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2021 (2) TMI 879 - Tri - Insolvency and BankruptcyCIRP - Relating parties - right of representation, participation and voting at the meetings of the Committee of Creditors of the Corporate Debtor - whether the “related party” status of the Respondent No.2 has to be seen on the commencement date of insolvency process or from the date of initiating CIRP? - Sec.5(24) and 5(24A) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is also pertinent to consider that as per Section 5 (12) the CIRP commencement date is to be taken from the date of admission of the application. It is true that Respondent No.2 had resigned from the position as a Director of the Corporate Debtor on 15.11.2019, that is after initiation of an application for CIRP. However, at that moment it cannot be said that the application will be admitted or rejected. So, this argument regarding eligibility as on the CIRP commencement cannot hold water. In this case, the Respondent No. 2 is participating in the CoC as a Financial Creditor with 45.60 voting percent along with his family members after resigning from the Directorship of the Corporate Debtor. The Respondent No. 2 herein is a Financial Creditor who is exercising its rights after stepping into the shoes of the creditors. Hence, saying that a creditor cannot be included in CoC, merely because the creditor was a related party of the Corporate Debtor before the commencement of CIRP, would be impractical and will prejudice the rights of the Financial Creditor. The matrix to decide whether the Respondent No. 2 is a related party of the Corporate Debtor or not is that what is the position or status of Respondent No.2 as on the date when it stepped into the shoes of the creditor or when he was made a part of CoC. As on the date of it becoming a part of the CoC, Respondent No. 2 was purely a Financial Creditor of the Corporate Debtor and hence, it cannot be said that because he was a related party of the Corporate Debtor prior to becoming a CoC member, Respondent No.2 is still a related party and cannot be a part of CoC. Since the Respondent No. 2 is a Financial Creditor of the Corporate Debtor and Respondent Nos.3 to 5 are his wife and Children, there is no illegality in constitution of CoC with Respondent Nos. 2 to 5. Hence Respondent Nos.3 to 5 will not come under the purview “related party”. Application dismissed.
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