AI OCR 
TaxTMI 
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2022 (12) TMI 499
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....d 7. Mr. Arvind Nayar, Sr. Advocate with Mr. Lokesh Malik, Advocate for R6, 8 to 13. Ms Honey Satpal, Advocate for R15. JUDGEMENT JUSTICE RAKESH KUMAR, MEMBER ( JUDICIAL ) The present appeal has been preferred by the Union Bank of India (on behalf of Committee of Creditors of Krishna Knitwear Technology Ltd) against an order dated 06.04.2021 passed by National Company Law Tribunal, Ahmedabad Bench (hereinafter referred to as the NCLT) in I.A. No.953/2020 in CP(IB) No.279/2018 with I.A. No.13 of 2021. The final conclusion of the order dated 06.04.2021 passed by the Adjudicating Authority is quoted hereinbelow: a) None of the parties i.e. applicant financial creditors in both IAs are a related party of the Corporate Debtor. b) Claim amounts of all applicants in IA 953 of 2020 have wrongly been reduced having regard to the material on record and, therefore, such claims are to be re-verified after considering all source documents produced by applicants including Form-26AS for respective financial years. c) Since they are not a related party, they are entitled to be a member of COC. COC be re-constituted forthwith. Voting rights of each applican....
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....he present matter. The short facts of the case is that in the years 2018 Andhra Bank (now Union Bank of India) filed an application under Section 7 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as the 'Code') against the Corporate Debtor namely Krishna Knitwear Technology Ltd which was numbered as CP(IB) 279/2018 and on 13.1.2020 the petition under Section 7 of the Code was admitted and CIRP was initiated against the Corporate Debtor. While initiating Corporate Insolvency Resolution Process (hereinafter referred to as "CIRP") one Mr. Brijesh Kumar Mishra was appointed as Interim Resolution Professional. Subsequently he was confirmed as Resolution Professional (hereinafter referred to as the 'RP'). Thereafter the RP published Form A inviting claim from the financial creditors by 13.02.2020 whereafter respondents herein submitted their claims. It is the case of the appellant that Respondent No.8 to 13 on 14.02.2020 lodged their claim with the RP. However, Respondent No. 5,6 and 7 subsequently received emails from the RP wherein RP had raised certain querries with respect to their claims. On 29.02.2020, RP invited Respondent No.1 to 4 to attend 1st Committee of....
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....ssing impugned order the learned Adjudicating Authority has also passed certain comments against earlier CoC also. Aggrieved with the impugned order the appellants has preferred the present appeal which was registered as Company Appeal (AT)(Ins) No.399 of 2021. At the time of hearing of the present appeal Mr. Abhijeet Sinha, learned counsel for the appellant while referring to certain paragraphs of the impugned order tried to persuade this Tribunal that the Learned Tribunal has seriously committed error in passing an order for including Respondents in the CoC of the Corporate Debtors. He emphasised that if the impugned order is not interfered with there is every possibility that considering the huge claims raised by the Respondents the appellant may not get its appropriate claim. Certainly if it is not interfered with considering the huge claims of the Respondents there is likelihood of reduction of the claim of appellants as Nil. He emphasised that under the Code it is the only CoC who is competent to appoint IRP or RP and in any event removal of the RP by the Adjudicating Authority was beyond its jurisdiction and competence. Mr. Abhijeet Sinha, learned counsel submitted tha....
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....ther complications, the CIRP may be stayed, a division bench of this Tribunal by its order dated 11.6.2021, while directing to list the appeal for admission on the next date directed that "in the meanwhile the impugned order dated 06.04.2021 and 08.04.2021 shall remain stayed till next day of hearing." Learned counsel appearing on behalf of the replaced RP was also directed not to proceed with CIRP till next date of hearing. The interim order passed earlier was further directed to continue till further orders by order dated 24.08.2022. Meaning thereby that the interim order till date is continuing. We partly heard the appeal on 1.11.2022 on which date learned counsel for the Appellants concluded his argument and on request of learned counsel for the Respondents hearing was deferred to 3rd November, 2022 on which date after hearing all the parties judgment was reserved. While giving reply Mr. P. Nagesh, learned senior counsel appearing on behalf of Respondent No.1 raised serious objection on the arguments of learned counsel for the appellant. He has drawn our attention to the relief sought for in the Memo of Appeal. He submitted that despite the fact that in the Memo of Appeal....
