Revolution Infocom Private Limited Vs. Sandwoods Infratech Projects (P) Limited
CA (AT) Insolvency No. 1259 of 2022
Facts:
1.CIRP was initiated against the Corporate debtor (Sandwoods Infratech Projects ) and appellant filed its claims before the Resolution professional as the Financial Creditor.
2.First Meeting of Committee of Creditors (“CoC”) was held on 24.11.2021, in which meeting the Appellant was invited to participate as Member of CoC on the strength of his claim. In the Minutes of the Meeting dated 24.11.2021, an objection was raised by a Member of CoC that Appellant being ‘related party’ cannot be part of the CoC.
3.An IA No.5535 of 2021 was filed by IRP seeking direction to take action against the Appellant Company under Section 235A of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”) for making willful and false disclosure and concealment of facts in Claim Form-C. An email was sent to appellant by the RP holding the appellant as the Related party of the corporate debtor on account of PNB objection.
4.Resolution plan was approved and an IA was filed challenging the decision of RP which was upheld by the adjudicating authority. Appellant is challenging the order of AA
Issue: Whether the RP was right in treating the appellant as related party of the Corporate debtor?
Arguments:
For appellants:
1.Counsel submitted that Appellant has no control over the Corporate Debtor nor any representation on the Board of Directors. The Appellant is also not a shareholder or Director of the Corporate Debtor. It is submitted that the Appellant is not covered by the definition of ‘related party’ within the meaning of Section 5(24) of the Code. It is submitted that IRP having admitted the claim of the Appellant as Financial Creditor, had no jurisdiction to review the claim by holding the Appellant as ‘related party’ to the Corporate Debtor.
For respondents:
1.Counsel submitted that appellant is covered by the definition of ‘related party’ as contained in Section 5(24)(i) of the Code. The Appellant is an associate Company of the Corporate Debtor being the Joint Venture on the basis of Memorandum of Understanding (“MoU”) executed between the Appellant and the Corporate Debtor dated 26.11.2012, the terms and conditions of the MoU specially paragraphs 5, 6 and 7 indicate that Appellant has control over the Corporate Debtor. The learned Counsel for the Respondent referred to definition of ‘associate company’ under Section 2(6) of the Companies Act, 2013 and it is submitted that Appellant is covered under the said definition
Decision: RP was right in treating the appellant as the related party of the Financial Creditor.
Rationale:
1.NCLAT noted that MoU clearly indicate that the MoU was nothing but a Joint Venture between the parties. Further, the only project of the Corporate Debtor is the project referred to in MoU dated 26.11.2012. From the clauses of the MoU as noted above, it is clear that decision pertaining to pricing has to be taken with the mutual consent. Thus, there is sufficient control of the Appellant as envisaged in provisions of law. The Appellant being Joint Venture Company of the Corporate Debtor was clearly ‘related party’ and no error has been committed by IRP in declaring the Appellant as ‘related party’.
2.It held that RP has to maintain an updated list of claims and is entitled to correct the errors, if any, in accepting or rejecting the claim. Further, it is not a case that IRP on his own has changed the category of Appellant. Rather, it was done on the objection of the Punjab National Bank, the Member of CoC, which objection was raised in the very First Meeting of the CoC held on 24.11.2021. Thus, present is not a case where IRP has reviewed its decision
Order Copy:
