# In the matter of IRIS Electric Optics Pvt. Ltd. IA No. 785 of 2019 in C.P. (IB) No. 181-7-HDB-2019

> NCLT judgment dated 2022-02-14. Citation: TCN-2022-NCLT-04150. The case involves a challenge to the Corporate Insolvency Resolution Process (CIRP) initiated…

- **Court:** NCLT
- **Order date:** 14 Feb 2022
- **Citation:** TCN-2022-NCLT-04150
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/iris-electric-optics-pvt-ltd-ia-no-785-of-2019-in-cp-ib-no-181-7-hdb-2019-abcb2b28

## Summary

### Background

The case involves a challenge to the Corporate Insolvency Resolution Process (CIRP) initiated against IRIS Electro Optics Pvt Ltd by Laxmi Kantha Rao Thota, a financial creditor. Bank of India, another financial creditor, filed an application (IA 785/2019) seeking recall of the order admitting the company petition, approval of a new Resolution Professional (RP), declaration of the voting share allotted to Laxmi Kantha Rao Thota as illegal, and a declaration that certain CoC meetings and the appointment of the existing RP are null and void. The bank also sought to hold the expenses incurred under CIRP to be borne by the financial creditor and impose costs of Rs. 1 Crore on the financial creditor for abusing the process of law. The NCLT initially dismissed IA 785/2019,

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## Facts

1. Laxmi Kantha Rao Thota initiated CIRP against IRIS Electro Optics Pvt Ltd.
2. Bank of India, another financial creditor, challenged the CIRP.
3. Archana Thota, wife of Laxmi Kantha Rao Thota, is a director of IRIS Electro Optics Pvt Ltd.
4. Archana Thota's resignation as director was disputed.
5. Bank of India initiated recovery measures under SARFAESI Act before CIRP.
6. The Corporate Debtor's account was classified as NPA.
7. The Resolution Professional's conduct and voting rights allocation were questioned.
8. The NCLAT directed the NCLT to reconsider the matter focusing on 'related party' status and fraudulent initiation.
9. The RP rejected the claim of Bank of India on technical grounds.
10. Bank of India lodged a complaint against the RP before IBBI.

## Issues and analysis

### Issue 1: Whether the third respondent is a 'related party' to the Corporate Debtor herein, as defined under …

**Ratio:** The definition of 'related party' under Section 5(24) of the I&B Code is broad and

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**Reasoning:** The NCLT found that Archana Thota was a director of the Corporate Debtor, and Laxmi

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**Interpretation:** The court interpreted the 'related party' definition broadly to capture all

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**Application:** Since Laxmi Kantha Rao Thota is a 'related party', he is debarred from any

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## Parties

- **Judges:** Venkata Ramakrishn…; Veera Brahma Rao…
- **Appellants:** Bank of…
- **Respondents:** IRIS Electro…; M/s. IRIS Electro…

## Timeline

- **2017-10-03 — Archana Thota appointed…**: Archana Thota was appointed as a…
- **2018-09-01 — SARFAESI Action…**: Bank of India initiated actions under the SARFAESI Act against IRIS Electro Optics Pvt…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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