2017 (9) TMI 1199 - Tri - Insolvency and Bankruptcy

Eligibility to execute the assignment agreements - Held that - In this case MFL has got all the rights as per the assignment agreements commonly dated 24.11.2016. Hence the allegations/apprehensions made by the applicants herein are baseless and mere apprehensions and they are deemed to have been executed in accordance with law especially in the absence of any challenge to those documents by a party to those documents. The applicant doesn t have any locus standi to question those documents in the insolvency proceedings initiated under IBC 2016 on a far fetched argument that they are going to be effected if the rights of SCL and MFL are recognized basing on the Assignment Agreements in question. And the applicant cannot assume jurisdiction to question the documents in question basing on baseless allegations apprehension etc. Therefore we hereby summarily rejected the contentions/allegations of the Applicant with regard to documents in question. In the result we hereby declare that both SCL and MFL are eligible to execute the assignment agreements in question and all rights flow those agreements to MFL. After getting assignment of rights the MFL is fully competent to participate in CoC in question and it cannot be called a related party as explained. Whether the above documents were executed without making reference to BIFR is valid or not? - Held that - Admittedly the applicant herein and the respondent No.3 are assignees of original lenders to SDAL. It is not the case of the Applicant that Assignors have no right to the rights in question to transfer their rights/interest to the assignee. It is the case of the Applicant that the Respondent No. 3 was assigned the rights/interest in question in order to deprive/reduce the interest of the applicant herein in the CoC. As long as the assignment agreement deeds are valid and legally enforceable the applicant has no locus standi to question its object modus operandi behind its execution. The contentions of the Applicant that the Respondent No.3 would become an admitted party by virtue of Section 5(24) is not at all tenable. . The Assignment deeds of various Banks/Financial Institutions/ARCs in favour of Respondent No.2 happened way back in the years 2008-2011 and that too from SBI IDBI ICICI (ARCIL). Therefore we cannot find any fault with these assignment deeds. With respect to the allegation of SCL assigning its debt to MFL on 24.11.2016 we find no merit in this argument as well. As commonly known the promulgation of IBC Code 2016 was widely discussed/debated/publicized in various media and not out of the blue. Therefore the assignment deeds between the two entities also legal and permissible. At most it can be said to be similar to tax planning rather tax avoiding. Because of this assignment deed not only the applicant s share in total debt is reduced but other financial creditors/Assignees share also proportionately reduced and they did not object to the same but only the applicant agitates with oblique motive/reasons best known to it. Therefore a fraudulent attempt made to reduce the Applicant s share in the total voting rights is not a plausible pleas by the Applicant. In the absence of any documentary proof/evidence to the claim of the Applicant the same is liable to be rejected. Accordingly the bench rejects the above allegations/claim of the applicant.

Summary

Issues Involved:
1. Status and rights of the Applicant vis-a-vis Corporate Debtor.
2. Validity and registration of the three Assignment Agreements dated 24.11.2016.
3. Locus standi of the Applicant to question the Assignment Agreements.
4. Enforceability of orders passed by BIFR and DRT.
5. Relationship between SCL and MFL as related parties.
6. Reliefs entitled to the Applicant.

Issue-wise Detailed Analysis:

1. Status and Rights of the Applicant vis-a-vis Corporate Debtor:
The Applicant, an asset reconstruction company, acquired the debt of the Corporate Debtor, Synergies-Dooray Automotive Limited (SDAL), from EXIM Bank via an Assignment Agreement dated January 6, 2014. The Applicant claimed &8377; 88,20,28,260.97 against the Corporate Debtor. The Respondent No. 2, a related party of the Corporate Debtor, and Respondent No. 3, a Non-Banking Financial Company, entered into three Assignment Agreements on November 24, 2016, transferring a significant portion of the debt from Respondent No. 2 to Respondent No. 3. The Applicant questioned the validity of these assignments, alleging they were executed to reduce its voting share in the Committee of Creditors (CoC).

2. Validity and Registration of the Three Assignment Agreements:
The Tribunal examined the three Assignment Agreements dated November 24, 2016, between SCL (Respondent No. 2) and MFL (Respondent No. 3). These agreements were duly registered with the District Registrar, Anakapalli, and the requisite stamp duties and registration fees were paid. The Tribunal found that these documents were executed in accordance with the law and were not questioned by any party to the agreements.

3. Locus Standi of the Applicant to Question the Assignment Agreements:
The Tribunal held that the Applicant, being similarly situated to SCL and MFL, did not have the locus standi to question the validity of the Assignment Agreements. The Applicant was not a party to these agreements, and its objections were based on mere apprehensions and baseless allegations. The Tribunal emphasized that courts adjudicate issues based on cause of action and not on speculative concerns.

4. Enforceability of Orders Passed by BIFR and DRT:
The Tribunal noted that various interim orders passed by BIFR and DRT would merge into the final orders. However, with the abatement of BIFR/AAIFR proceedings due to the Companies Act, 2013, the Tribunal focused on the existing agreements and orders. It was found that the BIFR had recorded settlements with five out of seven creditors, with only EXIM Bank and another remaining unsettled. The Tribunal emphasized the need to examine all documents and orders to resolve the issue comprehensively.

5. Relationship Between SCL and MFL as Related Parties:
The Tribunal found that SCL, being a related party to the Corporate Debtor, had assigned its debt to MFL, a Non-Banking Financial Company. The Applicant failed to provide evidence to demonstrate that MFL was a related party to the Corporate Debtor. The Tribunal concluded that MFL, as an independent party and the single largest Financial Creditor, was entitled to participate and vote in the CoC meetings.

6. Reliefs Entitled to the Applicant:
The Tribunal rejected the Applicant's claims and allegations regarding the Assignment Agreements and the participation of MFL in the CoC. The Tribunal found that the assignments were legally executed and enforceable. The Applicant's objections were deemed baseless and motivated by an intent to improve its position as a Financial Creditor. Consequently, the Tribunal dismissed the Company Application bearing C.A. No. 57 of 2017 in CP (IB) No. 01/HDB/2017.

Conclusion:
The Tribunal upheld the validity of the Assignment Agreements and the participation of MFL in the CoC. The Applicant's objections were dismissed, and the application was rejected with no order as to costs.