NATIONAL COMPANY LAW APPELLATE TRIBUNAL

PRINCIPAL BENCH, NEW DELHI

Company Appeal (AT)(Insolvency) No. 727-728 of 2023

[Arising out of order dated 12.04.2023 passed by the Adjudicating

Authority, National Company Law Tribunal, Chandigarh Bench in IA
No.1394 of 2022 and IA No. 823 of 2020 in CP (IB) No.515 (CHD) of 2019.]

IN THE MATTER OF:

Sita Chaudhary
(Suspended Director of Haryana Telecom Limited)
House No. N-102, Panchsheel Park,
New Delhi – 110 017 …Appellant

Versus

Haryana Telecom Limited

(through Resolution Professional)
Unit No.110, First Floor, JMD Pacific Square,
Sector-15, Part-II, Gurugram, Haryana – 122001 …Respondent No.1

Abhimanyu Singh Mehlawat

(Successful Resolution Applicant)
H. No.1036, IFFCO Colony,
Sector-17B, Gurugram,
Haryana – 122001 …Respondent No.2

Committee of Creditors (CoC)

Through Parivartan Investment Finance Company,
SCO-21, ICC Road,
Madhuban Colony, Rajpura,
Patiala, Punjab …Respondent No.3

Present:

Appellant: Mr. Aadil Singh Boparai, Mr. Sumer Singh Boparai,

Mr. Sidhant Saraswat, Advocates

For Respondents: Mr. Abhishek Anand, Mr. Karan Kohli, Advocates

for RP with Sanyam Goel, RP in person
Mr. Abhijeet Sinha, Mr. Saikat Sarkar, Mr. Naman
Joshi, Ms. Ritika Vohra, Advocates for CoC
Mr. Sumesh Dhawan, Advocate

Company Appeal (AT) (Ins.) No. 727-728 of 2023

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 JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal filed under Section 61 of Insolvency and

Bankruptcy Code, 2016 (“IBC” in short) by the Appellant arises out of two

orders dated 12.04.2023 passed by the Adjudicating Authority (National

Company Law Tribunal, Chandigarh Bench) in IA No. 1394 of 2022 and IA No.

823 of 2020 in CP (IB) No.515 (CHD) of 2019. By the impugned order passed

in IA No.823 of 2020 (hereinafter referred to as “First Impugned Order”), the

Adjudicating Authority had approved the Resolution Plan of the Corporate

Debtor. By the impugned order passed in IA No. 1394 of 2022 (hereinafter

referred to as “Second Impugned Order”), the Adjudicating Authority dismissed

this IA filed by the present Appellant seeking direction for rejection of the

Resolution Plan and dismissal of IA 823/2020. Aggrieved by these impugned

orders, the present appeal has been filed by Smt. Sita Chaudhary, the

suspended director of the Corporate Debtor.

2. The background facts of the case which are necessary to be noticed for

deciding this appeal are as outlined below: -

 An Agreement was executed between Haryana Telecom Ltd.-Corporate

Debtor and Parivartan Investment and Finance Company - Financial

Creditor, whereby Corporate Debtor agreed to redeem the Debentures

of the value of Rs. 5,00,00,000/-.

 The Corporate Debtor re-issued the Non-Convertible Debentures

(“NCD” in short) and an agreement was executed between the

Financial Creditor and the Corporate Debtor to extend the date of

redemption to 31.12.2010. By execution of subsequent agreements,

the period of redemption was extended up to 31.12.2020. As per the

Company Appeal (AT) (Ins.) No. 727-728 of 2023
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 redemption agreements, the Corporate Debtor was to pay 12% interest

for the extended period but the Financial Creditor waived off the

interest from time to time.

 The Financial Creditor, however, issued notice to the Corporate Debtor

demanding interest payment by 30.04.2019. The Corporate Debtor

agreed for the payment of interest for the period 01.04.2018 to

31.03.2019 @ 12% by 30.04.2019 and to be paid quarterly thereafter.

 Reminder letters were issued by the Financial Creditor to the

Corporate Debtor for interest payment on 25.02.2019, 31.03.2019,

20.04.2019, 03.05.2019 and 15.05.2019.

 Smt. Sunaina Singh is grand-daughter of Smt. Sita Chaudhary, who

is suspended Director of the Corporate Debtor. Sunaina Singh was

Director of the Corporate Debtor but she resigned as Director of the

Corporate Debtor on 25.03.2019 and since then has not been

continuing as Director of the Corporate Debtor.

 Insolvency proceedings under Section 7 of IBC were initiated against

the Corporate Debtor vide Financial Creditor’s application dated

25.09.2019. The Adjudicating Authority vide its order dated

07.02.2020 admitted the Section 7 petition and initiated CIRP against

the Corporate Debtor.

 Following initiation of CIRP, Resolution Professional – Respondent

No.1 was appointed. The Committee of Creditors (“CoC” in short) was

constituted by the Resolution Professional in terms of Section 21 of

IBC and the Financial Creditor was inducted as sole member into the

Committee of Creditors.

Company Appeal (AT) (Ins.) No. 727-728 of 2023

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  The Resolution Professional published the Invitation for Expression of

Interest in Form-G on 24.06.2020.

 In the 4th CoC Meeting on 19.07.2020 the Resolution Professional

apprised the CoC that it had received Expressions of Interest from five

prospective Resolution Applicants. The CoC also approved the

appointment of a professional to assist Resolution Professional in

carrying out due diligence of the prospective Resolution Applicants in

terms of Section 29A of IBC.

