# In the matter of Kaizen AAC Block Private Limited MA No. 1262-MB-C-II-2019 in C.P (IB) No. 2668-MB-C-II-2018

> NCLT judgment dated 2021-11-26. Citation: TCN-2021-NCLT-00388. The case involves an application (MA No. 1262/MB/C-II/2019) filed in C.P (IB) No.…

- **Court:** NCLT
- **Order date:** 26 Nov 2021
- **Citation:** TCN-2021-NCLT-00388
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/kaizen-aac-block-private-limited-ma-no-1262-mb-c-ii-2019-in-cp-ib-no-2668-mb-c-i-61da0d33

## Summary

### Background

The case involves an application (MA No. 1262/MB/C-II/2019) filed in C.P (IB) No. 2668/MB/C-II/2018 under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The applicants, Javed Abdul Rahim Sayed and Anr., sought an order to direct the Interim Resolution Professional (IRP) to accept and verify their proof of claim (Form-C) and subsequently conduct a meeting of creditors (CoC). The applicants, former directors and shareholders of Kaizen AAC Block Private Limited (Corporate Debtor), claimed to have provided unsecured interest-free loans to the Corporate Debtor. After their retirement, another director, Qamruddin Faizi, initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The IRP rejected the applicants' claim, considering them

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## Facts

1. Javed Abdul Rahim Sayed and Abid Ali Abdul Hai Khan (the Applicants) were former directors and shareholders of Kaizen AAC Block Private Limited (the Corporate Debtor). They provided unsecured interest-free loans totaling Rs. 2,11,04,000 to the Corporate Debtor.
2. The Applicants retired from the board of directors on January 23, 2018, and executed a Memorandum of Understanding (MOU) dated January 18, 2018, with the Corporate Debtor for the return of the unsecured loans.
3. Prior to the MOU, the Corporate Debtor paid Rs. 43,98,250 to Applicant No. 1 and Rs. 69,36,000 to Applicant No. 2 towards loan repayment. However, Rs. 64,53,750 remained due to Applicant No. 1 and Rs. 33,16,000 to Applicant No. 2.
4. Qamruddin Faizi, another director of the Corporate Debtor,

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## Issues and analysis

### Issue 1: Whether the Applicants, being former directors and shareholders of the Corporate Debtor, qualify as …

**Ratio:** The legal principle applied is that a person who was a related party at the time the debt

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**Reasoning:** The Tribunal reasoned that the Applicants were directors and shareholders of the

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**Interpretation:** Section 5(24) of the IBC, 2016, defines 'related party' in relation to a

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**Application:** In this case, the Applicants were directors and shareholders of the Corporate

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## Parties

- **Judges:** Ashok Kumar…; Shyam Babu…
- **Appellants:** Javed Abdul Rahim…
- **Respondents:** Kaizen AAC Block…; Kaizen Aac Blocks…

## Timeline

- **2018-01-18 — MOU Exec…**: Applicants and Corporate Debtor executed a Memorandum of Understanding (MOU) for the…
- **2018-01-23 — Applicants' Re…**: Applicants retired from the board of…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 60(5) — Adjudicating Authority for corporate persons](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-60)

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