Laxmi Bank Ltd. acquired 10 per cent convertible debentures in Bhaskar Ltd. In terms of the issue in the year 2012 these debentures were converted into the equity shares in Bhaskar Ltd. Consequent to conversion Laxmi Ban

As per first proviso to Section 21(2) of the Insolvency and Bankruptcy Code, 2016 (IBC), no related party to the Corporate Debtor, even if it is a financial creditor, has any right of participation, representation or voting at the meeting of Committee of Creditors. However, the second proviso to Section 21(2) clarifies that the restriction does not apply in case a financial creditor is governed by a financial sector regulator and is not considered as a related party solely on account of conversion or substitution of debt into equity or instruments convertible into equity shares or completion of such transactions as may be prior to the Insolvency Commencement Date. This clarification was inserted pursuant to an amendment to IBC in 2018. Financial Sector Regulator is defined as per Section 3(18) of IBC that refers to Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory Authority (PFRDA) and such other bodies as may be notified. In the given case, the shares were allotted to Laxmi Bank Ltd. on account of conversion of debt into equity. Since Laxmi Bank Ltd. is a Bank, it is regulated by RBI, which is a financial sector regulator. Therefore, Laxmi Bank Ltd. is not considered as a related party for the purpose of Section 21(2) due to the second proviso. Thus, the objection raised by ICID Bank is not tenable, and Laxmi Bank Ltd. has the right to representation, participation, and voting in the Committee of Creditors.