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TMI Blog2021 (1) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in brief are:- 2.1 That SREI Infrastructure Finance Limited / Respondent No.2 herein is a public Limited Company incorporated under the Companies Act, 1956 and a public financial institution notified under Section 4A of the Companies Act, having its registered office in Kolkata, West Bengal. 2.2 That the Applicant/ M/s. Palm Products Private Limited is a Company registered under the Companies Act, 1956, having its registered office in Koltaka, West Bengal. 2.3 It is averred, the M/s. Amrit Jal Ventures Private Limited / Corporate Debtor a Company registered under Companies Act, 1956, having its registered office in Telangana, approached the Assignor i.e. Respondent No.2 herein for financial assistance and executed documents in respect of the loan. The Assignor sanctioned term loan facility of Rs. 80.00 crores and disbursed an amount of Rs. 30.00 crores. 2.5 It is alleged the borrower / M/s. Amrit Jal Ventures Private Limited committed default and breached the loan agreement. In the meantime a Petition under Section 7 of IBC, 2016 was preferred by SEW Infrastructure Limited, which was admitted by this Tribunal. It is submitted subsequently, M/s. Palm Products Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f consideration from an old account or a new bank account is irrelevant on the transaction. Similarly whether the cheque issued was the first leaf of the cheque book or not too has no relevance and bearing on the transaction. (ix) Point No. (m): It is not mandatory to have company stamp because the bank has duly honoured the cheque. 2.8 With regard to various observations made by Resolution Professional to Issue No.2, the Applicant has clarified as follows:- (i) Point Nos (a) to (e): That the Applicant does not hold any shares in the Corporate Debtor as such it is not a related party. More so, because the shares of the Corporate Debtor which were pledged with Respondent No.2 as security for the loan facility availed by the Corporate Debtor have not been assigned with the loan facility to the Assignee. There is a clear mention in the Assignment Agreement that in the year 2015, Respondent No.2 had invoked the shares worth Rs. 52,61,767/- of the Corporate Debtor which was valued by LSI Financial Services Private Limited as at March 31, 2015 and the same has been adjusted against the dues of the Corporate Debtor. The Respondent No.2 is said to have filed its revised claim before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m "C" on 31.05.2019 for Rs. 61,00,29,089/-, out of which Respondent No. 1 admitted the claim to the tune of Rs. 43,24,16,082/-. Rs. 17,76,13,007/- was not admitted pending reconciliation of the account between Respondent No.2 and the Corporate Debtor. Despite several reminders by Respondent No.1 for reconciliation, Respondent No.2 chose to assign Rs. 60,47,67,322/-. It is submitted, by virtue of certain legal deficiencies, the claimed assignment between R-2 and the Applicant was not considered by the Resolution professional. 3.5 It is contended, attributing non-registration of Assignment Agreement to lockdown and "Amphan" cyclone in Kolkata city on 20.05.2020 before its submission to RP on 03.06.2020 is untenable. The Resolution Professional submits that he had diligently exercised his functions within the objectives of IBC and cannot be termed as overreaching on the part of RP. 3.6 It is further submitted, the Resolution Professional found the documents of transaction from the side of Applicant to be different from those from the side of Respondent No.2 and in order to ensure that the transaction between the parties is not a "transaction of accommodation", the bank statements fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Professional reiterates that he has acted within the purview of IBBI (CIRP) Regulations, 2016. Respondent NO.1 referred to Hon'ble NCLAT, Delhi order passed in Company Appeal No. 28/2018 in the matter of Pankaj Yadav & Anr vs. SBI and Fortune Pharma Pvt Ltd where in it was held that when the claimed Assignor is Financial Creditor (Related Party), then the claimed Assignee is FC (Related party). 3.11 It is submitted, as per Article 23 of Schedule-IA of Stamp Act on Certain Instruments under the Bengal Stamp (Amendment) Act, 1922, the stamp duty payable on the AA is ad valorem at 6%/7% on the market valuation of the securities. As such in the absence of supported valuations, the Resolution Professional is unable to determine the adequacy of stamp duty paid by the Applicant / Respondent No.2 on the AA. 3.12 It is submitted, the Resolution Professional took note of the purchase consideration to the tune of Rs. 10 lakhs claimed to have been paid by the Applicant against the assigned debt of Rs. 60,47,67,322/- from Respondent No.2. 3.13 While responding to the mail dated 04.05.2020 of the Resolution Professional, the Applicant affirmed that it issued cheque dated 18.05.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the Borrower/ Corporate Debtor in repayment of the Loan Facility as per the terms of the financing documents. 