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TMI Blog2019 (1) TMI 1507X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 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. - Company Appeal (AT) (Insolvency) No. 169 of 2017 with Company Appeal (AT) (Insolvency) No. 170 of 2017 with Company Appeal (AT) (Insolvency) No. 171 of 2017 with Company Appeal (AT) (Insolvency) No. 172 of 2017 And Company Appeal (AT) (Insolvency) N - - - Dated:- 14-12-2018 - Mr S.J. Mukhopadhaya, Chairperson And Mr Balvinder Singh, Member (Technical) For The Appellant : Shri Arun Kathpalia Senior Advocate with Mr. V.P. Singh, Mr. Aditya Jalan, Mr. Abhijaan Jha, Mr. Priyank Ladoia, Ms. Jyoti Singh, Ms. Smiti Verma, Mr. Vishnu Shriram and Mr. Somaksh Goyal, Advocates For The Respondents : Shri Sudipto Sarkar, Senior Advocate assisted by Mr. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 . It was alleged that the same is invalid as it was entered into with the mala fide ulterior motive of reducing the voting rights of the Applicant/Appellant in the meeting of the Committee of Creditors . The Adjudicating Authority taking into consideration the revised claim made by the Appellant as was requested to the Interim Resolution Professional and other facts held that the Adjudicating Authority cannot go into roving enquiry especially in the case where several issues have been settled by BIFR and several agreements have already been executed and approved. C.A No. 43 of 2017 preferred by the Applicant/Appellant was dismissed. This order dated 2nd August, 2017 is under challenge in Company Appeal (AT) (Insolvency) No. 170 of 2017. 5. Another application bearing CA No. 124 of 2017 was filed by the Applicant/Appellant under sub-section (5)(c) of section 60 of the I B Code read with Rules 14 34 of the National Company Law Tribunal Rules, 2016, inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent) happened way back in the years 2008-2011 and that too from SBI , IDBI , ICICI (ARCIL) and held that no fault can be found out from such assignment deeds. With respect to the allegation of Synergies Castings Limited assigning its debts to Millennium Finance Limited , the Adjudicating Authority having noticed that the said assignment were made on 24th November, 2016, held that there was no merit in the argument of alleged illegal assignment. CA No. 57 of 2017 having dismissed by order dated 2nd August, 2017, the Company Appeal (AT) (Insolvency) No. 173 of 2017 has been preferred. 8. By final order dated 2nd August, 2017 in CA No. 123 of 2017, the Adjudicating Authority approved the Resolution Plan submitted by Synergies Castings Limited . The said order is under challenge in Company Appeal (AT) (Insolvency) No. 169 of 2017 for the grounds as were taken in CA Nos. 43 and 57 of 2017. 9. The questions arise for consideration in these appeals are: i. Whether the assignment(s) made by Synergies Castings Limited on 24th November, 2016 in favour of Millennium Finance Limited is legal? ii. Whether the order dated 2nd August, 2017 passed by the Adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch, 2015 and 31st March, 2016. 14. On 15th February, 2017, the Appellant received a notice along with agenda for the first meeting of the Committee of Creditors scheduled to take place on 22nd February, 2017, and the initial Information Memorandum . 15. It was submitted that the Appellant was surprised to note that a new creditor - Millennium Finance Limited was reflected as a Financial Creditor and member of the Committee of Creditors . From the initial Information Memorandum , the Appellant noted that immediately before the SICA Repeal Act came into force, Synergies Castings Limited had allegedly entered into three purported Assignment Agreements, all dated 24th November, 2016 (purported Assignment Agreements) by which it claims to have assigned an amount of ₹ 749.63 crores to Millennium Finance Limited . 16. The details of the financial debt (claimed and admitted) owed by the Corporate Debtor to each Financial Creditor along with respective voting share before and after the purported assignment of debt from Synergies Castings Limited to Millennium Finance Limited is provided in the table below: Sr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erns and objections regarding the constitution of the Committee of Creditors and the agenda for the first meeting, including of the agenda item to confirm the leasing of assets of the Corporate Debtor to its related party Synergies Castings Limited at very low lease rentals. The fraudulent reduction of the Appellant s voting share meant that it could not effectively participate in the first meeting of the Committee of Creditors . 19. In this backdrop, the Appellant filed C.A. 43 of 2017 in C.P. No. 1/I BP/NGLT/HDB/2017 on 21st February, 2017 before the Adjudicating Authority inter alia seeking deferment of the first meeting of the Committee of Creditors till the Insolvency Professional considered the Appellant s concerns and objections. By an order dated 22nd February, 2017, the Adjudicating Authority permitted the first Committee of Creditors meeting to be held as scheduled, but expressly stated that the all decisions taken in the said meeting would be subject to further orders of the Adjudicating Authority. Thereafter, the Appellant also issued another letter dated 22nd February, 2017 also pointing out its objections. 