Judgment Summaries (NCLAT) Edelweiss Asset Reconstruction Company Ltd. v. Synergies Dooray Automotive Ltd. & Ors.

  March 3, 2022

CASE SUMMARY

Edelweiss Asset Reconstruction Company Ltd. v. Synergies Dooray Automotive Ltd. & Ors. 

{NCLAT, New Delhi, Principal Bench; December 14, 2018}

ABBREVIATIONS & ACRONYMS USED

Committee of Creditors CoC
Corporate Debtor CD
Corporate Insolvency Resolution Process CIRP
Financial Creditor FC
The Insolvency and Bankruptcy Board of India IBBI
Insolvency and Bankruptcy Code, 2016 the Code
National Company Law Appellate Tribunal NCLAT
National Company Law Tribunal NCLT
Operational Creditor OC

FACTS: CIRP was initiated against ‘Synergies Dooray Automotive Ltd. & Ors.’ (CD) and several resolution plans were received. The CoC approved the resolution plan of Synergies Castings Ltd. (“Synergies”) which was a related party of the CD. The appellant FC ‘Edelweiss Asset Reconstruction Company Ltd.’ filed several applications under Section 60(5) of the Code. The FC filed several applications against approval of the Resolution Plan because of three assignment deeds made in favor of another FC Millennium Finance Ltd. (“Millennium”). The NCLT rejected the claims of the appellant. On the date of repeal of the Sick Industries Companies Act which is December 01, 2016 the CD had three FCs – The appellant FC, Synergies and Alchemist Asset Reconstruction Company Limited (AARC). Millennium was introduced as a new creditor later to the surprise of the appellant FC. Immediately before SICA’s repeal Synergies allegedly made three assignments and assigned its entire debt to Millenium. 

ISSUES: The NCLAT decided upon the following issues:

  1. Whether the assignments made by Synergies in favor of Millennium were legal?
  2. Whether NCLT’s order approving the Resolution Plan of Synergies was legal?

The answer to the first question would automatically determine the answer to the second question i.e. if the assignments were legal so was NCLT’s order.

CONTENTIONS: The appellant FC contended that the sole objective of the assignment was to circumvent the provision of Section 21. Further, it was contended the evidence of the assignment was inadmissible as it was unregistered and insufficiently stamped. An IP is required to admit claims only on the basis of admissible evidence.

Synergies and Millenium countered these contentions by citing facts that the execution of the assignment deeds was valid and also that out of the three resolution plans submitted before the CoC, the two other plans were unanimously rejected by the CoC. Further that the appellant was a minority FC and was trying to avoid the Resolution Plan that was binding on it now.

HELD: The NCLAT noted that the manner in which debts were assigned by Synergies and that they originally were assigned to synergies by the ICICI Bank, SBI and IDBI Bank to Synergies which it assigned to Millenium and were duly registered. It was held that the appellant FC did not have the locus standi to object on the assignment since the appellant FC was similarly positioned to Synergies and Millenium. Further, the NCLAT reaffirmed NCLT’s observation that the assignment was duly executed. Therefore, the assignments and the NCLT’s order was legal.

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