The Insolvency and Bankruptcy Board of India (IBBI) has cleared the air on the crucial issue of whether a financial creditor who is not admitted as a member of the Committee of Creditors (CoC) would be considered a dissenting or abstaining financial creditor.
The regulator has clarified via a circular that financial creditors who do not become members of the CoC do not have any voting rights; they cannot be considered dissenting or abstaining creditors when it comes to approving a resolution process.
The industry had been seeking regulatory clarity on whether, while reckoning the mandatory approval of two-thirds of creditors to a ‘resolution plan’ under the IBC, the non-voting of creditors who do not find a place in the CoC amounts to a “dissenting vote”.
Mohit Chaudhary, Managing Partner at law firm Kings & Alliances, said the IBBI has clarified that a creditor who is not a member of the CoC does not have a voting right, and therefore cannot be regarded as one who has voted against a resolution plan or abstained from voting.
The clarification was critical in the IBC ecosystem, said Saurav Kumar, Partner at IndusLaw.
“The calculation of the 66 per cent vote share should be based on the CoC members who have come forward and whose claims are then admitted at the time of voting,” he said.
The circular also gives clarity in the real estate sphere. Though home buyers are now regarded as financial creditors and can form part of the CoC, the decisions already taken by the CoC may continue to hold good, Kumar said.
“The courts, however, have been averse to such approaches and are more inclined to allow re-voting (the Jaypee insolvency proceedings being an example). The acceptance of the circular with the courts will need to be seen,” Kumar added.
He further said that to make the process time efficient, it is extremely important to ensure that financial creditors who were not part of the CoC at the time of voting are (a) not counted as dissenting creditors for the decisions already taken; and (b) are not allowed to re-vote on those matters with retrospective effect.#casansaar (Source - The Hindu)
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