TMI Blog2021 (1) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Professional of the Corporate Debtor. The Learned Counsel contended, the Resolution Professional being administrator and facilitator is bound to accept the claim transferred in favour of Applicant, declaring him as Financial Creditor and include in the CoC for the Corporate Debtor. The Learned Counsel contended, the Resolution Professional has not admitted the claim raising unnecessary objections and acted as adjudicator, which he is not empowered to do so. The Learned Counsel contended, the Resolution Professional rejected the claim by adjudicating the claim filed by the Applicant, as if the same cannot be admitted. It is true the debt of ₹ 60,47,38,233/- was assigned to the Applicant with the underlying securities which is for a sum of ₹ 10 lakhs. I agree with the contention of the Assignor that the inadequacy of consideration is not by itself a ground to entertain a doubt about the transaction. There are other circumstances pointed out by the Resolution Professional. The contention of the Resolution Professional that he has relied on Section 5 (7) of the Code and decided the claim on administrative side. The Resolution Professional would contend, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant is to recognise him as financial creditor and further to include it in the CoC. The Resolution Professional has taken a right decision that Assignment Agreement is not registered. Therefore, he has not recognised the claim of the Applicant basing on the unregistered Assignment Agreement. Secondly, the Applicant cannot be included in the CoC even if transfer is treated as a valid transfer since the Assignee got the debt transferred from the related party. The Assignee is stepping into the shoes of the Assignor. Therefore, the Applicant cannot be included in the CoC having acquired the debt by transfer from the related party to the Corporate Debtor. The transaction on the face of it appear to be not a genuine transaction with regard to the transfer of debt in favour of Assignee. Already Resolution Professional recognised the debt of the Assignor and only a part of debt was not admitted because of pending reconciliation. Thus, there is no error committed by the Resolution Professional for not accepting transfer and not including the Applicant in the CoC. The Assignor continued to be a financial creditor of the Corporate Debtor. If transfer is not recognised by the Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rastructure Finance Ltd/ Respondent No.2 is the Assignor by virtue of Assignment Agreement dated 18.05.2020. 2.6 The Applicant vide email dated 03.06.2020 preferred its claim along with supporting documents to the Resolution Professional / Respondent No.1 herein. It is the case of Applicant that Resolution Professional vide letter dated 11.06.2020 rejected the claim of the Applicant without giving any valid reasons. It is submitted, by virtue of Assignment Agreement the Applicant / Assignee has become the lender and financial creditor to the borrower/corporate debtor. 2.7 The Applicant at para 5 (i) to (ix) has clarified to the observations made by the Resolution Professional in detail to Issue No.1. The explanation given by the Applicant in brief are as follows:- (i) Point No. (a) : Registration of the Assignment Agreement would be done within the permitted timeframe under the Indian Registration Act, 1908. (ii) Point No. (b) (c): There was no need felt for mentioning the issuance of receipt separately as the consideration under the Agreement was paid by the Applicant on 18.05.2020 through cheque and Respondent No.2 issued receipt on the same date as per Clause 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution Professional after deducting the valuation amount of the invoked shares. 2.9 It is submitted, the reasoning applied by the Resolution Professional basing on the decision dated 13.11.2017 of Hon'ble NCLT Mumbai Bench in M.A No. 560 in CP No. 1148/2017 and upheld by Hon'ble NCLAT Delhi in Appeal No. 28/2018 is not applicable to the instant case. 2.10 The Applicant has referred to the judgement dated 25.01.2019 of Hon'ble Apex Court in the matter of Swiss Ribbons Pvt LTd Anr Vs. Union of India Ors. in WP (Civil) Nos, 99,100, 115, 459, 598, 775, 822, 849 and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and WP (Civil) 37 of 2019 wherein it was held that (a) Resolution Professional has no adjudicatory powers. He has administrative powers as opposed to quasi-judicial powers (b) The Resolution professional is a facilitator of the resolution process, whose administrative functions are overseen by the CoC and by the Adjudicating Authority . 2.11 Aggrieved by the order of Resolution Professional, the Applicant has preferred this Application seeking directions to Resolution Professional to accept its claim amounting to ₹ 60,47,38,233/-, further to declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modation , the bank statements for three months from both the Applicant and Respondent No.2 were called for. However, it is stated that the Applicant only provided its bank statement for a single transaction dated 06.06.2020 of a newly opened bank account that too when RP posed a query on 04.06.2020. 3.7 It is contended, by issuing Letter Head receipt dated 18.05.2020, the Respondent No.2 committed to have received consideration cheque dated 18.05.2020 from the Applicant on 18.05.2020 itself. Had Respondent No.2 actually received the consideration, the computer accounts software would have automatically generated a receipt bearing 'auto generated serial number' with a phrase 'receipt issued subject to realization of the cheque . As such, the Resolution Professional could not check the genuineness of the receipt dated 18.05.2020. 