2023 (7) TMI 1407 - AT - Insolvency and Bankruptcy

Seeking direction to IRP to reconstitute the CoC of the Corporate Debtor by including the Appellant as Financial Creditor - genuinity of claims filed by the Appellant - Assignment Deeds were not brought on the record inspite of direction - HELD THAT - There are sufficient substance in submissions of learned counsel for the Respondent No.2 that Corporate Debtor being aware of the insolvency resolution process mentioned assignment in favour of the Appellant to put the Appellant in the CIRP of the Corporate Debtor in event it is initiated, to take control of the CIRP. As noted above, in the balance sheet of the Appellant no such dues payable by Corporate Debtor has been mentioned on the basis of any of the three assignments, as claimed before the Resolution Professional. In the balance sheet of the Assignor Company also there was no mention of the aforesaid dues against the Corporate Debtor before they were assigned to the Appellant. Non-reflection of amounts in the financial accounts of either of the Assignor or the Assignee creates substantial doubt in the case of the Appellant. Looking to the facts and circumstance and the manner in which the claim has been put up by the Appellant, the opinion of the Adjudicating Authority agreed upon that all three transactions are sham and the matter needs to be examined by appropriate authority to prevent misuse of the forum and defeat the objectives of the Code. The Adjudicating Authority after considering in detail the entire facts and circumstances and material on record has rightly come to the conclusion that none of the claim submitted by the Appellant in Form C could have been admitted in the CIRP of the Corporate Debtor. Claims submitted by the Appellant were all non-genuine claim and have rightly been rejected. The Adjudicating Authority has rightly directed the Resolution Professional to send all related papers received from the Applicant, Financial Creditors, Documents in his possession and details of such transactions to the Ministry of Corporate Affairs for examination/ investigation - there are no merit in the Appeal. Appeal is dismissed.

Summary

Issues Involved:
1. Inclusion of Appellant as Financial Creditor in the Committee of Creditors (CoC).
2. Validity of Assignment Deeds and Claims submitted by the Appellant.
3. Treatment of Appellant as a related party.
4. Compliance with the Adjudicating Authority's order for submission of documents.
5. Examination of the claims by the Ministry of Corporate Affairs.

Summary:

1. Inclusion of Appellant as Financial Creditor in the Committee of Creditors (CoC):
The Appellant challenged the order dated 19.04.2023 by the Adjudicating Authority (NCLT, Jaipur Bench) rejecting I.A. No. 203/JPR/2022, which sought to include the Appellant as a Financial Creditor in the CoC. The Adjudicating Authority rejected the application, leading to this appeal.

2. Validity of Assignment Deeds and Claims submitted by the Appellant:
The Appellant submitted three financial claims based on Assignment Deeds from Modern Terry Towel, Pallavi Synthetics Pvt. Ltd., and Midas Powertech Pvt. Ltd. totaling Rs.12893,39,03,000/-. The Adjudicating Authority found these claims to be dubious and not backed by sufficient documentation. The Appellant failed to submit original Assignment Deeds and other required documents, leading to the rejection of the claims. The Tribunal found the transactions to be sham and directed further examination by the appropriate authority.

3. Treatment of Appellant as a related party:
The IRP treated the Appellant as a related party to the Corporate Debtor, thereby excluding them from the CoC. The Appellant argued against this classification, but the Tribunal upheld the IRP's decision, noting the suspicious nature of the transactions.

4. Compliance with the Adjudicating Authority's order for submission of documents:
The Adjudicating Authority had directed the Appellant to submit various documents, including bank statements and original Assignment Deeds, which the Appellant failed to provide. This non-compliance was a significant factor in the rejection of the Appellant's claims.

5. Examination of the claims by the Ministry of Corporate Affairs:
The Tribunal concurred with the Adjudicating Authority's decision to refer the matter to the Ministry of Corporate Affairs for investigation, citing the need to prevent misuse of the forum and ensure the objectives of the Insolvency and Bankruptcy Code are met.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the Appellant's arguments and upheld the Adjudicating Authority's decision to reject the claims and refer the matter for further investigation.