2021 (1) TMI 108 - Tri - Insolvency and Bankruptcy

Tribunal dismisses Application, excludes Applicant from CoC, citing suspicious transaction & unregistered Agreement.

The Tribunal dismissed the Application, upholding the RP's decision to reject the Applicant's claim, not declare the Applicant as a Financial Creditor, ... Assignment of Debt - Seeking directions to Resolution Professional / 1st Respondent herein who is Resolution Professional to admit claim - Section 60 (5) of Insolvency & Bankruptcy Code - HELD THAT:- The Learned Counsel for Applicant would contend that the Applicant is assignee of the debt which was payable to the 2nd Respondent, the Assignor by the Corporate Debtor. The Learned Counsel would contend, there is an Assignment Agreement duly executed by the Assignor/the second Respondent herein namely, SREI Infrastructure Finance Limited. The Learned Counsel would contend, the debt transferred under Assignment Agreement is permitted to be recognised. In this connection the Learned Counsel for Applicant relied on Regulation 28 of CIRP Regulations. The Learned Counsel contended, the 2nd Respondent transferred / assigned the debt of ₹ 60,47,38,233/- on 18.05.2020. The Learned Counsel contended, soon after assigning the debt in favour of Applicant by the Assignor, the Applicant/Assignee filed claim before the 1st Respondent/ Resolution Professional of the Corporate Debtor. The Learned Counsel contended, the Resolution Professional being administrator and facilitator is bound to accept the claim transferred in favour of Applicant, declaring him as Financial Creditor and include in the CoC for the Corporate Debtor. The Learned Counsel contended, the Resolution Professional has not admitted the claim raising unnecessary objections and acted as adjudicator, which he is not empowered to do so. The Learned Counsel contended, the Resolution Professional rejected the claim by adjudicating the claim filed by the Applicant, as if the same cannot be admitted. It is true the debt of ₹ 60,47,38,233/- was assigned to the Applicant with the underlying securities which is for a sum of ₹ 10 lakhs. I agree with the contention of the Assignor that the inadequacy of consideration is not by itself a ground to entertain a doubt about the transaction. There are other circumstances pointed out by the Resolution Professional. The contention of the Resolution Professional that he has relied on Section 5 (7) of the Code and decided the claim on administrative side. The Resolution Professional would contend, the Applicant is a non-financial institution and non-ARC. How this Applicant being a non financial institution and non-ARC is entitled to purchase the debt with underlying immovable and movable securities from Respondent No.2 which is a Non-Banking financial institution and holding net worth of ₹ 2987.08 crores as on 31.03.2018 can assign its debts with underlying immovable and movable securities to non-financial institution and non-ARC, the Applicant herein, whose paid up capital is just ₹ 47.63 lakhs and how the debt of ₹ 60.47 crores was assigned for a sum of ₹ 10 lakhs. Certainly, this is an important circumstance which ought not to be ignored while assessing genuiness of this transaction. The question is whether claim can be admitted basing on the un-registered document when it was filed before the Resolution Professional. The unregistered documents cannot be taken into account for admission of the claim. The document must have been registered on the date on which the claim is made. No doubt for registration, four months are available under Section 23 of the Registration Act. The question is whether Assignment Agreement was registered on the date on which claim was made before the Resolution Professional. The documents must have been registered by the date the claim was made before the Resolution Professional. So when claim was made, the documents was not registered. Therefore, the document cannot be looked into. The Resolution Professional had not committed any error by not relying the unregistered Assignment Agreement because it was not registered and claim could not be admitted. The Resolution Professional has rightly observed a serious suspicious circumstance in the alleged transaction. The Applicant is a non-financial institution and non-ARC, then how the Applicant purchased the debt with underlying movable and immovable securities from the Assignor which is an NBFC and holding net-worth of ₹ 2987.08 crores as on 31.03.2018, which can assign its debts with underlying immovable and movable security to a non-financial institution and non-ARC, the Applicant herein, whose paid up capital is ₹ 47.63 