Greenshift Initiatives Pvt. Ltd. Vs. Sonu Gupta, Resolution Professional - Disqualification that existed at the time of initiating the CIRP cannot be removed by a mere assignment. It is submitted that assignment is transfer of one's right to recover debt to another person and that the rights of the 'assignee' are no better than those of an 'assignor'.

 NCLAT (2025.02.11) in Greenshift Initiatives Pvt. Ltd.  Vs. Sonu Gupta,   Resolution Professional  [Company Appeal (AT) (Insolvency) No.1936 of 2024], held that; 

• As such, the financial creditor who in praesenti is not a related party, would not be debarred from being a member of the CoC. However, in case where the related party financial creditor divests itself of its shareholding or ceases to become a related party in a business capacity with the sole intention of participating in the CoC and sabotage the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2), to consider the former related party creditor, as one debarred under the first proviso.

• It is based on the first principles of law that 'one cannot assign a better right that he himself possess'

• Disqualification that existed at the time of initiating the CIRP cannot be removed by a mere assignment. It is submitted that assignment is transfer of one's right to recover debt to another person and that the rights of the 'assignee' are no better than those of an 'assignor'.

• Accordingly, the assignee does not get the right to change its status from 'related' to 'unrelated'. At the same time, it is humbly submitted that the bar is on the person who is holding the debt and not the nature of the debt per se. It will not be entirely correct to bar somebody (who is otherwise eligible) from voting just because it bought the debt from a related party.”

Excerpts of the order;

11.02.2025: Resolution Professional appearing in person submits that the Resolution Professional does not propose to file a reply. We record the statement.

# 2. Heard learned counsel for the parties. This appeal has been filed against order of the Adjudicating Authority dated 13.01.2025 by which order application filed by the Appellant being IA No.331/2024 has been rejected.

# 3. Brief facts necessary to be noticed for deciding this appeal are:

3.1 CIRP against the Corporate Debtor - Rolta Bi & Big Data Analytics Pvt. Ltd. commenced on 13.10.2023. Form A was published on 16.10.2023 and last date was 28.10.2023. Appellant’s case is that it entered into Assignment Agreement on 06.11.2023 with Rolta Pvt. Ltd. and in terms of the said Assignment Agreement, Rolta Pvt. Ltd. assigned the debt for an amount of Rs.3,25,000-/to the Assignee. A claim was filed by the Applicant before the Resolution Professional and claim was admitted for Rs.3,48,742/-. However, the Applicant was not permitted a seat in the CoC, hence, an IA was filed by the Applicant to give a seat in CoC with voting rights, which application has been rejected by the impugned order. Aggrieved by which order this appeal has been filed.

# 4. Learned counsel for the Appellant submits that the mere fact that Rolta Pvt. Ltd., the Assignor was a related party cannot ipso-facto led to conclusion that Assignee/Applicant is also a related party. In support of his submission, learned counsel for the Appellant has relied on judgment of Hon’ble Supreme Court in “Phoenix ARC Private Limited vs. Spade Financial Services Ltd. & Ors., (2021) 3 SCC 475”.

# 5. The Resolution Professional appearing in person opposing the submission of learned counsel for the Appellant submits that the Appellant has entered into Assignment Agreement subsequent to commencement of CIRP with a motive to come in the CoC. A reply was also filed by the Resolution Professional opposing the application of the Appellant.

# 6. We have considered the submissions of learned counsel for the parties and perused the record.

# 7. There is not dispute to the facts and sequence of events. CIRP was commenced against the Corporate Debtor on 13.10.2023. Public Announcement was made on 16.10.2023 inviting claims and last date of submission of claims was 28.10.2023. Subsequently, Assignment Agreement was entered between the Appellant and Rolta Pvt. Ltd. on 06.11.2023 and on that basis the Appellant claim to be member of the CoC. The judgment in Phoenix ARC Private Limited has been relied by the Appellant in Para 100, 101 & 102, which is as follows:

• “100. Therefore, it could be stated that where a financial creditor seeks a position on the CoC on the basis of a debt which was created when it was a related party of the corporate debtor, the exclusion which is created by the first proviso to Section 21(2) must apply. For, it is on the strength of the financial debt as defined in Section 5(8) that an entity claiming as a financial creditor under Section 5(7) seeks a position on the CoC under Section 21(2). If the definition of the expression ‘related party’ under section 5(24) applies at the time when the debt was created, the exclusion in the first proviso to Section 21(2) would stand attracted.

• 101. However, if such an interpretation is given to the first proviso of Section 21(2), all financial creditors would stand excluded if they were a ‘related party’ of the corporate debtor at the time when the financial debt was created. This may arguably lead to absurd conclusions for entities which have legitimately takenover the debt of related parties, or where the related party entity had stopped being a ‘related party’ long ago.

• 102. In this regard, it is relevant to note the observations in the Insolvency Law Committee Report of 2020 clarifying the eligibility of third-party assignees of the debt of a related party creditor, to be members of the CoC. It was observed:

• “11.09 … As a third-party assignee, who by itself is not a related party, would not have any such conflict of interest, it should not be disabled from participating in the CoC. Further, the aforesaid disability is not related to the debt itself but is based on the relationship existing between a related party creditor and the corporate debtor. Therefore, as the disability imposed under the first proviso to Section 21(2) pertains to the related party financial creditor and not to the debt it is owed, the Committee agreed that it is clear that when a related party financial creditor assigns her debt to a third party in good faith, such third party should not be disqualified from participating, voting or being represented in a meeting of the CoC.

• 11.10. However, the Committee discussed that in certain cases, a related party creditor may assign its debts with the intention of circumventing the disability imposed under the first proviso to Section 21(2) by indirectly participating in the CoC through the assignee. As a related party is expressly prohibited from participating in the CoC, it cannot do so indirectly by assigning its debt to a third-party assignee for the purposes of circumventing this restriction. Therefore, in order to prevent any misuse, the Committee recommended that prior to including an assignee of a related party financial creditor within the CoC, the resolution professional should verify that the assignee is not a related party of the corporate debtor. In cases where it may be proved that a related party financial creditor had assigned or transferred its debts to a third party in bad faith or with a fraudulent intent to vitiate the proceedings under the Code, the assignee should be treated akin to a related party financial creditor under the first proviso to Section 21(2).”    (emphasis supplied)”

# 8. There can be no disputed to the proposition laid down by the Hon’ble Supreme Court in the above case that the financial creditor who in praesenti is not a related party, would not be debarred from being a member of CoC, but that proposition comes with a caveat that it should not be with intention of participating in the CoC and sabotage the CIRP by diluting the vote share of other creditors and it would be in keeping with the object and purpose of the first proviso to section 21(2), to consider said party out of CoC. In Para 103 of the judgment the Hon’ble Supreme Court laid down following:

• “103. Thus, it has been clarified that the exclusion under the first proviso to Section 21(2) is related not to the debt itself but to the relationship existing the financial creditor party financial creditor and the corporate debtor. As such, the financial creditor who in praesenti is not a related party, would not be debarred from being a member of the CoC. However, in case where the related party financial creditor divests itself of its shareholding or ceases to become a related party in a business capacity with the sole intention of participating in the CoC and sabotage the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2), to consider the former related party creditor, as one debarred under the first proviso.”

# 9. Learned counsel for the Appellant has pointed out the reply, which was filed by the Resolution Professional before the Adjudicating Authority. Resolution Professional clearly opposed the claim of the Appellant to be given seat in the CoC. Para 5 of the Reply gives details of the facts, which is as follows:

• “5. The Applicant submitted its claim to me and after verification, I admitted the claim amount and I sent an email on 18.12.2023 to the applicant stating that, "Dear Sir, With reference to the trailing mail, please be updated that your claim as a Financial Creditor of Rs. 3,48,742/- is hereby accepted in full. However, the claim was originally submitted by the related party of the corporate debtor and the said assignment took place on 06.11.2023 which is after the CIRP commencement date i.e. 13.10.2023. Therefore, participation in CoC and voting rights cannot be given with respect to the said claim as per the provisions of section 21 of IBC, 2016".

