AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 949
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....nd Mr. Kaushik Ramaswamy, Advocates For the Respondent No. 1 : Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. Avinash Krishnan Ravi, Advocate For the Respondent No. 3 : Mr. Y. Suryanarayana, and Mr. Sachin Sarma, Advocates For the Respondent No. 4 /: Mr. Narasimha Sarma, Advocate CoC JUDGMENT ( Virtual Mode ) Justice M. Venugopal, Member (Judicial): Comp. App (AT) (CH) (INS.) No. 331 of 2022: Introduction: The 'Appellant / Financial Creditor / 1st Respondent (in IA(IBC) No. 53 of 2022) / 3rd Respondent (in (IBC) No. 54 of 2022), has preferred the instant 'Company Appeals (AT) (CH) (INS.) No. 331 & 332 of 2022', being dissatisfied with the 'impugned order' dated 22.08.2022 in IA(IBC) Nos. 53 & 54 of 2022 (Petitioner) in CP(IB) No. 204/7/AMR/2019, passed by the 'Adjudicating Authority', ('National Company Law Tribunal', Amaravati Bench, Mangalagiri). 2. The 'Adjudicating Authority', ('National Company Law Tribunal', Amaravati Bench, Mangalagiri) in IA(IBC) Nos. 53 & 54 of 2022 (Petitioner) in CP(IB) No. 204/7/AMR/2019, while passing the 'impugned order' dated 22.08.2022, inter alia at Paragraphs 10 to 16, had observed the following: 10. "The ....
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....elf. The contention of the counsel for Bafna, is based on the fact that the resignation letter was sent to the company prior to the CD going in CIRP and hence Bafna ceases to be a related Party. There is no material placed by the FC to deny the fact that the letter was sent to the Company. But whether it is served as per section 168 is the contentious issue. Apart from that the Counsel for the FC by relying on the judgment of the High Court of Allahabad in the matter of Deepak Kumar & Others vs. State of U.P. & 6 others, contends that Section 27 of the General Clauses Act, 1897 does not take within its purview a service by private courier. It is also stated that in the above cited judgment it was held that the two conditions precedent for applicability of Section 27 are that firstly, the service must be as provided by the General Clauses Act, 1897 itself and secondly, that such service shall be deemed to be effected by properly addressing, prepaying and posting by registered post. It is held that unless the two conditions are satisfied, Section 27 of the General Clauses Act, 1897 will not apply. In this case the mode of service is through courier. For better appreciation of the fac....
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.... in the CoC. As the facts of this case reveal, the order admitting the CD in to CIRP is on 18.02.2022 and the resignation letter was sent through courier on 11.02.2022 which is 7 days prior to the CD being taken into CIRP. Inspite of the differences, disputes and the breaches which took place much prior to the moving of the Application under Section 7 of IBC by the "Bafna" they continued as nominee directors till 11.02.2022. Though may not be with a malafide intention, in their own interest "Bafna" appears to have considered it appropriate to tender their resignation in order to safeguard their financial interest by taking part in the CoC. Hence the intention for resignation apparently seems to be to become part of CoC. Hence by virtue of the judgment in Phoenix ARC Private Limited vs. Spade Financial Services Limited and others "Bafna" will not be entitled to participate in the CoC. 12. The contention with regard to the Shares in physical form never being provided to the financial creditor is not complete. The effect of the said lapse is not explained. Until the time the resignation comes into effect, Bafna continues to be nominee directors, which leads to a strong presum....