 In the 7th CoC meeting, the Resolution Professional apprised the CoC

members that due diligence of Resolution Plans as received from three

prospective Resolution Applicants had been undertaken.

 After due deliberations, the CoC found the resolution plan submitted

by Mr. Abhimanyu Singh Mehlawat as H-l, Resolution Plan of Pankaj

Sachdeva as H-2 and the Resolution Plan submitted by One City

Infrastructure Pvt. Ltd. as H-3.

 In the 9th CoC meeting, the Resolution Professional apprised the CoC

that H-l Resolution Applicant had filed Addendum to the Resolution

Plan and increased the Plan from Rs. 20.10 crore to 25.14 crore as

final offer. The Resolution Professional further apprised the CoC that

Resolution Plans of H-1 and H-2 is legally compliant but Resolution

Plan of H-3 is not legally compliant.

 The resolution plan submitted by Mr. Abhimanyu Singh Mehlawat was

approved by the CoC in its 9th meeting dated 31.10.2020 with 100%

voting share. Mr. Abhimanyu Singh Mehlawat, the Successful

Resolution Applicant (“SRA” in short) is present Respondent No. 2.

Company Appeal (AT) (Ins.) No. 727-728 of 2023

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  An Operational Creditor-Raj Babar filed an application bearing I.A. No.

344 of 2020 on 01.09.2020 challenging the constitution of the CoC

and seeking removal of the Financial Creditor from the CoC on the

ground of being a related party of the Corporate Debtor. I.A. No.

344/2020 was dismissed by the Adjudicating Authority vide its Order

dated 05.03.2021.

 An unsuccessful resolution applicant - One City Infrastructure Private

Limited - also filed IA No. 728 of 2020 seeking reconstitution of CoC

on account of Financial Creditor being a related party of the Corporate

Debtor. The Adjudicating Authority disposed of IA No. 728 of 2020 on

02.11.2021 in terms of the order dated 05.03.2021 in IA 344/2020.

 Challenging the above order dated 02.11.2021, the unsuccessful

resolution applicant preferred an appeal bearing CA (AT) (Ins) No. 1065

of 2021 before this Tribunal. The order of the Adjudicating Authority

in IA 728/2020 was affirmed by this Tribunal and the appeal was

dismissed vide order dated 14.07.2022.

 The Resolution Professional filed application bearing No.823 of 2020

before the Adjudicating Authority seeking approval of the Resolution

Plan. The IA 823 of 2020 was allowed on 12.04.2023 wherein the

resolution plan was approved by the Adjudicating Authority.

 The Appellant had filed a suit bearing no.C.S.(OS) 589 of 2021 before

the Hon’ble Delhi High Court for declaration, permanent and

mandatory injunction, rendition of account and cancellation of the gift

deed of the Appellant to Sunaina Singh. The Hon’ble Delhi High Court

on 29.07.2022 passed an interim order and granted injunction in

Company Appeal (AT) (Ins.) No. 727-728 of 2023

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 favour of the Appellant which order has been appealed by Sunaina

Singh which appeal is pending consideration.

 Basis the interim relief granted by the Hon’ble Delhi High Court, the

Appellant filed IA 1394 of 2022 before the Adjudicating Authority

seeking rejection of the resolution plan and directions to the

Resolution Professional for constituting a fresh CoC.

 The Adjudicating Authority has dismissed IA 1394/2022 on

12.04.2023 on the ground that issues raised by the Appellant therein

have already been decided in earlier proceedings. Aggrieved by this

order, the Appellant has come up in appeal praying for the following

reliefs: -

a) Pass an order setting aside the impugned order dated 12.04.2023

passed by the Adjudicating Authority dismissing the IA 1394 of

2022.

b) Pass and order setting aside the impugned order dated 12.04.2023

passed by the Adjudicating Authority dismissing the IA 823 of 2020.

c) Pass an order directing the Respondent No.1 to reconstitute the

Committee of Creditors.

d) Pass any other orders as this Hon’ble Appellate Tribunal may deem

fit and proper in the interest of justice.

3. The Learned Counsel for the Appellant making his submissions

contended that the Adjudicating Authority had dismissed the IA 1394/2022

without appreciating the fact that fraud and coercion was writ large in the

proceedings in CP(IB) 515/2019. This is validated by the findings of undue

influence, coercion and fraud on the part of Sunaina Singh and her associates

over the Appellant as held by the Hon'ble Delhi High Court in its order dated

Company Appeal (AT) (Ins.) No. 727-728 of 2023

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29.07.2022 in C.S.(OS) 589 of 2021. It was pointed out that the Appellant was

unaware of the CIRP proceedings as she was not in control of her own faculties

and was subjected to undue control of Sunaina Singh. Besides asserting that

the initiation of CIRP proceedings were vitiated by fraud, it was submitted

that Sunaina Singh in furtherance of her conspiracy orchestrated a debt and

default by exercising undue influence upon the Appellant. She had got the

waiver of interest for extended period of debentures revoked and thereafter

got the revocation of the interest waiver unscrupulously accepted by the

Corporate Debtor by exercising undue influence over the Appellant. When the

revocation of interest waiver was made, Sunaina Singh was acting as a

Director of the Corporate Debtor. It was vehemently contended that Sunaina

Singh’s subsequent resignation from the Corporate Debtor was a

smokescreen to enable her to participate in the CoC as the sole financial

Creditor to control the entire CIRP process and usurp the assets of the

Corporate Debtor. It was emphatically asserted that the resignation of

Sunaina Singh from the Corporate Debtor on 25.03.2019 after orchestrating

the default requires to be examined in light of the Order dated 29.07.2022 of

the Hon'ble Delhi High Court and the allegation of related party has to be

looked into in terms of Section 5(24)(h) of the IBC.