• It is humbly submitted that the Applicant is not entitled to right of representation, participation or voting in a meeting of the committee of creditors as on date. It is based on the first principles of law that 'one cannot assign a better right that he himself possess', if a related party creditor has assigned its debts with ulterior motives, the diminished voting share of the applicant creditor would be appropriate. Disqualification that existed at the time of initiating the CIRP cannot be removed by a mere assignment. It is submitted that assignment is transfer of one's right to recover debt to another person and that the rights of the 'assignee' are no better than those of an 'assignor'. Accordingly, the assignee does not get the right to change its status from 'related' to 'unrelated'. At the same time, it is humbly submitted that the bar is on the person who is holding the debt and not the nature of the debt per se. It will not be entirely correct to bar somebody (who is otherwise eligible) from voting just because it bought the debt from a related party.”

# 10. In the facts of the present case and sequence of time, it is clear that the Assignment was only with object to get a seat in the CoC to affect the interest and rights of other creditors. We, thus, are of the view that the Adjudicating Authority has rightly rejected the application of the Appellant claiming right in the CoC. We thus do not find any error in the order of the Adjudicating Authority. There is no merit in the appeal. Appeal is dismissed.

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Greenshift Initiatives Private Limited, Vs. Sonu Gupta, Resolution Professional - The Hon’ble Court also held that if the definition of the expression “related party under Section 21(24) applies at the time when the debt was created, the exclusion in the first place to Section 21(2) would stand attracted.

 NCLT Mumbai-V (2024.08.13) in Greenshift Initiatives Private Limited, Vs. Sonu Gupta, Resolution Professional of Rolta Bi & Big Data Analytics Private Limited,[(2024) ibclaw.in 716 NCLT, I.A. 331 of 2024 in C.P.(IB) No. 1122/MB/2021] held that; 

• It is evident that the objective is to exclude a related party of the Corporate Debtor from the CoC so as to obviate the conflict of interest that may arise if a related party is allowed to become a part of CoC.

• The Hon’ble Court also held that if the definition of the expression “related party under Section 21(24) applies at the time when the debt was created, the exclusion in the first place to Section 21(2) would stand attracted.

Excerpts of the Order;

# 1. The case of the Applicant in this IA is that he be allowed to attend the CoC meetings and the Respondent-RP be directed to give notice of all future meetings of CoC to the Applicant for enabling the Applicant to attend the meetings of the CoC. 

# 2. The case of the Applicant is that vide order 13.10.2023, the Corporate Debtor i.e. Rolta Bi & Big Data Analytics Private Limited was admitted to CIRP and the Respondent was appointed as RP for the said proceedings. The public announcement in Form-A was published on 16.10.2023 and the last date of submission of the claims was stated to be 28.10.2023. 

# 3. The case of the Applicant is that he entered into Assignment Agreement dated 06.11.2023 with one Rolta Private Limited. In terms of the said Assignment Agreement, Rolta Private Limited being the Assignor unconditionally and irrevocably assigned its debt to that of the Applicant. The Applicant has made payment of Rs. 3,25,000/- to the Assignor Rolta Private Limited. 

# 4. The case of the Applicant further is that the said debt arose due to the financial assistance of Rs. 3,48,742 having been provided by the Assignor Rolta Private Limited to that of the Corporate Debtor and the said debt is also acknowledged by the Corporate Debtor in its balance confirmation letter to Rolta Private Limited on 02.10.2023. 

# 5. The case of the Applicant is that in view of the above stated, the Applicant filed a claim of Rs. 3,48,742/- in Form-C dated 08.11.2023. The Respondent has been made duly aware of the said assignment. The Applicant has also placed on record one legal opinion having been sought from Justice S.C Gupta saying that the Assignment of loan granted to the Applicant by the said Rolta Private Limited deserve to be taken on record and the Applicant deserves to be admitted as a Financial Creditor. On 05.12.2023 from the IBBI portal, the Applicant came to know that he has been admitted as an unsecured Financial Creditor. In fact, the Respondent also vide email dated 18.01.2024 informed the Applicant that the Applicant’s claim has been admitted entirely as an unsecured Financial Creditor. It is also stated that being an Assignee, after announcement of the CIRP Proceedings, the Applicant cannot be given any voting rights in terms of Section 21 of the Code. 

# 6. The case of the Applicant is that he deserves to be given a seat in CoC with voting rights as he by no means can be stated to be directly or indirectly, connected or related to Corporate Debtor in any manner. Thus, Applicant cannot be termed as a related party of the Corporate Debtor under Section 5 (24) of the Code, thus, cannot be disqualified from being a member of the CoC in terms of first proviso to Section 21(2) of the Code. 

• 2) The Committee of Creditors shall comprise of all financial creditors of the Corporate Debtor:  . . . .  PROVIDED that a [financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor] shall not have any right of representation, participation or voting in a meeting of the committee of creditors: 

• a) After the proviso, the following proviso shall be inserted namely: - “PROVIDED FURTHER that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares or completion of such transactions as may be prescribed prior to the insolvency commencement date. 

The Applicant made an attempt to rely upon the INC report of 2020 stating that when a Financial Creditor assigns their debt to a third party in good faith, such third party remains entitle to participate, represent and vote in CoC. 

# 7. On the other hand, the case of the RP is that the assignment of debt to the Applicant who claims himself to be an independent party, cannot be treated as an independent party as the debt assigned to him is firstly during the course of the CIRP, secondly, from a related party. Thus, related party could only assign the rights, privileges or disqualifications which it carried in the CIRP to the Assignee. In fact, the Assignee has stepped into the shoes of a related party. Thus, he cannot be given any better rights than that of related party. 

# 8. In addition, the case of the Respondent/RP is that the claim of the Applicant has been duly admitted, but in view of the relationship of the Assignor with that of the Corporate Debtor, the Assignee cannot be given any voting rights in the present case, the said rights were assigned to the Applicant during the course of CIRP through the Assignment Agreement. Thus, the Applicant is not entitled to be given any rights to be a voting member of CoC. 

# 9. After having heard both the Ld. Counsels for the parties and after appreciating the relevant provisions of the Code i.e. Section 21 and also Section 5(24) of the Code. It is evident that in the present case, ‘Rolta Private Limited’ who is a related party, has assigned its debt to the Applicant after the Corporate Debtor was admitted to CIRP on 13.10.2023. The debt is stated to have been assigned to the Applicant on 06.11.2023. As is the settled principle of law that “one cannot assign a better right or title that he himself possess”. Thus a related party having a bar of not being allowed to be part of CoC cannot get over the said bar merely by assignment. The assignment of debt will carry the prohibition or bar which were there in the hands of related party. Assignment is transfer of one’s rights to recover debt to another person and that the rights of the Assignee are no better than that of an Assignor. Thus, the Assignee does not get the right to change its status from a related to an unrelated party merely by the assignment of the debt. 

# 10.Thus, it is evident that firstly the bar is because of the relationship of the parties and secondly the bar is on the person who’s holding the debt and not the nature of the debt per-se. That is precisely the reason why the Respondent-RP has in fact admitted the debt but not allowed the Applicant to be a member of CoC which seems to be justifiable in view of the objective of the law. 

# 11.We also deem it appropriate to consider the judgment of the Hon’ble Supreme Court in Phoenix ARC Private Limited Vs. Spade Financial Services Limited (2021) (3) SCC 475 wherein the Hon’ble Supreme Court in fact while appreciating the Insolvency Law Committee Report and quoting from the same has held that the objective is to prevent erstwhile promoters and other related parties of the Corporate Debtor from gaining control of the Corporate Debtor during the CIRP by virtue of any loan that may have been provided by them. It is evident that the objective is to exclude a related party of the Corporate Debtor from the CoC so as to obviate the conflict of interest that may arise if a related party is allowed to become a part of CoC. Thus, the Hon’ble Supreme Court held that the true test for determining whether the exclusion in the first proviso to Section 21(2), applies must be formulated in a manner which would advance the object and purpose of the Statute and not leads to its provision being defeated by indigenous strategies. The Hon’ble Court also held that if the definition of the expression “related party under Section 21(24) applies at the time when the debt was created, the exclusion in the first place to Section 21(2) would stand attracted. 