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....ainst the CoC. The Appellant is neither aggrieved nor challenged the findings of the Hon'ble NCLT, inter alia, that answering respondent is not a related party of the corporate debtor, thus, having right to participate, attend and vote in the meetings of the CoC of the Corporate Debtor. 3. It is submitted that it has been held in catena of cases now that the Hon'ble NCLT has power to replace the RP of the corporate debtor where the Hon'ble NCLT is of the opinion that the RP has failed to conduct the CIRP of the corporate debtor as per the provisions of the IBC or where the Hon'ble NCLT is not satisfied with the performance or conduct of the RP or where there is a dereliction of duties on the part of the RP. In the instant case, the Hon'ble NCLT vide its detailed order dated 06.04.2021, has taken into account the manner in which the CIRP of the corporate debtor was conducted by the RP and found it just and proper to replace the RP for smooth conduct of the CIRP. Therefore, the instant appeal filed by the appellant being a CoC member and on behalf of the CoC, is baseless and without any merits. Nor the CoC has any locus to challenge the decisions of the Hon'ble NCLT replacin....
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....ing is to enable the adversary party to know the case it has to meet. The appellant has conveniently suppressed the above material fact from this Hon'ble Tribunal. Therefore the Appellant cannot be heard and challenge the findings of the Hon'ble NCLT in the order impugned dated 06.04.2021 against which no appeal has been preferred. By way of referring to fact disclosed in the reply it was submitted by Learned senior counsel for the Respondent No.1 that the Respondent No.1 alongwith Respondent No.2 to 7 had earlier filed an application under Section 7 of the Code against the Corporate Debtor i.e. Company which was numbered as CP(IB)No.281/7/NCLT/AHM/2018 on 1.6.2018 before the NCLT Ahmedabad Bench. According to him the said application was registered on 23.08.2019 and after hearing order was reserved. However, prior to the pronouncement of the order the appellant herein i.e. Andhra Bank filed an application under Section 7 of the Code against the same Corporate Debtor which was admitted on 13.01.2020 and Mr. Brijendra Kumar Mishra was appointed as IRP of the Corporate Debtor who was subsequently confirmed as RP. After IRP issued public announcement through publication in newspape....
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....09 and 1810/2021, of course at the time of hearing has not been pressed, is not required to be taken note of. He submits that order impugned was passed on 06.04.2021. Thereafter the present appeal i.e. Company Appeal (AT)(Ins) No.399/2021 was filed on 2.6.2021 wherein the appellant sought relief only against the removal of the RP and also for expunging remarks against RP as well as against CoC. Since the IA in the garb of amendment petition was filed much beyond the statutory period of limitation, the said IA may not be entertained at this juncture. He submits that as per Code against an order appeal can be preferred under Section 61 of the Code. But Section 61(2) prescribes a period of limitation of 30 days before NCLAT. However, under proviso to Section 61(2) within further 15 days if appellant is in a position to satisfy sufficient cause for not filing appeal within time, it can be condoned. He submits that after expiry of total 45 days this Tribunal may not entertain such application. According to Learned Counsel for the Respondent by way of filing IA in the garb of amendment the appellant may not be allowed to avoid period of limitation in assailing the said order. According t....
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.... 399 of 2021. He submits that the Learned Adjudicating Authority exceeded his jurisdiction while passing suo motu order of replacing the 'Resolution Professional' (RP) and erroneously gave a finding that some of the Creditors are not related party and also directed to induct them in CoC by reconstitution of the CoC. He further submits that reconstituted CoC may take decision, which will create further complications, therefore, the CIRP may be stayed. We also heard Ld. Sr. Counsel Mr. Jayant Mehta in CA (AT) (Ins) No. 402-403 of 2021 for the Appellant. He submits that Ld. Adjudicating Authority passed some baseless stricture against the RP (Appellant) and without affording opportunity of hearing before IBBI directed to take action against the Appellant. He further submits that Appellant has also challenged the order dated 08.04.2021 whereby Learned Adjudicating Authority had given directions to the 'Corporate Debtor' (Kaushal Textiles Pvt. Ltd.) (R-15) Issue notice in both the Appeals. Learned Counsels Mr. Prateek Gupta and Mr. Vishal accept notice on behalf of R-1 & 15. Issue notice to other Respondents through Speed Post as well as e....