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....aish and Associates seeking for an opinion on whether "Bafna" is a related party of the CD or not. The contention is that there was no need for the IRP to seek opinion when as on 28.02.2022, the names of the nominees of the "Bafna" were still being reflected as directors on the MCA Portal. It is argued that as per the own admission of the IRP in his additional affidavit dated 16.07.2022, he had called for meeting of suspended board of directors on 01.03.2022 for which he had also invited Mr. Yogesh Bafna and Mr. Praful Bafna who at the meeting held on 01.03.2022 informed the IRP that they had resigned from the Board of the CD, though on 01.03.2022 their names were being reflected on MCA as directors of the CD since the E-form DIR 11 was filed on the MCA portal only on 04.03.2022. 14. The contention of the IRP is that in the meeting held on 01.03.2022 with the suspended directors Mr. Praful Bafna and Mr. Yogesh Bafna informed in the meeting that they had resigned from the directorship of the CD and dropped from the meeting and thereafter the resignation letters dated 11.02.2022 were received along with screen shots of MCA site reflecting 11.02.2022 as the end date of their ....
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....tioned so as to see that the resignation notice is not served on the Company. When Bafna decides to become part of CoC, they would, by all means, endeavour to serve the notice in compliance of section 168. But however, due to non-service of the resignation letter on the Company, section 168 of the Companies Act stands un-compiled with and Mr. Praful and Yogesh Bafna continue to be nominee directors and become disentitled to be a part of the CoC." and resultantly, 'allowed' the 'Applications' in 'Part', by declaring that Mr. Praful Prakash Bafna and Mr. Yogesh Prakash Bafna are 'related parties', to the 'Corporate Debtor', and shall not be continued in the 'Committee of Creditors'. Also, the 'Interim Resolution Professional', was required to 'reconstitute' the 'Committee of Creditors', as per 'Law'. Appellant's contentions in Comp. App (AT) (CH) (INS.) No. 331 / 2022: 3. According to the Learned Senior Counsel for the 'Appellant', the 'Adjudicating Authority', had committed an 'Error', in holding that the 'Resignation Notices', were not served upon the 'Corporate Debtor', even though 'Courier Receipt', indicating that the said 'Resignation Notices', were placed on record of....
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....might have been addressed to it. 10. The Learned Counsel for the Appellant submits that the 'Resignation Notices', were served upon the 'Company', through a 'Private Courier', which was recognised as per Section 20 of the Companies Act, 2013, and that the 'Corporate Debtor', is to ensure persons / facility to acknowledge Courier at its 'Registered Address', to 'receive / acknowledge' Notices. 11. The Learned Counsel for the Appellant points out that the 'Adjudicating Authority', in the impugned order, had recorded, among other things, 'Bafna however furnished information which unfortunately shows that the consignment which was booked on 11.02.2022 by 'Bafna' could not be delivered due to door being locked'. 12. The Learned Counsel for the Appellant adverts to the observation made by the 'Adjudicating Authority' in the 'Impugned Order', that 'The affidavit of Mr. Shrikrishna Purohit, Management Executive of M/s. P. P. Bafna Ventures Private Limited, is on record, which states that he personally gave the cover to the courier service. There is absolutely no reason to disbelieve the said fact and there is ample proof to show that the cover was given on '11th February'. 13. ....
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.... B Code, 2016, should be interpreted, in the light of the main provision. Also that, Section 21 of the Code and the proviso to Section 21 of the Code are to be interpreted, to achieve the Object and Purpose of the Act, which is to have 'External Creditors', and not 'Related Parties', in the 'Committee of Creditors'. 20. It is represented on behalf of the Appellant that the relevant date for deciding the 'Relevant Party' status is the 'date of Constitution of Committee of Creditors', and that, in the instant case, the 'Nominee Directors' of the 'Appellant' on the 'Board' of 'Corporate Debtor', had resigned on 11.02.2022, and further that the 'Two Directors', also ceased to be the 'Directors' on the 'Board' of the 'Appellant / Company', on 16.02.2022. Hence, there were no common 'Directors', between the 'Appellant; and the 'Corporate Debtor', on the 'date of Constitution of Committee of Creditors' (on 15.03.2022) and even on the 'ICD'. Even the details on the 'Ministry of Corporate Affairs' website', clearly reflects the 'End Date' of the 'Directorship' of the 'Two Nominee Directors' of the 'Appellant', on the 'Board' of 'Corporate Debtor', as on 11.02.2022. 21. In short, it is....
