AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 1507
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....Senior Advocate assisted by Mr. Milan Singh Negi, Ms. Manisha Chaudhary and Mr. Himanshu Vij, Advocates, Mr. Arjun Pant, AdvocateMr. Saurabh Kalia, Mr. Rahul Ahuja and Mr. Palash Agarwal, Advocates And Ms. Anuisha Mahajan and Mr. Harishit Agarwal, Advocates. JUDGMENT Justice S.J. Mukhopadhaya, Chairperson - All these appeals have been preferred by 'Edelweiss Asset Reconstruction Company Limited'- ('Financial Creditor') against different orders all dated 2nd August, 2017 passed by the Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench, Hyderabad, therefore, they were heard together and disposed of by this common judgment. 2. The 'Corporate Insolvency Resolution Process' was initiated against 'Synergies-Dooray Automotive Limited'. After the submission of the 'Resolution Plan(s)', a number of applications were preferred by the Applicant/Appellant under sub-section (5)(c) of section 60 of the Insolvency and Bankruptcy Code, 2016 ('I&B Code' for short) and related Rules. All the applications have been rejected by different orders all dated 2nd August, 2017 and the 'Resolution Plan' submitted by 'Synergies Castings Ltd.' as approved by the 'Committee of Creditors'....
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....s passed in the said meeting. The Adjudicating Authority, on hearing the parties, by another order dated 2nd August, 2017 observed that all the facts relating to related party considered in CA Nos. 43 and 57 of 2017 by adverting to fundamental objections raised by the Applicant/Appellant and subsequently, the 'Resolution Plan' having approved by separate order dated 2nd August, 2017 passed in CA No. 123 of 2017, the application has become infructuous. This order dated 2nd August, 2017 is under challenge in Company Appeal (AT) (Insolvency) No. 171 of 2017. 6. A third application being CA No. 56 of 2017 was filed by the Applicant/Appellant under sub-section (5) (c) of section 60 of the 'I&B Code' read with Rules 14 & 34 of the National Company Law Tribunal Rules, 2016, inter alia seeking to declare the meeting of the 'Committee of Creditors' of the 'Corporate Debtor' held on 22nd February, 2017 at Hotel Park Inn, New Delhi as invalid and consequentially declare all the decisions taken by the 'Committee of Creditors' as wrong. The Adjudicating Authority by separate order dated 2nd August, 2017 held that all those related matters have been considered in CA Nos. 43 and 57 of 2017 and t....
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....favour of 'Millennium Finance Limited' are legal, the second question will be automatically answered in favour of the Appellant. 11. On the other hand, if we hold that the assignments made by the 'Synergies Castings Limited' all dated 24th November, 2016 in favour of the 'Millennium Finance Limited' are illegal and invalid, the approval of the 'Resolution Plan' will be declared as illegal. Stand of the Appellant- 'Edelweiss Asset Reconstruction Company Limited' 12. Learned Senior Counsel for the Appellant submitted that on the eve of the issuance of Notification No. S.O. 3568(E) pursuant to which the 'Sick Industrial Companies (Special Provisions) Repeal Act, 2003' ('SICA Repeal Act') came into force on 1st December 2016, the 'Financial Creditors' of the 'Corporate Debtor' were: Sr. No. Creditor Amount (approx.) Percentage of Debt (approx.) 1. Edelweiss Asset Reconstruction Company Limited (EARC) Rs. 88. 92 Crores 9.25% 2. Alchemist Asset Reconstruction Company Limited (AARC) Rs. 122.07 Crores 12.70% 3. Synergies Castings Limited (SCL) Rs. 749.63 Crores 78.03% 13. Out of the above 'Financia....
