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2019 (1) TMI 1507 - AT - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process - sub-section (5)(c) of section 60 of the Insolvency and Bankruptcy Code, 2016 - Financial Creditors - Resolution Plan - application was filed on the ground that Interim Resolution Professional has failed to consider that the assignment agreements which were entered into as late as 24th November, 2016, by which the existing debt of the Corporate Debtor was suspiciously changed hands from a related party of the Corporate Debtor being Synergies Castings Limited to a third-party Non-Banking Financial Company being Millennium Finance Limited . Whether the assignment(s) made by Synergies Castings Limited on 24th November, 2016 in favour of Millennium Finance Limited is legal? Whether the order dated 2nd August, 2017 passed by the Adjudicating Authority approving the Resolution Plan submitted by Synergies Castings Limited is legal? Held that - It is evident that on the date of acquisition of the debt in the instant case, the Appellant was not only aware about the factum of pendency of reference of the Corporate Debtor with the BIFR indicating its financial stressed position but also aware about its limited rights and exposure in the total secured debts of the Corporate Debtor in terms of the order dated 29th May, 2012 passed by the BIFR and the orders dated 1st February, 2013 & 20th June, 2013 passed by the DRT , Visakhapatnam. However, despite the same, the Applicant acquired the debts of the Corporate Debtor and thereafter in the proceedings not only before the BIFR but before the Tribunal making systemized efforts to derail and delay the revival prospects of the Corporate Debtor - the Appellant in the present case is a minority creditor of the Corporate Debtor and thus single handedly not entitled under law to interject and interfere in an appropriate Resolution Plan having the consent of the majority Financial Creditors of the Corporate Debtor . On perusal of the three assignment agreements, it is clear those documents are duly executed with the concerned authorities, and they are not questioned by any party to those proceedings. Appellant herein, being similarly situated like that of Synergies Castings Limited and Millennium Finance Limited , do not have any locus standi to question the veracity of those documents on mere apprehensions or allegation of mala-fides or fraudulent etc. Admittedly, the Appellant is not a party to those Assignment agreements. It is not tenable to raise apprehensions before the Adjudicating Authority to adjudicate. The courts usually adjudicate issues basing on cause of action arisen in a particular case. The Adjudicating Authority cannot enter into roving enquiry on mere apprehensions, baseless allegations. It is hereby declare that both Synergies Castings Limited and Millennium Finance Limited were eligible to execute the assignment agreements in question and all rights flow those agreements to Millennium Finance Limited . After getting assignment of rights, the Millennium Finance Limited is fully competent to participate in Committee of Creditors 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 Appellant herein and the Millennium Finance Limited are assignees of original lenders to Synergies-Dooray Automotive Limited . It is not the case of the Appellant that Assignors have no right to question the 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 Appellant herein in the Committee of Creditors . As long as the assignment agreement deeds are valid and legally enforceable, the Appellant has no locus standi to question its object, modus operandi behind its execution. The contentions of the Appellant that the Millennium Finance Limited would become a related party by virtue of section 5(24) is not at all tenable. The Assignment deeds of various Banks/Financial Institutions/ARCs in favour of Synergies Castings Limited happened way back in the years 2008-2011 and that too from SBI , IDBI , ICICI (ARCIL). Therefore, the Adjudicating Authority has not find any fault with these assignment deeds. With respect to the allegation of Synergies Castings Limited assigning its debt to Millennium Finance Limited on 24th November, 2016, the Adjudicating Authority rightly held that there is no merit in this argument - The I&B Code is a code by itself and section 238 provides over riding effect of it over the provisions of the other Acts, if any of the provisions of an Act is in conflict with the provisions of the I&B Code . Therefore, the arguments of the Appellant that merger and amalgamation of the companies cannot be proposed in the Resolution Plan or such proposal is violative of clause(e) of sub-section (2) of section 30 is fit to be rejected. Appeal dismissed.
Issues Involved:
1. Legality of assignments made by 'Synergies Castings Limited' to 'Millennium Finance Limited' on 24th November 2016. 2. Legality of the order dated 2nd August 2017 approving the 'Resolution Plan' submitted by 'Synergies Castings Limited'. Issue-Wise Analysis: 1. Legality of Assignments: The Appellant, 'Edelweiss Asset Reconstruction Company Limited', challenged the assignments made by 'Synergies Castings Limited' to 'Millennium Finance Limited' on the grounds of fraud and lack of consideration. The Appellant argued that these assignments were executed with the mala fide intention of reducing its voting rights in the Committee of Creditors (CoC). The Appellant contended that the assignments were unregistered, inadequately stamped, and lacked proof of payment. The Respondent, 'Millennium Finance Limited', defended the legality of the assignments, asserting that the assignments were executed in accordance with the law, duly registered, and supported by payment schedules. The Adjudicating Authority examined the assignment agreements and found them to be valid, noting that the assignments were registered with the District Registrar and the required fines were paid for any delays in registration. The Authority held that the assignments were executed legally and that 'Millennium Finance Limited' was competent to participate in the CoC. 2. Legality of the Order Approving the 'Resolution Plan': The Appellant also challenged the order dated 2nd August 2017, which approved the 'Resolution Plan' submitted by 'Synergies Castings Limited'. The Appellant argued that the 'Resolution Plan' was contrary to the law, violated the provisions of the Insolvency and Bankruptcy Code (I&B Code), and lacked an implementation schedule. The Appellant further contended that the 'Resolution Plan' proposed an illegal amalgamation of the Corporate Debtor with 'Synergies Castings Limited'. The Respondents, including the 'Resolution Professional' and 'Synergies Castings Limited', defended the 'Resolution Plan', stating that it was approved by a majority of 91.06% of the CoC and provided for the payment of ?54.69 crores to the Financial Creditors against a liquidation value of ?6.93 crores. The Adjudicating Authority found no violation of the I&B Code or the Companies Act in the 'Resolution Plan'. The Authority noted that the I&B Code has an overriding effect over other Acts and that the 'Resolution Plan' could propose a merger or amalgamation. The Authority dismissed the Appellant's objections, stating that the 'Resolution Plan' was binding on all stakeholders and did not contravene any provisions of the law. Conclusion: The Appellate Tribunal upheld the legality of the assignments made by 'Synergies Castings Limited' to 'Millennium Finance Limited' and the order approving the 'Resolution Plan' submitted by 'Synergies Castings Limited'. The Tribunal dismissed the appeals filed by 'Edelweiss Asset Reconstruction Company Limited', finding no merit in their arguments. The Tribunal concluded that the assignments were executed legally, and the 'Resolution Plan' was in accordance with the provisions of the I&B Code and other applicable laws.
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