TaxTMI 
TaxTMI 
2024 (2) TMI 736
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....IB) No.1649/KB/2023. I.A.(IB) No.1649/KB/2023 wad filed by the Appellant seeking a direction to the Resolution Professional to include the Appellant in the Committee of Creditors (CoC) and also to provide voting rights to the Applicant/ Appellant. The application has been rejected by the impugned order. Aggrieved by which order this Appeal has been filed. Brief facts of the case necessary to be noticed for deciding this Appeal are : i. The Appellant - ODAT GmbH is a foreign financial lender who extended loan and advance to Darjeeling Organic Tea Estate Pvt. Ltd. (hereinafter referred to as 'Corporate Debtor') from the year 2014 to 2020. Total loan advanced to the Corporate debtor including interest amounts to Rs.158,97,81,571/-. The financial assistance advanced by the Appellant was a Reserve Bank of India approved external commercial borrowing. The Appellant has not appointed any Director in the board of the Corporate Debtor. ii. The Corporate Debtor was promoted by a Bansal Family but had to exit from the company by resignation on 15.06.2022 on account of insistence by the lenders, especially UCO Bank. The foreign shareholders of the Corporate Debtor appointed a....
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.... 2. We have heard Ms. Purti Gupta, learned counsel for the Appellant, Shri Shaunak Mitra, learned counsel appearing for the Respondent No.1 and Shri Abhijeet Sinha, learned senior counsel appearing for the Committee of Creditors. 3. Learned counsel for the Appellant submits that the Adjudicating Authority committed error in holding the Appellant as a related party of the Corporate Debtor. Neither Section 5(24)(h) nor Section 5(24)(m) was attracted in the facts of the present case. Rembert Biemond was one of the three Managing Directors of the Appellant. The word 'Geshaftsfuhrer' in German translates to Managing Director in English language but does not have the same meaning in terms of executive powers that a Managing Director has under Indian Companies Act. Under the registration of Appellant as German Company, when there are more than one Managing Director, any business on behalf of the Appellant can be transacted at least by two Managing Directors. Rembert Biemond who was one of the Managing Directors in the Appellant has no authority to act on behalf of the Appellant. Rembert Biemond was appointed in the Board of Corporate Debtor by its investors in 2017 whereas the Appella....
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....the Corporate Debtor. Section 5(24)(m) was not applicable. The Adjudicating Authority erred in holding that since Rembert Biemond was a common Director happen to be Managing Director of ODAT, he was in effect controlling affairs of ODAT and Corporate Debtor. There were three Managing Directors in the Appellant namely Mr. Ulrich Walter, Mr. Rembert Biemond and Mr. Thobias Von Glenk. As per the constitution documents of ODAT, the majority of two Directors could take a decision on behalf of ODAT GmbH. Rembert Biemond was also not a shareholder of Appellant. The Adjudicating Authority without considering and deciphering the true nature of the relationship of Appellant with the Corporate Debtor has come to erroneous finding that Appellant is a related party of the Corporate Debtor. 4. Shri Shaunak Mitra, learned counsel appearing for the IRP refuting the submission of learned counsel for the Appellant submits that Appellant is a related party to the Corporate Debtor. It is submitted that in the Appellant's Company one Rembert Biemond AB holds 20% shareholding. Rembert Biemond AB is 100% owned by Rembert Biemond, hence, the Appellant is also related party within the meaning of Section....
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....rized to receive, branches c) The object of the company Share capital or share capital a) General representation regulation b) Executive Board, Management Body, Managing Directors, General Partners, Managing Directors, Authorized Representatives and Special Powers of Representation Procuration a) legal from, commencement, articles of association or partnership agreement b) Other legal relationships a) Date of registration b) Comments 1 2 3 4 5 6 7 1 2 a) ODAT Ltd. b) Diepholz Business address: Bahnhofstrabe 28, 49356 Diepholz c) Consulting and support for companies in the agricultural, food and sustainable technology sectors in Germany and abroad through coaching, organizational development, interim management and financing solutions. 25,000,00 EUR a) If only one managing director has been appointed, he shall represent the company alone. If several managing directors have been appointed, the company shall be represented jointly by two managing directors. b) Managing director: Walter, Ulrich, Rehden, *23,08,1949 authorized to act as sole repres....
