Jaypee Infratech homebuyers file application before NCLT; seek clarification on ‘flawed’ voting system

Homebuyers, in their application to NCLT, have said the only logical way to calculate the percentage of the votes cast in favour or against a resolution is to take into account only those votes that are actually cast. Abstained votes must not be taken into account for the purpose.

What this means is even though homebuyers may have a 62 percent say in the committee of creditors, but the voting share does not guarantee the resolution plan will sail through. This was evident in the recently held elections through an authorised representative where over 14,500 homebuyers did not exercise their voting rights at all.

Even if all the financial creditors and the interested homebuyers vote in favour of a resolution plan, it is bound to fail as it would not receive legally the mandated 66 percent votes.

The IRP has confirmed that only 9,500 out of a total of 24,000 homebuyers voted in the appointment process of the authorised representative which means that a substantial majority of homebuyers had decided to stand outside the corporate insolvency resolution process. They had abstained from voting for their own representative in the Committee of Creditors (CoC), the application read.

“In a situation like this where a large number of homebuyers have decided not to exercise their right to vote in the CoC the votes cast by other creditors will be significantly diluted. The situation will substantially affect the decision-making process of the CoC, causing grave prejudice to the interests of the applications and also other creditors,” it says.

Earlier, homebuyers had also written to the secretary of corporate affairs Injeti Srinivas and held a meeting with him on the issue of ‘aberrations’ or ‘misinterpretations’ on the voting rules and requested that the claim verification process is streamlined.

They had brought to his attention the fact that the “existing rules are not being enforced in spirit and we feel that with the extant rules on voting and the interpretations being made by IRP, we are in a process (insolvency process) which is doomed to fail unless there is an intervention for course correction. In the recent voting, except for the resolution for confirmation of the resolution professional, even resolutions where 90 percent of the votes were cast in favour of the resolution agendas, failed due to non-participation by a large number of homebuyers.”

In the letter to the secretary, homebuyers have requested for a restructuring of the voting system and suggested that homebuyers be considered as a separate class of creditors as they have the same goal and a common agenda.

They have also suggested that if a creditor decides not to vote, his vote on any resolution for all purposes can be counted in the same manner as the majority of the homebuyers have voted for that resolution which will ultimately facilitate the insolvency resolution process under the Code, the letter reads.

“This will also ensure that some homebuyers’ inability to understand individual resolutions and unwillingness to vote does not come in the way of the process itself which is supposed to be timebound,” it says.

In the letter, they have also requested for mandatory Aadhaar seeding and PAN seeding to weed out any suspect ownership or properties acquired through undisclosed sources. Weeding out suspect ownership cases from the process will ensure that genuine homebuyers do not suffer, the letter says.

Jaypee Infratech homebuyers have also written to the Insolvency and Bankruptcy Board of India (IBBI), Chairperson MS Sahoo in which they claimed the present voting rules were skewed and bound to result in liquidation by design. They asked Sahoo to look into the issue and resolve the alleged bias rules.

"We understand based on publicly available information that the resolution professionals have been taking into account, all creditors who abstain from voting in the CoC, for purposes of determining the voting percentage of the creditors. If a similar approach is adopted (and which is likely to happen) in the CIRP of JIL, it is evident that the HBs’ voting share would be significantly diluted," the letter continued.

They informed the chairperson that in case absentee votes are considered for computing the voting percentage, the exercise will head towards a stalemate liquidation due to lack of sufficient consensus.

The letter pointed out the Supreme Court had earlier acknowledged that the liquidation of JIL would not be a viable option.

NCLT had last year admitted the application by an IDBI Bank-led consortium, seeking resolution for Jaypee Infratech under the Insolvency and Bankruptcy Code. It had appointed Anuj Jain as IRP to manage the company's business.

He had invited bids from investors to acquire Jaypee Infratech and finish the stuck projects located in Noida and Greater Noida. The embattled firm had also deposited Rs 750 crore with the Supreme Court registry to be refunded to buyers but the amount has now been transferred to NCLT following an order by the Supreme Court that has directed NCLT to start the bidding process anew.