# 12.Thus, keeping in view of the law laid down by the Apex Court and the objective of the Code itself in context with the facts and circumstances of the present case, we deem it appropriate not to grant the relief being prayed for. In view of the above, the present Application is dismissed. 

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Peanence Commercial Pvt. Ltd. and Anr. Vs. Mamta Binani (RP) - Those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder.

 NCLAT (2024.05.30) in Peanence Commercial Pvt. Ltd. and Anr. Vs. Mamta Binani (RP) [(2024) ibclaw.in 543 NCLAT, Company Appeal (AT) (Insolvency) No. 905 of 2024] held that;

• However, in case where the related party financial creditor divests itself of its shareholding or ceases to become a related party in a business capacity with the sole intention of participating in the CoC and sabotage the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2), to consider the former related party creditor, as one debarred under the first proviso.

• Those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder.

Excerpts of the order;.

This Appeal has been filed challenging the order dated 24.04.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-I in I.A. 724 of 2024. By the impugned order I.A. 724 of 2024 filed by Appellant No.2 has been dismissed. Aggrieved by which order this appeal has been filed. Brief facts of the case necessary for deciding this appeal are:

• (i) CIRP commenced against the Corporate Debtor – Rolta India Limited by order dated 19.01.2023.

• (ii) Pursuant to the admission order in the CIRP, Rolta Private Limited filed its claim of Rs.634,55,43,228/-. The claim of Rolta Private Limited was admitted by the Resolution Professional, however, Rolta Private Ltd. being a related party of the Corporate Debtor, the Rolta Private Limited was not permitted representation, participation or voting right in the Committee of Creditors (CoC).

• (iii) Rolta Private Limited entered into MoU dated 15.01.2024 with Peanence Commercial Private Limited for assignment of debt for a one-time consideration of Rs.50 Crores on as is where is basis.

• (iv) Appellant – Rolta Private Limited sent a letter to the Resolution Professional dated 06.02.2024 seeking in principle approval of the assignment dated 15.01.2024.

• (v) The Resolution Professional sent email dated 08.02.2024 to the Applicant informing that the Resolution Professional has no authority or jurisdiction to grant approval for the Deed of Assignment. It was further mentioned that on the basis of the documents shared, no information is found which requires any claim to be updated.

• (vi) On 15.02.2024, the Resolution Professional wrote to the Applicant that the Resolution Professional is unable to issue confirmation in relation to the Deed of Assignment and nature of the debt would not change and no voting rights would be available to Peanence Commercial Private Limited.

• (vii) Aggrieved by the response of the Resolution Professional dated 15.02.2024, I.A. 724 of 2024 was filed by the Appellant, which I.A. has been rejected by the Adjudicating Authority on 24.04.2024.

• (viii) Challenging the order dated 24.04.2024, this Appeal has been filed.

# 2. We have heard Shri Arun Kathpalia, learned senior counsel for the Appellant and Shri Sandeep Bajaj, learned counsel appearing for the Resolution Professional.

# 3. Learned counsel for the Appellant submits that the assignment dated 15.01.2024 could not have been refused to be acknowledged by the Resolution Professional. The Appellant – Peanence Commercial Private Limited is not a related party to the Corporate Debtor nor there is any disqualification attached to the Assignee to be part of the Committee of Creditors. It is submitted that the Adjudicating Authority has not correctly appreciated the judgment of Hon’ble Supreme Court in “Phoenix ARC Private Limited vs. Spade Financial Services Limited & Ors., (2021) 3 SCC 475”. The Assignment for consideration of Rs.50 Crore is an arm-length transaction. The Adjudicating Authority committed error in rejecting the claim. It is submitted that Appellant No.1 – Peanence Commercial Private Limited is entitled to avail benefits of an unrelated Financial Creditor of the Corporate Debtor. The application filed before the Adjudicating Authority was not premature. Findings returned by the Adjudicating Authority are based on issues which were not raised by any party.

