No Direct Approval for Amrapali Plan: NCLAT Upholds NCLT Direction to Reconsider Resolution or Issue Fresh Form G [Read Order]

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has clarified the voting mechanism for financial creditors in a class under Section 25A(3A) of the Insolvency and Bankruptcy Code, 2016 (IBC), while dismissing cross-appeals filed by Amrapali Fincap Ltd. and a homebuyer.

The Bench held that where a majority of homebuyers vote in favour of a resolution plan, the Authorised Representative is bound to cast 100% of the class vote in that direction. However, the Tribunal declined to grant automatic approval to Amrapali’s plan, affirming the NCLT’s discretion to permit the Committee of Creditors (CoC) to either reconsider the plan or issue a fresh Form G under Section 30(4).

The CIRP of JC World Hospitality Pvt. Ltd. involved two competing resolution plans, one from the company’s promoters and another from Amrapali Fincap Ltd. During re-voting in November 2021, both plans received comparable support from the homebuyers (comprising the entire CoC), but neither crossed the 66% threshold when counted individually.

After the NCLT set aside the promoters’ plan, it directed the Resolution Professional to place the matter before the CoC for further consideration of Amrapali’s plan or to issue a fresh Form G inviting new applicants.

Section 25A(3A) of the Insolvency and Bankruptcy Code reads as:

Notwithstanding anything to the contrary contained in sub-section (3), the authorised representative under sub-section (6A) of section 21 shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote:

Provided that for a vote to be cast in respect of an application under section 12A, the authorised representative shall cast his vote in accordance with the provisions of sub-section (3).

While Amrapali sought direct approval of its plan, Abhishek Nath Sarvaria, representing the homebuyer-creditor class, requested a fresh bidding process.

The Tribunal, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), analysed Section 25A(3A) which governs voting by financial creditors in a class along with Section 30(4) which deals with CoC approval of the IBC.

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Referring to the Supreme Court’s rulings in Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019) and Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. (2022), the NCLAT observed that when more than 50% of homebuyers vote in favour of a resolution plan, the Authorised Representative must cast 100% of the class vote in its favour. Therefore, both plans were deemed to have obtained 100% voting representation under Section 25A(3A) and the claim that the plans failed to reach 66% approval was incorrect in law.

On Amrapali’s plea for direct approval, the Bench reiterated that commercial wisdom lies with the CoC, not the tribunal. It upheld the NCLT’s liberty granted to the CoC to either reconsider Amrapali’s plan or reopen the process through a fresh Form G in line with Section 30(4).

In conclusion, the NCLAT upheld the validity of CoC voting under Section 25A(3A), rejecting Amrapali’s request for direct judicial approval of its resolution plan. The Bench ultimately affirmed the NCLT’s direction allowing the CoC to either reconsider or issue a fresh Form G.

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