2017 (9) TMI 1534 - Tri - Insolvency and Bankruptcy

Tribunal upholds IBC procedures, dismisses application in CP (IB) No. 1/HDB/2017. Debt Assignment Agreements valid.

Edelweiss Asset Reconstruction Company Limited Versus Mamta Binani, Synergies-Dooray Automative Limited

The Tribunal dismissed the application in CP (IB) No. 1/HDB/2017, affirming the Interim Resolution Professional's compliance with IBC procedures and ... Adherence to procedure prescribed under IBC. 2016, and IBBI Regulations, 2016 and also followed Principles of Natural Justice - validity of Debt Assignment agreements - allegation of related party - Held that:- The applicant's action throughout the entire CIRP proceedings which is not acceptable considering the preamble of the Code. After perusing various records, the Bench is of the opinion that there is no relationship between SCL and MFL. The Applicant's submission that the agenda of the meeting of CoC would have far reaching effect which is prejudicial to the interest of the Financial Creditors including the Applicant is factually not correct, since none of the other financial creditors objected to the agenda and it is only the Applicant objected to it. With regard to the intentions of the Corporate Debtor as well as its related party SCL, we would like to add that the proceedings before the Adjudicating Authority under the IBC is summary proceedings. Therefore, mens rea cannot be raised before the Adjudicating Authority under the IBC proceedings. BIFR proceedings have finally been concluded by passing final orders due to the reasons stated above. It is settled position of law that Assignee cannot get more rights than what its original Assignor has. Admittedly, the EXIM Bank was a party to all concerned proceedings for resolving dispute in question as stated supra. We have carefully examined various orders passed by the BIFR especially touching upon material allegations made by the applicant herein and are satisfied that all interim orders having a material bearing on the issue and also other relevant documents like MRA 2007 etc are valid and thus declared as such and are binding on the parties. The issue cannot be adjudicated in isolation ignoring all developments taken place. At the same time, it is to point out here, that in normal parlance, whatever, interim order(s) passed in a case would merge in the final orders. However, this principle would not be applicable in the present case for the reasons stated supra. The Adjudicating Authority, i.e. NCLT in the instant case, cannot go into roving enquiry especially in the case where several issues have been settled by BIFR and executing several agreements as detailed supra. In the light of aforesaid contentions and findings, We are satisfied that the Learned IRP has acted strictly in accordance I with law by duly following the extant procedure prescribed under IBC. 2016, and IBBI Regulations, 2016 and also followed Principles of Natural Justice. Issues Involved:1. Compliance with the procedure prescribed under IBC, 2016 and principles of natural justice by the Interim Resolution Professional (IRP).2. Validity of the Debt Assignment agreements dated November 24, 2016, between Synergies Casting Limited (SCL) and Millennium Finance Limited (MFL).3. Whether MFL qualifies as a related party.4. Status and impact of various orders passed by BIFR and AAIFR, and the Master Restructuring Agreement dated March 6, 2007.5. Scope of jurisdiction of the Tribunal in entertaining inter-se disputes among Financial Creditors and the Corporate Debtor.6. Reliefs entitled to the applicant.Detailed Analysis:1. Compliance with IBC, 2016, and Natural Justice:The Tribunal found that the IRP followed all the procedures prescribed under the IBC, 2016, and IBBI Regulations, 2016. The IRP held the first meeting of the Committee of Creditors (CoC) on February 22, 2017, issued notices, and prepared an Information Memorandum (IM) as required. The IRP also responded to all the issues raised by the applicant and allowed the applicant to participate in the CoC meeting and raise objections. The Tribunal concluded that the IRP acted in compliance with the law and principles of natural justice.2. Validity of Debt Assignment Agreements:The Tribunal examined the legality of the Assignment Agreements dated November 24, 2016, between SCL and MFL. It was found that the applicant, like MFL, had acquired debt from original lenders. The Tribunal rejected the applicant's objections, noting that the applicant had no locus standi to question the rights obtained by MFL from SCL. The Tribunal upheld the validity of the Assignment Agreements, stating that the applicant's continuous objections since the initiation of CIRP proceedings were not acceptable.3. MFL as a Related Party:The Tribunal addressed the applicant's contention that MFL is a related party. It was determined that MFL, which acquired debt from SCL, does not fall under the definition of a related party as per Section 5(24) of the IBC. The Tribunal emphasized that MFL's acquisition of debt was a commercial decision and did not establish a related party relationship. Consequently, the applicant's contention was rejected.4. Status of Orders by BIFR and AAIFR, and Master Restructuring Agreement:The Tribunal noted that various orders and agreements, including the Master Restructuring Agreement of 2007, were binding on all parties, including the applicant's assignor, EXIM Bank. The Tribunal declared these orders and agreements valid and binding, stating that the applicant could not claim special privileges over other financial creditors. The Tribunal emphasized that it could not ignore the developments and orders passed by BIFR and AAIFR.5. Jurisdiction of the Tribunal:The Tribunal clarified that its jurisdiction under Section 60(5)(c) of the IBC is limited to determining questions of priorities or questions of law or facts arising out of or in relation to the insolvency resolution of the Corporate Debtor. The Tribunal stated that it could not adjudicate on the validity of the Assignment Agreement between SCL and MFL, as it falls outside its jurisdiction.6. Reliefs Entitled to the Applicant:The Tribunal concluded that the applicant's actions throughout the CIRP proceedings were not in line with the objectives of the IBC. The Tribunal found no merit in the applicant's contentions and dismissed the application, stating that the IRP had acted in accordance with the law and followed the prescribed procedures.Conclusion:The application CA No. 43 of 2017 in CP (IB) No. 1/HDB/2017 was dismissed by the Tribunal, with no order as to costs. The Tribunal upheld the actions of the IRP, validated the Assignment Agreements, and rejected the applicant's contentions regarding related party status and procedural compliance.