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....he 'Corporate Debtor', and further that the 'Punjab National Bank' / being the 'only Member' in the 'Committee of Creditors', is against the aim and purpose of the I & B Code, 2016. 27. The Learned Counsel for the Appellant points out that the 'Appellant', projected 'Petitions' (under Section 9 & 17), of the 'Arbitration and Conciliation Act, 1996', against the 'Corporate Debtor', registered a 'Complaint', against the 'Corporate Debtor', before the 'Economic Offences Wing', Pune, registered an 'FIR', against the 'Corporate Debtor' in Pune, for misappropriation of Rs.5.28 Crores, under Section 406, 409, 420, 424, r/w. Section 34 of the Indian Penal Code. 28. The Learned Counsel for the Appellant refers to the 'Judgment of this Tribunal' in One City Infrastructure Pvt. Ltd. v Haryana Telecom Limited and Ors., reported in MANU/NL/0441/2022, which interpreted the position of 'Related Party', through the decision of the Hon'ble Supreme Court in Phoenix Arc, by stating that the exclusion under the first proviso to Section 21 (2) of the IBC is related to the relationship 'existing', between a related party Financial Creditor and the Corporate Debtor and that a Financial Creditor, wh....
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....ated to act solely in their own interests, even when their interests may directly conflict with the creditors' collective interests as a group. This self-interest creates a collective action problem, such that creditors eventually enter a grab race, operating under the belief that they would have recourse to fewer or no assets, if they delay their actions in the hope that creditors will be able to coordinate and agree to act collectively (Id, note 18, pp. 1855-1856). Bankruptcy law seeks to resolve this by preventing individual creditor action. The creditor's bargain theory therefore, operates to maximise group welfare through collectivization (Medha Shekar and Anuradha Guru, "Theoretical Framework of Insolvency Law", P. 52)." 33. The Learned Counsel for the Appellant cites the decision of the Hon'ble Supreme Court of India in Tribhovandas Haribhai Tamboli v Gujarat Revenue Tribunal & Ors. (1991) 3 SCC Page 442 at Spl. Pg.: 447, wherein at Paragraph 6, it is observed as under: 6. "It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the filed, which is covered by the main provision. It carves out an exception to the....
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....agement of a corporate debtor would ordinarily vest in a Board of Directors, and would include, in accord with the definitions of "manager", "managing director" and "officer" in Sections 2(53), 2(54) and 2(59) respectively of the Companies Act, 2013, the persons mentioned therein. 46. The expression "control" is defined in Section 2(27) of the Companies Act, 2013 as follows:- "(27) "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner;" 47. The expression "control" is therefore defined in two parts. The first part refers to de jure control, which includes the right to appoint a majority of the directors of a company. The second part refers to de facto control. So long as a person or persons acting in concert, directly or indirectly, can positively influence, in any manner, management or policy decisions, they could be said to be "in control". A management decision is....
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....hip of voting securities, by contract, or otherwise; the power or authority to manage, direct, or oversee." Control, according to the definition, is a proactive and not a reactive power. It is a power by which an acquirer can command the target company to do what he wants it to do. Control really means creating or controlling a situation by taking the initiative. Power by which an acquirer can only prevent a company from doing what the latter wants to do is by itself not control. In that event, the acquirer is only reacting rather than taking the initiative. It is a positive power and not a negative power. In a board managed company, it is the board of directors that is in control. If an acquirer were to have power to appoint majority of directors, it is obvious that he would be in control of the company but that is not the only way to be in control. If an acquirer were to control the management or policy decisions of a company, he would be in control. This could happen by virtue of his shareholding or management rights or by reason of shareholders agreements or voting agreements or in any other manner. The test really is whether the acquirer is in the driving seat. To extend the m....