3.8 It is the case of Respondent NO.1 that the parties of Assignment Agreement were not barred from doing online transfer of funds in respect of the consideration. However, Resolution Professional is questioning the claim of the parties that they could not go to bank to do RTGS in the wake of lockdown when one of the parties to the AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant affirmed that it issued cheque dated 18.05.2020 towards purchase consideration contrary to its reliance placed on Clauses 2.14, 3.1 and 2.1.5. 3.14 It is the case of Resolution Professional before accomplishing the transaction by encashing the consideration cheque and registering the claimed assignment deed, the parties chose to submit the assignment request before the Resolution Professional. 3.15 It is the case of Applicant that Respondent No.2 being the claimed Assignor is a Financial Creditor (Related Party) as such the Applicant being claimed Assignee cannot become member of CoC. It is further his case that the ratio arrived by Hon'ble NCLAT in Appeal No. 28/2018 needs to be complied by him. 3.16 Resolution professional reiterates that he has complied Section 5 (7) of the Code in letter and spirit and has applied applicable laws to the facts of the case and rendered administrative decision. That the reasons highlighted by the Resolution Professional in the letter dated 18.05.2020 are sufficient to reject the claim of the Applicant and requested this Tribunal to analyse how the Applicant being non-financial institution and Non-ARC is entitled to purchase t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Borrower/ Corporate Debtor and did not include Respondent No.2 in the Committee of Creditors. Aggrieved by the decision of Resolution Professional, Respondent No.2 challenged the decision of Resolution Professional by preferring an application bearing No. IA 677 of 2019 in CP IB NO. 192/7/HDB/2017. This Tribunal after adjudicating the matter passed order on 20.11.2019 wherein it held /confirmed the decision of Resolution Professional that Respondent No.2 is a related party of Respondent No. 1 by virtue of the invocation of the shares of the Borrower/ Corporate Debtor pledged with the Respondent No. 2 valued at ₹ 52,61,767/- (₹ 0.08 per share). 4.4 At this stage, the the Applicant Ms. Palm Products Private Limited, a non-banking Financial company approached the Respondent No.2 with an offer to take over the debts owed to the Respondent no.2 by the Borrower/ Corporate Debtor at its own risk in the month of April, 2020 after being aware of the circumstances with respect to the loan account of the Borrower/ Corporate Debtor. The Applicant is stated to have agreed to take over the Loan Facility together with the underlying securities on certain conditions even after know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that it is aware that the Assignment Agreement dated 18.05.2020 has to be registered and that the law under the Indian Registration Act 1908 provides 4 months' time for a document to be registered. The relevant section which is Section 23 of the Indian Registration Act 1908 as extracted by Respondent herein :- Section 23 in The Registration Act, 1908 Time for presenting documents.-Subject to the provisions contained in sections 24, 25 and 26, no document other than a will shall be accepted for registration unless presented for that purpose to the proper officer within four months from the date of its execution: Provided that a copy a of a decree or order may be presented within four months from the day on which the decree or order was made, or, where it is appealable, within four months from the day on which it becomes final. Moreover, the Assignment Agreement dated 18.05.2020 is a valid, binding agreement between the Applicant and Respondent No.2 and that the required stamp duty under the Indian Stamp Act has been paid on the Assignment Agreement. However, registration of the Assignment Agreement is pending for execution owing to complete lockdown and havoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows:- a) Responding to point nos. (a) to (e), Respondent No.2 submitted that, the Applicant cannot be considered as a related party financial creditor as the applicant does not hold any shares of the Borrower/Corporate Debtor because the shares of the Borrower/Corporate Debtor which were pledged with Respondent No. 2 as a security for the Loan Facility availed by the Borrower/Corporate Debtor was subsequently invoked by Respondent No. 2. Further it was mentioned in the Assignment Agreement that in the year 2015 the Respondent no. 2 had invoked shares worth ₹ 52,61,767/- (₹ 0.08 per share) of the Borrower/Corporate Debtor based on the valuation report furnished by LSI Financial Services Pvt Ltd as on March 31, 2015 and pledged to it and that valuation amount of the invoked shares had been adjusted against the dues of the Borrower/Corporate Debtor, following which respondent No. 2 had filed its revised claim before the Respondent No. 1, i.e., the Resolution Professional. The relevant clauses of the Assignment Deed dated 18.05.2020 as stated by Respondent No.2 is reproduced below:- Clause 4 of the agreement deals with. ASSIGNOR'S REPRESENTATIONS AND WARRAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assignment Agreement dated 18.05.2020 is registered at a later date, the assignment of debt will be considered from 18.05.2020. c) The Hon'ble National Company Law Appellate Tribunal ( NCLAT ) at New Delhi vide order dared 14.12.2018 in Company Appeal (AT) (Insolvency) No. 169,170,171,172,173 of 2017 in the matter of Edelweiss Asset Reconstruction Company Ltd vs. Synergies Dooray Automotive Ltd arising out of judgment given by this Tribunal in similar circumstance has held the following :- The contention of the party in this case in Para 60(4) was the allegation that 'Millennium Finance Limited' becoming a related party by virtue of assignment from a related party the same is frivolous and unsubstantiated. 