Foreign financial lender granted voting rights in Committee of Creditors after wrongful related party classification under Section 5(24)

NCLAT allowed the appeal of a foreign financial lender seeking inclusion in the Committee of Creditors with voting rights. The lower court erroneously held the appellant as a related party under Section 5(24)(h) and (m) of the IBC. NCLAT found no evidence that the appellant participated in day-to-day functions or policy-making of the corporate debtor. The court noted that the appellant's Managing Director was nominated by a foreign investor, not the appellant, and served on the debtor's board since 2017. No material evidence showed provision of essential technical information between parties. The adjudicating authority's conclusion lacked basis, and the impugned order was set aside.

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Issues Involved:
1. Whether the Appellant should be included in the Committee of Creditors (CoC) with voting rights.
2. Whether the Appellant is a "related party" under Section 5(24)(h) and 5(24)(m) of the Insolvency and Bankruptcy Code.

Summary:

Issue 1: Inclusion in CoC with Voting Rights
The Appellant, a foreign financial lender, sought inclusion in the CoC and voting rights. The application was initially rejected by the Adjudicating Authority. The Appellant argued that it should be included in the CoC with voting rights as it had extended a Reserve Bank of India-approved external commercial borrowing to the Corporate Debtor. The Tribunal concluded that the Adjudicating Authority erred in rejecting the Appellant's application and directed the IRP to include the Appellant in the CoC with voting rights proportionate to the admitted claim.

Issue 2: Related Party Status under Section 5(24)(h) and 5(24)(m)
The Adjudicating Authority had held that the Appellant was a related party under Section 5(24)(h) and 5(24)(m) due to the involvement of Rembert Biemond, a common Director in both the Appellant and the Corporate Debtor. The Tribunal found that:
- Section 5(24)(h): There was no evidence that the Corporate Debtor acted on the advice, directions, or instructions of the Appellant. The actions of Rembert Biemond as a Director of the Corporate Debtor were not attributable to the Appellant.
- Section 5(24)(m): There was no material evidence to prove that the Appellant participated in the policy-making processes of the Corporate Debtor or provided essential technical information. The Adjudicating Authority's conclusion was based on erroneous assumptions.

The Tribunal concluded that the Adjudicating Authority committed an error in holding the Appellant as a related party and set aside the impugned order, allowing the Appellant's inclusion in the CoC with voting rights.

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