2020 (2) TMI 1572 - Tri - Companies Law

Tribunal: Fraudulent Transfer of Funds; Liability of Parties; Repayment Order

Sripriya Kumar, RP (Perfect International Private Limited) Versus Ingenium Advisory LLP and Ors.

Sripriya Kumar, RP (Perfect International Private Limited) Versus Ingenium Advisory LLP and Ors. - TMI Issues Involved:1. Legitimacy of the transfer of Rs. 65 lakhs from the Corporate Debtor to Ingenium Advisory LLP (R1).2. Alleged fraudulent transactions under Sections 43 and 66 read with Section 60(5) of the Insolvency & Bankruptcy Code, 2016.3. Commonality of interest between the parties involved.4. Burden of proof regarding the genuineness of transactions.5. Liability of the parties involved (R2 and R3).Issue-wise Detailed Analysis:1. Legitimacy of the Transfer of Rs. 65 Lakhs:The Resolution Professional (RP) identified that Rs. 65 lakhs were transferred from the Corporate Debtor to R1 on various dates, with no supporting documents or contracts justifying these payments. The RP questioned the legitimacy of these transactions, as there were no records of services provided by R1 or any contract reflecting such services. The RP noted that no TDS was deducted from these payments, which further questioned the legitimacy of the transactions.2. Alleged Fraudulent Transactions:The RP alleged that the transactions between the Corporate Debtor and R1 were fraudulent, aimed at siphoning funds from the Corporate Debtor. The RP argued that the payments were made without any legitimate business purpose and lacked supporting documentation. The Tribunal found that the transactions lacked material proof and were not conducted in the ordinary course of business, thus falling under the purview of Section 43 of the Code. The Tribunal also noted that the burden of proof was on the Corporate Debtor to demonstrate the genuineness of these transactions, which they failed to do.3. Commonality of Interest:The RP highlighted the commonality of interest between the parties involved, noting that the directors of the Corporate Debtor and the partners of R1 had overlapping roles in another company, Udveka Engineering Services Private Limited. The Tribunal found that this commonality of interest indicated that the transactions were not genuine and were conducted to benefit R1 at the expense of the Corporate Debtor.4. Burden of Proof:The Tribunal emphasized that the burden of proof was on the Corporate Debtor to demonstrate that the transactions were genuine and conducted for legitimate business purposes. The Corporate Debtor failed to provide any material evidence, such as contracts, invoices, or TDS deductions, to support the legitimacy of the payments made to R1. The Tribunal concluded that the absence of such evidence indicated that the transactions were fraudulent.5. Liability of the Parties Involved:The Tribunal found that R3, the erstwhile Managing Director of the Corporate Debtor, and R2, a designated partner of R1, were knowingly involved in the fraudulent transactions. The Tribunal held R3 liable for failing to prove the genuineness of the transactions and for causing the release of funds from the Corporate Debtor to R1. R2 was also held liable for not refunding the money to the Corporate Debtor, knowing that R1 had no legitimate claim to it. The Tribunal directed R2 and R3 to jointly and severally contribute Rs. 65 lakhs to the Corporate Debtor within fifteen days.Conclusion:The Tribunal concluded that the transfer of Rs. 65 lakhs from the Corporate Debtor to R1 was for fraudulent purposes. The Tribunal directed R2 and R3 to jointly and severally repay Rs. 65 lakhs to the Corporate Debtor within fifteen days, thereby allowing the MA/987/2019 filed by the Resolution Professional.