Application for Inclusion in CoC Denied; Tribunal Upholds IRP's "Related Party" Classification Under IBC, 2016.

The Tribunal dismissed the application filed by the Applicant seeking inclusion in the CoC as a Financial Creditor under IBC, 2016. The IRP's decision to classify the Applicant as a "Related Party" was upheld, following due process. The Applicant's failure to challenge the IRP's findings or provide evidence to counter the "Related Party" classification led to the dismissal. Consequently, the Applicant was excluded from CoC meetings, and the application was deemed infructuous, with no costs awarded.

---

---

Issues Involved:

1. Whether the Applicant should be included in the Committee of Creditors (CoC) as a Financial Creditor.
2. Determination of the Applicant's status as a "Related Party" to the Corporate Debtor.

Detailed Analysis:

Issue 1: Inclusion in the CoC as a Financial Creditor

The Applicant, M/s. Radha Industries Private Limited, filed the application under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016), seeking to set aside the Minutes of the Committee of Creditors (CoC) dated 26.02.2020 and to be included in the CoC meeting as a Financial Creditor.

The Applicant claimed its right as a Financial Creditor based on a Deed of Assignment Cum Novation dated 02.04.2019, wherein the debt owed by the Corporate Debtor to OPG Power Generation Private Limited was assigned to the Applicant for a consideration of Rs. 13,61,07,978/-. The Corporate Debtor's CIRP commenced on 27.01.2020, and the Applicant submitted its claim, which was initially accepted by the Interim Resolution Professional (IRP).

During the CoC meeting on 26.02.2020, objections were raised by other Financial Creditors (Nationalized Banks) regarding the inclusion of the Applicant, alleging that the Applicant was a "Related Party" to the Corporate Debtor. Consequently, the IRP decided to keep the Applicant's claim in abeyance pending verification.

Issue 2: Determination of "Related Party" Status

The primary contention was whether the Applicant was a "Related Party" to the Corporate Debtor. The IRP conducted a detailed due diligence process, collecting relevant documents and providing the Applicant with opportunities to submit evidence. Despite these efforts, the IRP concluded that the Applicant was a "Related Party" based on the nexus between the Corporate Debtor and the Applicant.

The Tribunal referred to the decision of the Hon'ble NCLAT in Pankaj Yadav & Anr. v. State Bank of India & Anr., where it was held that the rights of an Assignee are no better than those of the Assignor. If the Assignor is a "Related Party," the Assignee also inherits this status. Applying this principle, the Tribunal concluded that the Applicant, as the Assignee of a loan from a Related Party of the Corporate Debtor, is also a "Related Party."

The Tribunal also considered the decision in Edelweiss Asset Reconstruction Company Ltd. v. Synergies Dooray Automotive Ltd. & Ors., noting that the facts of the present case were distinguishable. The Tribunal emphasized that the determination of "Related Party" status depends on the specific facts of each case.

The Tribunal further referenced the Hon'ble Supreme Court's decision in Arcelormittal India Private Limited v. Satish Kumar Gupta & Ors., which highlighted the importance of a "see through provision" to identify the real individuals or entities in control, thereby preventing ineligible persons from circumventing the provisions of IBC, 2016.

Conclusion:

The Tribunal concluded that the IRP acted within its powers and followed due process in determining the Applicant's status as a "Related Party." The Applicant failed to challenge the IRP's findings or provide sufficient evidence to rebut the "Related Party" status. Consequently, the Tribunal dismissed the application, upholding the IRP's decision to exclude the Applicant from participating in the CoC meetings. The application was deemed infructuous, and no costs were awarded.

---