4. It was also argued that the Financial Creditor was the only member in

the CoC and thus enjoyed the power and authority to unilaterally approve the

Resolution Plan. The commercial wisdom of the CoC was compromised as the

Sunaina Singh as director of the sole financial creditor had vested interest in

getting the Resolution Plan of the SRA/Respondent No. 2 approved as SRA

was a business partner of her husband. It was on this count the Appellant

had sought reconstitution of the CoC but the Adjudicating Authority failed to

Company Appeal (AT) (Ins.) No. 727-728 of 2023

7
appreciate their prayers while passing the two impugned orders. It was also

submitted that the Resolution Plan does not attempt to revive the Corporate

Debtor or maximise its assets but is an attempt to conduct liquidation of the

assets of the Corporate Debtor.

5. Learned Counsels appearing for the Resolution Professional, CoC as

well as the SRA have opposed the submissions of the Learned Counsel for the

Appellant. As their submissions overlap, the same are encapsulated together.

It was stated that the reliance placed by the Appellant on the Hon’ble Delhi

Court order dated 29.07.2022 is highly misplaced as the said order was

passed in a totally different set of facts and circumstances. The said order

being relied upon by the Appellant is interim in nature and relates to a matter

wherein neither the Corporate Debtor nor the Financial Creditor were a party.

It is further submitted that Sunaina Singh cannot be said to be related party

to the Corporate Debtor as she had resigned from the Board of Corporate

Debtor on 25.03.2019 whereas application under Section 7 was filed six

months thereafter and admitted on 07.02.2020. Thus, Sunaina Singh not

being a related party, there was no error in the constitution of the CoC with

Financial Creditor as the only member of the CoC. The same issue of Sunaina

Singh being a related party of the Corporate Debtor and need for

reconstitution of the CoC was raised by an Operational Creditor of the

Corporate Debtor in IA 344/2020 which was considered by the Adjudicating

Authority and rejected vide its order dated 05.03.2021. Thereafter, an

unsuccessful resolution applicant had filed application bearing IA No. 728 of

2020 seeking similar reliefs which also stood dismissed and appeal preferred

against this decision of the Adjudicating Authority before this Tribunal was

also dismissed vide Order dated 14.07.2022. Thus, the issue of the Financial

Company Appeal (AT) (Ins.) No. 727-728 of 2023

8
Creditor not being a related party of the Corporate Debtor having already

attained finality, it was vehemently contended that since the instant Appeal

raises similar grounds it deserves to be dismissed on this ground alone.

6. It was also submitted that the Appellant’s prayer for setting aside the

order of the Adjudicating Authority dated 12.04.2023 in IA 823 of 2020

approving the Resolution Plan submitted by the SRA lack proper foundation.

The same can be set aside only if the Appellant is able to demonstrate before

this Tribunal that their case falls within the grounds enumerated in Section

61(3) of the IBC which it has failed to do. It was argued that the intent of the

Appellant in preferring the present company petition is to indirectly challenge

the order dated 07.02.2020 passed by the Adjudicating Authority whereby

CIRP was initiated against the Corporate Debtor. Having not challenged the

CIRP admission order within the statutory period of 30 days, this is a ploy to

extend the limitation period under the garb of challenging the Resolution Plan.

With the sole intent to derail the entire CIRP it was submitted that the

Appellant is seeking to achieve something indirectly which otherwise could

not have been achieved directly.

7. We have duly considered the arguments advanced by the Learned

Counsel for the parties and perused the records carefully.

8. The broad questions which need to be answered are as follows: -

(i) With the previous adjudication of IA 344 of 2020; IA 728 of

2020 and in the light of the decision of this Tribunal in CA (AT)

(Ins.) 1065 of 2021 dated 14.07.2022 upholding the

constitution of CoC and this matter having attained finality,

Company Appeal (AT) (Ins.) No. 727-728 of 2023

9
 whether the issue of sole financial creditor being related party

to the Corporate Debtor can be raised again at this stage.

(ii) Whether the benefit of findings of the Hon’ble Delhi High Court

in its order dated 29.07.2022 in CS(OS) 589/2021 regarding

the Appellant being under undue and coercive influence of

Sunaina Singh which in turn purportedly vitiated the CIRP

proceedings was not available before the Adjudicating

Authority and the Appellate Authority.

(iii) Whether the Appellant not having challenged the CIRP

admission order or the constitution of CoC within 30 days from

the date of the passing of the relevant orders by the

Adjudicating Authority is now entitled to raise these issues

belatedly at this stage when the resolution plan came up for

approval.

(iv) Whether cogent grounds have been made out by the Appellant

in terms of Section 61(3) of IBC for challenging the order

approving the resolution plan and whether the Appellant under

the pretext of contesting the approval of the resolution plan has

attempted to indirectly challenge the CIRP admission order

dated 07.02.2020.