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....ch according to the applicants were of arbitrary nature and the sole object was to not to invite applicants no 5 to 7 for participation in COC meetings. In IA 13 of 2021, the claims pertain to amount of corporate guarantees which were invoked and such amount includes interest also. It is further noted that all supporting documents as required were attached with Form-C submitted by all applicants in both the applications. It is noteworthy that the basis for treating all the applicants as a related party is based upon the order of SAT dated 11.02.2014 and a report submitted by Transaction Auditor appointed by RP. 19. In this factual background, now, we have to look at the relevant provisions of the CODE as far as issue of admission, reduction or rejection of claims submitted by the Financial Creditors is concerned and their exclusion from COC, if they are found to be a related party of the Corporate Debtor within the meaning of the provision of Section 5(24) of CODE initially or subsequently. The commencement of Corporate Insolvency Resolution Process (CIRP) happens with the admission of Corporate Debtor into CIRP by the order of Adjudicating Authority to that effect. IRP is....
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....ddition to the general power contained in main clause(a) which provides for determining the financial position of the corporate debtor. The term "financial position" has been defined in clause 5(9) of CODE so as to mean that financial information of a person as on a certain date. It is pertinent to note that under Section 19 of CODE, personnel of the corporate debtor or its promoters or any other person associated with the management of the corporate debtor have been assigned with the responsibility to extend the cooperation to IRP failing which under Section 19(2) of CODE, IRP can approach this Adjudicating Authority for appropriate direction/relief. 20. After having this over view, we come to the provisions of Section18(b) of CODE which provides that IRP shall receive and collate all claims submitted by creditors to him pursuant to the public announcement made under Section 13 and section 15 of CODE. Section 18({c) provides that IRP has to constitute a Committee of Creditors. Section 21(1) also provides for the same. In fact, Section 21(1) is the consolidated version of Section 18(a), 18(b) and 18(c) of the CODE. Under Section 25(2)(e) maintain an updated list of claims.....
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....AS per Section 22 of CODE, first meeting of COC is to be held within seven {7) days of the constitution of COC. In such meeting, as per the provisions of Section 22(2) to 22(5) of CODE, the COC may approve the IRP to function as RP or may replace such IRP by another Insolvency Professional. The procedure for replacement of IRP, if it is so resolved by COC, is prescribed under Section 27 of CODE. It is needless to mention that term "Resolution Professional" as defined in Section 5(27) of CODE provides that it includes IRP. Hence, where the term "Resolution Professional" has been used in a context indicated otherwise, it would include both IRP as well as RP. Now, the CIRP starts with speed and momentum. In this process meetings of COC are crucial as certain decisions can be taken by RP only with the approval of COC as provided in Section 28 of CODE. Section 24(2) provides that all meetings of COC shall be conducted by the Resolution Professional. As per Section 24(3)(a), it is provided that the Resolution Professional shall give notice of each meeting of COC to the members of COC including authorised representative. Further, as per Section 24(3)(b}, notice is also to be give....
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....n 8 of the insolvency and Bankruptcy Board of India (insolvency Resolution Process for Corporate Persons) Regulations, 2016) [Date] To The Interim Resolution Professional / Resolution Professional, [Name of the Insolvency Resolution Professional / Resolution Professional] [Address as set out in public announcement] From [Name and address of the registered office and principal office of the financial creditor] Subject: Submission of proof of claim Madam/ Sir, [Name of the financial creditor], hereby submits this proof of claim in respect of the corporate insolvency resolution process in the case of (name of corporate debtor], The details for the same are set out below: ~~ PARTICULARS NAME OF FINANCIAL CREDITOR" IDENTIFICATION NUMBER OF FINANCIAL CREDITOR (IF AN INCORPORATED BODY, PROVIDE IDENTIFICATION NUMBER AND PROOF OF INCORPORATION. IF A PARTNERSHIP OR INDIVIDUAL PROVIDE IDENTIFICATION RECORDS* OF ALL THE PARTNERS OR THE INDIVIDUAL) ADDRESS AND EMAIL ADDRESS OF FINANCIAL CREDITOR FOR - CORRESPONDENCE. PARTICULARS TOTAL AMOUNT OF CLAIM IN....
