TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 949
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....r 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 issue before this Tribunal now in the case is whether the resigna....
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....t 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 facts Section 27 of the General Clauses Act, 1897 is extracted here ....
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....s 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 presumption and they are related parties and that they were playing the role as specified in the ag....
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....he 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 tenure as directors in the CD. He also once again verified from the MCA site at their end at the time of co....
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.... 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 the 'Adjudicating Authority' ('Tribunal'). 4. The Learned Counsel for the Appellant, points out that the 'Adjudicating....
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.... 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. Advancing his argument, the Learned Counsel for the Appellant points out that the 'Adjudicating Authority' ('Tribunal') should have taken in....
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....e 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 the stand of the Appellant, that it ceased to be 'Related Parties', before the 'relevant date', as contemplated under the I & B Code, 2016. 22. On behalf ....
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....& 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, who 'in praesenti', is not a related party would not be debarred from being a member of the 'CoC', except when the related party Financial Creditor, ceases to become relate....
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....ion 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 main provision to which it has been enacted by the proviso and to no other. The proper function of a proviso is to except and deal with a case which would otherwise fall within the general langua....
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....y 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 a decision to be taken as to how the corporate body is to be run in its day to day affairs. A policy decision would be a decision that would be beyond running day to day affairs, i.e., long term decisions. So long as management or policy dec....
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....o 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 metaphor further, the question would be whether he controls the steering, accelerator, the gears and the brakes. If the answer to these questions is in the affirmative, then alone would he be in control of the company. In other words, the question to be asked in each case would....
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....nt' 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 of other Company. 2 a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor Whether Respondent No.3 is a KMP of the CD? No 3 a limited liability partnership or a partnership firm in which a director, partner or manager of the corporate debtor or his relative is a partner NA No Respondent N....
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....structions 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 management and affairs of the Corporate Debtor including affirmative voting rights as stipulated under Clause 12 of the said SSHA. Hence, it is clear that almost all the major business related decisions of the CD were subject to affirmative vote of the Respondent No.3 and therefore the CD was operating on the instruction of Respondent No.3. 9 a body corporate which is a holding, subsidiary or an associate company of the corporate debtor, or a subsidiary of a holding company to which the corporate debtor is a subsidiary Whether Res....
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....cement 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) provision of essential technical information to, or from, the corporate debtor d) provision of essential technical information to, or from, the corporate debtor NA Unable to ascertain on account of non- availability of records. and points out that the 'Appellant', squarely falls under the definition under 'Related Party', under Section 5 (24) of the I & B Code, 2016. 39. The Learned Counsel for the 1st Respondent and 3rd Respondent ('Bank'), comes out with a plea that the aforesaid 'Nominee Directors' Mr. Yogesh Prakash Bafna and Mr. Praful Prakash Bafna, had resigned from the 'Board' of the 'Appellant Company', on 16.02.2022, i.e. just two days, before the commencement ....
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.... '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 status request could not be processed'. 44. According to the 1st Respondent and 3rd Respondent ('Bank'), it is unimaginable, as to how the Tracking No. assigned to a courier dispatched on 11.02.2022 is "PNU800000799" and "PNU800000800" when, the running Tracking Nos for the Couriers dispatched on 11.02.2022 was ranging from PNU800000924 to PNU800000945 and for the tracking numbers ranging around "PNU800000799" and "PNU00000800", the date of dispatch was around 21.02.2022 and so on. 45. Besides this, in fact, the 'Tracking Numbers', are not assigned in the strict order of 'Booking / Dispatch', and it is inconceivable as to how the 'Tracking Number', could vary to an extent of more than 100 S.Nos. i.....
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....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 duty bound to examine and verify as to what date, the 'resignation letters', as to 'on what date the Resignation Letters', were received by the 'Corporate Debtor', as it is on the 'date of receipt of Notice', by the 'Corporate Debtor', the 'Resignation', will be an 'effective' one. 50. According to the 1st Respondent and 3rd Respondent ('Bank'), the 'Two Nominee Directors', of the 'Appellant', were appointed in accordance with 'SSHA' and they were equally representing the 'Board' of the 'Corporate Debtor', together with other 'Two Promoter Directors'. Also that, the 'Nominee Directors', were operating the 'Corporate Debtor's Bank Account', jointly with the 'Promoter Director' of the 'Corporate Debtor'. 51. The L....