9. Before we seek to answer the above questions, we may recapitulate

some of the significant events and related dates which are going to have a

bearing on the determination of the above questions. Sunaina Singh resigned

as Director of the Corporate Debtor on 25.03.2019. The CIRP of the Corporate

Debtor commenced on 07.02.2020 and the CoC was constituted on

29.02.2020. The resolution plan submitted by SRA - Abhimanyu Singh

Company Appeal (AT) (Ins.) No. 727-728 of 2023

10
Mehlawat was approved by the CoC in its 9th meeting dated 31.10.2020. The

IA No. 344/2020 challenging the constitution of the CoC and seeking removal

of the Financial Creditor from the CoC on the ground of being a related party

of the Corporate Debtor was dismissed by the Adjudicating Authority on

05.03.2021. IA No. 728 of 2020 seeking reconstitution of CoC on account of

Financial Creditor being a related party of the Corporate Debtor was disposed

by the Adjudicating Authority on 02.11.2021 and appeal preferred thereto

was dismissed by this Tribunal on 14.07.2022. The Hon’ble Delhi High Court

on 29.07.2022 passed an interim order on civil suit - C.S.(OS) 589 of 2021

filed by the Appellant for declaration, permanent and mandatory injunction,

rendition of account and cancellation of the gift deed which order is presently

under challenge. IA 823 of 2020 filed by the Resolution Professional for

approval of the resolution plan was allowed on 12.04.2023 by the

Adjudicating Authority. IA No. 1394 of 2022 seeking rejection of the resolution

plan and directions to the Resolution Professional for constituting fresh CoC

was dismissed on 12.04.2023 by the Adjudicating Authority.

10. The questions outlined at Sl. Nos. (i) and (ii) at Para 6 being inter-

related, we wish to deal with them conjointly. The Learned Counsel for the

Appellant has pressed the submission that it is an erroneous interpretation

to hold that the issue of the Financial Creditor being a related party of the

Corporate Debtor has attained finality following the decision of this Tribunal

in Company Appeal (AT) (Ins.) 1065 of 2021 and that of the Adjudicating

Authority in IA 344 of 2020 and IA 728 of 2020 as both the adjudicatory and

appellate authority did not have the benefit of the findings of the Hon'ble Delhi

High Court in C.S. (O.S.) 589 of 2021 of undue influence and coercion by

Sunaina Singh over the Appellant while considering the matter. They were not

Company Appeal (AT) (Ins.) No. 727-728 of 2023

11
apprised of the true facts regarding the fraudulent acts of Sunaina Singh and

her husband. It was submitted that the Hon’ble Delhi High Court vide its

order dated 29.07.2022 held that the Appellant was accustomed to act under

the advice and directions of Sunaina Singh and that undue influence and

coercion exercised over the Appellant by Sunaina Singh coincided with the

time period of the CIRP proceedings before the Adjudicating Authority. It was

pressed that the allegation of related party therefore requires to be looked into

afresh in terms of Section 5(24)(h) of the IBC and the act of resignation of

Sunaina Singh from the Corporate Debtor on 25.03.2019 has to be re-

examined both in the light of the Hon'ble Delhi High Court order dated

29.07.2022. In support of their contention, attention was also adverted to the

exception carved out by the Hon'ble Apex Court in Phoenix ARC (P) Ltd. v.

Spade Financial Services Ltd. & Ors (2021) 3 SCC 475 where the related

party divests itself of its shareholding or ceases to become a related party in

a business capacity with the sole intention of participating in the CoC to

sabotage the CIRP.

11. Making rival submissions, it has been contended by the Learned

counsel of the Respondents that the orders of the Adjudicating Authority

dated 05.03.2021 and 02.11.2021 dismissing I.A. No. 344 of 2020 and I.A.

No. 728 of 2020 by holding that the Financial Creditor is not a related party

of the Corporate Debtor is well-reasoned. That the Adjudicating Authority had

made cogent findings stands validated by the fact that this Tribunal in its

orders dated 14.07.2022 in Company Appeal (AT) (Ins.) 1065 of 2021 had

affirmed these findings. Hence the issue having already attained finality, the

instant appeal deserves to be dismissed. It was also contended that the

reliance placed by the Appellant on the Hon’ble Delhi Court order dated

Company Appeal (AT) (Ins.) No. 727-728 of 2023

12
29.07.2022 is misconceived as the said order was passed in a totally different

context and in totally different set of facts and circumstances. Moreover, the

said order being relied upon by the Appellant is interim in nature and relates

to a matter wherein neither the Corporate Debtor nor the Financial Creditor

were a party.

12. At this juncture, it may be useful for us to have a look at how this

Tribunal had dealt with the allegation of Financial Creditor being a related

party of the Corporate Debtor as raised by the Appellant in Company Appeal

(AT) (Ins.) 1065 of 2021. It may be constructive to especially focus on whether

this Tribunal in its findings had taken note of the judgment of Hon’ble

Supreme Court in Phoenix supra and the statutory provisions contained in

Sections 5(24) and 21(2) of the IBC which have been relied upon by the

Appellant.

13. We find that this Tribunal in Para 9 of its judgment dated 14.07.2022

in CA (AT) (Ins.) 1065 of 2021 has adverted to the Phoenix (supra) and

observed as follows: -

“9. The ratio which can be culled out from the above judgment is

that the Financial Creditor who is praesenti is not related party

cannot be debarred from being a member of the CoC. The

exception to the above preposition is that in case where the related

party Financial Creditor divests itself of its shareholding or ceases

to become a related party in a business capacity with the sole

intention of participating the CoC and sabotage the CIRP, by

diluting the vote share of other creditors or otherwise, it would be

in keeping with the object and purpose of the first proviso to

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 Section 21(2), to consider the former related party creditor, as one

debarred under the first proviso. Following has been laid down in

Para 103 of the judgment:-

“103. Thus, it has been clarified that the exclusion under

the first proviso to Section 21(2) is related not to the debt
itself but to the relationship existing between a related
party financial creditor and the corporate debtor. As
such, the financial creditor who in praesenti is not a
related party, would not be debarred from being a
member of the CoC. However, in case where the related
party financial creditor divests itself of its shareholding
or ceases to become a related party in a business capacity
with the sole intention of participating the CoC and
sabotage the CIRP, by diluting the vote share of other
creditors or otherwise, it would be in keeping with the
object and purpose of the first proviso to Section 21(2), to
consider the former related party creditor, as one
debarred under the first proviso.”

14. After noticing the Phoenix ratio, we find that this Tribunal in the same

judgement has also noticed at length the relevant provisions of IBC as

contained in Section 5(24) [including Section 5(24)(h)], Section 5(24A) and

Section 21(2) and recorded its findings in Para 16 of the said order as

reproduced: -

“16. The fact that Smt. Sunaina Singh on 01.01.2019 requested

the Corporate Debtor for redemption of non-convertible
debentures and the fact that Smt. Sunaina Singh was a Director
of the Corporate Debtor when non-convertible debentures were
issued by the Corporate Debtor and held by Financial Creditor
i.e. 13.01.2016, in view of the law laid down by the Hon’ble
Supreme Court in ‘Phoenix ARC Pvt. Ltd.’ (supra) are not relevant
criteria to hold Financial Creditor as related party to the
Corporate Debtor. Only exception which has been laid down in

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14
 Para 103 of the judgment of Hon’ble Supreme Court in ‘Phoenix
ARC Pvt. Ltd.’, as extracted above and noted by us is that where
the Financial Creditor divests itself of its shareholding or ceases
to become a related party in a business capacity with the sole
intention of participating the CoC and sabotage the CIRP, by
diluting the vote share of other creditors or otherwise, it would be
in keeping with the object and purpose of the first proviso to
Section 21(2), to consider the former related party. When we look
into the Application I.A. No. 728 of 2020 and even rejoinder filed
in the said Application, there is no averment that one of the
Director of the Financial Creditor, Smt. Sunaina Singh ceases to
become a related party in a business capacity with the sole
intention of participating the CoC and sabotage the CIRP, by
diluting the vote share of other creditors. There being no
foundation in the I.A. No. 728 of 2020 making any averment
which can be looked into to find out whether present is a case
which can be said to be an exception to related party being in
praesenti as laid down by the Hon’ble Supreme Court in Para
103 of the judgment in ‘Phoenix ARC Pvt. Ltd.’.

17. At this stage, we may also refer to order dated 05.03.2021

passed by the Adjudicating Authority in I.A. No. 344 of 2020. One
Mr. Rajiv Babbar, who was an Operational Creditor has also filed
an Application being I.A. No. 344 of 2020 making same
allegations against the Financial Creditor alleging that Smt.
Sunaina Singh being Director who has resigned on 25.03.2019
is related party and Financial Creditor cannot be part of the CoC.
Adjudicating Authority dealt the issue elaborately in Para 10,
which is to the following effect:-

“10. From the above, it is clear that though Mrs. Sunaina

Singh was a Director of the third respondent/financial
creditor on an earlier point of time but either on the date
of filing of Section 7 application or on the date of initiation
of the CIR Proceedings i.e. the date of admission of CP, she
was not the Director of the third respondent/financial

Company Appeal (AT) (Ins.) No. 727-728 of 2023

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 creditor, since she had admittedly resigned as a Director
from the corporate debtor on 25.03.2019. The financial
creditor/third respondent is not a holding, subsidiary or
associate company of the corporate debtor. The averments
made or documents filed on behalf of the applicant do not
show that any of the Directors of the corporate debtor have
in any manner interfered in the working of the financial
creditor/third respondent in the ordinary course of
business of that the Directors of the corporate debtor in
any way advise/instruct the Directors of the financial
creditor/third respondent or vice versa. In the absence of
the same, it cannot be stated that the third
respondent/financial creditor is a related party to the
corporate debtor. Mere relationship between Mrs. Sunaina
Singh and Mrs. Sita Chaudhary i.e. granddaughter and
grandmother without there being sufficient evidence to
show that both of them are working conjointly on aid and
advise of each other shall not disentitle the third
respondent/financial creditor to be the COC Member
either under Section 5(24) or/and Section 21(2). In view of
our finding that the applicant failed to show that the third
respondent/financial creditor is a related party to the
corporate debtor, there is no need of delving upon the
various decisions cited by both sides.”

18. The Adjudicating Authority has also elaborately noticed the

judgment of Hon’ble Supreme Court in ‘Phoenix ARC Pvt. Ltd.’
and made following observations in Para 14:-

“14. The Hon’ble Apex Court held that, in a given case, if

it is established that the related party financial creditor
divests itself of its shareholding or ceases to become a
related party in a business capacity with the sole
intention of participating in the COC and to sabotage the
CIRP, by diluting the vote share of other creditors or
otherwise, can be debarred from the COC, though the

Company Appeal (AT) (Ins.) No. 727-728 of 2023

16
 said financial creditor was not a related party as on the
date of filing of the CP. But in the present case, since the
applicant failed to establish any such intention on the
part of the third respondent, the decision of the Hon’ble
Apex Court is also not applicable.”

