2022 (9) TMI 133 - Tri - Insolvency and Bankruptcy

Seeking directions of this Tribunal to take action against the Respondent Company, the Creditor - wilful and false disclosure and concealment of facts in Claim Form-C in an attempt to be considered as a Financial Creditor and be a member of the Committee of Creditors - Power of Resolution Professional to suo moto review, modify or vary the claim of a creditor once the same has been admitted/verified by IRP/RP - Section 235A of IBC, 2016 - whether Applicant as a member of the COC is adjudicatory in nature or otherwise and whether it amounts to review of his decision? - related party of the Corporate Debtor or not. HELD THAT - The duties of IRP have been enumerated under Section 18 and duties of the RP have been enumerated under Section 25 of the Code, under which, the IRP and RP are duty bound to perform their duties as envisaged under the said provisions. Further, the IRP/RP are also guided by the CIRP Regulations while verifying the claims and determining the amount of such claims. The relevant provisions which come into play are Regulations 10, 12, 13 14 of the CIRP Regulations - It is noticed that the RP sought clarification from the Applicant vide e-Mail dated 24.11.2021 after receiving information/documents from Punjab National Bank, to which, the Applicant did not reply. Therefore, the RP in discharge of his duties as stipulated under the Act as well as in the Regulations updated the claim on the basis of documents received by him and re-designated the Applicant from Financial Creditor to Financial Creditor - Related party. The action of the RP in issuing e-Mail dated 29.11.2021 cannot said to be the adjudicatory in nature and it is in fact administrative in nature - the RP has acted well within his limits and took into consideration the material placed before him subsequently by Punjab National Bank which is supported by State Bank of India as well as by the promoters of corporate debtor. Whether the Applicant can be held to be a related party of the Corporate Debtor in the facts circumstances of the present case? - HELD THAT - It is seen that both the parties will have share on profits and furthermore the brokerage will be shared by them. It is thus clear that there is a nexus between the Applicant and the Corporate Debtor and its prima-facie establishes that the Applicant is a related party of the Corporate Debtor - there are no hesitation to hold that the Applicant is a related party to the Corporate Debtor in terms of Section 5(24)(i) of the IBC. Application dismissed.

Summary

Issues Involved:
1. Power of the Resolution Professional (RP) to suo moto review, modify, or vary the claim of a creditor once admitted/verified by IRP/RP.
2. Nature of the RP's action in removing the Applicant from the Committee of Creditors (COC) and whether it amounts to a review of his decision.
3. Determination of whether the Applicant is a related party of the Corporate Debtor.

Issue-wise Detailed Analysis:

I. Power of IRP/RP:
The Applicant argued that the IRP/RP does not have the power to suo moto change or revise the claim of any creditor once collated. They relied on Section 18 of the IBC and various CIRP Regulations, emphasizing that the RP's role is administrative and not adjudicatory. The Applicant cited several judgments, including those from the Hon'ble NCLAT, to support their stance that the RP cannot revise claims or change creditor status without moving the Adjudicating Authority.

Conversely, the RP contended that the re-designation of the Applicant's claim from Financial Creditor to Financial Creditor - Related party was based on additional documents received from creditors like Punjab National Bank and was not an adjudicatory action. The RP maintained that the action was administrative, in line with their duties under the Code and CIRP Regulations.

II. Nature of RP's Action:
The Tribunal examined the duties of the IRP/RP under Sections 18 and 25 of the Code and relevant CIRP Regulations, concluding that the RP's action in re-designating the Applicant's claim was administrative and not adjudicatory. The Tribunal referred to the Supreme Court's judgment in Swiss Ribbons vs. Union of India, which clarified that the RP has administrative powers. The Tribunal found that the RP acted within their limits by updating the claim based on new information from Punjab National Bank and other sources.

III. Related Party Determination:
The Applicant argued that they are not a related party to the Corporate Debtor, as they do not hold shares, have no representation on the Board of Directors, and have no other relationship beyond being a creditor. They contested the RP's reliance on the Punjab RERA Act's definition of a promoter, asserting that it was irrelevant to the IBC.

The RP, however, presented clauses from the Joint Venture Agreement (JVA) and other documents indicating a significant relationship between the Applicant and the Corporate Debtor. The RP argued that the Applicant is a related party under Section 5(24)(i) of the IBC due to their joint venture status and other associative ties.

The Tribunal reviewed the JVA and supporting documents, including irrevocable letters of consent, board resolutions, and power of attorney, concluding that the Applicant is indeed a related party to the Corporate Debtor as per Section 5(24)(i) of the IBC.

Conclusion:
The Tribunal dismissed IA No. 2325/2021, affirming the RP's decision to re-designate the Applicant as a related party based on additional information. The Tribunal found the RP's actions to be administrative and within their authority. IA-5535/2022 was scheduled for a separate hearing, as it concerns the Applicant's alleged willful and false disclosure in the Claim Form-C.