2025 (3) TMI 1192 - AT - IBC

Seeking to recall order passed by the Adjudicating Authority - whether HUDCO is a related party of the Corporate Debtor or not? - HELD THAT - Appellant and HUDCO entered into Joint Venture Agreement on 02.05.2006 incorporating Srishti Urban Infrastructure Development Ltd. The shareholding as per the Joint Venture Agreement between the Appellant and the Respondent No. 1 for SUIDL was in the proportion of 60 40. Corporate Debtor was promoted by Appellant and SUIDL. The Corporate Debtor entered into a loan agreement with HUDCO for an amount of Rs.6907.92 Lakhs. Under the loan agreement HUDCO was empowered to appoint a Nominee Director. HUDCO exercised its right and appointed a Nominee Director in the Board of the Corporate Debtor. The submission which has been pressed by learned counsel for the Appellant is that the Application filed by the Appellant was fully covered on the ground that there was suppression on the part of HUDCO which lead to issuance of order dated 30.08.2023 which was obtained by HUDCO by playing fraud on the Court. The submission is pressed on the ground that Annual Report of the HUDCO was not placed by HUDCO when earlier application was decided on 30.08.2023. Admittedly the Appellant is related party of the Corporate Debtor which is an undisputed fact. All aspects of the matter including HUDCO having promoted JV with Appellant where HUDCO has 40% shareholding and Appellant has 60% shareholding has been noticed and examined by the Adjudicating Authority in order dated 30.08.2023. In the present case suppression of relevant document cannot be accepted since all the document which were relevant for determination of issues raised in I.A. No.514/KB/2022 were filed and relied by both the parties i.e. HUDCO and Resolution Professional. It is not the case of the Appellant that HUDCO was asked to file Annual Report in which it failed to file. 51st Annual Report of HUDCO on which reliance has been placed by the Appellant was filed with the ROC and is matter of public record. When the report is filed with the ROC there is no question of suppression of the report and submission of the Appellant tat there was any suppression on part of HUDCO is baseless. Conclusion - HUDCO is not a related party and that the order dated 30.08.2023 was not obtained by fraud or suppression. Appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether HUDCO should be considered a related party of the Corporate Debtor under Section 5(24) of the Insolvency and Bankruptcy Code (I&B Code), which would affect its inclusion in the Committee of Creditors (CoC).
Whether the Adjudicating Authority's order dated 30.08.2023, which allowed HUDCO's inclusion in the CoC, was obtained by fraud or suppression of material facts, justifying its recall.
The scope of the Tribunal's power to recall an order, particularly in the context of alleged procedural errors or fraud.

ISSUE-WISE DETAILED ANALYSIS

1. Related Party Status of HUDCO

Relevant legal framework and precedents: The determination of related party status is governed by Section 5(24) of the I&B Code. The Tribunal referred to previous judgments to interpret related party definitions and the implications for CoC membership.
Court's interpretation and reasoning: The Tribunal examined the relationship between HUDCO, the Corporate Debtor, and the Joint Venture Company, Srishti Urban Infrastructure Development Ltd. (SUIDL). It concluded that HUDCO, despite its shareholding and nominee director position, did not exert control over the Corporate Debtor that would qualify it as a related party under the I&B Code.
Key evidence and findings: The Tribunal considered the shareholding structure and HUDCO's role in SUIDL. It also analyzed the Annual Report of HUDCO, which the Appellant claimed was suppressed, to determine if it indicated a related party relationship.
Application of law to facts: The Tribunal applied Section 5(24) criteria and found that HUDCO's involvement as a shareholder in SUIDL, which promoted the Corporate Debtor, did not automatically make HUDCO a related party.
Treatment of competing arguments: The Appellant argued that HUDCO's control through SUIDL and its nominee director status should classify it as a related party. The Tribunal rejected this, emphasizing that the mere presence of a nominee director does not establish control.
Conclusions: The Tribunal upheld the Adjudicating Authority's decision that HUDCO is not a related party, allowing its inclusion in the CoC.

2. Allegation of Fraud and Suppression of Facts

Relevant legal framework and precedents: The Tribunal considered the principles of recall and review, distinguishing between them. It cited the Union Bank of India vs. Dinkar T. Venkatasubramanian & Ors. case, which outlines the inherent power to recall orders obtained by fraud.
Court's interpretation and reasoning: The Tribunal assessed whether HUDCO's failure to present its Annual Report constituted suppression of material facts amounting to fraud. It concluded that the report was a public document filed with the Registrar of Companies, thus not suppressed.
Key evidence and findings: The Tribunal noted that the Annual Report did not explicitly list the Corporate Debtor as a related party of HUDCO. It also acknowledged that the report was available in the public domain.
Application of law to facts: The Tribunal applied the test for fraud and found no evidence that HUDCO had misled the court or suppressed crucial information.
Treatment of competing arguments: The Appellant's claim of fraud was dismissed as baseless, with the Tribunal emphasizing the transparency and availability of the Annual Report.
Conclusions: The Tribunal found no grounds for recalling the order dated 30.08.2023 based on alleged fraud or suppression.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal reiterated, "Power of recall is not power of the Tribunal to rehear the case to find out any apparent error in the judgment which is the scope of a review of a judgment. Power of recall of a judgment can be exercised by this Tribunal when any procedural error is committed in delivering the earlier judgment... Well known ground on which a judgment can always be recalled by a Court is ground of fraud played on the Court in obtaining judgment from the Court."
Core principles established: The judgment reinforced the principle that mere shareholding and nominee directorship do not establish related party status without evidence of control. It also clarified the distinction between recall and review, emphasizing the limited grounds for recall.
Final determinations on each issue: The appeal was dismissed, affirming that HUDCO is not a related party and that the order dated 30.08.2023 was not obtained by fraud or suppression. The Tribunal upheld the Adjudicating Authority's decision to include HUDCO in the CoC.

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