In Brief
Phoenix Arc Private Limited challenged the National Company Law Appellate Tribunal's finding that Spade Financial Services and AAA Landmark were financial creditors of AKME Projects Limited, while Spade and AAA challenged their exclusion from the Committee of Creditors as related parties. The Supreme Court held that the transactions between the parties were collusive and lacked the essential elements of financial debt under the Insolvency and Bankruptcy Code. Although Spade and AAA had ceased to be related parties by the time of CIRP initiation, the Court found they were related parties when the debts arose and had divested themselves through commercial contrivances. The Court affirmed their exclusion from the Committee of Creditors under the first proviso to Section 21(2), interpreting the provision purposively to prevent circumvention of the statute's protective intent.
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