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....me of corporate debtor], the corporate debtor was, at the insolvency commencement date, being the... day OF______ 20......., actually indebted to me in the sum of Rs. [insert amount of claim. 2 In respect of my claim of the said sum or any part thereof, I have relied on the documents specified below: [Please list the documents relied on as evidence of claim]. i The said documents are true, valid and genuine to the best of my knowledge, information and belief and no material facts have been concealed therefrom. i In respect of the said sum or any part thereof, neither I, nor any person, by my order, to my knowledge or belief, for my use, had or received any manner of satisfaction or security whatsoever, save and except the following: [Please state details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim]. I am not a related party in relation to the corporate debtor, as defined under section 5 (24) of the Code. It can be seen from the contents of revised Form-C, the word "Affidavit" has been substituted by word "Declaration". ....
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.... Further, provisions of Section 5(24A) defining a related party in relation to an individual were brought in w.e.f. 06.06.2018. Thus, such changes in Form-C were necessitated because of incorporation of provisions of Section 29A in the CODE. Thereafter, a significant and notable insertion comes into force w.e.f. 03.07.2018 in the form of Clause-6 of the declaration part of Form-C which is most relevant for deciding the issue on hand as regard to whether a related party can be a member of COC. Clause-6 of this declaration makes clear, in no uncertain terms, the scope of proviso to Section 21(2) and its implications which have already expressed that even a related financial creditor will remain part of COC which gets further fortified from this clause that financial creditor, even though being a related party, cannot be ousted from COC. 22. We further think it pertinent to mention that IBC is a complete CODE in itself and unless IBC, 2016 incorporates the provisions of other Acts, provisions of other Acts cannot be applied to IBC, 2016 as such although some assistance can be taken there-from in a given set of circumstances. As noted earlier, provisions of Section 5(24) of th....
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....and a related party would be treated as "connected person" as defined in Explanation I of clause (j) of Section 29A of CODE. However, for the purpose of Section 29A also, in our view, the provisions of Section 5(24) or 5(29A) of CODE will also have to be applied to find out the meaning of the term "related party" as these terms have not defined in Section 29A separately. Thus, for different purposes, the legislature has provided distinct provisions i.e., Section 21(2) for constitution of COC and Section 29A as regards to ineligibility of certain persons including a related party to submit a Resolution Plan and this mechanism further confirms our view that related party even though it may not be eligible to submit a Resolution Plan but it would remain a member of COC having no voting rights. 23. Now, having discussed the broad features of relevant provisions of CODE, we also consider it pertinent to mention that we are conscious of the fact that errant promoters/management need not to be given an opportunity to derail the process of CIRP in any manner. We are also conscious of the fact that the legislature has provided statutory mechanism for achieving this purpose. However....
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...., are concerned, this scheme has been intentionally designed by legislature so that the Financial Creditors who only have voting rights cannot usurp the CIRP because a number of decisions cannot be taken without approval of COC with minimum percentage of vote required for approval or rejection of such actions. Thus, if the COC is given any power, which is certainly prone to misuse of abuse due to apparent conflict of interest. Now, coming to the powers of IRP/RP, it is apparent that they are responsible for collating the claims, revising the claims from time to time based upon information coming to their possession or being provided by the creditors. We have found no provision in the CODE or Regulations which permit for review of status of a creditor as all provisions focus only on the amount of claim. Thus, IRP /RP cannot, on its own, review and reverse his own earlier decision without approval of Adjudicating Authority. When we apply this general legal position to the facts of the case, it is noted that in the first meeting of COC itself the aspect of some of the Financial Creditors being a related party was raised in that meeting by some of the members and in spite of that the R....
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....cifically provided in proviso to Regulation 12(3) that any decision taken prior to such inclusion would remain valid in spite of change of constitution of COC because of such re-constitution of COC. Thus, the only situation which has been prescribed in the CODE r.w. Regulation 12 (3) is this one. This re-constitution happens only because of admission of a claim of a Financial Creditor subsequently meaning thereby the Financial Creditors who have already been included cannot be excluded from COC by RP for any reason of whatsoever nature. We are, however, of the view that this legal situation is subject to decision of the Adjudicating Authority which can correct or modify the constitution of COC, if facts and circumstances of case demand so and an appropriate application is made by RP to this effect. We again state that decision of the Adjudicating Authority in this regard cannot be challenged by RP though it may be challenged by any member of COC who is aggrieved by such decision. Before leaving this issue we also consider it pertinent to mention that the power to constitute COC, as such, cannot include a power to re-constitute COC except as provided in the CODE or CIRP Regulations.....
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....d view, the same can be reviewed for both violations and reversed by Adjudicating Authority. 24A.Hence, we hold that final determination of claims of Financial Creditors lies with the Adjudicating Authority and actions of RP are subject to this determination by the Adjudicating Authority. Accordingly, in our opinion, for this reason also action of Resolution Professional in reducing the claimed amount deserves to be reversed and cancelled. 25.Having stated so, similar position of law is applicable as regard to determination of status of a financial creditor i.e., whether such financial creditor is a related party or not. In the present case, RP has initially inducted such financial creditors as members of COC and then without prior approval of this Authority, removed them from COC, hence, we direct RP to reconstitute the COC by including them in COC irrespective of the fact that whether they are a related party or not subject to limitation as contained in proviso to Section 21(2) of the CODE. 25A.Our views expressed hereinbefore also find support on some aspects involved in these application from the order of Hon'ble NCLAT in the case of Mr. Rajnish J....
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....eport of external expert has been taken; hence, it becomes imperative for us to see whether such action of RP is justified as per the provisions of CODE. Before proceeding further, we may mention that as per the provision of Section 23 (2) of CODE all the powers and duties vested or conferred on IRP are also available to the Resolution Professional. Now, we come to Section 20 of CODE. subsection (1) thereof makes it obligatory on the part of Interim Resolution Professional to make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. Section 20(2)(a) of CODE provides that for the purposes of sub-section (1), the Interim Resolution Professional shall have the authority to appoint accountants, legal or other professionals as may be necessary. In other clause of Section 20(2) of CODE, reference has been made to keep the corporate debtor as a going concern. Similar provisions have been made in Section 25 of CODE. However, as per Section 25(2}(d) of CODE, the Resolution Professional can appoint accountants, legal or other professionals in the manner as specified by the Board. The wo....
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....ntegrity. It has also been mentioned that Insolvency Professional may pay the fee for the services obtained for conducting CIRP. It has also been mentioned that Insolvency Professional is obliged under Section 208(2)(a) of CODE to take reasonable care and diligence while performing his duties including incurring expenses which should be necessarily reasonable though such criteria is context specific and cannot be defied in a precise manner. Thereafter, in the said Circular regulatory framework has been outlined. In Annexure-B, it has been provided that what would constitute reasonable cost and reasonable fee. A reference to statement of best practices has also been made in this regard. Thus, the focus of IBBI is absolutely clear that Insolvency Professional cannot outsource his responsibilities at the first stage in a liberal manner and if need arises then it can do so but that should be very prudent and reasonable. From the minutes of meetings of COC, contents of appointment letter appears that main object of such appointment was to obtain Forensic Audit Report to ascertain the transactions of the nature as specified in Section 43,45,50 or 66 of the CODE and verification of claims....
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....s required to examine that the resolution plan submitted by various applicants is complete in all respects, before submitting it to the Committee of Creditors. The Resolution Professional is not required to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time being in force, including Section 29-A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2}(e) does not empower the Resolution Professional to "decide" whether the resolution plan does or does not contravene the provisions of law. Regulation 36-A of the CIRP Regulations specifically provides as follows:- "36-A(8) The resolution professional shall conduct due diligence based on the material on record in order to satisfy that the prospective resolution applicant complies with- (a) the provisions of clause (h) of sub-section (2) ....
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....tion of CIRP and submission of claims by applicants. 29.These facts have been taken into consideration in the peculiar circumstances of the case having regard to declaration made by the applicants in Form-C and if, before taking any decision, these facts would have been disclosed to them and _ their comments would have been taken then matter could have been resolved in either way on that stage only without going into the further process such as appointment of External Consultant ete. RP could have focused on main objects i.e., insolvency resolution of Corporate Debtor and managing the affairs of the Corporate Debtor as a going concern. 30.Now, proceeding further, we have to analyze the proceedings as regard to how and for what purpose the External Expert has been appointed. The issue of appointment of Transactional Auditor firstly arose in first COC meeting held on 29.02.2020. From discussion on agenda item no. 10, it is noted that some lenders opined that some claims received belonged to related parties so it was advisable to have a clear opinion on the same. However, the basis for such view has not been disclosed in the minutes. It was also specifically submitte....