20. The Appellant filed C.A. 56 of 2017 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Plan to the Insolvency Professional by its letter dated 23rd June, 2017. The Appellant made suggestions by which the Synergies Castings Limited Resolution Plan could be improved and made more beneficial for all stakeholders since the Liquidation Value was not arrived at correctly and even the repayment to financial creditors with 94% haircut was detrimental to their interest. At the second Committee of Creditors meeting on 24th June, 2017, the Synergies Castings Limited Resolution Plan came to be approved without any modification and without considering any of the suggestions/concerns of the Appellant. Pursuant thereto, the Insolvency Professional filed C.A. 123 of 2017 in C.P. No. 1/I BP/NCLT/HDB/2017 before the Adjudicating Authority on 7th July, 2017 seeking approval of the Synergies Castings Limited Resolution Plan from the Adjudicating Authority. Consequently, the Appellant was constrained to file its objection affidavit dated 10th July, 2017 before the Adjudicating Authority. The Appellant also filed C.A. 124 of 2017 in C.P. No. 1/I BP/NCLT/HDB/2017 before the Adjudicating Authority on 11th July, 2017 challenging the resolutions in the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roof and are admissible in evidence. 28. It was contended that the process leading to the formulation and approval of the Synergies Castings Limited Resolution Plan suffers from material irregularities, which are set out hereunder: a. Admission of Millennium Finance Limited as a Financial Creditor of the Corporate Debtor coupled with giving it a seat in the Committee of Creditors is in violation of law: i. Violation of the Registration Act. The purported Assignment Agreements are in violation of the Registration Act, 1908 as despite being compulsorily registrable documents, they were unregistered at the time of verification and admission of claims by the Insolvency Professional . ii. Violation of the Stamp Act─ The purported Assignment Agreements are in violation of the Stamp Act as they were also inadequately stamped at the time of verification and admission of claims by the Insolvency Professional . iii. Verification of evidence and proof of claim- The Insolvency Professional can only accept and admit claims that are legally valid. Millennium Finance Limited s claim and its basis, were therefore inadmissible. iv. Apart from the purpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial Creditors as placed before the Adjudicating Authority by the Corporate Debtor in its section 10 application reflected Millennium Finance Limited as its Financial Creditor . 35. It is submitted that Millennium Finance Limited in its proof of claim had filed three Assignment Agreements dated 24th November, 2016 which were executed by Synergies Castings Limited in favour of Millennium Finance Limited , whereby the Synergies Castings Limited assigned the debts qua ICICI Bank , SBI and IDBI Bank in favour of Millennium Finance Limited . 36. Along with the Assignment Agreements Millennium Finance Limited had also filed Form No. CHG-I which demonstrates that the charges were registered with the Registrar of Companies in favour of the Millennium Finance Limited on 24th November, 2016 itself which is even prior to coming into force of provisions of I B Code . The objections of the Appellant have been dealt with by the Resolution Professional vide reply dated 21st February, 2017. Reliance has been placed on the same and similar stand has been taken by the Resolution Professional before this Appellate Tribunal. It is informed that the Appellant objecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Castings Limited has been duly approved by the Adjudicating Authority vide order dated 2nd August, 2018 pursuant to which the same has been made binding on all stakeholders. Stand of the Synergies Castings Limited 40. Learned counsel for the Synergies Castings Limited submitted that that the debt of Synergies Castings Limited in the Corporate Debtor were assigned to Millennium Finance Limited on 24th November, 2016 vide Assignment Agreements all dated 24th November, 2016. In furtherance of Assignment Agreements, the charge was created in favour of the Millennium Finance Limited in Form No. CHG-1 on 24th November, 2016 itself. 41. It was submitted that the creation of charge with the Registrar of Companies in favour of Millennium Finance Limited substantiates the fact that the debt was validly transferred from Synergies Castings Limited to Millennium Finance Limited on 24th November, 2016 which is even prior to coming into force of I B Code . 42. According to learned counsel, the argument of Appellant that no consideration was paid by Millennium Finance Limited to Synergies Castings Limited is baseless as the payment schedule agreement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 . The approved Resolution Plan in the instant case accordingly envisages amalgamation. 47. The approved Resolution Plan in the instant case provides for dispensation of meeting in terms of Sections 230 and 231 of Companies Act, 2013. It is submitted that an approved Resolution Plan is binding upon all the creditors and stakeholders in terms of section 31 of the I B Code . It is noteworthy that the Appellant in the present case never objected to the dispensation of applicability of sections 230-232 of the Companies Act, 2013. 