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....pondent' ('Bank'), adverts to the fact that in terms of the above 'Agreements', the 'Appellant', had appointed its 'Nominees' Mr. Yogesh Prakash Bafna and Mr. Praful Prakash Bafna on the 'Board' of the 'Corporate Debtor', on 29.12.2018, who were also the 'Directors' on the 'Board' of the 'Appellant' i.e. 'P.P. Bafna Ventures Private Limited', since 28.11.2014. Also that, the 'Nominee Directors' hold '33% of the Total Share Capital' of the 'Appellant / Company', as per the 'Annual Return' for the 'Financial Year 31.03.2021, filed by the 'Appellant', on the 'Ministry of Corporate Affairs' Portal. 38. The Learned Counsel for the '1st Respondent and 3rd Respondent' ('Bank'), refers to the 'Table', as under : Sub Clause Sub Clause description (of Clause 24 of Section 5) Question Whether Related Party Basis of Conclusion 1 a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor Whether Respondent No.3 is a director or partner of the Corporate Debtor (CD)? No Respondent No.3 is shareholder of CD and being a Company it cannot be a director / KMP ....
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....reflects that the Board of the Respondent No.3 was acting on the instructions of the directors of the Corporate Debtor. Copies of extracts of details of signatories to the directors reports and balance sheets for the financial year 2017- 18, 2018-19 & 2019-20 are annexed hereto as Annexure-6 7 any limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor NA No Respondent No.3 is not a LLP or partnership. 8 any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act Whether CD was operated on advice, directions or instructions of Respondent No.3? Yes Respondent No.3 had appointed 2 (two) nominee directors on the Bord of the CD who resigned on 11.02.2022 i.e. just 6 (six) days before the commencement of CIRP of the Corporate Debtor i.e.18.02.2022. Further, as per the SSHA, the Respondent No. 3 has substantial rights in the ....
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....blish that the management of factory of the Corporate Debtor was the sole responsibility of the Respondent No.3 and several other decisions of the Corporate Debtor would jointly be decided by the Respondent No.3 and the other 2 (two) directors of the Corporate Debtor. b) having more than two directors in common between the corporate debtor and such person; or Whether the Respondent No.3 and Corporate Debtor have two common directors No. However, Mr. Praful Bafna and Mr. Yogesh Bafna were on the Board of both the Respondent No.3 and the Corporate Debtor and just before the CIRP commencement date i.e. 18.02.2022, they resigned from the Board of the Respondent No. 3 on 16.02.2022 and from the Board of the Corporate Debtor on 11.02.2022. Details of resignation are reflected on the MCA portal which is annexed hereto as Annexure-7. c) interchange of managerial personnel between the corporate debtor and such person; or c) interchange of managerial personnel between the corporate debtor and such person; or - Unable to ascertain on account of non- availability of records. d)....
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....d this itself reflects the 'ill motives' of the 'Appellant. 42. The Learned Counsel for the '1st Respondent and 3rd Respondent' ('Bank'), points out that a mere perusal of the 'Courier Receipts', to establish that the 'Courier', was sent to the 'wrong Pin Code', and that the 'correct Pin Code' of the 'Registered Office' of the 'Corporate Debtor', is '530 016', but, the 'Pin Code', mentioned in the 'Courier Receipt', is '430 016', and therefore, the said Courier Receipts cannot be relied upon as they are not 'genuine / authentic'. Also that, the 'Resignation Letters', were never delivered to the 'Corporate Debtor' and the 'Website' of the 'Professional Courier Services', does not reflect that the 'Resignation Letters', were delivered. 43. The Learned Counsel for the 1st Respondent and 3rd Respondent ('Bank'), brings it to the notice of this 'Tribunal', that the 'Courier Consignment Bearing Nos. PNU8000000799 and PNU8000000800', through which the purported 'Resignation Letters', were sent to the address of the 'Corporate Debtor', were never received by the 'Corporate Debtor', and that the 'Tracking Status' of the said 'Consignment', reflects that 'We are sorry your consignment ....
