The National Company Law Appellate Tribunal (NCLAT) rejected Edelweiss Asset Restoration Company's multiple pleas challenging the National Company Law Tribunal (NCLT) order of August 2, 2017, that approved the resolution proposal of Synergy Dooray Automotive (SDAL).
In the instant case titled Edelweiss Asset Reconstruction Co. Ltd. v Synergies Dooray Automotive Ltd. & Ors. two questions were raised before the NCLAT:
Whether the assignment(s) made by ‘Synergies Castings Limited’ on 24th November 2016 in favour of ‘Millennium Finance Limited’ is legal?
Whether the order dated 2nd August 2017 passed by the Adjudicating Authority approving the ‘Resolution Plan’ submitted by ‘Synergies Castings Limited’ legal?
Regarding the first point, NCLAT maintains that the Adjudicating Authority cannot conduct a roaming investigation based on mere suspicions or unfounded claims. It is common law that whatever rights the first assignor received from the original lender will automatically accrue to successive assignees if the relevant legal documents are executed in line with the law. As per the assignment agreements all dated November 24, 2016, 'Millennium Finance Limited' possesses all the rights in this matter. As a result, the Appellant's allegations/ apprehensions, which are false and mere apprehensions, based on conjuncture and assumed, cannot be accepted, especially when they were carried out in compliance with the law and accepted by the Registrar of Companies.
Both 'Synergies Castings Limited' and 'Millennium Finance Limited' were eligible to execute the assignment agreements in question, and 'Millennium Finance Limited' owns all rights to those agreements. The 'Millennium Finance Limited' is completely competent to participate in the 'Committee of Creditors' in question after receiving the assignment of rights, and therefore cannot be considered a linked party as indicated.
With regard to the second issue, it was held that on the basis of breach of Sections 230-232 of the Companies Act, 2013, the 'Resolution Plan' provided by 'Synergies Castings Limited' could not be considered to be in violation of sub-section (2) of Section 30 or any other provision of the law. The Businesses Act of 2013, Section 230, deals with the "ability to compromise or make settlements with creditors and members," while Section 232 deals with the "merger and amalgamation of companies." Because it is unknown which of the 'Resolution Plans' will be authorised, the question of filing an application with the National Company Law Tribunal under Sections 230-232 does not arise at the time of filing the 'Resolution Plan.' It is possible to argue that once a proposal is accepted, it is no longer feasible.
The tribunal categorically held that:
“ a related party cannot suddenly become a non-related party just because he washes off his hands and hands over the papers to other parties who have no valid reason for taking up assignment of a debt which may not be recoverable. We don’t see any business prudence on the part of Brainer Impex Limited and Mr Pankaj Radhakrishna Yadav in stepping into the shoes of the Assignors. Since the whole transaction is controversial, the disqualification cannot be removed and it follows till the end”.
Hence, it was held that the ‘I&B Code’ is a code by itself and Section 238 provides the overriding 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. In view of the findings described above and in the absence of any merit.