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....her of the manner stated above) and the KYC document of the Authorized Representative also needs to be attested." In absence of signature of one Director your representation for authorization letter cannot be accepted. Thanks & regards, CA Santanu Brahma IRP, Darjeeling Organic Tea Estates Pvt. Ltd. (in CIRP)" 9. The Constitution Documents of the Appellant as has been extracted above which was filed by the IRP himself clearly indicate that if several managing directors have been appointed, the company shall be represented jointly by two Managing Directors. This being admitted position that there are three Managing Directors in the Appellant Company. The German word 'Geshaftsfuhrer' translates to Managing Director in English language. Conclusion is that on behalf of the Appellant two Managing Directors have to act jointly to act on behalf of the Appellant. 10. Now, we come to the impugned order by which the Application of the Appellant seeking direction to include it in the CoC with voting rights has been rejected. The Adjudicating Authority upheld the decision of the IRP to treat the Appellant as a related party relying on Section 5(24(h) a....
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....the Section 5(24)(h) is "a person on whose advice, directions or instructions, the individual is accustomed to act". Thus, for applying Section 5(24)(h) it has to be proved that on the advice of Appellant a Director, Partner or Manager of the Corporate Debtor is accustomed to act. The mere fact that one of the Director i.e. Rembert Biemond is common in Appellant as well as the Corporate Debtor shall not ipso facto lead to prove fulfilment of Section 5(24)(h). It has to be pleaded and proved that on advise, direction or instruction of the Appellant, a Director, Promoter or Manager of the Corporate Debtor is accustomed to act. The Appellant is only financial lender, who has extended loan facility to the Corporate Debtor. No material has been placed on record to indicate that Appellant has given advise, direction or instruction to Director, Promoter or Manager of the Corporate Debtor who is accustomed to act accordingly. As noted above, the Appellant has to act jointly through two Managing Directors since there are more than one Managing Directors and it cannot be held that Appellant is acting through Rembert Biemond. Rembert Biemond is a Director in Corporate Debtor and all functions....
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....that condition as mentioned in 24(m)(i) are fulfilled, there has to be any evident material or pleading that Appellant is participating in policy making of the Corporate Debtor. There is no material on record or any such document or pleading on behalf of the IRP that there is any material to prove that Appellant has participation in the policy making process of the Corporate Debtor. Appellant has not nominated any Director in the Corporate Debtor. Even Rembert Biemond is Director who was nominated in the Corporate Debtor in 2017 by a Foreign Investor, at that time Appellant was not even incorporated. Participation in policy making process has to be through Director of the Corporate Debtor. There is no iota of evidence that Appellant has ever participated in policy making process of the Corporate Debtor. The Adjudicating Authority has again confused with actions of Rembert Biemond as Director of the Corporate. The actions of the Rembert Biemond as Director of the Corporate Debtor were his actions as Director of the Corporate Debtor and not on behalf of the Appellant. None of the correspondence and email which has been relied proves that functions of Rembert Biemond were not on behal....
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....ng and therefore it is obvious that he has been providing essential technical information to the Corporate Debtor. In the aforesaid observation the Adjudicating Authority has referred to Rembert Biemond. The Adjudicating Authority failed to notice that Rembert Biemond is in the Board of Director of the Corporate Debtor since 2017 when he was nominated by a foreign investor of the Corporate Debtor and Rembert Biemond was not nominated by the Appellant in the Board of Corporate Debtor. Hence, the whole observation is fallacious. In spite of pleading of the Appellant that there was no material to suggest essential technical information were received by the Appellant or were given by the Appellant to the Corporate Debtor. No finding has been returned referring to any material. Appellant was only Financial Creditor who has extended loan to the Corporate Debtor. There being neither any pleading regarding provision of essential technical information to, or from, the Corporate Debtor nor any proof, there was no occasion to come to the conclusion that condition under Section 5(24)(m) were fulfilled. The conclusion of the Adjudicating Authority were wholly baseless. 16. Shri Shaunak Mitra....