Excerpts of the order;
# 2. The ‘Corporate Insolvency Resolution Process’ was initiated against ‘Synergies-Dooray Automotive Limited’. After the submission of the ‘Resolution Plan(s)’, a number of applications were preferred by the Applicant/Appellant under sub-section (5) (c) of Section 60 of the Insolvency and Bankruptcy Code, 2016 (‘I&B Code’ for short) and related Rules. All the applications have been rejected by different orders all dated 2nd August, 2017 and the ‘Resolution Plan’ submitted by ‘Synergies Castings Ltd.’ as approved by the ‘Committee of Creditors’ with 91.06% vote, has also been approved by the Adjudicating Authority in terms of Section 31(1) of the ‘I&B Code’.
# 4. An application bearing C.A No. 43 of 2017 was filed by the Applicant/Appellant under sub-section (5) (c) of Section 60 of the ‘I&B Code’ read with Rules 14 & 34 of the National Company Law Tribunal Rules, 2016, inter alia seeking direction to direct the ‘Resolution Professional’ to cancel and/or defer the first meeting of the ‘Committee of Creditors’. It was scheduled to be held on 22nd February, 2017 at 2.00 p.m. at Hotel Park Inn by Raddisson, 1 & 2, Ring Road, Vikram Vihar, Lajpat Nagar-4, Near Moolchand Metro Station, New Delhi. Such application was filed on the ground that ‘Interim Resolution Professional’ has failed to consider that the assignment agreements which were entered into as late as 24th November, 2016, by which the existing debt of the ‘Corporate Debtor’ was suspiciously changed hands from a related party of the ‘Corporate Debtor’ being ‘Synergies Castings Limited’ to a third-party Non-Banking Financial Company being ‘Millennium Finance Limited’. It was alleged that the same is invalid as it was entered into with the malafide ulterior motive of reducing the voting rights of the Applicant/Appellant in the meeting of the ‘Committee of Creditors’.
The Adjudicating Authority taking into consideration the revised claim made by the Appellant as was requested to the ‘Interim Resolution Professional’ and other facts held that the Adjudicating Authority cannot go into roving enquiry especially in the case where several issues have been settled by ‘BIFR’ and several agreements have already been executed and approved. C.A No. 43 of 2017 preferred by the Applicant/Appellant was dismissed. This order dated 2nd August, 2017 is under challenge in Company Appeal (AT) (Insolvency) No. 170 of 2017.
# 8. By final order dated 2nd August, 2017 in CA No. 123 of 2017, the Adjudicating Authority approved the ‘Resolution Plan’ submitted by ‘Synergies Castings Limited’. The said order is under challenge in Company Appeal (AT) (Insolvency) No. 169 of 2017 for the grounds as were taken in CA Nos. 43 and 57 of 2017.
# 9. The questions arise for consideration in these appeals are:
i. Whether the assignment(s) made by ‘Synergies Castings Limited’ on 24th November, 2016 in favour of ‘Millennium Finance Limited’ is legal?
ii. Whether the order dated 2nd August, 2017 passed by the Adjudicating Authority approving the ‘Resolution Plan’ submitted by ‘Synergies Castings Limited’ is legal?
# 10. In the present case, if we hold that the assignments made by ‘Synergies Castings Limited’ on 24th November, 2016 in favour of ‘Millennium Finance Limited’ are legal, the second question will be automatically answered in favour of the Appellant.
# 11. On the other hand, if we hold that the assignments made by the ‘Synergies Castings Limited’ all dated 24th November, 2016 in favour of the ‘Millennium Finance Limited’ are illegal and invalid, the approval of the ‘Resolution Plan’ will be declared as illegal.
# 29. According to learned Senior Counsel for the Appellant, ‘Millennium Finance Limited’s claim ought not have been verified/ admitted since the / purported Assignment Agreements were inadequately stamped and unregistered at the time the ‘Insolvency Professional’ verified/ admitted ‘Millennium Finance Limited’s claim.
# 30. Further, it was contended that the purported Assignment Agreements were entered into to circumvent the provisions of the ‘I&B Code’ and fraudulently reduce the voting share of the Appellant in the ‘Committee of Creditors’ of the ‘Corporate Debtor’.
# 31. It was also submitted that Assignment of debt with no payment of consideration is illegal/ unenforceable. As per the ‘Resolution Plan’ submitted by ‘Synergies Castings Limited’ as approved by the ‘Committee of Creditors’, no purchase consideration has been paid by ‘Millennium Finance Limited’ to ‘Synergies Castings Limited’ in respect of the purported Assignment Agreements, and it proposes netting off of the amount due from ‘Millennium Finance Limited’ as purchase consideration against the amount due to be paid under the ‘Resolution Plan’.
# 32. Further, according to the Appellant, the payment Schedule Agreement dated 24th November, 2016 produced before this Appellate Tribunal for the first time on 13th March, 2018 is not a genuine document.