# 4. Learned counsel for the Resolution Professional refuting the submission of learned counsel for the Appellant submits that the application filed by the Applicant was misconceived and entire proceeding on the basis of which application was filed are pre-mature. The MoU relied by the Appellant indicate that no Assignment Agreement has taken place between Appellant No.1 and Appellant No.2. MoU is only an agreement to enter into an Assignment in future. The Deed’s terms are contingent in nature, upon the approval being granted by the Resolution Professional to recognize the Assignee as a non-related secured financial creditor and further to recognize its right to participate in the CoC. It is submitted that the Resolution Professional has no authority to recognize any assignment. It is submitted that the assignment dated 15.01.2024 is nothing but malafide exercise by the Appellants to enter into the CoC which has been denied to Rolta Private Limited being related party. The Adjudicating Authority has rightly relied on the judgment of Hon’ble Supreme Court in “Phoenix ARC Private Limited vs. Spade Financial Services Limited & Ors.”. It is submitted that the resolution process of the Corporate Debtor is at a conclusionary stage. The purpose and intend of the assignment is to somehow put an entity in the CoC by Rolta Private Limited who could not itself get a berth in the CoC it being a related party. The entire exercise is wholly malafide and rightly not recognized by the Adjudicating Authority.

# 5. We have considered the submissions of learned counsel for the parties and perused the record.

# 6. From the facts as noticed above, it is clear that the entire claim filed by Rolta Private Limited, a related party of the Corporate Debtor, has been admitted in the CIRP. The Rolta Private Limited, however, being a related party has not been given a berth in the CoC. The copy of the Assignment Agreement dated 15.01.2024 has been brought on the record. ‘Purchase Consideration’ and ‘Purchase Consideration Due Date’ has been defined in following words:

• ““Purchase Consideration” means a sum of Rs. 50,00,00,000 (Rupees Fifty crores) payable by the Assignee to the Assignor for the purchase of the Financial Assistance;

• “Purchase Consideration Due Date” means the date agreed upon by the Assignee and Assignor for payment of the Purchase Consideration which will be immediately upon obtaining the approval of the resolution professional of the Borrower on the recognition of the Assignee as a non-related secured financial creditor in the Insolvency Proceedings with the confirmation that the assignee will have the full voting rights for an amount of Rs.634,55,43,228/- as financial creditor in the Committee of Creditor of the Borrower (Corporate Debtor);”

# 7. Clause 2 deals with ‘Assignment of loans’. Clause 2.5 is as follows:

• “2.5 From the date of the Confirmation Notice, all economic benefits pertaining to the Financial Assistance, including all realization and recoveries, if any made on and after the date of Assignment Agreement, shall be for the benefit of the Assignee.”

# 8. We have noticed the sequence of the events where after the Assignment Agreement dated 15.01.2024, an email was sent to the Resolution Professional seeking conformation by the Resolution Professional to the Assignment Agreement dated 15.01.2024. By email dated 06.02.2024, the Appellants requested for confirmation at the earliest. Para 6 of the email is as follows:

• “6. Accordingly, in view of the foregoing, we request for your confirmation at the earliest that, in the present circumstances, the Assignee would be recognized as a non-related financial creditor of the Corporate Debtor.”

# 9. The Resolution Professional immediately replied to the Appellants on 08.02.2024 informing that the Resolution Professional has no authority or jurisdiction to grant any such approval as prayed for. The Resolution Professional on 15.02.2024 wrote to the Appellant communicating that the Resolution Professional is unable to issue any confirmation as has been sought with regard to proposed assignment. Reply dated 15.02.2024 is as follows:

• “Subject: FW: Assignment of financial debt due to Rolta Private Ltd, Assignment of financial debt due to Rolta Private Ltd.