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....ed Senior Counsel for the Appellant, the purported Assignment Agreements, their alleged dates of execution as also the manner of execution were clearly fraudulent having been made with the sole object of attempting to defeat and negate the rigours and mandate of section 21 of the 'I&B Code'. Apart from that, even otherwise the purported Assignment Agreements did not constitute evidence of any assignment and were inadmissible as such, in view of the fact that these being compulsorily registrable instruments were unregistered and inadequately stamped. Despite the 'Insolvency Professional' being obliged to admit only those claims with regard to which evidence was presented (and evidence must mean "admissible" evidence), the 'Insolvency Professional' in a blatant disregard of the law and in complete "dereliction of duties" under the 'I&B Code' and Regulations framed thereunder, proceeded to admit 'Millennium Finance Limited' as a 'Financial Creditor'. 18. Further, according to him, the effect of the highly dubious and purported assignment of debt by 'Synergies Castings Limited' to 'Millennium Finance Limited' is that the Appellant's voting share in the 'Committee of Creditors' was red....
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....al' setting out its serious objections as to why the 'Synergies Castings Limited' 'Resolution Plan' cannot be put to vote before the 'Committee of Creditors', including but not limited to the fact that the purported Assignment Agreements could not have been relied upon for verification of 'Millennium Finance Limited's claim, that the constitution of the 'Committee of Creditors' itself was illegal and invalid and most importantly that there was no consideration whatsoever paid by 'Millennium Finance Limited' to 'Synergies Castings Limited' under the purported Assignment Agreements (which fact also came to the knowledge of the Appellant for the first time after receipt of the 'Synergies Castings Limited' 'Resolution Plan'). The Appellant requested the 'Insolvency Professional' to bring the Appellant's objections to the notice of the Adjudicating Authority or defer the second 'Committee of Creditors' meeting till such time. The 'Insolvency Professional' responded by an email dated 23rd June, 2017 yet again refusing to even place the grave and serious objections of the Appellant before the Adjudicating Authority and continued to state that she does not have the power to get into disput....
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....ncluding section 230 of Companies Act, 2013. 25. According to learned Senior Counsel for the Appellant, the 'I&B Code' does not contemplate/permit/provide for effecting amalgamation before implementation of the 'Resolution Plan' especially in case such amalgamation has an effect of extinguishment of the 'Corporate Debtor' itself 26. Further, the 'Synergies Castings Limited' 'Resolution Plan' does not have an implementation schedule or means of supervision, which are mandatory contents of any 'Resolution Plan' under section 30 of the 'I&B Code' read with Regulation 38(2) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016'. 27. Learned Senior Counsel for the Appellant submitted that the 'I&B Code' obliges the 'Insolvency Professional' to examine and admit only those claims that admissible in law. Regulations 8, 10 and 13 of the 'Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016' may be referred to, which uses words such "proof", "evidence", "verify", "substantiate", "determine". While the Insolvency Professional does not discharge an adjudicatory function h....
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....bt with no payment of consideration is illegal/unenforceable. As per the 'Resolution Plan' submitted by 'Synergies Castings Limited' as approved by the 'Committee of Creditors', no purchase consideration has been paid by 'Millennium Finance Limited' to 'Synergies Castings Limited' in respect of the purported Assignment Agreements, and it proposes netting off of the amount due from 'Millennium Finance Limited' as purchase consideration against the amount due to be paid under the 'Resolution Plan'. 32. Further, according to the Appellant, the payment Schedule Agreement dated 24th November, 2016 produced before this Appellate Tribunal for the first time on 13th March, 2018 is not a genuine document. Stand of the 'Resolution Professional' 33. Learned counsel for the 'Resolution Professional' submitted that he duly verified the claims of the creditors in terms of section 18(1)(b) read with Regulation 13 of the 'Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016' and accordingly, constituted 'Committee of Creditors' of the 'Corporate Debtor'. It is submitted that the 'Resolution Professional' in terms of provisions of 'I&B ....
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....4. Synergies Castings Ltd. - Resolution Applicant 9.18% 89.26 TOTAL 100% 100% It is stated that all the 'Financial Creditors' of the 'Corporate Debtor' including the Appellants herein are assignee of the original lenders and thus to be treated identically. 38. It was submitted that in the instant case, the 'Resolution Professional' received three 'Resolution Plans' for the resolution of the 'Corporate Debtor' which were placed before the 'Committee of Creditors' in its 2nd meeting held on 24th June, 2017. The 'Committee of Creditors' with a majority of 91.06% approved the 'Resolution Plan' submitted by 'Synergies Castings Limited' which provided for merger of 'Synergies Castings Limited' with the 'Corporate Debtor'. 39. The 'Resolution Plan' of 'Synergies Castings Limited' has been duly approved by the Adjudicating Authority vide order dated 2nd August, 2018 pursuant to which the same has been made binding on all stakeholders. Stand of the 'Synergies Castings Limited' 40. Learned counsel for the 'Synergies Castings Limited' submitted that that the debt of 'Synergies Castings Limited' in the 'Corporate Debtor' were assigned to 'Millennium Finance L....
