TMI Blog2019 (3) TMI 1605X X X X Extracts X X X X X X X X Extracts X X X X ..... P V. Nallasenapathy, ORDER 1. The Applicant, an Asset Reconstruction Company, filed this application praying for the following reliefs; (a) That this Hon ble Tribunal be pleased to allow Miscellaneous Application filed by the Applicant and accordingly quash and/or set aside the decision of the RP dated 11.10.2018; (b) That this Hon ble Tribunal be pleased to direct the Resolution Professional to incorporate the claim of the Applicant herein as a Financial Creditor, in accordance with the provisions of the Insolvency and Bankruptcy Code; Or in the alternative, (c) Pending the hearing and final disposal of the present Miscellaneous Application, this Hon ble Tribunal be pleased to stay the effect and operation of the decision dated 11.10.2018 and accordingly permit the Applicant to participate in the Resolution Process as a member of Committee of Creditors; Or in the alternative, (d) This Hon ble Tribunal be pleased to stay any further steps to be taken by Resolution Professional and by the Committee of Creditors in the absence of or without taking into consideration the vote of the present Application; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected. Your contentions only prove your debt claim on the principal borrower and not on Sterling International. Sterling International has only mortgaged its properties but not given any corporate guarantee, so it is not a debtor and consequently your claim cannot be accepted. 6. The Resolution Professional subsequently on 11.10.2018 sent another E-mail to the Applicant stating as below: Dear sirs, I have reviewed your request and also consulted a few lawyers and even they are of the opinion that your claim is not admissible for the same reason I stated earlier. I am sorry to say but your claim is rejected. 7. Aggrieved by the decision of the resolution professional, the applicant filed this application under section 60(5) of the Code for the reliefs cited supra. 8. The followings are the contentions of the applicant: A. The resolution professional has arrived at an erroneous conclusion that though there is a mortgage created in favor of the applicant by the Corporate Debtor but since no corporate guarantee was executed, the claim of the applicant is not tenable in the CIRP of the Corporate De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced to judgment, fixed, matured, immature, disputed, undisputed, secured or unsecured; ii. Section 3 (8) which defines Corporate Debtor as a corporate who owes a debt to any person; iii. Section 3 (10) which defines creditor as any person to whom a debt is owed and includes a Financial Creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree holder; iv. Section 3 (11) which defines debt as a liability or obligation in respect of a claim which is due from any person and includes a financial debt or an operational debt along with the Form C filed by the applicant; - it is clear that neither any financial debt nor any operational debt is owed by the Corporate Debtor to the applicant and as such the applicant is precluded to file a proof of claim during the CIRP. C. The RP further submits that a perusal of Form C submitted by the Applicant and even the present Application, it clearly appears that it is not the case where the money has been disbursed to the Corporate Debtor which is payable along with interest, therefore, the argument of the Applicant that the definition of financial debt does not env ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RP, this fact has to be disclosed. Now, COC will decide on the Resolution Plan without the participation of the mortgagee of the Corporate Debtor as and when the Resolution Plan is submitted before it by RP, since the claim of the mortgagee was rejected by the RP. This creates an anomalous situation where the COC decides on a Resolution Plan completely ignoring a mortgagee who is also an important stakeholder. If the mortgagee, being a stakeholder in the mortgaged property, is left out of the process and nobody knows how the mortgagee will deal with the properties since the mortgagee has an interest transferred in specific immovable properties in its favor, which is also admitted by the RP. Hence, unless otherwise an opportunity is given to the mortgagee to have a seat in the Committee of Creditors and is made as a party to the process of approval or rejection of Resolution Plan, that will be a clear case of violation of natural justice. The main objective of the Code is resolution of the Corporate Debtor and this kind of selective exclusion of an important stakeholder may not auger well for the successful conduct of CIRP. By providing a narrow, conventional and restricted inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d foremost, it speaks of the resolution professional seeking information. The resolution professional does not seek information at a meeting of the committee of creditors, which is what Section 24 is all about. The resolution professional only seeks information from the erstwhile Board of Directors under Section 29 before preparing an information memorandum, which then includes the financial position of the Corporate Debtor and information relating to disputes by or against the Corporate Debtor etc. All this has nothing to do with Section 24 of the Code which deals with meetings of the committee of creditors. Secondly, the resolution professional does not prepare a resolution plan as is mentioned in the Notes on Clause 24; he only prepares an information memorandum which is to be given to the resolution applicants who then submit their resolution plans under Section 30 of the Code. The committee of creditors, in turn, gets information so that they can assess the financial position of the Corporate Debtor from various sources before they meet. It is, therefore, difficult to understand the Notes on Clause 24. Even assuming that the Notes on Clause 24 may be read as being a one-way st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only be sent to participants because they are vitally interested in the outcome of such resolution plan, and may, as persons aggrieved, file an appeal from the Adjudicating Authority s order to the Appellate Tribunal under Section 61 of the Code. Quite apart from this, Section 60(5)(c) is also very wide, and a member of the erstwhile Board of Directors also has an independent right to approach the Adjudicating Authority, which must then hear such person before it is satisfied that such resolution plan can pass muster under Section 31 of the Code . E. The mortgage executed by the Corporate Debtor in favor of the applicant is also a security interest as provided u/s 3(31) of the Code and the applicant/mortgagee is also a stakeholder whose rights will be affected vitally. In view of this situation, this Bench is of the considered view that the Applicant/Mortgagee shall be given the status of Financial Creditor. F. It is also worth mentioning the judgment of the Hon ble NCLAT in the case of Export Import Bank of India Vs. Resolution Professional of JEKPL Private Limited, in CA (AT) (Insolvency) No. 304 of 2017 dated 14.08.2018, wherein it was held that guarante ..... X X X X Extracts X X X X X X X X Extracts X X X X
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