4.2 That Respondent No.2 in the year 2015, invoked the shares of the Borrower/ Corporate Debtor as a security for the Loan Facility aggregating to 44.30% shares of the Borrower/ Corporate Debtor and pledged it with the Respondent No. 2. Subsequently, Respondent No. 2 invoked the shares of the Borrower/ Corporate Debtor worth Rs. 52,61,767/- (Rs. 0.08 per share) as on March 31, 2015, by converting the debt into equity as per the valuation made by LSI Financial Services Pvt Ltd. 4.3 That, in the meantime, this Tribunal admitted the petition filed by SEW Infrastructure Ltd. under section 7 of the Insolvency and Bankruptcy Code, 2016 on May 07, 2019 and Corporate Insolvency Resolution Process started against the Borrower/ Corporate Debtor. That, subsequently Respondent No.2 had filed its claim amounting to Rs. 61 crores before the Resolution Professional, the Respondent no.1 herein. However, Respondent No.1 had declared the Respondent no.2 as a related party of the Borrower/ Corporate Debtor and did not include Respondent No.2 in the Committee of Creditors. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee within two days of such change." Moreover, under Section 5(7) of the Code, the assignee is also accepted as financial Creditor. 4.6 Pursuant to execution of the Assignment Agreement on 18.05.2020, the Applicant vide its email dated June 3, 2020 had filed its claim as a financial creditor of the Corporate debtor with the resolution professional in Form C along with the supporting documents. However Resolution Professional vide letter dated 11.06.2020 informed the Applicant and Respondent No.2 that the claim of the Applicant has been rejected without any justification and further rejected the assignment of the Loan Facility vide the Assignment Agreement on several untenable grounds and held the Applicant as a related party of the Borrower/Corporate Debtor. 4.7 Respondent No.2 has clarified at para 9 (a) to (b) at page No.s 6 -8 of its counter to the various observations made by the Respondent No.1 about Issue No. 1 in his letter dated 11.06.2020, which is submitted in brief as follows:- (i) In response to point no. (a) Respondent No.2 submits that it is aware that the Assignment Agreement dated 18.05.2020 has to be registered and that the law under the Indian Registration Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India & Ors. [WP (Civil) Nos. 99, 100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and WP (Civil) 37 of 2019] which has held that (a) Resolution Professional has no adjudicatory powers. He has administrative powers as opposed to quasi-judicial powers; (b) The Resolution Professional is a facilitator of the resolution process, whose administrative functions are overseen by the CoC and by the Adjudicating Authority. iii) Respondent No.2 submits that assigning the Loan Facility together with the underlying securities to the Applicant pursuant to execution of Assignment agreement between the parties on 18.05.2020, is a valid transaction under regulation 28 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 4.8. Respondent No.2 has clarified at para 10 (a) at page No 10-12 of its counter to the various observations made by the Respondent No.1 about Issue No. 2 in his letter dated 11.06.2020, which is submitted in brief as follows:- a) Responding to point nos. (a) to (e), Respondent No.2 submitted that, the Applicant cannot be considered as a related party financial credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court in ICICI Bank Lt. V. APS Star Industries Ltd., (2010) 10 SCC 1', has 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). Respondent No.2 relied on the judgement supra for disregarding the Assignment Agreement by Respondent No. 1. b) Respondent No.2 relied on Hon'ble Supreme court in "Gurbax Singh V. Kartar Singh & ors., SLP (Civil) No. 1969 of 2002" and in "Principal Secretary Gov. of Karnataka and Anr. V. Ragini Narayan and Anr., Civil Appeal No. 8895 of 2012" where in it was held that "In terms of Section 47 of the 'Indian Registration Act, 1908', once a document is registered, the operation of the said relates to the date of execution of the document." Further, the Indian Registration act 1908 provides 4 months' time to register a document from the date of its execution. Though the Assignment Agreement dated 18.05.2020 is registered at a later date, the assignment of debt will be considered from 18.05.2020. c) The Hon'ble National Company Law Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d argument that they are going to be effected if the rights of 'Synergies Castings Limited' and 'Millennium Finance Limited' are recognized basing on the Assignment Agreements in question and the Appellant cannot assume jurisdiction to question the documents in question basing on baseless allegations, apprehension etc. Therefore, the Adjudicating Authority summarily rejected the contentions/allegations of the Appellant with regard to documents in question. In the result, we 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. 