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....on 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', with the sole intention of participating in the 'Committee of Creditors', it should be considered as a 'Related Party', for the purpose of Section 21(2) of the Code, and shall not be entitled to participate in the 'Committee of Creditors'. 56. 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. and Ors., reported in 2021, 3 SCC at Page 475 at Spl Pgs: 527 and 528, wherein at Paragraphs 103 to 105, it is observed as under: 103. "Thus, it has been clarified that the exclusion under the first proviso to Section 21(2) is related not to the debt itself but to the relationship existing betw....
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....ith 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 Respondent and 1st Respondent, refers to the Judgment of this 'Tribunal' in Telangana State Trade Promotion Corporation v. AP Gems and Jewellery Park Private Limited and Ors., reported in MANU/NL/0409/2021 (where 'Director', sought to be a 'Part' of the 'Committee of Creditors'), whereby and whereunder, it is observed at Paragraphs 67, 68, 70 and 71, as under: 67. "As far as the present case is concerned, this Tribunal points out that, the Appellant's Managing Director was also a Director of the first Respondent Company. Moreover, the Director nominated by the Appellant, in fact, advises the Appellant / Company in matters relating to the first Respondent / Company. To put it precisely, the part played by the two nominee Directors clearly point out th....
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....eating 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 is observed as under: 16. "It is pertinent to mention that Hon'ble Supreme Court in (2021) 3 SCC 4754 Phoenix ARC Private Limited v Spade Financial Services Ltd has held that the objective and purpose of the Code are best served when the CIRP is driven by external creditors so as to ensure that related parties of the Corporate Debtor do not sabotage the CoC. This is the intent behind the first proviso to Section 21 (2) of the Code, which disqualifies a Financial Creditor or the authorized representative of the Financial Creditor under Sub-section (6A) or Sub-section (5) of Section 24 of the Code, if it is a related party of the Corporate Debtor, from having any right of representation, participation or voting in a meeting of CoC. The purpose of excluding a relating party of the C....
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....ame 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 Authority', by seeking the 'Appellant', as a 'Related Party', and not to be a 'Party', in 'Committee of Creditors'. The 'Adjudicating Authority', had approved the 'Petition' / 'Application', and passed an 'Order', observing that the 'Appellant', is a 'Related Party', and that, 'the Committee of Creditors', was reconstituted as per Section 21 of the Insolvency and Bankruptcy Code, 2016, read with Regulation 17(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons, 2016). 62. According to the Resolution Professional / 4th Respondent, to place on 26.09.2022 with the Agenda Items were circulated. The 'Expression of Interest', in 'Form-G' for calling 'EOI', was invited on 27.09.2022 in Financial Express (English) and Prajasakthi Telugu for an appointment of T....
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.... 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 'Articles of Association' of the 'Corporate Debtor', had not been amended and that the 'Appellant', cannot be considered to be a 'Related Party', to attract the provisions of Section 5 (24) of the 'Insolvency and Bankruptcy Code, 2016'. 71. According to the Appellant, the Companies Act, 2013, is a 'Special Act', and as per Section 20 of the Companies Act, 2013, 'Courier', is recognised as form of 'Service'. Also that, a 'Notice', is considered to be served, it was left at the 'Registered Address' of the Company, as per Section 20 of the Companies Act, 2013. Furthermore, as per Section 12 (1) of the Companies Act, 2013, a 'Company', is required to have a 'Registered Office', to receive and acknowledge all 'communications and notices', to be addressed to it. 72. The Learned Counsel for the Appellant takes a stand that the 'Adjudicating Auth....
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....eks 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', that the '1st Respondent / Sole Member' of the 'Committee of Creditors', who is acting in collusion with the 'Promoter Group' of the 'Corporate Debtor', does not 'sabotage' the 'CIRP' Process. 78. The Learned Counsel for the Appellant, therefore, prays for allowing the instant 'Comp. App (AT) (CH) (INS.) No. 332 of 2022', by this 'Tribunal', in setting aside the 'impugned order' dated 28.02.2022, in IA(IBC) No. 54 of 2022 in CP(IB) No. 204/7/AMR/2019, passed by the 'Adjudicating Authority', ('Tribunal'). Service of Notice : 79. Be it noted that, if a registered 'Summons', is sent to 'Defendant', at the correct / proper address, there arises a presumption of 'Service', in the considered opinion of this 'Tribunal'. 80. In fact, the 'Onus', to prove 'Service of Summons', is on a 'Plaintiff'. Where a 'question' of 'Service of Notice', arises, the 'Cou....