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.... Learned Counsel for the 1st Respondent and 3rd Respondent ('Bank'), projects an argument that the 'Interim Resolution Professional', had invited the 'Appellant's Nominee Directors' (a) Mr. Praful Bafna and (b) Mr. Yogesh Bafna vide email dated 28.02.2022, which clearly proves that they had not resigned from the 'Board' of the 'Corporate Debtor' that there was 'no document', in relation to the purported 'Resignation' that were available in the 'Office' of the 'Corporate Debtor'. Also that, the 'Interim Resolution Professional', should have checked the website of 'Ministry of Corporate Affairs', on 01.03.2022, to see whether any documents reflecting the 'Resignation' of the aforesaid 'Directors', were filed or not. In fact, the 'Interim Resolution Professional', had neither checked the 'Website' of 'Ministry of Corporate Affairs', nor enquired for the details of 'Resignation', from the said 'Directors' and merely believed the 'Statements', obviously made by the 'Nominee Directors' that they 'resigned', from the 'Board' of the 'Corporate Debtor'. 49. The Learned Counsel for the 1st Respondent and 3rd Respondent ('Bank') points out that the 'Interim Resolution Professional', is dut....
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....nt 'Appeal', takes a plea that the said 'SSHA', is not even enforceable, as the 'Articles of Association', were never amended by the 'Corporate Debtor' and that the 'Nominees' of the Appellant, had remained just 'paper Tigers', and this will squarely indicate that the 'Appellant', is 'Approbating' and Reprobating'. 54. The Learned Counsel for the 1st Respondent and 3rd Respondent ('Bank'), takes a stand that as per the 'Business Management Agreement' ('BMA') dated 29.12.2018, the factory premises of the 'Corporate Debtor', was managed by the 'Appellant' and its 'Nominees' and the 'Clause 3' of the said 'Agreement', reflects the same, and in any event, this does not prevent the 'Appellant', from falling in to the definition of a 'Related Party'. 55. The Learned Counsel for the 1st Respondent and 3rd Respondent ('Bank'), refers to the Judgment of the Hon'ble Supreme Court of India in Phoenix Arc Private Ltd. v. Spade Financial Services Ltd. (vide Civil Appeal No. 2842 of 2020 with Civil Appeal No. 3063 of 2020, dated 01.02.2021), reported in (2021) 3 SCC 475, wherein, it is held that, 'in a case, where the related party 'Financial Creditor', cease to become a 'Related Party', w....
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....ey assert a claim to be a part of the CoC was created. This was due to the long-standing relationship between Mr Arun Anand and Mr Anil Nanda, and their respective corporations. Admittedly, such a relationship still existed even in 2017, since Mr Anil Nanda's JIPL held shareholding in Mr Arun Anand's Spade. Further, we have also concluded that the transactions between Spade and AAA on one hand, and the Corporate Debtor on the other hand, which gave rise to their alleged financial debts were collusive in nature. Therefore, it is evident that there existed a deeply entangled relationship between Spade, AAA and Corporate Debtor, when the alleged financial debt arose. While their status as related parties may no longer stand, we are inclined to agree with Mr Kaul that this was due to commercial contrivances through which these entities seek to now enter the CoC. The pervasive influence of Mr Anil Nanda (the promoter/director of the Corporate Debtor) over these entities is clear, and allowing them in the CoC would definitely affect the other independent financial creditors. Citations of 3rd Respondent and 1st Respondent (in both 'Appeals'): 57. The Learned Counsel for the 3rd Resp....
