cent voting in favour of the resolution to be passed.

The principal Bench of the NCLT, apart from referring it to a third member Justice R Varadharajan, had also sought the government’s and the Insolvency and Bankruptcy Board of India’s (IBBI’s) view. 

The IBBI has suggested the resolution professional should take a vote of only members of the committee present and voting.

“The board states the stakeholder, who with adequate notice and opportunity to participate, does not do so, should be deemed to have given his or her assent to the other stakeholder to decide on the matter at hand. This presumption is necessary to prevent decisions being stalled as a result of non-participation,” the IBBI said in its submission to the NCLT.

The Centre, too, has followed the principle of ‘present and voting’, and said the preferred approach should be resolution of Jaypee Infratech rather than its liquidation.

Apart from one of the resolutions brought in by the resolution professional in the Jaypee Infratech insolvency case, nine out of 10 resolutions have been rejected as none of the resolutions got the required votes to be passed due to poor response of the homebuyers as compared to the en masse participation by the lenders. 

To solve the deadlock, the resolution professional decided that only the votes cast would be considered and the voters who had abstained would be disregarded. The homebuyers’ associations had, however, opposed the proposal arguing that it would defeat the purpose of homebuyers’ inclusion as financial creditors.

After the decision of the reference Bench of the NCLT, the matter will now be sent back to the president for his perusal, following which it can be announced in the NCLT Allahabad, Justice Varadharajan said in his order.

Jaypee Infratech