'Millennium Finance Limited' does not fall within any of the definitions of related party as mentioned from 5(24)(a) to 5(24)(m). 'Edelweiss Asset Reconstruction Company' is put to strict proof of establishing the same. 66. On perusal of above three assignment agreements, it is clear those documents are duly executed with the concerned authorities, and they are not questioned by any party to those proceedings. Appellant herein, being simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove documents were executed without making reference to 'BIFR' is valid or not. Admittedly, the Appellant herein and the 'Millennium Finance Limited' are assignees of original lenders to 'Synergies-Dooray Automotive Limited'. It is not the case of the Appellant that Assignors have no right to question the rights / interest to the assignee. It is the case of the Applicant that the Respondent No. 3 was assigned the rights / interest in question in order to deprive / reduce the interest of the Appellant herein in the 'Committee of Creditors'. As long as the assignment agreement deeds are valid and legally enforceable, the Appellant has no locus standi to question its object, modus operandi behind its execution. The contentions of the Appellant that the 'Millennium Finance Limited' would become a related party by virtue of Section 5 (24) is not at all tenable. Respondent No.2 submits that the above stated judgements is similar to the facts and circumstances in the present application and as such the Assignment Agreement dated 18.05.2020 is valid as per law and the Applicant cannot be held as a related party financial creditor and urged this T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into Assignment Agreement with Applicant for consideration for transferring the debt of ₹ 60,47,38,233/- for a sum of ₹ 10 lakhs. The Learned Counsel contended, 2nd Respondent has not transferred shares held by it in the Corporate debtor. Therefore, the Applicant is not a related party. Respondent No.2 retained shares with it. Therefore, there is no impediment for including the Applicant in the CoC after admitting the claim basing on Assignment Agreement. The Learned Counsel contended, it is not open to entertain doubt over Assignment Agreement on the ground consideration is very meagre for the transfer of debt. 8. The Resolution Professional strongly contended that there are suspicious circumstances surrounding the Assignment Agreement. The suspicious circumstances have been explained. The Resolution Professional would contend, this transaction was alleged to have taken place on 18.05.2020. The Assignment Agreement is not registered. It requires registration. Therefore, this document cannot be looked into at the time when the claim was made before Resolution Professional. The Resolution Professional would further contend, the document was stated to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serves to be rejected. 11. The case of Respondent No.2, it has entered into Assignment Agreement with the Applicant. Respondent No.2 is the creditor of Corporate Debtor. Respondent No.2 filed counter and categorically admitted transferring the debt in favour of Applicant and entering into Assignment Agreement daed 18.05.2020. 12. It is true the debt of ₹ 60,47,38,233/- was assigned to the Applicant with the underlying securities which is for a sum of ₹ 10 lakhs. I agree with the contention of the Assignor that the inadequacy of consideration is not by itself a ground to entertain a doubt about the transaction. There are other circumstances pointed out by the Resolution Professional. The contention of the Resolution Professional that he has relied on Section 5 (7) of the Code and decided the claim on administrative side. The Resolution Professional would contend, the Applicant is a non-financial institution and non-ARC. How this Applicant being a non financial institution and non-ARC is entitled to purchase the debt with underlying immovable and movable securities from Respondent No.2 which is a Non-Banking financial institution and holding net worth of ₹ 298 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before the Resolution Professional. The unregistered documents cannot be taken into account for admission of the claim. The document must have been registered on the date on which the claim is made. No doubt for registration, four months are available under Section 23 of the Registration Act. The question is whether Assignment Agreement was registered on the date on which claim was made before the Resolution Professional. The documents must have been registered by the date the claim was made before the Resolution Professional. So when claim was made, the documents was not registered. Therefore, the document cannot be looked into. The Resolution Professional had not committed any error by not relying the unregistered Assignment Agreement because it was not registered and claim could not be admitted. 16. The second contention is Applicant ought to have been declared as financial creditor and ought to have been in the CoC. It was held by this Tribunal in IA 677/2019 that Assignor is a related party. When Assignor is a related party, how Assignee is not a related party who is stepping into the shoes of the Assignor by virtue of assignment of debt. In this connection Resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