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....at the nominee Directors have a vital influence in regard to the working of the 'Corporate Debtor', this Tribunal unhesitatingly comes to a consequent conclusion that the Appellant is a 'related party' and the view arrived at by the 'Resolution Professional' to include the Appellant/TSTPCL as member of the 'Committee of Creditors' is clearly unsustainable in the eye of law. In this regard, this Tribunal concurs with a view arrived at by the 'Adjudicating Authority' in the 'impugned order' that the Appellant is a 'related party'. Further, the direction issued by the 'Adjudicating Authority' in the impugned order that the 'Resolution Professional' shall reconstitute the 'Committee of Creditors' (CoC) treating the Appellant as 'related party' is free from legal errors. Viewed in that perspective, the instant 'Appeal' fails." 58. The Learned Counsel for the 3rd Respondent and 1st Respondent refers to the Judgment of this 'Tribunal' dated 03.01.2020, in Sai Peace and Prosperity Apartment v. ASK Investment Managers P Ltd. (vide Comp. App (AT) (INS.) 252 of 2020, wherein at Paragraph 16, it ....
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....raying for the commencement of 'CIR7P', against 'M/s. KVR Industries Pvt. Ltd.' ('Corporate Debtor'). The said 'Petition', was admitted by the 'Adjudicating Authority' ('Tribunal', Amaravti Bench) in and by which, the 'Corporate Insolvency Resolution Process' of 'KVRIPL', had commenced and one Mr. Purusottam Behra, was appointed as an 'Interim Resolution Professional'. Later, the 'Committee of Creditors', had recommended Maligi Madhusudhana Reddy as 'Resolution Professional', in its '3rd Committee of Creditors Meeting', and the same was approved by the 'Adjudicating Authority', on 07.09.2022. 60. On behalf of the 'Resolution Professional / 4th Respondent', it is brought to the notice of this 'Tribunal' that, the 'Interim Resolution Professional', after collating the materials, verified the same and in fact, submitted the 'List of Creditors', and convened the '1st Meeting' of the 'Committee of Creditors', on 21.03.2022, by the earlier 'Interim Resolution Professional'. 61. According to the Resolution Professional / 4th Respondent, after the 'Constitution' of the 'Committee of Creditors', the '1st Respondent / Bank', had preferred a 'Petition', before the 'Adjudicating Authorit....
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....d to consider the duty of the 'Corporate Debtor', to maintain 'Facility', at its 'Registered Address', to acknowledge 'Service of Notices', in terms of Section 12 (1) of the Companies Act, 2013. 67. The Learned Counsel for the Appellant points out that the 'Adjudicating Authority', came to the wrong conclusion that Mr. Praful and Yogesh Bafna, continued to be 'Nominee Directors', and become dis-entitled, to be a part of the 'Committee of Creditors'. 68. The Learned Counsel for the Appellant submit that the 'Adjudicating Authority', had failed to consider the 'Agreements' on virtue of which, 'Investor Nominee Directors' of the 'Appellant', had appointed the 'Board' of 'Corporate Debtor', was never included in the 'Articles of Association' of the 'Corporate Debtor'. 69. The other contention advanced on behalf of the 'Appellant' is that, the 'Adjudicating Authority', had omitted to consider that the 'Appellant', had recalled its 'Shareholding', and terminated 'SSHA', as per Clause 15 (1) (b), and therefore, 'SSHA', Cannot be, said to be 'inforce', and cannot be set to evidence any control whatsoever. 70. The Learned Counsel for the Appellant points out that as per the 'Art....
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....rection', for which, the 'Committee of Creditors', be restrained from considering or voting of any 'Agenda Item', pertaining to 'Liquidation of Corporate Debtor', until 'Final Adjudication' of the 'Appeal'. Also that, the 'Appellant', prays for permission being accorded to it, in respect of the 'Participatory Rights', in the 'Committee of Creditors', till the final determination of the 'Appeal'. 76. The Learned Counsel for the Appellant contends that the 'Appellant', who had resigned from the 'Board' of the 'Corporate Debtor', before the relevant date of the 'Constitution of Committee of Creditors' dated 15.03.2022, and who acted as a 'Whistle-Blower', by exposing the 'Mala fide' actions of the 'Promoter Group' of the 'Corporate Debtor', can in no way sabotage the 'Corporate Insolvency Resolution Process', or the 'Committee of Creditors', and seeks a position in the 'Committee of Creditors', only to ensure that the collective process involving Financial Creditors, as contemplated by the 'Code', and in the decision of the Hon'ble Supreme Court of India in Phoenix Arc Private Limited's case. 77. According to the Appellant, it claims a position in the 'Committee of Creditors', t....