67. The next question arises is whether the above documents were executed without making reference to 'BIFR' is valid or not. Admittedly, the Appellant herein and the 'Millennium Finance Limited' are assignees of original lender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned Counsel contended, the Resolution Professional rejected the claim by adjudicating the claim filed by the Applicant, as if the same cannot be admitted. 6. The Learned Counsel for Applicant would contend that it has given detailed explanation for the points raised by the Resolution Professional and that Resolution Professional committed serious irregularities in not recognizing the Applicant as Financial Creditor by virtue of assignment of debt. The Counsel contended, the Resolution Professional raised various grounds which are not required as far as admission of the claim is concerned. 7. The Learned Counsel for Respondent No.2/Assignor supported the stand taken by the Applicant. The Learned Counsel also contended, the Resolution Professional ought not to have rejected the claim filed by the Applicant and ought to have admitted the claim by treating the Applicant as Financial Creditor by including the Applicant in CoC. The Learned Counsel urged that Respondent No.2 entered into Assignment Agreement with Applicant for consideration for transferring the debt of Rs. 60,47,38,233/- for a sum of Rs. 10 lakhs. The Learned Counsel contended, 2nd Respondent has not transferred sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a transferred debt from Assignor who is a related party. The Assignee is also a related party because the debt is transferred from a related party. In this connection, the Resolution Professional relied on the decision of Hon'ble NCLAT in Company Appeal No. 28/2018 in the matter of Pankaj Yadav & Anr vs. SBI and Fortune Pharma Pvt Ltd where in it was held that when the claimed Assignor is Financial Creditor (Related Party), then the claimed Assignee is FC (Related party). 10. The Resolution Professional further relied on the decision of Hon'ble NCLT Mumbai Bench in M.A No. 560 in CP No. 1148/2017 dated 13.11.2017 and contended, when Assignor is a related party, the Assignee is deemed to be a related party. Therefore, the Applicant cannot be included in the CoC. It is the contention of Resolution professional that Assignment Agreement is not registered and transaction is not a true and correct transaction and as such Application deserves to be rejected. 11. The case of Respondent No.2, it has entered into Assignment Agreement with the Applicant. Respondent No.2 is the creditor of Corporate Debtor. Respondent No.2 filed counter and categorically admitted transferring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the Applicant to get it registered and when once it is registered it dates back to the date of execution of documents. In this connection, Learned Counsels for Applicant and Respondent No.2 relied on Section 23 of the Indian Registration Act 1908 which is state hereunder:- "Section 23 in The Registration Act, 1908 Time for presenting documents.-Subject to the provisions contained in sections 24, 25 and 26, no document other than a will shall he accepted for registration unless presented for that purpose to the proper officer within four months from the date of its execution: Provided that a copy a of a decree or order may be presented within four months from the day on which the decree or order was made, or, where it is appealable, within four months from the day on which it becomes final." 15. The question is whether claim can be admitted basing on the un-registered document when it was filed before the Resolution Professional. The unregistered documents cannot be taken into account for admission of the claim. The document must have been registered on the date on which the claim is made. No doubt for registration, four months are available under Section 23 of the Regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is certainly is an important circumstance which cannot be ignored and it casts a serious doubt on the transaction. 17. The debt is stated to have been transferred to the Applicant, the Assignee. Now the prayer by the Applicant is to recognise him as financial creditor and further to include it in the CoC. The Resolution Professional has taken a right decision that Assignment Agreement is not registered. Therefore, he has not recognised the claim of the Applicant basing on the unregistered Assignment Agreement. Secondly, the Applicant cannot be included in the CoC even if transfer is treated as a valid transfer since the Assignee got the debt transferred from the related party. The Assignee is stepping into the shoes of the Assignor. Therefore, the Applicant cannot be included in the CoC having acquired the debt by transfer from the related party to the Corporate Debtor. The transaction on the face of it appear to be not a genuine transaction with regard to the transfer of debt in favour of Assignee. Already Resolution Professional recognised the debt of the Assignor and only a part of debt was not admitted because of pending reconciliation. 18. Thus, there is no error committed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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