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Homebuyers, who could not vote on a resolution plan before the Committee of Creditors (CoC) due to various reasons, including absence at the meeting, have reasons to cheer.
They would still have a say in the approval of the resolution plan, with the insolvency regulator, the Insolvency and Bankruptcy Board of India (IBBI), giving them another opportunity to exercise their vote in such situations.
However, this opportunity would be available only after the minutes of the CoC meeting are circulated to them by their authorised representative.
The Insolvency and Bankruptcy Board of India (IBBI) has now amended its Corporate Insolvency Resolution Process (CIRP) regulations for this purpose.
Financial creditors
The latest change will ensure that financial creditors in a class, including that of homebuyers’, will have an effective say in shaping the decisions on resolution plans before the CoC, say insolvency law experts.
The amended CIRP regulation requires the resolution professional to circulate the minutes of the meeting by electronic means to authorised representative(s) also. It further requires the authorised representative to circulate the minutes of the meeting received from the resolution professional to the financial creditors in a class, including homebuyers, who are now treated as financial creditors under the IBC.
The authorised representative of the financial creditors in a class will have to announce the voting window at least 24 hours before the window opens for voting instructions, and keep the voting window open for at least 12 hours.
He (authorised representative) should exercise the votes either by electronic means or through electronic voting system as per the voting instruction received by him from the financial creditors in the class pursuant to circulation of the minutes, according to IBBI.
It may, henceforth, not be beneficial for financial creditors to be in the shoes of a dissenting financial creditor. This is because the amended CIRP has stipulated that the amount due to operational creditors under the resolution plan should be paid in priority over financial creditors. Consequently, the CIRP regulation has done away with references to dissenting financial creditors in the regulations.
Prior to this change, liquidation value was required to be paid to dissenting financial creditors in priority along with operating creditors. Now, only operating creditors are required to be paid the liquidation value in priority.
Saurav Kumar, Partner, Induslaw, a law firm, told BusinessLine that this would mean that the dissenting financial creditors are likely to be treated in the same bucket as other creditors (affirming creditors) in terms of the payment schedule.
On the change in CIRP regulations as regards homebuyers getting another opportunity to vote, Kumar said that this was due to the fact that many of the creditors, such as homebuyers, may not be present at the meeting of the CoC, and are represented by an authorised representative at such meetings.
Daizy Chawla, Senior Partner, Singh & Associates, a law firm, said that the latest change in CIRP regulations would ensure that financial creditors in a class including home buyers are going to get double opportunity. “If they miss first (when CoC meeting takes place), they can still vote on the resolution plan after the minutes of the CoC are circulated to them”, she said.
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