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2023 (2) TMI 949 - AT - Insolvency and BankruptcyRelated parties to Corporate Debtor or not - continuation with the Committee of Creditors or not - requirement to reconstitute the Committee of Creditors or not - 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 - service of notice. Service of notice - HELD THAT - In fact the Onus to prove Service of Summons is on a Plaintiff. Where a question of Service of Notice arises the Court is duty bound to Record a Finding - The Service of Summons by a Courier at the instance of Plaintiff is permissible as per decision of the Hon ble Supreme Court of India in (2005) 6 SCC 344 2005 (8) TMI 714 - SUPREME COURT . Other Mode of Service are such as (a) Courier (b) Facts and (c) Electronic Mail Service or Service by Litigant directly. Where the Registered Office of a Company is intact and working it was held that the Service of Statutory Notice for payment of Debt a condition necessary for preserving a Winding up Petition should have been served at the Registered Office. In Palmer s Company Law (21st Edition at Page 543) it is stated that a Director can at any time Resign from his Office and usually the Articles make express provision accordingly. If he communicates his Resignation to the Company for instance by a Notice upon the Company served in the manner provided by Section 437 his Resignation is effective. A Resignation once made cannot be Withdrawn except with a Consent of a Company. 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 - 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. It is to be remembered that the ingredients of Section 3 (24) of the Code do not exclude those Directors who are not under the Control of the Promoter of the Corporate Debtor from the ambit of the Related Parties. Even otherwise in a given case where a Related Party / Financial Creditor ceases to be a Related Party with the prime aim of taking part in the Committee of Creditors then he / it ought to be considered as a Related Party for the purpose of Section 21(2) of the I B Code 2016 and not entitled to take part in the Committee of Creditors Meeting as opined by this Tribunal. In the instant case the Cover given on 11.02.2022 had not reached the Company as per the Track Record of the Courier (Filed on behalf of the Bafna) as rightly observed by the Adjudicating Authority (Tribunal) in the impugned order. Suffice it for this Tribunal to unerringly point out that the non-service of Resignation Letter on the Company leads to an inescapable conclusion that the ingredients of Section 168 of the Companies Act 2013 were not complied with and therefore Mr. Praful Bafna and Mr. Yogesh Bafna remain to be the Nominee Directors and hence they are not entitled to be a part and parcel of the Committee of Creditors as held by this Tribunal. In view of the foregoing detailed qualitative and quantitative discussions and reasons this Tribunal taking note of the divergent contentions advanced on either side keeping in mind the surrounding facts and circumstances in an integral manner and also on going through the impugned order dated 22.08.2022 in IA (IBC) Nos. 53 and 54 of 2022 in CP (IB) No. 204/7/AMR/2019 passed by the Adjudicating Authority (NCLT Amaravati Bench) comes to a consequent conclusion that there is no Irregularity or Illegality in regard to the conclusion arrived at in partly allowing the two Applications / Petitions. Petition dismissed.
Issues Involved:
1. Whether the resignation of the nominee directors was effective and whether they ceased to be related parties. 2. Whether the appellant should be considered a related party and thus excluded from the Committee of Creditors (CoC). 3. Whether the Interim Resolution Professional (IRP) acted diligently in verifying the resignation of the nominee directors. 4. Whether the appellant's participation in the CoC would sabotage the Corporate Insolvency Resolution Process (CIRP). Detailed Analysis: 1. Effectiveness of Resignation and Related Party Status: The Tribunal examined whether the resignation of the nominee directors, Mr. Praful Prakash Bafna and Mr. Yogesh Prakash Bafna, was effective and whether it excluded them from being related parties. The appellant contended that the resignation letters were sent via courier on 11.02.2022, which should be deemed as served. However, the Tribunal observed that the resignation letters were not served on the company as required under Section 168 of the Companies Act, 2013, because the courier could not deliver the letters due to the door being locked. Furthermore, the pin code on the courier receipt was incorrect, which further invalidated the service of the resignation letters. 2. Appellant as a Related Party: The Tribunal held that due to the non-service of the resignation letters, the nominee directors continued to be directors of the corporate debtor, thereby maintaining their status as related parties. Additionally, the Tribunal referred to the judgment in Phoenix ARC Private Limited vs. Spade Financial Services Limited, which states that if a related party financial creditor ceases to be a related party with the sole intention of participating in the CoC, they should still be considered a related party for the purpose of Section 21(2) of the Insolvency and Bankruptcy Code, 2016. The Tribunal concluded that the appellant's intention to resign was to participate in the CoC, thus they should be excluded. 3. Diligence of the Interim Resolution Professional (IRP): The Tribunal examined the role of the IRP in verifying the resignation of the nominee directors. The IRP had relied on a legal opinion and the resignation letters dated 11.02.2022. However, the Tribunal noted that the IRP did not exercise due diligence as the resignation letters were not properly served, and the IRP should have verified the resignation more thoroughly. The Tribunal cautioned the IRP to be more vigilant in the future but did not find any malafide intention on the part of the IRP. 4. Potential Sabotage of CIRP: The Tribunal considered whether the appellant's participation in the CoC would sabotage the CIRP. The Tribunal noted that the appellant had significant control over the affairs of the corporate debtor, which could lead to conflicts of interest. The Tribunal emphasized the intent behind the first proviso to Section 21(2) of the Code, which aims to prevent related parties from sabotaging the CoC. The Tribunal concluded that allowing the appellant to participate in the CoC would be against the intent of the Code and could jeopardize the CIRP. Conclusion: The Tribunal dismissed the appeals, upholding the decision that the nominee directors' resignation was not effective, and the appellant was a related party. Consequently, the appellant was excluded from the CoC to prevent potential conflicts of interest and ensure the integrity of the CIRP. The Tribunal emphasized the importance of due diligence by the IRP and the need to prevent related parties from influencing the CoC.
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