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2019 (3) TMI 1605
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....he provisions of the Insolvency and Bankruptcy Code; Or in the alternative, (c) Pending the hearing and final disposal of the present Miscellaneous Application, this Hon'ble Tribunal be pleased to stay the effect and operation of the decision dated 11.10.2018 and accordingly permit the Applicant to participate in the Resolution Process as a member of Committee of Creditors; Or in the alternative, (d) This Hon'ble Tribunal be pleased to stay any further steps to be taken by Resolution Professional and by the Committee of Creditors in the absence of or without taking into consideration the vote of the present Application; (e) Interim reliefs as prayed in prayer clause (b) to (d); (f) Any other and further reliefs as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case; (g) Costs of the application. 2. Sterling International Enterprises Limited, the Corporate Debtor herein, was put in Corporate Insolvency Resolution Process (CIRP) by an order of this adjudicating authority dated 16.07.2018 and the Respondent is the Resolution Professional (RP). 3. One M/s Unique Proteins Private ....
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....that your claim is not admissible for the same reason I stated earlier. I am sorry to say but your claim is rejected." 7. Aggrieved by the decision of the resolution professional, the applicant filed this application under section 60(5) of the Code for the reliefs cited supra. 8. The followings are the contentions of the applicant: A. The resolution professional has arrived at an erroneous conclusion that though there is a mortgage created in favor of the applicant by the Corporate Debtor but since no corporate guarantee was executed, the claim of the applicant is not tenable in the CIRP of the Corporate Debtor and the decision of the RP in rejecting the claim is flawed. B. The decision of the resolution professional is without any justification or without any reasoning, contrary to the principal of natural justice and not based on the sound principle of law. C. The RP failed to appreciate the distinction between a mortgage or a guarantee and proceeded on the basis that there cannot be a mortgage without any guarantee. Any party can create a mortgage as a security without guaranteeing the repayment of debt. Creation of mortgage i....
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....hich is due from any person and includes a financial debt or an operational debt along with the Form C filed by the applicant; - it is clear that neither any financial debt nor any operational debt is owed by the Corporate Debtor to the applicant and as such the applicant is precluded to file a proof of claim during the CIRP. C. The RP further submits that a perusal of Form C submitted by the Applicant and even the present Application, it clearly appears that it is not the case where the money has been disbursed to the Corporate Debtor which is payable along with interest, therefore, the argument of the Applicant that the definition of financial debt does not envisage the disbursement of the debt has to be necessarily to the Corporate Debtor, is completely untenable. It is further submitted that the arguments of the applicant, that the scope of debt in the code is not limited to the liability or obligation owed directly by the principal borrower, but also includes liability or other liability of other parties in respect of the debt of the principal borrower is also untenable. D. The RP further submits that the question of exercising th....
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...., is left out of the process and nobody knows how the mortgagee will deal with the properties since the mortgagee has an interest transferred in specific immovable properties in its favor, which is also admitted by the RP. Hence, unless otherwise an opportunity is given to the mortgagee to have a seat in the Committee of Creditors and is made as a party to the process of approval or rejection of Resolution Plan, that will be a clear case of violation of natural justice. The main objective of the Code is resolution of the Corporate Debtor and this kind of selective exclusion of an important stakeholder may not auger well for the successful conduct of CIRP. By providing a narrow, conventional and restricted interpretation of the financial debt may lead to a situation which is diagonally opposite to the objective of the Code itself. Further, when no representation is given to the mortgagee in the Committee of Creditors the binding effect of the Resolution Plan may also end up in jeopardy when the mortgagee enters into litigation at the stage of approval of Resolution Plan or thereafter. Hence, the contention of the RP that the question of exercising the rights under the Mortgage Deed ....
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....es by or against the Corporate Debtor etc. All this has nothing to do with Section 24 of the Code which deals with meetings of the committee of creditors. Secondly, the resolution professional does not prepare a resolution plan as is mentioned in the Notes on Clause 24; he only prepares an information memorandum which is to be given to the resolution applicants who then submit their resolution plans under Section 30 of the Code. The committee of creditors, in turn, gets information so that they can assess the financial position of the Corporate Debtor from various sources before they meet. It is, therefore, difficult to understand the Notes on Clause 24. Even assuming that the Notes on Clause 24 may be read as being a one-way street by which erstwhile members of the Board of Directors are only to provide information, we find that Section 31(1) of the Code would make it clear that such members of the erstwhile Board of Directors, who are often guarantors, are vitally interested in a resolution plan as such resolution plan then binds them. Such plan may scale down the debt of the principal debtor, resulting in scaling down the debt of the guarantor as well, or it may not. The resolut....