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NCLAT rejects the Appellant's claim as Financial Creditor since partners are listed as shareholders


The National Company Law Appellate Tribunal (NCLAT, Chennai Bench comprising Justice M. Venugopal and Ms. Shreesha Merla was hearing an appeal against the rejection of the Section 7 application. The NCLAT bench affirmed the NCLT's dismissal of the Appellant's claim as a Financial Creditor, stating that the Appellant's partners were listed as shareholders in the Corporate Debtor's records, and no compelling reasons were found to overturn the decision.


In the present case, the Appellant, M/s SMS Foundation and Investment LLP, filed an appeal against the Impugned Order passed by the National Company Law Tribunal (NCLT), Chennai Bench. The NCLT had dismissed the Appellant's application to admit their claim as a Financial Creditor. The NCLT based its decision on the fact that the Appellant's partners were reflected as shareholders in the books of the Corporate Debtor, and the Appellant had taken no steps to rectify this.


The Appellant argued that the shares were never transferred to them according to the requirements of the Companies Act, 2013. They claimed that there were no signed Share Transfer Deeds, no payment of Stamp Duty, and no transfer entry on the reverse side of the Share Certificate. They relied on a previous judgment of the NCLAT and the Supreme Court to support their argument.


The Appellant also alleged that the Corporate Debtor had manipulated documents, such as the MGT-7 and balance sheet, to falsely show the Appellant as a shareholder. They claimed that these documents were created shortly before the commencement of the Corporate Insolvency Resolution Process (CIRP) to prevent the Appellant from participating in the Committee of Creditors (CoC).


The Respondent, the Resolution Professional (RP) of the Corporate Debtor, argued that the Appellant was involved in the management of the Company and actively participated in its affairs. They stated that the Loan Agreement entered into by the Appellant was for a future transaction and not for an amount already transferred to the Corporate Debtor. They also claimed that the shares had been duly transferred and reflected in the Registrar of Companies (RoC) records.


The NCLAT considered the arguments presented and examined the documentary evidence. They concluded that the MoU between the Appellant and the Corporate Debtor was not revoked as claimed by the Appellant. They found no evidence of a Board Meeting revoking the MoU, and the MoU itself had not been cancelled by all the parties involved. The NCLAT also noted that the Share Certificate had been received by one of the Appellant's partners, and the transfer of shares was reflected in the MGT-7 filed with the RoC.


The NCLAT held that there was no substantial ground to interfere with the NCLT's decision. They dismissed the appeal and closed any pending interlocutory applications.


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