2017 (9) TMI 1199 - Tri - Insolvency and Bankruptcy

Tribunal validates Assignment Agreements & MFL's Creditor Committee role, dismisses Applicant's challenge

Edelweiss Asset Reconstruction Company Limited Versus Synergies-Dooray Automotive Limited, Synergies Casting Limited, Millennium Finance Limited And Ms. Mamta Binani

Edelweiss Asset Reconstruction Company Limited Versus Synergies-Dooray Automotive Limited, Synergies Casting Limited, Millennium Finance Limited And Ms. ... Issues Involved:1. Status and rights of the Applicant vis-a-vis Corporate Debtor.2. Validity and registration of the three Assignment Agreements dated 24.11.2016.3. Locus standi of the Applicant to question the Assignment Agreements.4. Enforceability of orders passed by BIFR and DRT.5. Relationship between SCL and MFL as related parties.6. Reliefs entitled to the Applicant.Issue-wise Detailed Analysis:1. Status and Rights of the Applicant vis-a-vis Corporate Debtor:The Applicant, an asset reconstruction company, acquired the debt of the Corporate Debtor, Synergies-Dooray Automotive Limited (SDAL), from EXIM Bank via an Assignment Agreement dated January 6, 2014. The Applicant claimed &8377; 88,20,28,260.97 against the Corporate Debtor. The Respondent No. 2, a related party of the Corporate Debtor, and Respondent No. 3, a Non-Banking Financial Company, entered into three Assignment Agreements on November 24, 2016, transferring a significant portion of the debt from Respondent No. 2 to Respondent No. 3. The Applicant questioned the validity of these assignments, alleging they were executed to reduce its voting share in the Committee of Creditors (CoC).2. Validity and Registration of the Three Assignment Agreements:The Tribunal examined the three Assignment Agreements dated November 24, 2016, between SCL (Respondent No. 2) and MFL (Respondent No. 3). These agreements were duly registered with the District Registrar, Anakapalli, and the requisite stamp duties and registration fees were paid. The Tribunal found that these documents were executed in accordance with the law and were not questioned by any party to the agreements.3. Locus Standi of the Applicant to Question the Assignment Agreements:The Tribunal held that the Applicant, being similarly situated to SCL and MFL, did not have the locus standi to question the validity of the Assignment Agreements. The Applicant was not a party to these agreements, and its objections were based on mere apprehensions and baseless allegations. The Tribunal emphasized that courts adjudicate issues based on cause of action and not on speculative concerns.4. Enforceability of Orders Passed by BIFR and DRT:The Tribunal noted that various interim orders passed by BIFR and DRT would merge into the final orders. However, with the abatement of BIFR/AAIFR proceedings due to the Companies Act, 2013, the Tribunal focused on the existing agreements and orders. It was found that the BIFR had recorded settlements with five out of seven creditors, with only EXIM Bank and another remaining unsettled. The Tribunal emphasized the need to examine all documents and orders to resolve the issue comprehensively.5. Relationship Between SCL and MFL as Related Parties:The Tribunal found that SCL, being a related party to the Corporate Debtor, had assigned its debt to MFL, a Non-Banking Financial Company. The Applicant failed to provide evidence to demonstrate that MFL was a related party to the Corporate Debtor. The Tribunal concluded that MFL, as an independent party and the single largest Financial Creditor, was entitled to participate and vote in the CoC meetings.6. Reliefs Entitled to the Applicant:The Tribunal rejected the Applicant's claims and allegations regarding the Assignment Agreements and the participation of MFL in the CoC. The Tribunal found that the assignments were legally executed and enforceable. The Applicant's objections were deemed baseless and motivated by an intent to improve its position as a Financial Creditor. Consequently, the Tribunal dismissed the Company Application bearing C.A. No. 57 of 2017 in CP (IB) No. 01/HDB/2017.Conclusion:The Tribunal upheld the validity of the Assignment Agreements and the participation of MFL in the CoC. The Applicant's objections were dismissed, and the application was rejected with no order as to costs.