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2021 (3) TMI 304 - AT - Insolvency and BankruptcyNBFC kept the shares and transferred debt to the Appellant (Another NBFC) in the course of Corporate Insolvency Resolution Process - Entitlement to be included in Committee of Creditors - HELD THAT - When Respondent No. 2 was treated as Financial Creditor (related party) Respondent No. 2 had challenged the decision of Insolvency Resolution Professional before the Adjudicating Authority vide I.A. No. 677 of 2019. There is order dated 20.11.2019 (Page 221 of the Appeal Paper Book) which shows that for reasons recorded in that order, especially in paragraph 10 benefit of 2nd Proviso to Section 21(2) of IBC was not given and the claim of the Respondent No. 2 that it was not a related party, was rejected. In paragraph 11 of the Order the acceptance of Part claim of Respondent No. 2 was not disturbed and for balance liberty was given to approach Resolution Professional. There is no dispute with regard to the fact that such Order of the Adjudicating Authority was not challenged by anybody and especially Respondent No. 2 and that the Order has attained finality. Undisputedly, when the claim was made before the Resolution Professional, at that point of time the Assignment Deed dated 18th May, 2020 was not yet registered and the Resolution Professional mentioned this in his letter dated 11th June, 2020 as one of the reasons why he was not acting upon the same. At the time of arguments, we had asked specifically asked the Counsel for Appellant if the Appellant again made a claim before the Resolution Professional after registering the document on 18th May, 2020 - We do not find fault with the Adjudicating Authority for the observations that when the claim was made before the Resolution Professional the document being unregistered, the Resolution Professional rightly ignored the same. Appeal dismissed.
Issues Involved:
1. Whether the Appellant should be included in the Committee of Creditors (CoC) as a Financial Creditor. 2. Validity and enforceability of the Assignment Deed. 3. Whether the Appellant is a related party under Section 29A of the Insolvency and Bankruptcy Code, 2016 (IBC). 4. Whether the Resolution Professional has the authority to reject the Assignment Deed. Issue-wise Detailed Analysis: 1. Inclusion in the Committee of Creditors (CoC): The Appellant sought to be included in the CoC by claiming a debt of ?60,47,38,233 assigned by Respondent No. 2. The Adjudicating Authority rejected this claim, which led to the present appeal. The Appellant argued that the Resolution Professional wrongly concluded that the Assignment Deed was unregistered and that the Appellant was a non-financial institution. The Appellant contended that it had a valid, legally enforceable debt and should be recognized as a Financial Creditor. 2. Validity and Enforceability of the Assignment Deed: The Appellant argued that under Section 23 of the Registration Act, the Assignment Deed dated 18th May 2020 was registered within the permissible four-month period, specifically on 15th July 2020. However, the Adjudicating Authority noted that the document was unregistered at the time the claim was made before the Resolution Professional. The Authority held that unregistered documents could not be relied upon for admitting claims, and thus, the Resolution Professional was correct in not considering the unregistered Assignment Deed. 3. Related Party Status under Section 29A of IBC: The Appellant contended that it was not a related party as it did not hold any shares in the Corporate Debtor, unlike Respondent No. 2, which was held to be a related party. The Resolution Professional argued that Respondent No. 2, being a related party, had assigned the debt to the Appellant at the fag end of the CIRP, and the assignment appeared to be undervalued. The Resolution Professional suspected collusion between the Appellant and Respondent No. 2 to enter the CoC surreptitiously. The Adjudicating Authority maintained that the Appellant, having stepped into the shoes of Respondent No. 2, should be treated as a related party. 4. Authority of the Resolution Professional: The Appellant referenced the Supreme Court's decision in "Swiss Ribbons (P) Ltd. & Anr. Vs. Union of India & Ors." to argue that the Resolution Professional does not have adjudicatory powers and thus could not declare the Assignment Deed unenforceable. However, the Resolution Professional's duty includes verifying the authenticity and compliance of documents. The Resolution Professional found the Assignment Deed lacking proof of consideration and deemed the transaction suspicious due to the undervaluation and timing. Conclusion: The appeal was dismissed, affirming the Adjudicating Authority's decision. The Appellant failed to provide sufficient evidence of the transaction's legitimacy and the consideration paid. The Assignment Deed, being unregistered at the time of the claim, was rightly ignored by the Resolution Professional. The Appellant, stepping into the shoes of Respondent No. 2, was considered a related party, thus ineligible for inclusion in the CoC.
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