9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (3) TMI 22 - AT - Insolvency and BankruptcyCIRP admitted - locus of shareholder of the Corporate Debtor in Section 7 application filed by the Financial Creditor - Fraudulent and malicious initiation of proceedings under Section 7 of the I B Code 2016 - Both the Appellants and the Respondents have alleged that they have become Shareholder / Financial Creditors respectively for a paltry sum of few crores and trying to grab the Corporate Debtor whose investment in form of shares in other companies have been valued more than Rs. 1000 crores - both the Appellants and the Respondents have alleged each other that they are acting on behalf of the Ex-Promoter Mr. Vijay Mallya is group companies and trying to take over the company at the behest of Ex-Promoter. Whether the Respondent No. 2 (Corporate Debtor) is a Non- Banking Financial Company (NBFC) having assets of more than Rs. 500 crores and therefore exempted from the Corporate Insolvency Resolution Process ordered by the Adjudicating Authority? - Appellants are related parties of the suspended management as claimed by the Respondents or not - Respondents are related parties of the suspended management of the Corporate Debtor or not. Whether the Adjudicating Authority committed an error in admitting the CIRP of the Corporate Debtor - Whether the shareholder of the Corporate Debtor has any locus in Section 7 application filed by the Financial Creditor? - HELD THAT - In the present case undisputedly the 1st Respondent became Financial Creditor since the assignment was created with all requisite formalities and the Corporate Debtor has not denied the financial transaction. In such case the Adjudicating Authority is supposed to admit Section 7 Application - It is the case of Appellant that Section 7 Application was filed by the Financial Creditor in collusion with the Corporate Debtor. After reading Section 61(1) of the I B Code 2016 it becomes clear that any person aggrieved by the order of the Adjudicating Authority may prefer an appeal to National Company Law Appellate Tribunal. It infers that the Appellants even as shareholders cannot be aggrieved merely by the admission of the Corporate Debtor into Corporate Insolvency Resolution Process. Such objection may render the object of I B Code 2016 illusory since any shareholder of any Corporate Debtor against which Insolvency proceedings have been initiated can then seek to maintain a derivative action and sabotage a valid Corporate Insolvency Resolution Process initiated by the Adjudicating Authority - prima-facie there is no specific law which allows any shareholder of the Corporate Debtor to challenge the admission of Corporate Insolvency Resolution Process of the Corporate Debtor once the debt due and default is established by the Adjudicating Authority in an application made by the Financial Creditor filed under Section 7 of the I B Code 2016 before the Adjudicating Authority. Having considered all the averments made by the Appellants as well as the Respondents including various Written Submissions made available to this Appellate Tribunal and after careful consideration of various judicial pronouncements of the Hon ble Supreme Court of India as well as this Appellate Tribunal comes to concrete conclusion without any hesitation that in the present Appeals the Appellants do not have any Locus and therefore the present Appeals are not maintainable. This Appellate Tribunal therefore does not find any Error / Legal Infirmity in the impugned order on this issue. Appeal dismissed.
