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TMI Blog2022 (10) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... g the said debt, it moved this Tribunal by way of an application under Section 7 of the IBC, which was admitted and the CD was taken into CIRP. However, there is no dispute that Mr. Praful Bama and Mr. Yogesh Bafna would continue to be nominal directors till their resignation comes into effect. Section 27 of the General Clauses Act, 1897 under which the notice has to be served by post cannot be applied to a service by courier. Apart from that, the Counsel for the FC submits that the pin code number mentioned in the track record and the one mentioned in the address shown in the application are different. The resignation notice was sent to an address with pin code number 53016 as reflected in the track record of the courier service, whereas the pin code pertaining to the registered address of the FC is 532016 as per the application. Obviously notice is served in the application, which shows that the pin code in the application is the correct one. By virtue of the notice of the resignation not reaching the Company, Bafna continues to be nominee director in the CD and hence his status as related party does not cease - Inspite of the differences, disputes and the breaches which took pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CoC. The IRP shall reconstitute the COC accordingly - the applications are partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... response to the mail sent by the IRP on 19.03.2022, the Applicant sent a letter vide mail of the same date and informed that Respondent No. 3 is a related party. He also informed that Respondent No. 3 intentionally resigned right before the date of admission order dated 18.02.2022 in an attempt to avoid Respondent No. 3 from falling within the definition of related party. vi). The Supreme Court in Phoenix ARC Private Limited vs. Spade Financial Services Limited and others held that if the related party FC ceases to become a related party with the sole intention of participating in the CoC, then it should be considered as a related party for the purpose of Section 21(2) of the Code. Hence, in view of the above, it is prayed that Respondent No. 2 shall be directed not to convene and conduct any meeting of CoC until dismissal of the Application and to direct Respondent No. 2 to remove Respondent No. 3 from the CoC and to issue directions to IBBI to enquire into the misconduct of Respondent No. 2 in the CIRP of the CD and to initiate appropriate disciplinary proceedings in order to protect the sanctity of the profession of Insolvency Professionals and also that of the CIRP. 3. Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bafna were not directors of the CD as on the ICD. MCA Master Data as on ICD shows that both directors of "Bafna" had resigned from the directorship of the CD on 11.02.2022. The IRP also took a legal opinion from an independent law firm, which is to the effect that as on ICD, the "Bafna" could not be treated as a related party. The said opinion was sought before constituting the CoC and hence it shows that the IRP has diligently performed his duties. c) The Ministry of Corporate Affairs (MCA) record clearly shows the end date of directorship of Mr. Praful Prakash Bafna and Mr. Yogesh Prakash Bafna as 11.02.2022 while the ICD in the present case is 18.02.2022. The other contentions need not be mentioned as they are not relevant. 6. Rejoinder is filed by "Bafna" to the counters, reiterating that "Bafna" clearly falls within the definition of related party. The contention of "Bafna" that Mr. Praful Prakash Bafna and Mr. Yogesh Prakash Bafna have resigned from the position of directors on 11.02.2022 due to sustained non filing of balance sheets of the CD is absolutely false. The nominees of "Bafna" were representing 50% of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween them arose and the breaches of the agreement occurred. In the capacity of the investor he became an F. Hence due to the "Bama" recalling the ICD which is the Intercorporate Debt, it became entitled for recovering the amount from the CD and due to the default in discharging the said debt, it moved this Tribunal by way of an application under Section 7 of the IBC, which was admitted and the CD was taken into CIRP. However, there is no dispute that Mr. Praful Bama and Mr. Yogesh Bafna would continue to be nominal directors till their resignation comes into effect. 10. The issue before this Tribunal now in this case is whether the resignation of "Bama" came into effect and whether the said resignation would exclude them from the category of related party and whether they can be members of COC. The counsel for Bafna relies on a judgment of NCLAT in Sai prosperity Apartments vs. ASK investments services limited which held that the Insolvency Law Committee of 2020 has clarified that under the 1st proviso to section 21(2) under the code is related not to the debt itself but the relationship between a related party and financial creditor and the corporate debtor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Section 27 of the General Clauses Act, 1897 does not take within its purview a service by private courier. It is also stated that in the above cited judgment it was held that the two conditions precedent for applicability of Section 27 are that firstly, the service must be as provided by the General Clauses Act, 1897 itself and secondly, that such service shall be deemed to be effected by properly addressing, prepaying and posting by registered post. It is held that unless the two conditions are satisfied, Section 27 of the General Clauses Act, 1897 will not apply. In this case the mode of service is through courier. For better appreciation of the facts Section 27 of the General Clauses Act, 1897 is extracted here under: "27. Meaning of service by post. - Where any (Central Act) or Regulation made after the commencement of this Act authorizes of requires any document to be served by post, where the expression "serve" or either of the expressions "give" or "send" or any other expression in used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing pre-paying and posting by registered po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest "Bafna" appears to have considered it appropriate to tender their resignation in order to safeguard their financial interest by taking part in the COC. Hence the intention for resignation apparently seems to be to become part of COC. Hence by virtue of the judgment in Phoenix ARC Private Limited vs. Spade Financial Services Limited and others "Bafna" will not be entitled to participate in the CoC. 12. The contention with regard to the Shares in physical form never being provided to the financial creditor is not complete. The effect of the said lapse is not explained. Until the time the resignation comes into effect, Bafna continues to be nominee directors, which leads to a strong presumption that they are related parties and that they were playing the role as specified in the agreements between the CD and Bafna. Section 3(24) does not exclude those directors who are not under the control of the promoter of the CD, from the purview of Related parties. Hence the contention in that regard is not merited. Bafna falls under Section 24(a), hence whether they acted according to the other clauses, is not material. Judgment in ASK Investment Managers case is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which he had also invited Mr. Yogesh Bafna and Mr. Praful Bafna who at the meeting held on 01.03.2022 informed the IRP that they had resigned from the Board of the CD, though on 01.03.2022 then-names were being reflected on MCA as directors of the CD since the E-Form DIR 11 was filed on the MCA portal only on 04.03.2022. 14. The contention of the IRP is that in the meeting held on 01.03.2022 with the suspended directors Mr. Praful Bafna and Mr. Yogesh Bafna informed in the meeting that they had resigned from the directorship of the CD and dropped from the meeting and thereafter the resignation letters dated 11.02.2022 were received along with screen shots of MCA site reflecting 11.02.2022 as the end date of their tenure as directors in the CD. He also once again verified from the MCA site at their end at the time of constitution of COC. The notice dated 11.02.2022, mentioned that the director is resigning with immediate effect and as per Section 168(2) of Companies Act, 2013, the resignation of director shall be effective from the date specified by the director in the said notice. Hence, the IRP treated the date of resignation of Mr. Praful Bafna and Mr. Yogesh Bafna as 11.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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