19. Although order dated 02.11.2021 rejecting the I.A. No. 728
of 2020 is not an elaborate order, the elaborate order having
been passed earlier on 05.03.2021, the reasoning given in order
dated 05.03.2021 can be looked into to find out the reason given
by the Adjudicating Authority for rejecting application filed by the
Appellant. We are, thus, satisfied that present is a case where
Smt. Sunaina Singh in praesenti was not a related party having
resigned six months prior to filing of Section 7 Application. There
is no averment or material on record to show that Smt. Sunaina
Singh has resigned to cease to be Director of the Corporate Debtor
with the sole intention of participating in the CoC and to sabotage
the CIRP, by diluting the vote share of other creditors or
otherwise. Present is not a case covered by exception as
elaborated in Para 103 of judgment of Hon’ble Supreme Court in
‘Phoenix ARC Pvt. Ltd.’ (supra). We, thus, are satisfied that no
error has been committed by the Adjudicating Authority in
rejecting I.A. No. 728 of 2020 filed by the Appellant. In result, the
Appeal is dismissed.”

15. From the foregoing paragraphs of this Tribunal’s findings, it is amply

clear that this Tribunal on 14.07.2022 came to the categorical conclusion

that Sunaina Singh was not a related party having resigned much before the

filing of Section 7 application and that her case was not covered by the

exception carved out in Phoenix (supra) judgment. We also note that this

order of 14.07.2022 was not challenged by the Appellant and to that extent

has attained finality.

Company Appeal (AT) (Ins.) No. 727-728 of 2023

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16. The only issue at hand before us now is the allegation raised by the

Appellant that the benefit of findings of the Hon’ble Delhi High Court dated

29.07.2022 was not available to this Tribunal while passing its orders. Be

that as it may, this contention lacks substance as we find that the

Adjudicating Authority while passing the second impugned order in IA No.

1394/2022 has dwelled at length on the findings of the Hon’ble Delhi High

Court dated 29.07.2022 before coming to the conclusion that the financial

creditor in the present case is not a related party of the corporate debtor,

which is as reproduced below: -

“10. In the present case, the applicant has mainly relied on the interim
reliefs in the order of the Hon'ble Delhi High Court dated 29.07.2022,
granted in favour of the applicant, i.e. Ms. Sita Chaudhary, and the
injuncting director of the financial creditor, i.e. Ms. Sunaina Singh and
Associates from transferring and siphoning off the assets of the family
assets of late Devinder Singh Chaudhary, i.e. the husband of the
applicant. The details of the shareholding pattern and these
companies, which were under dispute before the Hon'ble High Court,
mentioned on pages 71 to 13, have been perused. We note that the
name of the corporate debtor, i.e. Haryana Telecom Limited, does not
feature anywhere in the said order of the Hon'ble Delhi High Court
even though the list of defendants contains the names of as many as
seven companies in which late Shri. Davinder Singh Chaudhary had
substantial shareholdings. It is also noted that the applicant has got
very negligible shareholding in the corporate debtor.

11. We note that in the present case, the CIRP was initiated on
07.02.2023, and the applicant being suspended director was in
complete knowledge of the facts right from the beginning. Resolution
proceedings in the case of the corporate debtor under the IBC are in
progress. Despite the same, the present application is being filed
when the Resolution Plan is placed before this Authority for approval.
The reference to Ms. Sunaina Singh, Director of the financial creditor
in the order of the Hon'ble Delhi High Court, on which much reliance
Company Appeal (AT) (Ins.) No. 727-728 of 2023
18
 has been placed by the applicant, is in the context of the distribution
of the assets of late Devinder Singh Chaudhary, who happened to be
the husband of the plaintiff in that application i.e., Ms. Sita
Chaudhary. Prima facie, the only connecting link between the case
before the Hon'ble Delhi High Court and the present application is the
plaintiff/applicant, Ms. Sita Chaudhary, who happens to be one of the
directors of the suspended Board of the corporate debtor. Even if, for
the sake of argument, the allegation of wielding undue influence is
accepted, the decision by the Delhi High Court was delivered in a
totally different context of inheritance of a third party's estate. We do
not find any reason to allow it to cast any shadow over the initiation
of CIRP by order of this Adjudicating Authority, as the same has been
initiated after considering the debt and default committed by the
corporate debtors. The present applicant has not been able to show
any ground for disputing the debt and default committed by the
corporate debtor resulting in the initiation of the CIRP.

12. We further note that the issues of the financial creditor being a
related party of the corporate debtor and the re-constitution of CoC in
the matter of the corporate debtor have been adjudicated by this
Adjudicating Authority by its order dated 05.03.2021 in IA No.
344/2020, and order dated 02.11.2021 in IA No. 728/2020, and the
prayers have been rejected.”

17. It is the case of the SRA and the Financial Creditor that the decision of

the Hon’ble Delhi High Court is interim in nature and is presently under

challenge. It is also their contention that the subject matter before the Hon’ble

Delhi High Court for its consideration was different in that it related to

declaration, permanent and mandatory injunction, rendition of account and

cancellation of the gift deed by the Appellant to Sunaina Singh. The

determination of these issues by the Hon’ble High Court can at best be for the

purposes for which the suit was filed in the Hon’ble High Court and not for

deciding on the sustainability of the CIRP proceedings.

