Pankaj Yadav vs State Bank Of India Ltd. & Anr

[arising out of Order dated 13th November, 2017 by NCLT, Mumbai Bench, in Case No. MA 560 IN CP No. 1148/I&BC/NCLT/MB/MAH/2017]

IN THE MATTER OF:

1. Pankaj Yadav, Flat No. 802, Bldg. No. 23, Evershine Millennium Paradise, Thakur village, Mumbai - 400 101

2. Brainer Impex Limited, 102, Shree Gajanan Apartment, Chincholi Bunder Road, Opp. Infant Jesus School, Malad West, Mumbai - 400 064. ...Appellants

Versus

1. State Bank of India Ltd. Stressed Assets Management Brnach-II, Raheja Chambers, Free Press Journal Road, Nariman Point, Mumbai - 400 021.

2. Fortune Pharma Pvt. Ltd., Tapadiya Terrace, Adalat Road, Aurngabad - 431 001. ...Respondents

Present: For Appellants: Mr. Dhaval Deshpande, Advocate

For 1st Respondent: Mr. P. V. Dinesh, Mr. Rajendra Beniwal and Mr. Sindhu T.P., Advocates 2

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

The appellant, an 'assignee' of Mr. Sudhakar Mulay (Promoter), was

inducted by 'Resolution Professional' as a member of the 'Committee of

Creditors', which was challenged by 'State Bank of India' (Financial Creditor) on

the ground that the appellant is a 'related party'. The Adjudicating Authority

(National Company Law Tribunal) Mumbai Bench by the impugned order dated

13th November, 2017 having held the appellant as 'related party', the appellants

have preferred this appeal.

2. The only question requires for determination in this appeal is whether the

1st appellant is a 'related party' or not?

3. The brief facts of the case are that one Mr. Sudhakar Mulay and another

Mr. Vikram Sudhakar Mulay the Directors/Promoters of M/s. Fortune Pharma

Private Limited had executed the 'personal guarantee' in favour of the 'State

Bank of India'. Against the said company and the Directors/Promoters, the

'State Bank of India' enforced SARFAESI Act and by order dated 23rd March,

2016 directed the company to hand over possession of the factory premises

situated at Aurangabad to 'State Bank of India.'

4. It was at this stage, the company filed an application under Section 10 of

the Insolvency & Bankruptcy Code, 2016 ((hereinafter referred to as the 'I&B

Code') which was admitted. After filing of the application under Section 10 of

the I&B Code, Mr. Sudhakar Mulay, Director/Promoter assigned his 'debt' in

favour of the 1st appellant on 1st July, 2017.

Company Appeal (AT) (Insolvency) No. 28 of 2018 3

5. Learned counsel appearing for the appellants refers to Section 5(7) r/w (8)

to suggest that the 1st appellant comes within the meaning of 'Financial Creditor'.

Reliance was also placed on Section 5(24) of the I&B Code which defines 'related

party' in relation to a 'Corporate Debtor' which means a 'Director or partner' of

the 'Corporate Debtor' or a relative of a 'Director or partner' of the 'Corporate

Debtor' etc. According to the learned counsel for the appellants Mr. Sudhakar

Mulay having assigned debt in favour of the 1st appellant and he being not the

Director of the 'Corporate Debtor' or relative of the Director of the 'Corporate

Debtor' cannot be treated to be a 'related party' within the meaning of Section

5(24) of the I&B Code.

6. The Adjudicating Authority taking into consideration the facts and

circumstances of the case observed that meticulous planning was made by the

Director of the 'Corporate Debtor' to execute 'Assignment Deed' with the sole

intention to bring down the voting power to the 'State Bank of India' which

cannot be regarded as a natural business decision. The Adjudicating Authority

also observed that 'related party' cannot suddenly become a 'non-related party'

because he just washes off his hands and hands over the paper to other party

who had no valid reasons for taking up the assignment of a debt.

7. It is not in dispute that the assignor Mr. Sudhakar Mulay was the

Director/promoter of the 'Corporate Debtor'. Therefore, he is 'related party'

within the meaning of Section 5(24). A legal transfer of 'debt' account from a

'creditor' (assignor) to a third party (assignee) provides the rightful ownership to

the assignee. The 'debt assignment' is a transfer of debt with all the rights and

obligations associated with it from a creditor to a third party, who is' assignee'.

Company Appeal (AT) (Insolvency) No. 28 of 2018 4

The 'debt' is in the form of loan from a 'financial institution', the debtor is referred

as a 'borrower' and if the debt is in the form of securities, such as bonds, the

debtor is referred to as an 'issuer'. Undisputedly, the assignment is the transfer

of one's right to recover the debt of another person as a contractual right. Rights

of an 'assignee' are no better than those of the 'assignor'. It can be, therefore,

held that 'assignor' assigns its debt in favour of the 'assignee' and 'assignee' steps

in the shoes of the 'assignor'. The 'assignee' thereby takes over the right as it

actually did and also takes over all the disadvantages by virtue of such

assignment.

8. What cannot be achieved directly by Mr. Sudhakar Mulay, he did it

indirectly assigning his debt in favour of the 1st appellant. Mr. Sudhakar Mulay

being the 'related party', with the assignment of 'debt', the disadvantage also

goes to the 1st appellant. For the reasons aforesaid, we hold that the issue has

been rightly decided by the Adjudicating Authority and no ground has been made

out to interfere with the impugned order. In absence of any merit, the appeal is

dismissed. No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial) New Delhi 7th August, 2018

/ns/

Company Appeal (AT) (Insolvency) No. 28 of 2018