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.... question as to why only this professional was appointed and no other independent professional entity could be appointed. According to us, cost factor, in such situation, is of secondary nature particularly when necessity of such appointment is in question itself. In this meeting, an update on the list of creditors was also made and it was stated by RP that process of up-dation of list of creditors was in progress and on availability of relevant information and transaction Auditor's Report, the updated List of creditors shall be provided to the COC in the fourth meeting of COC. The fourth meeting of COC was held on 19.08.2020 wherein progress made so far in this regard was discussed in a summary manner. 32.Fifth meeting of COC held on 27.10.2020. It is worthwhile to mention that in earlier meetings applicants financial creditors were present but in this meeting none of the applicants was present because after 4th meeting held on 19.08.2020, the RP excluded them from COC and mail had been sent to them to that effect on 14.10.2020. It is worthwhile to mention that in the 4" meeting of COC no discussion happened as to what would happen if financial creditors were consider....
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.... 33. Generally, we do not go into the detail but facts of the present case demand that a proper analysis as regard to conduct of CIRP by RP. The appointment Transaction Auditor was made on 17.07.2020. The Scope of work is defined as under: SCOPE OF WORK . 1.In accordance with the provisions of Regulation 35A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016, the Resolution Professional shall be required to form an opinion on whether the Corporate Debtor has been subjected to any transaction falling under the purview of the following sections of the Insolvency & Bankruptcy Code, 2016; a. Section 43: Preferential Transactions b. Section 45: Undervalued Transactions c. Section 50: Extortionate Credit Transactions d. Section 66: Fraudulent trading or wrongful trading 2. A detailed report and professional opinion on the amount, security interest and admissibility of claims received or to be received from various creditors including but not limited to giving professional advice on the re-constitution of the Committee of Creditors pursuant to such claim veri....
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....ate guarantees which are subject matter of IA 13 of 2021, hence, will be dealt while disposing of that application in the later part of this order. In IA 953 of 2020 the claims of applicants/financial creditors who had given loans have been dealt in second part of such report. Out of nine (9) financial creditors mentioned therein, two financial creditors, namely, Capman Compro Pvt. Ltd. and Chams Holding Pvt. Ltd. are not part of any of these two applications, hence, not of any relevance. One reason for nonadmission of aforesaid members in COC has been that name of M/s. Hikal Pro-Estate Pvt. Ltd. appeared in the impugned order of SAT. Second reason which is given in the report is that there were common directors of six (6) applicants companies and the Corporate Debtor. However, these six (6) applicant companies do not include the name of M/s Hikal Pro-Estate Pvt. Ltd., hence, for this reason; the link between Corporate Debtor and directors of this company is not established. We have also gone through the details enclosed in Annexure-II of the report showing common directorship of individuals but on careful perusal of such details which are placed in the paper book from pag....
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....ble because the Transactional Auditor has given a wrong finding of fact as regard to common directorship. Further, from the material on record, it is seen that no reply has been given RP to the letter of applicants dated 29.10.2020. From the minutes of meetings COC, it appears that this issue has never been considered and reviewed by COC also in this manner. 36.One more reason on the basis of which the report of the Transactional Auditor is liable to be rejected is that a blanket claim has been made in respect of all applicants that they were a related party in terms of provisions of Clause (f), (h), (l)" and (m) of sub-section 24 of Section 5 of CODE. For the sake of read reference these clauses are reproduces as under: 5(24) "related party", in relation to a corporate debtor, means- (f) anybody corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor: (h) any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act: (l....