• Attachments: Rolta India Limited Legal opinion-related party assignment14.02.2024 with Judgments.pdf
  Importance: High
  15.02.2024

• Sir

• Greetings!

• We are in receipt of communication dated 07.02.2024 and a preliminary response to the same was issued on 08.02.2024. As stated therein, we have now received the legal opinion (attached to this email) and in pursuance of the advice received, our final response to your query is as follows:

• a. Your communication seeks prior confirmation from the resolution professional that the said assignment would enable re-categorisation of a related party’s claim to non-related party even prior to the actual assignment taking place and makes such confirmation a condition precedent.

• b. The ratio decidendi of the judgment dated 01.02.2021 passed by the Hon’ble Supreme Court in the case of in Phoenix Are Private Limited vs Spade Financial Services Limited & Ors, reported at 2021 (3) SCC 475 is clear that the actions of a related party of the corporate debtor have to be viewed with serious and intricate circumspection, especially as what is being sought vide your communication is a confirmation that the existing voting rights of the members of the committee of creditors would be revised or not.

• c. In this regard, I have been advised that there is no provision under the Code which empowers/ entitles a resolution professional to grant such confirmation in advance or be party to the assignment of debt by one creditor in favour of third parties.

• d. I have also been advised that the position of law that has remained uncontroverted is that assignment is the transfer of one’s right to recover the debt of another person as a contractual right and hence, the rights of an ‘assignee’ are no better than those of the ‘assignor’ as the “assignee’ merely steps into the shoes of the ‘assignor’. The ‘assignee’ accordingly would take over the rights and the allied disadvantages as well.

• e. Furthermore, on the aspect of taking cognizance of the proposed assignment, I have been advised that the IRP/RP are responsible for collating the claims, revising the claims from time to time based upon information coming into their possession or being provided by the creditors. However, there are no provision in the Code or CIRP Regulations which permit for review of the status of a creditor. Secondly, the power to constitute Committee of Creditors cannot include a power to re-constitute Committee of Creditors except in the manner provided in the Code or CIRP Regulations.

• In regard to the above, I have also perused the Assignment Deed along with the legal opinion shared by your goodself and the legal opinion as sought by me (attached to this email). Accordingly, keeping in mind the current stage of the corporate insolvency resolution process of the Corporate Debtor, contents of the Said Assignment Deed and the legal opinion received by me, following is my response:

• a. I am unable to issue confirmation as has been sought in respect of the proposed assignment

• b. Furthermore, even if the steps are undertaken as envisaged under the Said Assignment Deed, the nature of the debt that has been assigned would not change and no voting rights would be available to such assignee, as the assignee would simpliciter step into the shoes of the assignor and not be entitled to enjoy any better rights than that of assignor.

• c. Even otherwise, revision of the voting share cannot be undertaken by the resolution professional at this stage even on account of the assignment, as the same falls beyond the purview of the scope of ‘updation of claim’.

• Thanking you

• Warm Regards
  Dr. CS Adv Mamta Binani
  Resolution Professional (RP)
  In the matter of Rolta India Limited
  Registration No.: IBBI/IPA-002/IP-N00086/2017-18/10227
  AFA valid till 03.12.2024
  +91 98310 99551
  roltaindia.cirp@gmail.com (process specific)
  mamtabinani@gmail.com (registered with IBBI)
  Address of the RP registered with IBBI: Second
  Floor, Nicco House, 2 Hare Street Kolkata 700001,
  West Bengal”

# 10. It was thereafter the application was filed and the Adjudicating Authority by the impugned order has rejected the application. The Adjudicating Authority in Para 4.2 and 4.4 has made following observations:

• “4.2. The Applicant is stated to have written a letter dated 06.02.2024 to the Respondent Resolution Professional seeking confirmation that the assignee will be recognized as a non-related financial creditor of the Corporate Debtor contending that Justice (Retd.) Suresh C. Gupte has opined that the disqualification under the first proviso to Section 21(2) would not be attracted to an assignment that the bonafide and at arm’s length to an unrelated party. However, the RP is stated to have refused to give confirmation stating that assignment of agreement has yet to take place vide Email dated 14.02.2024.