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.... 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 Hon'ble High Court of Karnataka, in Mother Care (India) Ltd. v. Prof. Ramaswamy P Aiyar (ILR 2004) Kar. 1081, it is observed that there is no provision in the Companies Act, 2013, for the 'Acceptance of Resignation', because of the fact that the 'Appointment of a Director', is not 'bilateral in character'. Withdrawal of Resignation: 89. While a 'Director', can unilaterally 'Resign', his 'Withdrawal of Resignation', cannot be 'Unilateral', and unless and until, the 'Board of Directors', accept his 'request', and permitted the 'Director', to 'Withdraw' his 'Resignation'. Agents: 90. A 'Resignation' of a 'Director' of a 'Company', is an 'Unilateral' act, which comes into an 'operative play', as soon as the 'Resignation', is tendered by a 'Director', of a 'Company'. After all, a 'Director', is an 'Agent', of a 'Company', and the 'Agent', is competent to determine the 'Agency', at hi....
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....d 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 Ventures Private Limited'). 98. Being aggrieved, over the inaction of the 'Interim Resolution Professional', in not removing the 'Appellant / 1st Respondent' ('P P Bafna Ventures Private Limited'), from the 'Committee of Creditors' of the 'Corporate Debtor', the '3rd Respondent / 1st Respondent', had filed the present IA No. 53 of 2022 in CP (IB) No. 204/7/AMR/2019, assailing the Constitution of the 'Committee of Creditors'. 99. The stand of the '3rd Respondent / 1st Respondent / Petitioner', in 'IA No. 53 of 2022 in CP (IB) No. 204/7/AMR/2019', is that the 'Resolution Professional', had not applied his mind to the opinion given by a 'Law Firm', and took the opinion as Resolution Professional's conclusion, without any determination being made based on the facts of the case. Hence, the '3rd Respondent / 1st Respondent / Petitioner', in 'IA No. 53 of 2022 in CP (IB) No. 204 / 7 / AMR / 2019', had prayed for, the '....
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....ant 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 in a Meeting of the 'Committee of Creditors'. Also, a reading of the 1st proviso to Section 21 (2) of the Code, coupled with Section 21 (1) of the Code, will show that the 'relevant date', contemplated by the 'Code', for determining the question on the 'Related Party Status', is the date of 'Constitution of Committee of Creditors', as the said provision, relates to the specific event of 'Committee of Creditors', being constituted. 104. The version of the Appellant is that the 'Nominee Directors' of the 'Appellant', on the 'Board' of 'Corporate Debtor', had resigned on 11.02.2022 and the 'two Directors', also ceased to be 'Directors' on the 'Board' of the 'Appellant / Company', on 16.02.2022. Hence, it is represented on behalf of the Appellant, that there were no 'common Directors', between the 'Appellant' and the 'Corporate Debtor', on the 'relevant date', i.e., on 15.03.2022, the 'Date of Constitution of Committee of Credi....
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....ees' 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 Capital' of the 'Appellant / Company', as per the 'Annual Return' for the Financial Year ending 31.03.2021 (Filed by the 'Appellant', on 'Ministry of Corporate Affairs Portal'). 112. As a matter of fact, the aforesaid 'Two Nominee Directors', had resigned from the 'Board' of the 'Appellant / Company', on 16.02.2022, just two days before the 'Corporate Insolvency Resolution Process' commencement date i.e. 18.02.2022 and purportedly resigned from the Board of the Corporate Debtor on 11.02.2022, just six days before the commencement of the 'CIRP'. 113. The plea of the Appellant is that, the 'Resignation Letters', were correctly addressed to the 'Corporate Debtor', is an 'incorrect one', because of the fact that the 'Courier Receipt' from the 'Consignor' (Mr. Praful Bafna), addressed to the 'Consignee' (KVR Industries Private Ltd.) dated 11.02.2022, shows the destination is Vishakapattinam and the Pin Code mentioned, under the head 'Mobile No.....
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.... 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 Debtor', had commenced on 18.02.2022, which indicates that only as an afterthought, the said e-form DIR-11, was filed by the 'Nominee Directors'. Also that, no Form DIR-12, which is required to be filed by the 'Company', Viz. the 'Corporate Debtor', was ever filed. In effect, this 'Tribunal', is of the considered view that, when the 'Notice of Resignation', had not reached the 'Company', 'Bafna' remains as a 'Director', in the 'Corporate Debtor', and his position as 'Related Party', may not get erased, in the 'eye of Law'. 119. In the instant case, it cannot be brushed aside that the 'Corporate Debtor' was admitted into 'CIRP' on 18.02.2022 and the 'Resignation Letter', was sent on 11.02.2022, one week before the 'Corporate Debtor', being taken into the 'Corporate Insolvency Resolution Process'. Also that, till the filing of Section 7 Petition, under the 'Code', by Mr. Bafna, he continued as 'Nominee Director', till 11.02.202, which is a stark reality. ....