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2021 (9) TMI 1121 - AT - Insolvency and BankruptcyValidity of decision of IRP/RP holding that the claimant/ Applicant is a Financial Creditor but is not eligible to be a part of CoC - related party in terms of Section 5(24)(m) & 5(24) (i) of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- The Respondent No. 1 had a share in the profits of the Corporate Debtor Company and cannot be said to be a person acting solely on account of the conversion of debt. In the instant case, the Corporate Debtor had issued non-convertible debentures to Respondent No. 1, which SEBI does not regulate. The SEBI only regulates the issue of debentures relating to “convertible securities” - In the present case, it was not a case of a convertible security. Appellant has annexed the xerox copy of the debenture certificate, which states that “debentures is not convertible but redeemable on maturity” - It is also evident that 2nd proviso to Section 21 (2) of the Code applies where instruments convertible into equity shares were converted prior to the insolvency commencement date. Therefore, 2nd proviso to Section 21(2) is not applicable in the present case and does not enure the benefit to Respondent No 1 ‘ASK’. It is evident that ASK has a substantial interest in the operations of the Corporate Debtor. Moreover, the intent is to increase the same is clear from their stake to claim a considerable ownership interest in the Corporate Debtor Company, i.e. 89.9%. Their significant involvement in the operations and day-to-day decision-making of the Corporate Debtor is substantiated - 'ASK' is, in effect, an insider of the Corporate Debtor having substantial interest in the ownership of the Corporate Debtor. Hence 'ASK' being a related party, and their claim with the IRP concerning the mentioned CIRP should be rejected, and they are not entitled to participate in the CoC. The Hon’ble Supreme Court, in Municipal Corporation of Greater Mumbai v Abhilash Lal [2019 (11) TMI 844 - SUPREME COURT], has affirmed the principles that “if any statute requires a thing to be done in a particular manner, it should be done in that in that manner or not at all” and that “there can be no estoppel against the express provisions of law.” Therefore, the mere fact that the improperly constituted Committee of Creditors has approved a Resolution Plan during the pendency of the present Appeal can have no bearing on the merits of the Appeal. Respondent No. 1 ASK Investment Managers Ltd is a related party to the Corporate Debtor; therefore, it cannot be made part of COC with voting rights - Appeal allowed.
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