Company Appeal (AT) (Ins.) No. 727-728 of 2023

19
18. Having regard to the material facts on record which shows that Sunaina

Singh resigned as Director of the Corporate Debtor on 25.03.2019 while the

Section 7 application was filed on 25.09.2019 and CIRP of the Corporate

Debtor commenced on 07.02.2020, we are satisfied with the above findings in

the second impugned order that Sunaina Singh was not a related party of the

Corporate Debtor having resigned much before the filing of section 7

application. Though Sunaina Singh was a Director of the Corporate Debtor at

earlier point of time but as on the date of filing of Section 7 application or on

the date of admission of CIRP, she was not the Director of the Corporate

Debtor since she had admittedly resigned as a Director from the Corporate

Debtor on 25.03.2019. We are also convinced that the Adjudicating Authority

while passing the second impugned order was fully abreast of the findings of

the Hon’ble Delhi Court and has recorded detailed findings as to why these

findings are distinguishable and inapplicable in determining the issue of

Financial Creditor being a related party of the Corporate Debtor.

19. In answering the questions outlined at para 6(i) and (ii) above, in our

considered opinion, there is no force in the contention of the Appellant that

the findings of the Hon’ble Delhi High Court in the context of related party

allegation have been missed out by the Adjudicating Authority. The issue of

sole financial creditor not being a related party to the Corporate Debtor has

been well settled with due consistency both by the Adjudicating Authority and

this Tribunal after noticing the relevant provisions of IBC and Phoenix

judgment and cannot be reagitated at this stage now.

20. This now brings us to questions poised at paras 6 (iii) and 6 (iv) above,

which we propose to deal together. It is the case of the Appellant that debt

Company Appeal (AT) (Ins.) No. 727-728 of 2023

20
and default was orchestrated by exercising undue influence over the

Appellant by Sunaina Singh. At the time of admission of the Section 7 petition,

Sunaina Singh was giving instructions to the Counsel of the Appellant and

made her forcefully sign pleadings and the Appellant being under duress and

coercion could not raise objections to the initiation of CIRP proceedings. On

the other hand, rival contention has been made that the Appellant was

conscious and aware of the initiation of CIRP proceedings and having failed

to challenge the said CIRP admission order within the statutory period of 30

days, Appellant is now attempting to extend the limitation period under the

garb of challenging the Resolution Plan. Thus, the Appellant wants to achieve

something indirectly which otherwise it would not have been achieved

directly.

21. It is trite law that under the IBC, once a debt becomes due or payable,

in law and in fact, and there is incidence of non-payment of the said debt in

full or part thereof, CIRP may be initiated by the Financial Creditor. The

Adjudicating Authority only has to determine whether a default has occurred,

i.e., whether the debt was due and remained unpaid. Once this is established,

the CIRP has to be initiated against the Corporate Debtor. The Adjudicating

Authority following this mandate of Section 7(5) of IBC had admitted the

section 7 application on 07.02.2020 and initiated the CIRP against the

Corporate Debtor. The CIRP admission order could have been challenged and

an appeal filed within 30 days from the date of passing of the order.

Admittedly, the Appellant never challenged the CIRP order. Thereafter the

CIRP proceedings had commenced and CoC was constituted on 29.02.2020.

Even the constitution of CoC was not questioned within the prescribed period.

The statutory scheme of the IBC makes it clear that though the erstwhile

Company Appeal (AT) (Ins.) No. 727-728 of 2023

21
Board of Directors are not CoC members, yet they have a right to participate

in each and every meeting held by the CoC including right to discuss all the

resolution plans presented in such meetings. In the present case too,

pursuant to the constitution of CoC, notice of meetings of the CoC were duly

sent to the Appellant. Despite service of notices upon the Appellant, it is clear

that the Appellant chose neither to attend the meetings of the CoC and

participate in the deliberations therein but never raised any objection on the

CIRP process in spite of having knowledge of the ongoing CIRP.

22. It has been contended by the Appellant that the commercial wisdom of

the CoC was compromised as the Sunaina Singh the director of the sole

financial creditor had vested interest in the Resolution Plan of the Respondent

No. 2. It is also contended that Sunaina Singh had resigned from the

Corporate Debtor with the intention to participate in the CoC as the sole

Financial Creditor so as to control the entire CIRP process and usurp the

assets of the Corporate Debtor. Hence it is the plea of the Appellant that there

is a need to reject the resolution plan as approved by the Adjudicating

Authority vide the first impugned order.

23. The rival submissions made is that the Appellant has attempted to

indirectly challenge the CIRP admission order dated 07.02.2020 under the

pretext of contesting the approval of the resolution plan. It is contended that

the Appellant on the one hand is asserting fraudulent initiation of CIRP and

on the other hand wants reconstitution of the CoC. In doing so, the Appellant

is blowing hot and cold, and the sole intention of the Appellant is to derail the

CIRP proceedings and cause hindrance in successful implementation of the

Resolution Plan which goes against the twin objectives of the Code of

maximization of the value of the assets and time-bound insolvency resolution.

Company Appeal (AT) (Ins.) No. 727-728 of 2023
22
24. The present prayer of the Appellant to set aside the order approving the

resolution plan submitted by the SRA can only be sustained if grounds

mentioned under Section 61(3) of the IBC are met. This therefore brings us to

the question whether cogent grounds have been made out by the Appellant in

terms of Section 61(3) of IBC for challenging the first impugned order dated

12.04.2023 of the Adjudicating Authority approving the resolution plan.

25. To arrive at our findings, we may therefore glance through the relevant

portions of the first impugned order approving the resolution plan. In para 11

of the first impugned order, the Adjudicating Authority has categorically held

that the CoC evaluated all the resolution plans submitted by the PRAs in

terms of Regulation 39 of the IBBI (CIRP) Regulations as per the Evaluation

Matrix to identify the best resolution plan. We also notice that the

Adjudicating Authority has observed at paras 33 and 34 of the first impugned

order that :

“33. As per the CoC, the Resolution Plan meets the requirement

of being viable and feasible for the revival of the Corporate

Debtor. By and large, all the compliances have been done by the

RP and the Resolution Applicant for making the plan effective

after approval by this Bench.

