Tribunal deems TSTPCL related party, directs CoC reconstitution

The Tribunal concluded that TSTPCL is a related party under Section 5(24) of the I&B Code due to its significant influence on the Corporate Debtor's decisions. The inclusion of TSTPCL in the CoC with 67% voting rights was deemed unlawful, leading to the directive to reconstitute the CoC treating TSTPCL as a related party. The Resolution Professional's actions were found not to be in accordance with the I&B Code, resulting in the Tribunal instructing the reconstitution of the CoC accordingly.

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Issues Involved:
1. Whether TSTPCL is a related party under Section 5(24) of the I&B Code.
2. Whether the inclusion of TSTPCL as a member of the CoC and granting it 67% voting rights was lawful.
3. Whether the actions and decisions of the Resolution Professional were in accordance with the I&B Code.

Issue-wise Detailed Analysis:

1. Whether TSTPCL is a related party under Section 5(24) of the I&B Code:
The applicant argued that TSTPCL is a related party as per Section 5(24) of the I&B Code, citing several clauses including (a), (h), (j), (l), and (m). The applicant highlighted that TSTPCL holds 5.1% equity shares in the Corporate Debtor and has two non-executive directors on the Board, indicating significant influence. The Resolution Professional initially did not include TSTPCL in the CoC but later did so based on documents provided by TSTPCL, concluding it was not a related party. The Tribunal examined the Articles of Association, particularly Article 62, which requires an affirmative vote including a director nominated by TSTPCL for key decisions, indicating significant influence. The Tribunal concluded that TSTPCL fits the definition of a related party under the I&B Code.

2. Whether the inclusion of TSTPCL as a member of the CoC and granting it 67% voting rights was lawful:
The applicant contended that the Resolution Professional's decision to include TSTPCL as a member of the CoC with 67% voting rights, thus reducing the applicant's voting rights to 33%, was arbitrary and against the law. The Resolution Professional argued that the inclusion was based on the amount due to TSTPCL and in accordance with the I&B Code. The Tribunal, however, found that TSTPCL’s significant influence on the Corporate Debtor’s decisions, as evidenced by Article 62, made it a related party. Consequently, the inclusion of TSTPCL in the CoC was not lawful, and the CoC should be reconstituted treating TSTPCL as a related party.

3. Whether the actions and decisions of the Resolution Professional were in accordance with the I&B Code:
The applicant challenged various actions of the Resolution Professional, including allowing an unauthorized representative of TSTPCL to file a claim and participate in CoC meetings, and reducing the applicant’s voting rights. The Resolution Professional defended his actions, stating they were in line with the I&B Code and based on the claims received. The Tribunal, however, found that the Resolution Professional’s decision to include TSTPCL in the CoC was not in accordance with the I&B Code, as TSTPCL should have been treated as a related party. The Tribunal directed the Resolution Professional to reconstitute the CoC accordingly.

Conclusion:
The Tribunal concluded that TSTPCL is a related party under Section 5(24) of the I&B Code due to its significant influence on the Corporate Debtor’s decisions. The inclusion of TSTPCL in the CoC with 67% voting rights was not lawful, and the CoC should be reconstituted treating TSTPCL as a related party. The actions of the Resolution Professional in this regard were not in accordance with the I&B Code. The Tribunal directed the Resolution Professional to reconstitute the CoC treating TSTPCL as a related party.

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