Tribunal rules Respondent No. 3 related party, ineligible for CoC. IRP to reconstitute.

The Tribunal concluded that Respondent No. 3 should be considered a related party due to ineffective resignations of its directors, disqualifying it from the Committee of Creditors (CoC). The Interim Resolution Professional's reliance on incorrect information was noted, but no misconduct was found. Respondent No. 3, represented by Mr. Praful Prakash Bafna and Mr. Yogesh Prakash Bafna, was directed to be excluded from the CoC, with the IRP instructed to reconstitute the CoC accordingly. Applications IA (IBC) No. 53/2022 and IA (IBC) No. 54/2022 were partly allowed, affirming Respondent No. 3's related party status and its ineligibility for the CoC.

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Issues Involved:
1. Classification of Respondent No. 3 as an unrelated financial creditor (FC) and its inclusion in the Committee of Creditors (CoC).
2. Validity of the resignation of directors from Respondent No. 3 and its impact on their status as related parties.
3. Allegations against the Interim Resolution Professional (IRP) regarding diligence and potential misconduct.

Detailed Analysis:

1. Classification of Respondent No. 3 as an Unrelated Financial Creditor (FC) and its Inclusion in the CoC:
The primary issue arose when the IRP classified Respondent No. 3 as an unrelated FC and assigned it 53.87% voting rights in the CoC, thereby diluting the voting rights of the original FC to 46.13%. The IRP's decision was based on the resignation of two directors from Respondent No. 3 before the Insolvency Commencement Date (ICD). However, the Tribunal found that the resignation letters were not served on the Corporate Debtor (CD) as mandated by Section 168 of the Companies Act, 2013. The Tribunal emphasized that the resignation letters, although sent by courier, were not delivered due to an incorrect pin code. Consequently, the resignation was deemed ineffective, and Respondent No. 3 remained a related party, disqualifying it from participating in the CoC as per Section 21(2) of the Insolvency and Bankruptcy Code (IBC).

2. Validity of the Resignation of Directors from Respondent No. 3 and its Impact on Their Status as Related Parties:
The Tribunal scrutinized whether the resignation of directors from Respondent No. 3 was valid and if it excluded them from being categorized as related parties. The resignation letters dated 11.02.2022 were sent via courier but were not delivered to the CD due to an incorrect pin code. The Tribunal held that the resignation did not comply with Section 168 of the Companies Act, 2013, which requires proper service to the company. Additionally, the Tribunal referred to the Supreme Court's judgment in Phoenix ARC Private Limited vs. Spade Financial Services Limited, which held that if a related party FC ceases to be a related party with the sole intention of participating in the CoC, it should still be considered a related party. The Tribunal concluded that the resignation was intended to allow Respondent No. 3 to participate in the CoC, thus maintaining their status as related parties.

3. Allegations Against the Interim Resolution Professional (IRP) Regarding Diligence and Potential Misconduct:
The Tribunal addressed allegations against the IRP for not diligently performing his duties and for relying on a legal opinion to determine the related party status of Respondent No. 3. The IRP had sought a legal opinion and verified the MCA records, which showed the directors' resignation. The Tribunal acknowledged that the IRP might have misunderstood the date of resignation due to the information provided but found no evidence of mala fide intention or conspiracy. The IRP was cautioned to exercise greater vigilance in the future, but no disciplinary action was recommended.

Conclusion:
The Tribunal concluded that Respondent No. 3, represented by Mr. Praful Prakash Bafna and Mr. Yogesh Prakash Bafna, should be considered a related party and thus excluded from the CoC. The IRP was directed to reconstitute the CoC accordingly. The applications IA (IBC) No. 53/2022 and IA (IBC) No. 54/2022 were partly allowed, affirming the related party status of Respondent No. 3 and its disqualification from the CoC.

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