NCLAT quashes CoC constitution of Value Infratech, asks NCLT to remove RP

PTI | | Updated on: Nov 30, 2021
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The homebuyers in their petition claimed the process as illegal as the constitution of CoC

The insolvency appellate tribunal NCLAT on Monday quashed the constitution of the Committee of Creditors of Value Infratech India and removed the Resolution Professional with a direction to IBBI to conduct an investigation and take appropriate action.

A two-member bench of the NCLAT has also directed the claims of various financial creditors including home buyers should be appropriately fixed against Value Infratech India for its project Skywalk RNE.

Moreover, it has also remanded the matter back to the National Company Law Tribunal for taking action as directed, in accordance with the provisions of the Insolvency & Bankruptcy Code and law.

Earlier, the Delhi bench of the NCLT had January 4, 2021 directed for liquidation of realty firm Value Infratech India, which was developing project Skywalk RNE This was challenged by 25 homebuyers of Skywalk RNE and alleged that Capri Global Capital, a financial creditor, was given the undue advantage of a much higher voting share than was permissible, in the constitution of the CoC in the Corporate Insolvency Resolution Process.

Moreover, RP has shown undue favour to Capri Global Capital by adding up all the loans provided by it to its subsidiaries also.

RP Sanjay Kumar Singh did not follow the procedure prescribed in the IBC for inviting Expression of Interest for submission of Resolution Plan and submitted a proposal for liquidation of Value Infratech before the CoC in its second meeting only.

As Capri Global Capital was given highly inflated voting rights, resulting in majority voting right in the CoC, the resolution for liquidation was approved.

Homebuyers’ claim

The homebuyers in their petition claimed the process as illegal as the constitution of CoC and allocation of highly inflated voting rights was much in excess of its actual financial credit, to Capri Global Capital.

Consenting to it, the NCLAT said from the minutes of the second meeting of the CoC, it is clear that the RP "has resorted to a very novel and ingenious way of circumventing the duties imposed upon him in the IBC for preparation of information memorandum, exclusion of time to extend CIRP period and inviting Expression of Interest for Resolution Plan for the Corporate Debtor”.

"He, with the active support of Nitin Goel, representation of Respondent No. 4 (Capri Global), managed to deal with these important issues in a very superficial and objectionable manner. Such action of RP betrays of prejudicial action reeking of favouritism for Respondent No. 4,” said the NCLAT.

While passing the order, the NCLAT said: ”We find that the CoC was not constituted in accordance with the provisions of IBC”.

The CIRP was not pursued with “fairness” and due diligence by the RP and the resolution for liquidation of Value Infratech was taken in a meeting with an “improper voting share” ascribed to Capri Global and taken in unseemly haste, the appellate tribunal observed.

“These are actions of omissions and commissions, which we cannot absolve the Resolution Professional from, his conduct should be investigated by Insolvency and Bankruptcy Board of India (IBBI) and action as appropriate may be taken against the present Resolution Professional,” it said.

NCLAT further said: "He should, therefore, be replaced with immediate effect and a suitable Resolution Professional be appointed in the CIRP of Value Infratech India by the Adjudicating Authority (NCLT)".

Homebuyers were represented by PSP Legal and the matter was argued by Piyush Singh.

CIRP against Value Infratech was initiated on December 3, 2020 by NCLT.

Published on November 30, 2021

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