Stand of the ‘Resolution Professional’
# 36. Along with the Assignment Agreements ‘Millennium Finance Limited’ had also filed Form No. CHG-I which demonstrates that the charges were registered with the Registrar of Companies in favor of the ‘Millennium Finance Limited’ on 24th November, 2016 itself which is even prior to coming into force of provisions of ‘I&B Code’.
# 37. Based on the documents and after due verification of claims by the ‘Resolution Professional’, the ‘Committee of Creditors’ was constituted by the ‘Resolution Professional’ and accordingly, voting rights were assigned to the members of ‘Committee of Creditors’.
# 38. It was submitted that in the instant case, the ‘Resolution Professional’ received three ‘Resolution Plans’ for the resolution of the ‘Corporate Debtor’ which were placed before the ‘Committee of Creditors’ in its 2nd meeting held on 24th June, 2017. The ‘Committee of Creditors’ with a majority of 91.06% approved the ‘Resolution Plan’ submitted by ‘Synergies Castings Limited’ which provided for merger of ‘Synergies Castings Limited’ with the ‘Corporate Debtor’.
# 39. The ‘Resolution Plan’ of ‘Synergies Castings Limited’ has been duly approved by the Adjudicating Authority vide order dated 2nd August, 2018 pursuant to which the same has been made binding on all stakeholders.
Stand of the ‘Synergies Castings Limited’
# 41. It was submitted that the creation of charge with the Registrar of Companies in favor of ‘Millennium Finance Limited’ substantiates the fact that the debt was validly transferred from ‘Synergies Castings Limited’ to ‘Millennium Finance Limited’ on 24th November, 2016 which is even prior to coming into force of ‘I&B Code’.
Stand of ‘Millennium Finance Limited’
# 53. It was submitted that the transfer of debt is valid even if the assignment agreements dated 24th November, 2016 were not registered immediately on 24th November, 2016. It is a settled position of law that a debt can be transferred / assigned on execution of an instrument in writing signed by the transferor or his duly authorized agent.
# 55. Learned counsel for the Respondent further submitted that in terms of section 47 of the ‘Indian Registration Act, 1908’, registration relates back to the date of execution of the agreements itself. In the present case, the Assignment Agreements were duly registered with the Joint Sub Registrar, Sabbavaram on 25th April, 2017 and the payment of stamp duty to the tune of Rs. 1,30,300/- for each of the Assignment Agreements made. Further, a sum of Rs. 1,50,000/- was also paid towards fine for delay in presenting the documents in each case. In terms of Section 47 of the ‘Indian Registration Act, 1908’, once a document is registered, the operation of the said relates to the date of execution of the document as held by the Hon'ble Supreme Court in the matter of “Gurbax Singh V. Kartar Singh & ors., SLP (Civil) No. 1969 of 2002” and “Principal Secretary Gov. of Karnataka and Anr. V. Ragini Narayan and Anr., Civil Appeal No. 8895 of 2012”. Accordingly, the assignment deeds by virtue of which ‘Millennium Finance Limited’ became a ‘Financial Creditor’ of the ‘Corporate Debtor’, are validly executed and in force w.e.f. 24th November, 2016.
# 66. …… In the result, we hereby declare that both ‘Synergies Castings Limited’ and ‘Millennium Finance Limited’ were eligible to execute the assignment agreements in question and all rights flow those agreements to ‘Millennium Finance Limited’. After getting assignment of rights, the ‘Millennium Finance Limited’ is fully competent to participate in ‘Committee of Creditors’ in question and it cannot be called a related party as explained.
# 67. ………. 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
# 69. The Assignment deeds of various Banks / Financial Institutions/ ARCs in favour of ‘Synergies Castings Limited’ happened way back in the years 2008-2011 and that too from ‘SBI’, ‘IDBI’, ‘ICICI’ (ARCIL). Therefore, the Adjudicating Authority has not find any fault with these assignment deeds. With respect to the allegation of ‘Synergies Castings Limited’ assigning its debt to ‘Millennium Finance Limited’ on 24th November, 2016, the Adjudicating Authority rightly held that there is no merit in this argument.
# 70. In so far as ‘Resolution Plan’ submitted by ‘Synergies Castings Limited’, it cannot be held to be violation of sub-section (2) of Section 30 or any of the provisions of the law on the ground of violation of Sections 230-232 of the Companies Act, 2013.
# 72. The ‘I&B Code’ is a code by itself and Section 238 provides over riding effect of it over the provisions of the other Acts, if any of the provisions of an Act is in conflict with the provisions of the ‘I&B Code’. Therefore, the arguments of the Appellant that merger and amalgamation of the companies cannot be proposed in the ‘Resolution Plan’ or such proposal is violative of clause (e) of sub-section (2) of Section 30 is fit to be rejected.
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