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....rs of 'Appointment of Directors' and 'Key Managerial Personnel', and changes among them. Where the change relates to the 'Resignation' of 'Office', by a 'Director', the Form-12, should be accompanied by a 'Notice' of 'Resignation'. Observation: 86. In Palmer's Company Law (21st Edition at Page 543), it is stated that, a 'Director', can at any time, 'Resign', from his 'Office', and usually the 'Articles', make 'express' provision accordingly. If he communicates his 'Resignation', to the 'Company', for instance, by a 'Notice', upon the 'Company', served in the manner, provided by 'Section 437, his 'Resignation', is effective. A 'Resignation', once made, cannot be 'Withdrawn', except with a 'Consent' of a 'Company'. Relinquishment of Office: 87. At this juncture, this 'Tribunal', worth recalls and recollects the decision in Glossop v. Glossop, reported in (1907), 2 Ch D 370, wherein, it is held that a 'Director', is entitled to 'Relinquish', his 'Office', at any time, as he pleases by 'proper Notice', to the 'Company', and his 'Resignation', depends upon his 'Notice', and is 'not dependent' on any 'acceptance'. Acceptance of Resignation: 88. In the decision of the Ho....
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.... Assessment (in Comp. App (AT) (CH) (INS.) Nos. 331 & 332 of 2022): 96. The 3rd Respondent / 1st Respondent ('KVR Industries Private Limited'), before the 'Adjudicating Authority' ('Tribunal') had preferred an IA No. 53 of 2022 in CP (IB) No. 204 / 7 / AMR / 2019, against the 'Appellant' ('PP Bafna Ventures Private Limited', Maharashtra, India), among other things averring that the 'Appellant' / '1st Respondent' ('P P Bafna Ventures Private Limited'), is a 'Related Party', as per Section 5(24) (d), 5(24) (f), 5(24) (h), 5(24)(l) and section 5(24)(m)(i) to 5(24)(m)(iv) of the Insolvency and Bankruptcy Code, 2016. 97. According to the 1st Respondent / Petitioner in (IA No. 53 of 2022 in main CP(IB) No. 204 / 7 / AMR / 2019), the 'Factum' of the 'Appellant' / '1st Respondent', being a 'Related Party', was brought to the knowledge of the '2nd Respondent / IRP', by the Punjab National Bank ('1st Respondent / 3rd Respondent' in both 'Appeals'), and objections were placed, by the '3rd Respondent / 1st Respondent' ('KVR Industries Private Limited'), in the 'First Meeting' of the 'Committee of Creditors'. However, no action was taken by the 'Appellant' / '1st Respondent' ('PP Bafna ....
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....ed for the 'Reconstitution' of the 'Committee of Creditors', with the 'Petitioner / Bank', being the 'Sole Member' of the 'Committee of Creditors', etc. 101. Also, it is averred by the '1st Respondent / 3rd Respondent / Petitioner / Bank', in IA No. 54 of 2022 that the Resolution Professional had arbitrarily reduced the Voting Percentage of the Financial Creditor from 100% to 46.13% and granted 53.87% Voting Rights to the Appellant / 3rd Respondent, thereby, negating Section 21 (2) of the I & B Code, 2016. 102. According to the Appellant in both the 'Appeals', it is not a 'Financial Creditor', regulated by a 'Financial Sector Regulator', and the 'relevant date', to be considered, while determining the 'Related Party' status will be the 'date of Constitution' of 'Committee of Creditors', as specified in the '1st proviso' of the 'Section 21 (2) of the I & B Code, 2016'. 103. The other plea taken on behalf of the Appellant is that, a reading of 1st proviso to section 21 (2) of the I & B Code, 2016, a 'Financial Creditor', mentioned in Section 5 (24) of the Code, if it's a 'Related Party', of the 'Corporate Debtor', shall not have any right to represent, participate or to vote....
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.... sent by the Learned Counsel for the Appellant on 04.02.2022, will indicate where the email was bounced / undelivered. 109. According to the Appellant, in the present case, the 'two Nominee Directors' of the 'Appellant', had resigned from the 'Board' of Directors', on 11.02.2022, and intimated the 'Registrar of Companies', about the same, on 04.03.2022. Also that, the 'Two Nominee Directors' of the 'Appellant', on the 'Board' of the 'Corporate Debtor', who resigned on 11.02.2022, had filed DIR-11 Form for 'Resignation', with the 'Registrar of Companies', mentioning the same date, as per proviso to Section 168 (1) of the Companies Act, 2013. 110. In reality, the 'resignation date' of the 'Two Nominee Directors' of the 'Appellant' is 11.02.2022, before the date of 'Constitution' of the 'Committee of Creditors' (15.03.2022). 111. The plea of the '1st Respondent / 3rd Respondent / Bank' is that, the 'Appellant', had appointed its 'Nominees' Mr. Yogesh Prakash Bafna and Mr. Praful Prakash Bafna on the 'Board' of the Corporate Debtor', on 29.12.2018, who were also the 'Directors' on the 'Board' of the 'Appellant / Company', from 28.11.2014, and they 'hold 33% of the Total Share ....
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.....08.2022, had mentioned in Paragraph 10 that 'in this case, the resignation was sent by 'Courier Service'. But it was not served on the CD even as per memo filed by the Counsel for "Bafna" himself. The contention of the Counsel for Bafna is based on the fact that the resignation letter was sent to the Company prior to the CD going into CIRP and hence Bafna ceases to be a related party. There is no material placed by the FC to deny the fact that the letter was sent to the Company, etc.' 117. It is pointed out that the 'Resignation Notice', was sent to an address with Pin Code No. 53016, reflected in the 'Track Record' of the 'Courier Service', but the 'Pin Code', relating to the 'Registered Address' of the 'FC', is '532016', as per the 'Application'. In fact, the 'Adjudicating Authority' ('Tribunal'), in the impugned order at Paragraph 10, had pertinently observed that 'obviously 'Notice', is served in the Application, which shows that the 'Pin Code', in the 'Application', is the 'correct one', etc'. 118. One cannot ignore the vital fact that the 'Nominee Directors' filed the e-form DIR-11 only on 03.03.2022. But, the 'Corporate Insolvency Resolution Process' of the 'Corporate....
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....', and dropped from the 'Meeting', and later the 'Resignation Letters' dated 11.02.2022, were received with the 'Screenshots' of 'Ministry of Corporate Affairs' site, exhibiting 11.02.2022, as the 'end date' of the 'Tenure', as 'Directors', in the 'Corporate Debtor'. 123. It cannot be gainsaid that, in the case on hand, the 'Interim Resolution Professional', ought to have exercised his due diligence and acted with meticulous care, caution and utmost circumspection. 124. In the instant case, the 'Cover', given on 11.02.2022, had not reached the Company, as per the 'Track Record of the Courier' (Filed on behalf of the 'Bafna'), as rightly observed by the 'Adjudicating Authority' ('Tribunal'), in the impugned order. Suffice it, for this 'Tribunal', to unerringly point out that the 'non-service' of 'Resignation Letter', on the 'Company', leads to an 'inescapable conclusion' that the ingredients of Section 168 of the Companies Act, 2013, were not complied with, and therefore, Mr. Praful Bafna and Mr. Yogesh Bafna, remain to be the 'Nominee Directors', and hence, they are not entitled to be a 'part and parcel' of the 'Committee of Creditors', as held by this 'Tribunal'. 125. As ....