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2020 (9) TMI 598 - Tri - Insolvency and BankruptcyStay on the process of CIRP until outcome of this Application - liquidity of Corporate Debtor to pay the claim - status of CoC on cancellation of claim of R-2 as Financial Creditor - HELD THAT - Respondent No. 2 is only entitled for 25% of the net profit of the project. That apart, as per MOU, both sides agreed that in case of any dispute, the matter shall be resolved by the arbitration. It is also a matter of record that as per Annexure-E, page No. 59 of the Application i.e. reply of public notice given for title clearance, wherein, Mr. Mukeshbhai Nanubhai Desai has been shown as having ownership of 25% share in the Coconut project and to that effect MOU has been executed. Further, on perusal of the record, it is found that the RP has declared Respondent No. 2 as a sole Financial Creditor as reflected from Minutes of Meeting dated 14.11.2019, to which the Applicant/Suspended Management raised an objection, as reflected from page No. 22 of the rejoinder to reply filed by the Respondent No. 1 and thereafter the instant application is filed on 19.11.2019. Time Limitation - HELD THAT - On perusal of the record, it is amply clear that amount so paid by the Respondent No. 2 has no time value of money by way of interest or repayable along with interest, as is also admitted by the Respondent No. 2 himself that the same is paid towards development and construction of the project and he has to get 25% from the net profit, as reflected in MOU and its various covenants/terms and conditions. Further, even if it is assumed that amount is paid as a loan, but admittedly it was paid in 2014 and as such is barred by limitation. The status of the Respondent No. 2 (Mr. Mukesh Desai) cannot be taken as Financial Creditor. Hence, the COC so constituted by the RP is void ab initio. Further, the Operational Creditor have liberty to file his application through RP and RP shall make all endeavour to file Form F.A., so filed by the Operational Creditor for withdrawal of the CIRP before this Adjudicating Authority - Application allowed.
Issues Involved:
1. Validity of the Financial Creditor's claim and the constitution of the Committee of Creditors (COC). 2. Request for stay on the Corporate Insolvency Resolution Process (CIRP). 3. Allegations against the Interim Resolution Professional (IRP) for misconduct. 4. Request for withdrawal of the CIRP application by the Operational Creditor. Issue-wise Detailed Analysis: 1. Validity of the Financial Creditor's claim and the constitution of the Committee of Creditors (COC): The Applicant argued that Mr. Mukesh Desai, who was constituted as the sole Financial Creditor in the COC, is actually a partner in the project and not a Financial Creditor. The Applicant provided evidence, including an MOU and public notices, showing that Mr. Desai had a 25% ownership in the project and was entitled to 25% of the net profit, not a financial debt with time value of money. The Tribunal found that the amount paid by Mr. Desai did not qualify as a "Financial Debt" under Section 5(8) of the IB Code, as it lacked the time value of money and was not repayable with interest. Consequently, the Tribunal declared the COC constituted by the RP as void ab initio. 2. Request for stay on the Corporate Insolvency Resolution Process (CIRP): The Applicant requested a stay on the CIRP, arguing that the company had enough liquidity to pay the original applicant and that no other creditors had claims. The Tribunal noted that no other claims were received, indicating that the Corporate Debtor was a going concern and financially sound. Given this context, the Tribunal found it unnecessary to continue the CIRP and allowed the application to stay the process. 3. Allegations against the Interim Resolution Professional (IRP) for misconduct: The Applicant accused the IRP of convening meetings in Ahmedabad instead of Surat, causing inconvenience and charging exorbitant travel expenses. The IRP was also accused of conspiring with Mr. Desai and acting suspiciously. The Tribunal noted inconsistencies in the claim amounts presented by the IRP in different meetings and found that the IRP had not adequately justified these actions. The Tribunal directed the IRP to justify his expenses and actions as required. 4. Request for withdrawal of the CIRP application by the Operational Creditor: The Operational Creditor had requested to withdraw the CIRP application under Section 12A of the IB Code, which requires the consent of 90% of the COC members. The Tribunal noted that despite the request, the sole Financial Creditor (Mr. Desai) did not consent to the withdrawal, and the IRP did not inform the Adjudicating Authority of this fact. The Tribunal found this lack of communication unacceptable and directed the IRP to facilitate the withdrawal process as per the Operational Creditor's request. Conclusion: The Tribunal concluded that Mr. Mukesh Desai could not be considered a Financial Creditor, rendering the COC's constitution invalid. The Tribunal allowed the application, staying the CIRP and directing the IRP to assist in the withdrawal of the CIRP application by the Operational Creditor. The Tribunal emphasized the importance of resolution over liquidation, aligning with the objectives of the IB Code.
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