• 4.4. In the present case the consideration of Rs.50 crore on assignment of debt of Rs.634,55 crores is payable only upon approval of the resolution professional of the borrower a non-related secured financial creditor having full voting rights. It is undisputed fact that the Assignor Rolta Private Limited is related party of the Corporate Debtor and the suspended board of the Corporate Debtor has a right of representation on the CoC where at the resolution plans of prospective resolution application are placed and discussed. This resolution plans clearly show the amounts set aside in each plan towards payment related as well as unrelated financial creditors. In other words the suspended board of the Corporate Debtor is privy to the amounts set aside for payment to Rolta Private Limited in the plan and in this case the amounts so set aside towards related party creditors payment is nil. It is also an undisputed fact that Rolta Private Limited does not have voting rights in the CoC because of disqualification attached to it in terms of proviso to Section 21(2) of the Code. In view of these facts we are of the considered view that the assignment becoming affecting only upon confirmation from Resolution Professional of treating the Applicant as unrelated secured financial creditor with voting rights in itself cannot be said to be a bonafide transaction.”

# 11. The Adjudicating Authority in the impugned order has also relied on Para 103 and 104 of the judgment of Hon’ble Supreme Court in “Phoenix ARC Private Limited vs. Spade Financial Services Limited & Ors., (2021) 3 SCC 475”. Para 4.3 of the order of the Adjudicating Authority is as follows:

• “4.3. The Hon’ble Supreme Court in the case of Phoenix Arc (P) Ltd. vs Spade Financial Services Ltd. (2021) 3 SCC 475 held that –

• 103. Thus, it has been clarified that the exclusion under the first proviso to Section 21(2) is related not to the debt itself but to the relationship existing the financial creditor party financial creditor and the corporate debtor. As such, the financial creditor who in prasenti is not a related party, would not be debarred from being a member of the CoC. However, in case where the related party financial creditor divests itself of its shareholding or ceases to become a related party in a business capacity with the sole intention of participating in the CoC and sabotage the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2), to consider the former related party creditor, as one debarred under the first proviso.

• 104. Hence, while the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in prasenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a “related party” before the corporate debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors.”

# 12. When we look into the facts and sequence of events, it is clear that present is a case where in fact no assignment has taken place. What is entered between the parties is agreement for assignment that is contingent on approval by the Resolution Professional that Assignee will be given a seat in the CoC. The Adjudicating Authority has rightly taken the view that the whole exercise is a malafide exercise by Rolta Private Limited whose claim has been admitted and who being related party has not been given berth in the CoC and by means of alleged assignment is trying to bring Peanence Commercial Private Limited into the CoC. The real intent of the assignment is clear from the email send to the Resolution Professional where the Resolution Professional has been requested to confirm that Assignee would be declared as non related party to the Corporate Debtor, meaning thereafter the Assignee shall get a berth in the CoC.

# 13. The Adjudicating Authority has rightly noticed the judgment of the Hon’ble Supreme Court in “Phoenix ARC Private Limited vs. Spade Financial Services Limited & Ors.”. It has also been noticed that the Assignor is a related party of the Corporate Debtor and the Suspended Board of Corporate Debtor. Resolution Plan of the respective Resolution Applicants being placed and discussed, the Suspended Board of the Corporate Debtor is privy to the amounts which has been set aside for payment to Rolta Private Limited in the plan. At this stage, the Assignment Agreement which has been entered by the parties and has been communicated to the Resolution Professional, clearly indicates that Rolta Private Limited is trying to bring its Assignee to create hurdles and delay in the CIRP of the Corporate Debtor.

# 14. The Adjudicating Authority has given ample reasons in the impugned order for not allowing the prayers made by the Applicant/ Appellant in the application. We are of the view that no error has been committed by the Adjudicating Authority in rejecting I.A. filed by the Appellants by the impugned order dated 24.04.2024. There is no merit in the appeal. Appeal is dismissed.

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