13/11/2017

The assignee does not get the right to change its status from ‘related’ to ‘unrelated’ – Fortune Pharma Private Limited – NCLT Mumbai Bench

NCLT held that disqualification that existed at the time of initiation of CIRP cannot be washed away just because of an assignment. It observed that assignment refers to transfer of one’s right to recover debt to another person and that the rights of ‘Assignee’ are no better than those of the ‘Assignor’. Therefore, the assignee does not get the right to change its status from ‘related’ to ‘unrelated’ vis-à-vis the impugned debt. An assignment the assignee not get the right to change its status. If the assignor is a ‘related party’ then the assignee shall also treated in the same status as ‘related party’ vis-a-vis to the impugned debt. Yet another example is that if the assignor is an creditor’ then as a result of assignment the assignees shall treated as Operational Creditor and its status must not for a moment considered as ‘financial creditor. The Insolvency Professional went wrong in changing the status of the assignees as non-related party on transfer of debt from a related patty creditor. The debt belonged to a ‘related party financial hence on transfer its status shall remain unchanged. The assignee Shall also considered as financial while convening the meeting of to commence resolution process. Learned Insolvency Professional shall take note of the findings of this order and accordingly.

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