The National Company Law Appellate Tribunal’s ( NCLAT ) New Delhi bench ruled that the authorized representative can be replaced by following the process outlined in Regulation 16(3A) of the CIRP Regulations, and the adjudicating authority cannot consider an individual homebuyer’s application to replace the authorized representative.
Ashmeet Singh Bhatia , a Homebuyer filed appeal against an order passed by the NCLT by which the application to replace the authorised representative of Homebuyers was rejected. The appeal was filed one day after expiry of the limitation period of 30 days and voluminous nature of the documents was cited as a ground for the delay.
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The appellant, a corporate debtor, was given residential apartment number 2502 on the 25th floor of Tower-19 in the “Lotus Panache Project of M/s. Granite Gate Properties Private Limited.” Additionally, the Committee of Creditors (CoC) approved a resolution plan that SMV Agencies Pvt. Ltd. proposed.
After then, the RP also submitted an application to have the plan approved. The appellant then filed an IA to change the Authorized Representative, but the Adjudicating Authority rejected it on the grounds that the process outlined in Regulation 16(3A) of the CIRP Regulations had not been followed. The appellant argued that the Adjudicating Authority erred by failing to replace the authorized representative, citing the unmaintainability of such an application on behalf of a single homeowner.
Additionally, it was argued that the Adjudicating Authority should have replaced the Authorized Representative in the same way as it had decided to remove the RP after taking into account the Applicant’s submissions and claims. In contrast, the respondent argued that no individual homebuyer could be granted the authority to file an application for the removal of the Authorized Representative in the current case. This was the case approximately four years after the Resolution Plan with a CoC was approved, and the appellant had filed an application to replace the Authorized Representative.
Finally, it was argued that 10% of the creditors in class, as specified by Regulation 16(3A) of the CIRP Regulations, is the threshold for considering any application for replacement under the statutory framework. Since there are thousands of creditors in the class, it is against the interests of the majority of homebuyers to entertain the application or at the request of one of them, as they have never been wronged by the Authorized Representative’s actions and have never complained or requested a replacement.
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The tribunal referred to its own ruling in Innovators Cleantech Pvt. Ltd. vs. Pasari Multi Projects Pvt. Ltd. (2024), which held that the date of an appeal’s electronic filing can be regarded as the date of appeal filing for the purposes of calculating the statute of limitations. The panel also noted that, for the purposes of calculating the statute of limitations, the date of appeal refiling after the faults have been fixed cannot be considered the date of appeal filing.
In evaluating the parties’ case on the basis of merits, the tribunal noted that section 25A of the code stipulates that the authorized representative of the financial creditors is responsible for attending CoC meetings and casting votes in accordance with the financial creditors’ directives based on their voting shares. Additionally, it made reference to Regulation 16A of the “CIRP Regulations” and noted that the majority of financial creditors’ preferences are taken into consideration when selecting an Authorized Representative.
The bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mita (Technical Member) and Mr. Arun Baroka (Technical Member) viewed that as per the statutory scheme, all voting which has to be done by the Authorised Representative in the Meeting of the CoC is on the basis of prior instructions received from Financial Creditors.
The tribunal pointed out that the AA had clarified in the order that the RP was being replaced because the RP had not fulfilled his responsibilities regarding crucial aspects imposed upon him by the code, not because of the applicant’s plea. As a result, the appellant’s argument that the authorised representative should also be removed on the same grounds cannot be accepted.
While rejecting the appeal, the tribunal came to the conclusion that the aforementioned legislative provision must be adhered to in order to change Authorized Representatives after a mechanism for doing so has been incorporated into the Regulations by 16A(3A) inserted on 18.09.2023. The Adjudicating Authority made no mistakes in rejecting the appellant’s application by citing Regulation 16A(3A) of the CIRP Regulations.
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