“The resolution plan, which receives the highest votes, but not less than sixty-six percent of voting share, shall be considered as approved,” it added. According to experts, the move is likely to reduce the amount of litigation involved in the CIRP. Earlier, creditors who voted against the single resolution plan put up for voting, which if approved, would subsequently oppose it in court, delaying the process. The notification further stated that where two or more plans received the same vote share, both higher than 66%, the CoC shall approve any one of them, as per the tie-breaker formula announced before voting, according to the notification.
“The tie breaker formula could soon be the most important factor in a resolution plan getting selected. Like liquidation value, the treatment of this formula would also be the subject to significant scrutiny,” said Veena Sivaramakrishnan, partner, Shardul Amarchand Mangaldas & Co. “A detailed process of parallel voting ought to meet the intended result of value maximisation for the creditors and stakeholders,” she added. Further, in the event that none of the plans receive the requisite vote share, the CoC shall vote again on the plan that received the highest number of votes, subject to the timelines under the Insolvency and Bankruptcy Code (IBC).
The amendment came about on account of a recent National Company Law Appellate Tribunal (NCLAT) judgement to allow voting on two plans simultaneously, according to Rajiv Chandak, partner, Deloitte India. In the CIRP of Jaypee Infratech last year, the NCLAT allowed the CoC to simultaneously vote on two resolution plans from state-run NBCC and Suraksha Realty as without an approved plan, the bankrupt firm would go into liquidation, leaving 21,000 home buyers in a lurch.