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....tion Plan' approved by the 'Committee of Creditors' and Adjudicating Authority duly identifies specific sources of funds that will be used to pay Insolvency Resolution Process Costs, liquidation value due to 'Operational Creditors' and liquidation value due to dissenting 'Financial Creditors' in terms of priority prescribed under Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. In terms of Regulation 37 of 'Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016', a 'Resolution Plan' can provide for merger or consolidation of the 'Corporate Debtor' with one or more person in terms of Regulation 37(1)(c) of 'Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016'. The approved 'Resolution Plan' in the instant case accordingly envisages amalgamation. 47. The approved 'Resolution Plan' in the instant case provides for dispensation of meeting in terms of Sections 230 and 231 of Companies Act, 2013. It is submitted that an approved 'Resolution Plan' is binding upon all the creditors and s....
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.... charge as a contemporaneous document with the Registrar of Companies on 24th November, 2016 itself. The creation of charge with the Registrar of Companies which is an independent third party evidences valid transfer of debt in favour of 'Millennium Finance Limited' which is even prior to coming into force of the 'I&B Code'. 53. It was submitted that the transfer of debt is valid even if the assignment agreements dated 24th November, 2016 were not registered immediately on 24th November, 2016. It is a settled position of law that a debt can be transferred/assigned on execution of an instrument in writing signed by the transferor or his duly authorized agent. 54. Reliance was placed on the decision of the Hon'ble Supreme Court in ICICI Bank Ltd. v. APS Star Industries Ltd. [2010] 10 SCC 1, wherein it has been held that an assignment of a debt will not be contrary to public policy on the grounds that the assignee has purchased the debt for a considerably discounted price or because that price is only payable after a period of credit. (Para 49). Even otherwise, in the instant case the Assignment Agreements are supported by Payment Schedule Agreements dated 24th November, 2016, where....
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....resent case, the Appellant vide the Assignment Agreement dated 6th January, 2014 acquired the debt of 'EXIM Bank', during the subsistence of a status quo order passed by the 'Debts Recovery Tribunal', Visakhapatnam under the provisions of the 'SARFAESI Act' and also during subsistence of the order dated 29th May, 2012 passed by the 'BIFR', wherein the 'BIFR' categorically directed 'EXIM Bank' to accept the offer of the 'Corporate Debtor' for settlement of its dues at 26.66% of the principal dues in line with the settlement offered and agreed by other Secured Lenders of the 'Corporate Debtor'. Thus, it is evident that on the date of acquisition of the debt in the instant case, the Appellant was not only aware about the factum of pendency of reference of the 'Corporate Debtor' with the 'BIFR' indicating its financial stressed position but also aware about its limited rights and exposure in the total secured debts of the 'Corporate Debtor' in terms of the order dated 29th May, 2012 passed by the 'BIFR' and the orders dated 1st February, 2013 & 20th June, 2013 passed by the 'DRT', Visakhapatnam. However, despite the same, the Applicant acquired the debts of the 'Corporate Debtor' and t....
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....ition and exposure as one of the 'Financial Creditors' of the 'Corporate Debtor' by non-suiting 'Millennium Finance Limited' which is legally impermissible and accordingly warrants no indulgence of the Tribunal. (2) It is further stated that 'Millennium Finance Limited' is not a related party as regards the 'Corporate Debtor' as alleged by the Appellant and thus it cannot be eliminated from the 'Committee of Creditors'. 'Millennium Finance Limited' is a Non-Banking Financial Institution, which had acquired the debts from 'Synergies Castings Limited' and being an independent party and the single largest 'Financial Creditor' of the 'Corporate Debtor' entitled to voting in the meeting of 'Committee of Creditors'. The date of the Assignment Agreement being just a date precedent to the issuance of notification by the Central Government for the purpose of repeal of 'SICA' is no ground to eliminate 'Millennium Finance Limited' from the 'Committee of Creditors'. 'Millennium Finance Limited' in its ordinary course of business entered into an Assignment Agreement dated 24th November, 2016. There is neither any mechanism nor any manner by which 'Millennium Finance Limited' can be attributed....
