9911796707
TMI Blog2021 (2) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution Professionals to the extent of their holding that the second respondent, his family members, respondents 3 to 5, are not related parties within the meaning of Sec.5(24) and 5(24A) of the Insolvency and Bankruptcy Code, 2016, in relation to the Corporate Debtor. (b) an order declaring that the respondents 2 to 5 are 'related parties' as defined and envisaged by and within the meaning of Sec.5(24) and 5(24A) of the Insolvency and Bankruptcy Code, 2016 and hence they shall not have the right of representation, participation and voting at the meetings of the Committee of Creditors of the Corporate Debtor. 2. The applicant filed an application under Section 7 of the I &B Code on 30.10.2019 to initiate Corporate Insolvency Resolution Process (CIRP) against M/s. Bristo Foods Pvt Limited (hereinafter called as ('Corporate Debtor'). The Corporate Insolvency Resolution Process (CIRP) was initiated against Corporate Debtor vide Order dated 20.12.2019. The Interim Resolution professional was appointed and he collated the claims of the creditors and constituted the Committee of Creditors (CoC) of the Corporate Debtor under Section 21 of the I&B Code. The first meeting of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his personal e-mail id and mobile number in the Annual returns of the Company filed with the Registrar of the Companies. The applicant sent a notice to the Respondent No.2 and another director on 25.07.2018 to which a reply received on 21.08.2018 disowning the responsibility of repayment and he was not the Manging Director of the Corporate Debtor. Even after the resignation of the Respondent No.2 on 15.11.2019, the E-mail Id of the Corporate Debtor is shown as [email protected], but the telephone number is the similar to the earlier one. It is further stated that Respondent No.2 had signed the Financial Statements of the Company for the last 5 consecutive years, from 2014-2015 to 2018-2019. 7. His further contention is that the Respondent No.2 is a shareholder of the Corporate Debtor and manging the affairs of the Corporate Debtor till the nearest date of commencement of the Insolvency Proceedings, and he is trying to evade accountability in the proceedings and escape disqualification to be a member of the CoC and with malice intention to get into the CoC as a member with a dominant voting share in its meetings. For the aforesaid reasons, the applicant prayed that the relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs, which limit was subsequently enhanced to Rs. 450 lakhs over a period of time with due approval by the Board of Directors as well in the Annual General Body meeting of the Company. The Board had also decided that such amounts brought in by the Directors as loan shall be considered as secured loans carrying interest @14% and shall have a charge against the assets of the Company, which decision was approved in the General Body Meetings of the Company. With the funds so brought by the Directors, the Company could install new machineries and for providing additional factory building and other infrastructures. This effort by the Directors resulted in increase in the production capacity by 10 tons per day. The Loan accounts with Kerala State Industrial Development Corporation Ltd and Canara Bank, which the Creditor institution had already declared Non-Performing Assets (NPA) and accordingly had been subjected to recovery proceedings could be settled utilizing the loan so raised through the Directors of the Company. The loans so brought in by Sri P.M.Mathen Panicker, Thoms Varghese (who later resigned from the Board) Varghese Thomas, Jose T. Polachiara and Thomas Abraham/family mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y false to say that after notice in the CIRP application was served on the Company for appearance on 04.12.2019, that the Respondent No.2 vacated his directorship by resignation on 15.11.2019. The Respondent No.2 was quite unaware of any such action from the part of the applicant as on 15.11.2019, the date of his resignation. The averment that the Respondent No.2 has resigned from the Board of the Company to evade accountability in the further proceedings and escape disqualification to' be a member of the CoC as also to get into the CoC as a member with a dominant voting share in its meeting is a highly false and baseless statement, and this statement is only to be denied. After resignation from the Company, the Respondent No.2 had no involvement in the business of the Company and if at all the remaining directors of the Company failed to remove the mobile number of the Respondent No.2 while preparing Annual Return, that could only be by way of an omission and that cannot be construed even to contend that the resignation of the Respondent No.2 was only a ruse to defeat the process of law and that he was still having control of the Company. The further averment that the 2nd Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y process or from the date of initiating CIRP?. 15. If the answer is from the date of initiation of CIRP, then constitution of CoC having related-party cannot be accepted in law. But if it is from the date of commencement of CIRP, then the CoC is perfectly valid in law and the rights of Respondent 2 to 5 in participating and voting according to the shares cannot be interfered with. 16. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rresponding governing body of the corporate debtor; m. any person who is associated with the corporate debtor on account of- (i) participation in policy making processes of the corporate debtor; or (ii) having more than two directors in common between the corporate debtor and such person; or (iii) interchange of managerial personnel between the corporate debtor and such person; or (iv) provision of essential technical information to, or from, the corporate debtor; Section 5 (24-A) "related party", in relation to an Individual, means- a. a person who is a relative of the individual or a relative of the spouse of the individual; b. a partner of a limited liability partnership, or a limited liability partnership or a partnership firm, in which the individual is a partner; c. a person who is a trustee of a trust in which the beneficiary of the trust includes the individual, or the terms of the trust confers a power on the trustee which may be exercised for the benefit of the individual; d. a private Company in which the individual is a director and holds along with his relatives, more than two per cent. of its share capital; e. a public Company in which the indivi ..... 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