48. In terms of explanation to Section 30(2) approval of shareholders if any under Companies Act, 2013 or any or any other law for the time being in force for the implementation of actions under the Resolution Plan shall be deemed to have been given and accordingly, there shall not be a contravention of that Act or law. The said explanation as per settled provision of law is retrospective in effect. 49. In view of the deemed consent of shareholders and Resolution Plan . being binding upon the creditors, the approved Resolution Plan in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Ltd. v. APS Star Industries Ltd. [2010] 10 SCC 1, wherein it has been held that an assignment of a debt will not be contrary to public policy on the grounds that the assignee has purchased the debt for a considerably discounted price or because that price is only payable after a period of credit. (Para 49). Even otherwise, in the instant case the Assignment Agreements are supported by Payment Schedule Agreements dated 24th November, 2016, whereby, the consideration towards the assignment of debt from Synergies Castings Limited to Millennium Finance Limited is being duly paid by Millennium Finance Limited to Synergies Castings Limited . 55. Learned counsel for the Respondent further submitted that in terms of section 47 of the Indian Registration Act, 1908 , registration relates back to the date of execution of the agreements itself. In the present case, the Assignment Agreements were duly registered with the Joint Sub-Registrar, Sabbavaram on 25th April, 2017 and the payment of stamp duty to the tune of ₹ 1,30,300/- for each of the Assignment Agreements made. Further, a sum of ₹ 1,50,000/- was also paid towards fine for delay in presenting the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . 59. The BIFR has subsequently also passed an order dated 25th June, 2013, wherein also the BIFR returned a finding as to the exposure of the dues of the Appellant in the Corporate Debtor under the provisions of the SARFAESI Act . The BIFR vide its order dated 25th June, 2013, specifically stated that between the Appellant and Alchemist Asset Reconstruction Company Ltd. (AARC), it is apparent that the exposure of Appellant is in the ratio of 34.15%: 65.85%. Therefore, the Appellant in the present case is a minority creditor of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal. (2) It is further stated that Millennium Finance Limited is not a related party as regards the Corporate Debtor as alleged by the Appellant and thus it cannot be eliminated from the Committee of Creditors . Millennium Finance Limited is a Non-Banking Financial Institution, which had acquired the debts from Synergies Castings Limited and being an independent party and the single largest Financial Creditor of the Corporate Debtor entitled to voting in the meeting of Committee of Creditors . The date of the Assignment Agreement being just a date precedent to the issuance of notification by the Central Government for the purpose of repeal of SICA is no ground to eliminate Millennium Finance Limited from the Committee of Creditors . Millennium Finance Limited in its ordinary course of business entered into an Assignment Agreement dated 24th November, 2016. There is neither any mechanism nor any manner by which Millennium Finance Limited can be attributed with any mala fide intent of entering into an agreement immediately prior to coming into force of SICA Repeal Act . The submissions and averments made by the Appellant on the proximity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reconciled secured term loans outstanding as on 30.9.2004 as provided by the Company PART-A Lenders Outstanding (Rs in millions) IDBI 656.6 ICICI BANK 663.0 EXIM BANK OF INDIA 183.6 STATE BANK OF INDIA 252.8 INDIAN OVERSEAS BANK 98.9 ANDHRA BANK 83.5 JP MORGAN CHASE (HSBC HARE) 95.2 INDBI BANK 89.1 TOTAL SECURED LOANS 89.1 TOTAL SECURED LOANS 2122.7 PART-B LIST OF EXISTING CDR LENDERS ICICI BANK IDBI BANK STATE BANK OF INDIA EXPORT IMPORT BANK OF INDIA INDIAN OVERSES BANK ANDHRA BANK PART-C LIST OF EXISTING NON-CDR LENDERS JP MORGAN CHASE BANK 63. The first assignment agreement dated 24th November, 2016 was executed between Synergies Castings Limited and Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was duly registered with the District Registrar, Anakapalli vide proceedings No. 197/G1/2017, Dated : 28th April, 2017 on payment of fine (5 times equal to registration fee) of ₹ 1,50,000/- for a delay of 1 month 1 day in presentation of the document under section 25, section 34 of the Registration Act, 1908 . The purchase consideration for these rights is ₹ 16,78, 00,000/-. 66. On perusal of above 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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. 68. The Appellant has alleged that the Corporate Debtor had suppressed several material facts especially with regard to leasing out all its assets to Synergies Castings Limited before BIFR . The Appellant and its Assignor viz. Export Import Bank of India ( Exim Bank ) has filed various applications before BIFR / AAIFR questioning the determination of the Corporate Debtor as a sick industrial company, but such ground cannot be taken at the time of approval of the Resolution Plan(s) . 69. 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 a ..... 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