Issues Involved:
1. Whether the Adjudicating Authority committed an error in admitting the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. 2. Whether the shareholder of the Corporate Debtor has any locus in Section 7 application filed by the Financial Creditor. 3. Whether the shareholders can make payment to satisfy financial debt of financial creditor to take away the Corporate Debtor from the clutches of the Corporate Insolvency Resolution Process. 4. Whether the Corporate Debtor is a Non-Banking Financial Company (NBFC) having assets of more than Rs. 500 crores and therefore exempted from the Corporate Insolvency Resolution Process. 5. Whether such cases of Non-Banking Financial Company are required to be registered or can fall in the definition of 'Exemption' even without being registered with the Reserve Bank of India. 6. Whether the permission of the Reserve Bank of India is mandatory prior to initiating the Corporate Insolvency Resolution Process proceedings against the Corporate Debtor. 7. Whether the Appellants are related parties of the suspended management as claimed by the Respondents and similarly whether the Respondents are related parties of the suspended management of the Corporate Debtor as claimed by the Appellants and what is the impact of such relationship over the maintainability of Section 7 Application under I & B Code, 2016. Detailed Analysis: Issue I(a): Whether the Adjudicating Authority committed an error in admitting the CIRP of the Corporate Debtor The Adjudicating Authority is required to ascertain the existence of default and if satisfied, admit the application under Section 7 of the I & B Code, 2016. The Financial Creditor, in this case, had legally assigned the debt, thus stepping into the shoes of the original creditor. The Corporate Debtor did not deny the financial transaction, and the Adjudicating Authority admitted the application, initiating the CIRP. Issue I(b): Whether the shareholder of the Corporate Debtor has any locus in Section 7 application filed by the Financial Creditor The definition of "person" under Section 3(23) of the I & B Code, 2016 includes an individual, which can encompass a shareholder. However, Section 6 of the I & B Code, 2016 restricts the initiation of CIRP to Financial Creditors, Operational Creditors, or the Corporate Debtor itself. The Adjudicating Authority dismissed the intervention applications filed by the shareholders, stating that shareholders have no locus standi in a Section 7 application. The Appellate Tribunal agreed, noting that allowing shareholders to challenge CIRP admission would undermine the I & B Code, 2016's objectives. Issue II: Whether the shareholders can make payment to satisfy financial debt of financial creditor to take away the Corporate Debtor from the clutches of the Corporate Insolvency Resolution Process There is no specific provision in the I & B Code, 2016 or the Companies Act, 2013 allowing shareholders to settle the debts of the Corporate Debtor on its behalf. The Appellants could not provide any legal precedent supporting such a settlement. The Appellate Tribunal noted that theoretically, even if a person aggrieved by the impugned order challenges the CIRP admission, it would not resolve the issues under any relevant law and would only cause delays. Issue III: Whether the Corporate Debtor is a Non-Banking Financial Company (NBFC) having assets of more than Rs. 500 crores and therefore exempted from the Corporate Insolvency Resolution Process The Appellants argued that the Corporate Debtor was an NBFC with assets over Rs. 500 crores, thus exempt from CIRP without RBI approval. However, the Respondents contended that the Corporate Debtor ceased to be an NBFC long ago. The Appellate Tribunal did not delve into this issue, as it found the appeals non-maintainable on other grounds. Issue IV: Whether such cases of Non-Banking Financial Company are required to be registered or can fall in the definition of 'Exemption' even without being registered with the Reserve Bank of India The Respondents argued that the Corporate Debtor was not performing any activity classified as financial service and thus was not a Financial Service Provider or NBFC under the I & B Code, 2016. The Appellate Tribunal did not address this issue due to the non-maintainability of the appeals. Issue V: Whether the permission of the Reserve Bank of India is mandatory prior to initiating the Corporate Insolvency Resolution Process proceedings against the Corporate Debtor The Appellants claimed that RBI approval was required before initiating CIRP against an NBFC. However, the Respondents maintained that the Corporate Debtor was neither an NBFC nor a Financial Service Provider. The Appellate Tribunal did not explore this issue further. Issue VI: Whether the Appellants are related parties of the suspended management as claimed by the Respondents and similarly whether the Respondents are related parties of the suspended management of the Corporate Debtor as claimed by the Appellants and what is the impact of such relationship over the maintainability of Section 7 Application under I & B Code, 2016 The Respondents alleged that the Appellants were acting on behalf of the erstwhile promoters of the Corporate Debtor. The Appellants denied any connection. The Appellate Tribunal did not find it necessary to address these allegations, given the non-maintainability of the appeals. Conclusion: The Appellate Tribunal concluded that the appeals were not maintainable as the shareholders did not have locus standi to challenge the CIRP admission. The Tribunal dismissed the appeals without costs and closed the connected pending interlocutory applications.
|
