In the case, Authum Investment and Infrastructure Ltd. Vs. HSBC Asset Management (India) Pvt. Ltd. & Ors., a landmark order was delivered by the NCLT, Mumbai Bench (Court-V), whereby the Tribunal dismissed an application filed by a Financial Creditor seeking to modify their vote after the conclusion of the voting window.
The Core Issues: The Applicant (assignee of Reliance Commercial Finance Ltd), holding a “subservient charge” on assets, originally dissented to the Resolution Plan. Realizing that the payout for dissenting creditors (Liquidation Value) would be nil due to their subservient charge, they sought to change their vote to “Assenting” after the e-voting window had closed and the Plan was approved by the CoC. They further challenged the CoC’s decision to pay them only 3% of their admitted claim while paying First Charge holders differently.
Key Takeaways:
1. Sanctity of the Voting Window (Regulation 26): The Tribunal held that while the specific sub-regulation barring a change of vote was omitted from the CIRP Regulations, this does not grant a creditor an indefinite license to change their vote. Once the e-voting window is closed and the Resolution Professional has recorded the decision, the process attains finality. Allowing changes post-facto would compromise the integrity and timeline of the CIRP.
2. Subservient Charge & Commercial Wisdom: Upholding the “Commercial Wisdom” of the CoC, the NCLT reaffirmed that creditors can be classified into sub-classes based on their security interest. The Tribunal ruled that distinguishing between First Pari-Passu Charge holders (Respondents 1-5) and Subservient Charge (Applicant) holders for the purpose of distribution is valid and non-justiciable. A payout of 3% to the subservient charge holder was deemed fair and within the CoC’s discretion.
3. No “Class within a Class” Violation: The Court relied on Essar Steel, clarifying that differential payments based on the nature of security interest do not amount to discrimination against similarly placed creditors.
Advocate Deep Roy along with Advocate Shrishti Agnihotri and Advocate Anuj Lakhotiya from Equilex represented Respondents 1 to 5.