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....er individually referred to as the "Existing CDR Lender" and collectively as the "Existing CDR Lenders", are as follows: "LIST OF EXISTING TERM LENDERS AND THE EXISTING TERM LOANS Reconciled secured term loans outstanding as on 30.9.2004 as provided by the Company PART-A Lenders Outstanding (Rs in millions) IDBI 656.6 ICICI BANK 663.0 EXIM BANK OF INDIA 183.6 STATE BANK OF INDIA 252.8 INDIAN OVERSEAS BANK 98.9 ANDHRA BANK 83.5 JP MORGAN CHASE (HSBC HARE) 95.2 INDBI BANK 89.1 TOTAL SECURED LOANS 89.1 TOTAL SECURED LOANS 2122.7 PART-B LIST OF EXISTING CDR LENDERS ICICI BANK IDBI BANK STATE BANK OF INDIA EXPORT IMPORT BANK OF INDIA INDIAN OVERSES BANK ANDHRA BANK PART-C LIST OF EXISTING "NON-CDR LENDERS JP MORGAN CHASE BANK" 63. The first assignment agreement dated 24th November, 2016 was executed between 'Synergies Castings Limited' and 'Millennium Finance Limited'. This assignment originally relates to 'ICICI Bank'. 'ICICI Bank Limited' vide its assignment dated 28th September, 2011 assigned the loans together with all its rights, title and interest in financing documents etc. in favour of the assignor ('Synergies Castings Limited'). In turn....
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....chase consideration for these rights is Rs. 16,78, 00,000/-. 66. On perusal of above three assignment agreements, it is clear those documents are duly executed with the concerned authorities, and they are not questioned by any party to those proceedings. Appellant herein, being similarly situated like that of 'Synergies Castings Limited' and 'Millennium Finance Limited', do not have any locus standi to question the veracity of those documents on mere apprehensions or allegation of mala-fides or fraudulent etc. Admittedly, the Appellant is not a party to those Assignment agreements. It is not tenable to raise apprehensions before the Adjudicating Authority to adjudicate. The courts usually adjudicate issues basing on cause of action arisen in a particular case. The Adjudicating Authority cannot enter into roving enquiry on mere apprehensions, baseless allegations. It is a settled law that whatever the rights the original assignor got it from the original lender will automatically accrues to subsequent assignees basing on executing appropriate legal documents in accordance with law. Here, in this case, 'Millennium Finance Limited' has got all the rights as per the assignment agreeme....
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....o 'Synergies Castings Limited' before 'BIFR'. The Appellant and its Assignor viz. 'Export Import Bank of India' ('Exim Bank') has filed various applications before 'BIFR' /'AAIFR' questioning the determination of the 'Corporate Debtor' as a sick industrial company, but such ground cannot be taken at the time of approval of the 'Resolution Plan(s)'. 69. The Assignment deeds of various Banks/Financial Institutions/ARCs in favour of 'Synergies Castings Limited' happened way back in the years 2008-2011 and that too from 'SBI', 'IDBI', 'ICICI' (ARCIL). Therefore, the Adjudicating Authority has not find any fault with these assignment deeds. With respect to the allegation of 'Synergies Castings Limited' assigning its debt to 'Millennium Finance Limited' on 24th November, 2016, the Adjudicating Authority rightly held that there is no merit in this argument. 70. Insofar as 'Resolution Plan' submitted by 'Synergies Castings Limited', it cannot be held to be violation of sub-section (2) of section 30 or any of the provisions of the law on the ground of violation of Sections 230-232 of the Companies Act, 2013. 71. Section 230 of the Companies Act, 2013 relates to 'power to compromise or ma....