A Resolution Plan passed by a CoC, which is comprised of related parties of the Corporate Debtor, is void ab initio as it violates Section 21(2) read with Section 30(2)(e) of IBC, 2016 – M/s. Punjabi Accessoriezz Pvt. Ltd. Vs. M/s. Kredo Beauty Pvt. Ltd. – NCLT New Delhi Bench Court-II
The present IA has been filed by the Resolution Professional for approval of the Resolution plan. The entire Committee of Creditors (CoC) of the Corporate Debtor consists of its Shareholders only. There are only 04 shareholders in the present Corporate Debtor, and both the Members of the CoC are from amongst them. To appoint or remove a Director, an Ordinary Resolution is required to be passed. Voting by Show of Hands, is not excluded as a mode of voting for an Ordinary Resolution for either appointing or removing a Director of the Board. To pass an Ordinary Resolution by a show of hands, approval of more than 50% of the “shareholders in number” is required, which in the present case comes to 3.
The Adjudicating Authority referring various provision of the Companies Act, 2013 with section 5(24(l) of IBC held that if voting by show of hands would have taken place for passing an Ordinary Resolution for the appointment or removal of a Director in the Corporate Debtor i.e., Kredo Beauty Pvt. Ltd., then the same could not have been possible without the participation of any of the CoC members. Therefore, we are of the firm view that the said two shareholders, who are also the members of the CoC of the Corporate Debtor, were capable of controlling the composition of the Board of Directors of the said Corporate Debtor. Hence, by virtue of their capability of controlling the composition of the Board of Directors of the Corporate Debtor, we conclude that both the CoC members/CoC as a whole comprised of “related parties” to the Corporate Debtor in terms of Section 5(24)(l) of IBC, 2016 and therefore, the entire constitution of CoC is erroneous in the eyes of law.
