TaxTMI 
TaxTMI 
2019 (1) TMI 1507
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....Respondent- SCL, Dr. U.K. Chaudhary, 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.' ....
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....tly to set aside and quashing of all the resolutions 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 ha....
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....e assignments made by 'Synergies Castings Limited' on 24th November, 2016 in 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 Cro....
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....102.95 89.26 9.18% 0% 0% 3. EARC 88.92 86.92 8.94% 41.59% 9.85% 4. AARC 122.07 122.06 12.56% 58.41% 13.83% 17. According to learned 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 ....
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....itself for voting (while there had been no discussion inter-se 'Committee of Creditors' members on the same). 23. The Appellant issued a letter dated 22nd June, 2017 to the 'Insolvency Professional' 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....
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....30(2)(e) and 61(3)(f) 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' and other laws, including 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 ....
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....ted Assignment Agreements were entered into to circumvent the provisions of the 'I&B Code' and fraudulently reduce the voting share of the Appellant in the 'Committee of Creditors' of the 'Corporate Debtor'. 31. It was also submitted that Assignment of debt 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....
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.... Percentage of debt Amount of Claim admitted in Cr. Voting Share 1. Alchemist Asset Reconstruction Com an (AARC) 12.56% 122.06 13.83% 2. Edelweiss Asset Reconstruction Company Limited (EARC) 8.94% 86.92 9.84% 3. Millennium Finance Ltd. 69.32% 673.91 76.33% 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 Auth....
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....on value which is merely 6.93 Cr. The approved 'Resolution Plan' had the consent of overwhelming majority of the 'Financial Creditors' i.e. the consent of 91.06%, whereas the Appellant merely having 8.94% of voting share abstained from voting. Thus, a minority creditor having a share of only 8.94% was trying to scuttle the process of 'Resolution Plan'. 46. The 'Resolution 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 Proce....
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....hereby the 'Synergies Castings Limited' assigned the debts qua ' ICICI Bank', 'SBI' and ' IDBI Bank' in favour of 'Millennium Finance Limited'. 52. In pursuance of execution of above Assignment Agreements, appropriate charges in Form No. CHG-I were duly created in favour of the 'Millennium Finance Limited' on 24th November, 2016. The said assignment is duly evidenced by creation of 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....
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....ebt of the 'Corporate Debtor' as owned by the Appellant as on date was originally disbursed by 'EXIM Bank'. The Appellant during the pendency of the reference of the 'Corporate Debtor' with the 'BIFR', took over the debts of 'EXIM Bank', pursuant to which, the Appellant, at best, stepped into the shoes of the original Lender of the 'Corporate Debtor' i.e. 'EXIM Bank'. It is noteworthy that in the present 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 'BIF....
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....ation on Scope of Existing Loans Each of the Existing CDR Lenders hereby represents and warrants to each other Lender that, in the absence of any manifest error, the details of its Existing Loans as set out in Annexure III are complete and accurate in all respects." So it is beyond doubt that Appellant is a minority 'Financial Creditor' in the case of the 'Corporate Debtor'. However, the Appellant in the garb of instant Application is attempting to improve its position 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 ....
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....gies Castings Limited' and 'Millennium Finance Limited' are assignees of original lenders to the borrowers ('Synergies-Dooray Automotive Limited').The list of existing term lenders and existing term loans and list of existing CDR lender and on CDR lenders are as per master restructuring agreement dated 6th March, 2007 made by and between 'Synergies-Dooray Automotive Limited', 'ICICI Bank Limited', 'Indian Overseas Bank' and 'Andhra Bank' (more particularly set forth in part C of Schedule 1 herein and hereinafter 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 I....
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....ghts, title and interest in financing documents etc. in favour of the assignor ('Synergies Castings Limited') herein. In turn, the assignee of 'IDBI Bank', 'Synergies Castings Limited' herein, assigned its rights accrued from IDBI Bank' to 'Millennium Finance Limited'. This document was duly registered with the District Registrar, Anakapalli vide proceedings No. 197/G1/2017, Dated : 28th April, 2017 on payment of fine (5 times equal to registration fee) of Rs. 1,50,000/- for a delay of 1 month 1 day in presentation of the document under section 25, section 34 of the 'Registration Act, 1908'. The purchase 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....
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.... assigned the rights/interest in question in order to deprive/reduce the interest of the Appellant herein in the 'Committee of Creditors'. As long as the assignment agreement deeds are valid and legally enforceable, the Appellant has no locus standi to question its object, modus operandi behind its execution. The contentions of the Appellant that the 'Millennium Finance Limited' would become a related party by virtue of section 5(24) is not at all tenable. 68. The Appellant has alleged that the 'Corporate Debtor' had suppressed several material facts especially with regard to leasing out all its assets to '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 A....