lakhs. This certainly is an important circumstance which cannot be ignored and it casts a serious doubt on the transaction - The debt is stated to have been transferred to the Applicant, the Assignee. Now the prayer by the Applicant is to recognise him as financial creditor and further to include it in the CoC. The Resolution Professional has taken a right decision that Assignment Agreement is not registered. Therefore, he has not recognised the claim of the Applicant basing on the unregistered Assignment Agreement. Secondly, the Applicant cannot be included in the CoC even if transfer is treated as a valid transfer since the Assignee got the debt transferred from the related party. The Assignee is stepping into the shoes of the Assignor. Therefore, the Applicant cannot be included in the CoC having acquired the debt by transfer from the related party to the Corporate Debtor. The transaction on the face of it appear to be not a genuine transaction with regard to the transfer of debt in favour of Assignee. Already Resolution Professional recognised the debt of the Assignor and only a part of debt was not admitted because of pending reconciliation. Thus, there is no error committed by the Resolution Professional for not accepting transfer and not including the Applicant in the CoC. The Assignor continued to be a financial creditor of the Corporate Debtor. If transfer is not recognised by the Resolution Professional, the status of the Assignor/2nd Respondent herein, does not change and Assignor continues to be financial creditor of the Corporate Debtor - application dismissed. Issues Involved:1. Whether the Applicant's claim of Rs. 60,47,38,233/- should be accepted by the Resolution Professional.2. Whether the Applicant should be declared as a Financial Creditor by accepting the Assignment Deed dated 18.05.2020.3. Whether the Applicant should be included in the Committee of Creditors (CoC).Detailed Analysis:Issue 1: Acceptance of Applicant's ClaimThe Applicant sought directions under Section 60(5) of the Insolvency & Bankruptcy Code (IBC) to have its claim of Rs. 60,47,38,233/- accepted by the Resolution Professional (RP). The Applicant argued that the Assignment Agreement dated 18.05.2020, through which it became the lender and financial creditor, was valid and binding. The Applicant contended that the RP rejected the claim without valid reasons, despite providing detailed explanations addressing the RP's observations.The RP countered, stating that the claim was rejected due to the lack of satisfactory documentary records and the suspicious nature of the transaction. The RP highlighted that the Assignment Agreement was unregistered at the time of submission, and the consideration cheque was deposited much later. The RP also pointed out that the transaction occurred at the fag end of the resolution process, raising doubts about its genuineness. The Tribunal agreed with the RP, stating that the unregistered document could not be relied upon for admitting the claim.Issue 2: Declaration as Financial CreditorThe Applicant argued that by virtue of the Assignment Agreement, it should be declared a Financial Creditor. The RP and Respondent No.2 (Assignor) disputed this, citing that the Applicant, being a non-financial institution and non-Asset Reconstruction Company (ARC), could not purchase the debt with underlying securities from a Non-Banking Financial Company (NBFC) like Respondent No.2. The Tribunal noted that the Assignor was already declared a related party and excluded from the CoC. The Tribunal referenced the Hon'ble NCLAT decision, which held that if the Assignor is a related party, the Assignee also becomes a related party. Thus, the Applicant could not be declared a Financial Creditor.Issue 3: Inclusion in Committee of Creditors (CoC)The Applicant sought inclusion in the CoC, arguing that the RP should recognize the Assignment Agreement and its status as a Financial Creditor. The RP contended that the Applicant, being a related party due to the debt transfer from the Assignor, could not be included in the CoC. The Tribunal upheld this view, stating that the Applicant, stepping into the shoes of the Assignor, could not be included in the CoC. The Tribunal emphasized that the transaction appeared suspicious, and the RP had rightly not recognized the transfer based on the unregistered Assignment Agreement.Conclusion:The Tribunal dismissed the Application, agreeing with the RP's decision not to accept the claim, not to declare the Applicant as a Financial Creditor, and not to include the Applicant in the CoC. The Tribunal found no error in the RP's actions and concluded that the transaction was not genuine.