ONE PAGE #10– IN MATTER OF M/S ARUNA HOTELS LTD
DOES AN RP HAVE POWERS TO MODIFY THE COC ONCE CONSTITUTED?
Court: NCLT-Chennai & NCLAT-Chennai. (AT#48 – Dt: 30.04.2021)
1. Facts of the Case:
- Appellant is suspended Director of CD, Respondents are RP, N Subramanian (Sec 9 Applicant & HDFC (New FC).
- Application got admitted at NCLT in 2017, set aside by NCLAT in 2019 but SC admitted the same in 2021 with a liberty to approach COC for settlement.
- NCLT directed RP to convene the COC meeting with members constituted in 2017 at the time of admission & to give a report on the decision taken by COC regarding settlement within 10days. NCLT also held that the COC presently formed by IRP/RP in derogation of the Order passed by NCLT stands suspended & that the newly constituted COC has no powers to exercise in CIRP.
- Averments by the Appellant/Suspended Director are:
- That 961 days elapsed between admission to restoration of CIRP. Creditors of that time are no long creditors & hence members of COC must be updated. They are the third parties to affairs of the CD & can not decide on 12A application.
- NCLT is not correct in directing the RP to conduct the meeting with old COC. NCLT ought to have considered CIRP Regulation 12(A) & 13 which requires RP to update the status of claims of the CD. When RP comes across additional information, warranting revision, he must revise the amounts of claims admitted.
- Appellant referred to Judgement of Rajnish Jain V Manoj Kumar Singh (NCLAT): “IRP is authorised to collate claims and based on that he is empowered to constitute the COC. He can update the list of claims by accepting or rejecting the claims which are further received but he cannot review and change the position of the creditor of the accepted claim in the name of updation of the claim”.
- Accordingly, claim (Rs.38 Cr) of HDFC, the new FC must be considered.
- Averments by Resp 1/RP: That HDFC is required to submit its claim in Form C as per CIRP regulation. That CD is not in operation, no business from 2017 till today and Respondent will have first charge.
- Averments by Resp 3/HDFC Bank/New FC: That it is not an interim financier, CD is functioning from 2017 and it funded money to CD (36Cr) at a time when CIRP was not in place. Hence it must be included as FC. Interest of bank is paramount so it must be included as FC along with others.
2. Points of Law: Sec 21(2) –COC shall comprise all FCs of the CD; Reg 12 – Submission of proof of claims, Reg 12A – Updation of claim, Regulation 13 – Verification of claims; Regulation 14 – Determination of amount of claim; Sec 3(8) – Corporate Debtor; Sec 5(8) – Financial Debt; Sec 5(7) – Financial Creditor
3. Discussions & Findings by NCLAT: Once the COC is formed, RP cannot constitute COC afresh, in negation of the earlier constituted COC & alter the same. He has no adjudicating power under the code. RP followed up with the suspended directors for settlement but there was not action for withdrawal from their end. Appeal 48/2021 is dismissed without costs.