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2021 (9) TMI 991 - AT - Insolvency and BankruptcySeeking for removal of the Appellant (APSTC/TSTPC) from the ‘CoC’ - Promotion of trade from the State and create logistics infrastructure in the state and to carry out its existing business of manufacture and sale of notebooks for students - ‘related party’ as construed under Section 24(5) of the ‘I&B’ Code, 2016 - submission of appellant is that there is no participation in policy making of the First Respondent/ Company nor there is interchange of managerial personnel between the Appellant and the First Respondent/ Company - HELD THAT:- It must be borne in mind that the expression ‘control’ in Section 29A(c) of the ‘I&B’ Code symbolizes only the positive control i.e. that the mere power to block special resolutions of a Company cannot amount to control. In reality, the word ‘control’ juxtaposed with the term ‘management’ means ‘De facto control of actual management or policy decisions that may be or are in reality taken - this Tribunal points out that, the Appellant’s Managing Director was also a Director of the first Respondent Company. Moreover, the Director nominated by the Appellant, in fact, advises the Appellant / Company in matters relating to the first Respondent / Company. The part played by the two nominee Directors clearly point out that the first Respondent / Company acts on the advice, direction and instructions of the Appellant in its normal business affairs relating to the first Respondent. As such, this Tribunal is of the earnest opinion that the Appellant ‘squarely comes within the ambit of related party as per clause (f) of Sub Section 24 of section 5 of the Code. The other important fact that cannot be brushed aside is that that the First Respondent had reported the transactions between the Appellant and it, in their ‘Annual Reports’ and ‘Audited Financial Statements’. Besides this, as perceived from the ‘Articles of Association’ and the requisite majority needed for taking important business decisions, the conduct of the business of the First Respondent, the establishment of First Respondent Company, all considered in an integral and cumulative manner will exhibit the noteworthy influence of the Appellant in issues concerning the First Respondent. In this manner also, the First Respondent is treating the Appellant as ‘Related Party’. The Appellant / Company has a control in regard to the arrangement of ‘Board of Directors’ of the First Respondent / Company and on this score also, the Appellant comes within the purview of ‘related party’ as per clause L of sub section 24 of 5 of the ‘I&B’ Code, as opined by this Tribunal - It is to be pointed out that the ‘Articles of Association’ point out that action relating to significant matters ought to be taken only by affirmative vote of three or more Directors and in the qualified majority, minimum one Director is to be nominated for inclusion by the APTPCL. Considering the facts and circumstances of the instant case in a conspectus fashion and keeping in mind the ingredients of the ‘Articles of Association’ to the effect that the nominee Directors have a vital influence in regard to the working of the ‘Corporate Debtor’, this Tribunal unhesitatingly comes to a consequent conclusion that the Appellant is a ‘related party’ and the view arrived at by the ‘Resolution Professional’ to include the Appellant/TSTPCL as member of the ‘Committee of Creditors’ is clearly unsustainable in the eye of law. This Tribunal concurs with a view arrived at by the ‘Adjudicating Authority’ in the ‘impugned order’ that the Appellant is a ‘related party’ - Appeal dismissed.
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