34. On perusal of the documents on record, we are satisfied that

the Resolution Plan is in accordance with Sections 30 and 31 of

the Code and complies with Regulations 38 and 39 of the IBBI

(Insolvency Resolution Process for Corporate Persons)

Regulations, 2016.”.

26. Undisputedly, in the statutory framework of IBC, the grounds on which

the decision of approval of the resolution plan by the CoC can be interfered

Company Appeal (AT) (Ins.) No. 727-728 of 2023

23
with by the Adjudicating Authority has been set out in Section 31 read with

Section 30 of IBC. In terms of Section 31 of IBC, the scope of enquiry by the

Adjudicating Authority is confined to scrutinizing whether Section 30(4) has

been complied with or not. In the present case, the CoC after considering the

viability and feasibility of the resolution plan has approved the same with

100% vote share thereby fairly and squarely meeting the conditionalities laid

down in Section 30(4) of the IBC. In the present case, the Resolution

Professional after approval of the plan by the CoC filed an application before

the Adjudicating Authority seeking approval of the Resolution Plan under

Section 31 of the IBC. After detailed deliberations on feasibility and viability

of Resolution Plan, the Adjudicating Authority has clearly recorded in the first

impugned order that on examination of the resolution plan it has found that

no provision of law appears to have been contravened and that there is

compliance to Regulations 38 and 39 of CIRP Regulations, 2016.

27. The Appellant has also prayed for rejecting the resolution plan of the

SRA on the ground that the SRA is a related party having a business

relationship with the husband of the Director of the sole Financial Creditor of

the Corporate Debtor. We are inclined to agree with the rival contention that

relief cannot be granted on the basis of mere bald assertions assailing the

commercial wisdom of the CoC which has approved the resolution plan

without placing any material on record to show under which clause of Section

5(24) of the IBC the SRA can be considered to be a related party or how the

SRA would be ineligible to submit a resolution plan under Section 29A of the

IBC.

28. We are of the considered view that the CoC has done due diligence and

evaluated the matrix in approving the resolution plan of the SRA and the sole
Company Appeal (AT) (Ins.) No. 727-728 of 2023
24
member of CoC having 100% voting share has already approved the plan in

their commercial wisdom as contemplated under the law. The Appellant has

failed to point out any material irregularity or contravention of any provision

of law by the CoC in approving the plan. That being the case, the Adjudicating

Authority with the limited powers of judicial review available to it, cannot

substitute its views with the commercial wisdom of the CoC in rejecting the

resolution plan unless it is found it to be contrary to the express provisions

of law or there is sufficient basis which establishes material irregularity. There

can be no fetters on the commercial wisdom of CoC and the supremacy of

commercial wisdom of CoC has been reaffirmed time and again by the Hon’ble

Supreme Court in a catena of judgements including K. Sashidhar v. Indian

Overseas Bank (2019) 12 SCC 150 ; Committee of Creditors of Essar Steel

India Limited v. Satish Kumar Gupta (2020) 8 SCC 531; Maharashtra

Seamless Limited v. Padmanabhan Venkatesh (2020) 11 SCC 467; Kalpraj

Dharamshi v. Kotak Investment Advisors Limited, (2021) 10 SCC 401

and Ghanashyam Mishra and Sons Private Limited through the

Authorized Signatory v. Edelweiss Asset Reconstruction Company

Limited through the Director (2021) 9 SCC 657.

29. Thus, to summarise our findings on the questions raised at para 6(iii)

and (iv) we are of the clear view that the scope of interference with an order

approving the resolution plan is very limited. The approved resolution plan

can only be challenged before the Appellate Authority on limited grounds in

terms of Section 61 (3) of the IBC. However, the Appellant has failed to make

out a case of applicability of any such limited grounds. The IBC provides for

an initiation of timely resolution of the corporate debtor and in the instant

case the resolution plan of the SRA having already been approved by the CoC

Company Appeal (AT) (Ins.) No. 727-728 of 2023

25
and the Adjudicating Authority, it cannot now be open to interference on the

ground that the CoC was not properly constituted. When the Appellant did

not challenge the CIRP admission and constitution of CoC at the right point

of time, it cannot raise the matter belatedly and make it a ground for rejection

of the duly approved resolution plan. When the CoC has approved a

Resolution Plan by 100% voting share after considering its feasibility and

viability, such decision of CoC is a commercial decision and it is settled law

that commercial wisdom of CoC in approving the Resolution Plan is not to be

interfered in the exercise of jurisdiction of judicial review either by the

Adjudicating Authority or by this Tribunal in the exercise of its appellate

powers. We are of the view that the Adjudicating Authority did not commit

any error in approving the resolution plan and therefore concur in the first

impugned order of the Adjudicating Authority approving the resolution plan.

30. In view of the foregoing discussions and conclusions, we do not find any

error in the first impugned order dated 12.04.2023 approving the Resolution

Plan and in the second impugned order of the same date dismissing IA No.

1394 which sought rejection of the Resolution Plan. In result, the present

appeal is dismissed.

[Justice Ashok Bhushan]

Chairperson

[Barun Mitra]
Member (Technical)
Place: New Delhi
Date: 09.11.2023

PKM
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