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....or fraudulent claims are concerned but in the present case this does not appear to be a fact situation. Further, where the Corporate Debtor has been subjected to any transaction as specified in Section 43, 45, 50 and 66 of CODE separate mechanism exists which can be invoked in that situation even in case of related parties. 39.It is also noted that even in case of applicants who had given unsecured loans, where ever Form-26 AS were required by the RP, the same have been provided which fact further creates a question mark as to why the claims as regard to interest, in such cases, have been rejected. In this regard, we also consider it pertinent to mention that even loan agreements and other documents exist which provide for interest as well. No mention of these facts have been made in the report of Transactional Auditor except one observation that claims of aforesaid creditors have been admitted to the extent of principal amount based upon the Books of Account which reflects adversely on the approach of the Transaction Auditor in cases where Form-26 AS had been submitted and which fact has not been taken into consideration by the Transaction Auditor. 40.Now, coming....
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.... legitimacy of such documents needed a further investigation and substantiation. As far as ground of non-disclosure is concerned, it is noted that the disclosure made is with reference to loan guarantees given in respect of loan taken from public financial institutions or from other Banks, hence, it does not relate to unsecured financial creditors which are not a pubic financial institutions. As far as the legitimacy and authenticity of documents of corporate guarantee and loan agreement is concerned, it has been stated by the Transactional Auditor itself that further investigation and substantiation were required which means that no final conclusion could be given without such process being completed. 41.The other reasons are similar to the reasons given in respect of unsecured financial creditors which had already been dealt with while disposing of IA 953 of 2020, hence, not discussed separately. It is to be noted that substantial documents were submitted by the applicants while claim was made in requisite Form-C, The applicants have also filed affidavits that they were not a related party or connected with the Corporate Debtor at any point of time in terms of provisions....
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.... is being taken or his rights are prejudiced or adversely impacted because of some action of the other person, such affected person should get an opportunity to present his case. This principle is called 'Audi Altrem Partem' which requires hearing the view point of a person before taking a decision against such person. In the present case, this principle has grossly been violated as evident from the facts and sequence of events narrated hereinbefore and for the sake of brevity, we do not repeat the same. 43A.We have also gone through the communication made by Resolution Professional and it is noted that after initial communication as regard to submission of information and some details, no communication has been made with them as regard to the aspect of related party. Hence, we do not find any merit in the contention of the RP that it conducted the CIRP in most transparent and fair manner rather having regard to the facts stated hereinbefore the picture is otherwise. This aspect has already been considered by us in earlier part of our order and it has been established that the conduct of CIRP is not in accordance with the object and scheme of CODE, Regulations made thereun....
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....are related parties, without prior approval of Adjudicating Authority? (ii) Whether Financial Creditors, though they may be a related party remain entitled to be a part of COC without having any voting rights or right to participate or represent in the COC meetings? (iii) whether such financial creditors, in view of evidence brought on record, are a related party of the corporate debtor or not? (iv) Whether opportunity of hearing to the affected parties is to be given before taking such action? 18. Now, we will deal with these questions in the following manner: (i)Whether Resolution Professional, after including Financial Creditors in Committee of Creditors, can remove them from COC for the reason that they are related parties, without prior approval of Adjudicating Authority? (ii)Whether Financial Creditors, though they may be a related party remain entitled to be a part of COC without having any voting rights or right to participate or represent in the COC meetings? In IA No.953/2021, here are 7 applicants. Claims of applicant no. 1 to 7 have been admitted at principal amount. Applicants no. 1 to 4 have participated i....
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....d in Section 22 of the I&B Code which contemplates appointment of Resolution Professional and further replacement is concerned, this power can only be used when the ingredients of Section 22 is met. (ii) (ii) Further, so far as the provision of Section 27 of 'IB Code' is concerned it contemplates with the Replacement of Resolution Professional by CoC. This power can only be used when the ingredients of Section is met. (iii) (iii) In the facts of this case neither the ingredients of Section 22 & 27 of the Insolvency & Bankruptcy Code, 2016 ('I&B Code') is made out. (iv) So, the Learned Adjudicating Authority have rightly invoked inherent jurisdiction in the fact of this case and passed the Impugned Order. (v) The Learned Adjudicating Authority is conscious of the fact that the Appellant herein could not provide leadership to CIRP proceedings and further there was clash between the Secured and Unsecured Creditors and timeline for CIRP proceedings was running out. (vi) So, the Learned Adjudicating Authority in order to shape the CIRP proceedings on an Application under Rule 11 filed by Respondent No. 1/ Allahabad Bank, taking note of the fa....