Hari Vitthal Mission Vs Ravi Sethia (NCLAT Delhi)
Conclusion: RP had excluded assessee from the COC as RP was empowered to decide about the status of a creditor as related party and the findings of RP and AA concluded assessee as related party in terms of provisions of Section 5 (24) of the Code.
Held: Suasth Healthcare Foundation , the Corporate Debtor approached Hari Vitthal Mission , assessee to raise financial assistance of Rs. 44.2 crore for the construction of a hospital for affordable healthcare. An agreement was signed between Corporate Debtor and assessee. Assessee provided Rs. 50 crore as an interest-free security deposit, refundable with 10% interest. The Corporate Debtor defaulted on its obligations as the project was not completed on time. The agreement was terminated. The Corporate Debtor filed an application under section 10 of the the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate voluntary insolvency resolution process. On 31.08.2021, the National Company Law Tribunal (NCLT), Kolkata, admitted the application, initiated Corporate Insolvency Resolution Process (CIRP) and appointed an Interim Resolution Professional (IRP). Assessee filed a claim as financial creditor, which was accepted by IRP. Assessee became a member of Committee of Creditors (CoC). However, RP notified the Appellant of its classification as a related party under section 5(24) of IBC due to its connection with Kanoria Foundation, which purportedly had indirect control over the Corporate Debtor through a series of entities, including SREI Infrastructure Finance Limited (SIFL) and Trinity Alternative Investment Managers Limited (TAIML). The RP excluded the Appellant from the CoC. National Company Law Tribunal (NCLT) upheld the RP’s decision, confirming assessee’s related party status due to its connection with Kanoria Foundation resulting in its exclusion from the CoC. It was alleged that the classification of assessee as “related party” and exclusion unlawfully deprives it of participation rights in the resolution process and prejudices its interests as a financial creditor. Kanoria Foundation was a trust and not a company as defined under Section 2(46) of the Companies Act, 2013. Section 5(24)(i) of IBC would not be applicable as it pertained to relationships between holding and subsidiary companies. It was held that as per section Section 5(24)(j) Hari Vitthal Mission which was 99.9% owned by Kanoria Foundation was a subsidiary company of Kanoria Foundation. The holding entity Kanoria Foundation held more than 20% in both CD and assessee and assessee therefore squarely fell in the definition of related party of CD. As RP was empowered to decide about the status of a creditor as related party. Therefore, the findings of RP and AA wherein assessee had been held as related party in terms of provisions of Section 5 (24) of the Code. There was no infirmity in the order of AA. Accordingly, the appeal was dismissed.
