2022 (3) TMI 56 - AT - Insolvency and Bankruptcy

Tribunal dismisses applications, upholds judgment, finds no fraud

Vineet Khosla Versus Edelweiss Asset Reconstruction Company Ltd. & Ors.

The Tribunal dismissed various applications and a Contempt Application, finding no merit in the allegations of fraud, misrepresentation, or material ... Scope of 'Fraud' - Whether this Appellate Tribunal was misled and deceived by fraud practiced by Respondent No.1 which lead dismissal of the Company Appeal in MR. VINEET KHOSLA VERSUS M/S EDELWEISS ASSET RECONSTRUCTION COMPANY LTD., MARGRA INDUSTRIES LTD., MR. RAJENDER KUMAR GIRDHAR, MR. PARAMJEET SINGH BHATIA, ARCK RESOLUTION PROFESSIONALS LLP [2022 (1) TMI 321 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI]? HELD THAT:- The judgment of MR. VINEET KHOSLA is sought to be recalled on the ground of fraud claim to have been practiced by Respondent No.1. Insolvency and Bankruptcy Code, 2016 does not define fraud - the definition of ‘fraud’ as contained in Section 17 of the Indian Contract Act, 1872 becomes relevant for determining a question of fraud claim to be practiced in proceedings under the IBC. Section 3(37) of the IBC expressly provided that words and expressions used but not defined in the Code but defined in the Indian Contract Act, 1872 and other Acts as referred therein, shall have the meanings respectively assigned to them in those Acts. The Hon’ble Supreme Court A.V. PAPAYYA SASTRY & ORS VERSUS GOVERNMENT OF A.P. & ORS [2007 (3) TMI 735 - SUPREME COURT] has also defined the expression ‘fraud’. The Hon’ble Supreme Court held that the fraud is an act of deliberate deception with the design of securing some unfair or undeserved benefit by taking undue advantage of another. In the resent case, there was neither any fraud practiced by Respondent No.1 nor any misrepresentations made by Respondent No.1 before this Tribunal and the judgment dated 07.01.2022 passed by this Tribunal cannot be held to be obtained by fraud. There are no substance in the submissions of counsel for the Applicant of allegation of fraud or misrepresentation Application disposed off. Issues Involved:1. Whether the judgment dated 07.01.2022 was obtained by practicing fraud.2. Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP.3. Whether the liquidation order suffers from material irregularity.4. Whether the Tribunal should expunge certain events alluded in the order dated 07.01.2022.5. Whether the Tribunal should maintain status quo pending adjudication of I.A Nos. 190, 191 & 192 of 2022.6. Whether to initiate contempt proceedings against the Respondents.Detailed Analysis:1. Whether the judgment dated 07.01.2022 was obtained by practicing fraud:The Applicant contended that the judgment dated 07.01.2022 was obtained by Respondent No.1 by practicing fraud on the Tribunal. The Applicant alleged that Respondent No.1 made false submissions regarding the acknowledgment of debt and the filing of relevant documents. The Tribunal examined the submissions and the documents provided by Respondent No.1. It was found that the Respondent No.1 had not misrepresented the facts or misled the Tribunal. The Tribunal concluded that there was no fraud practiced by Respondent No.1 and dismissed I.A No. 192 of 2022.2. Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP:The Tribunal considered whether the Adjudicating Authority had the competence to recall the order of initiation of CIRP. It was observed that the Adjudicating Authority had affirmed the order dated 15.03.2019, and the appeal against it was dismissed. The Tribunal held that the Adjudicating Authority was not competent to recall the order of initiation of CIRP, thus affirming the order dated 08.11.2020 rejecting CA 307/2020 filed by the Suspended Directors.3. Whether the liquidation order suffers from material irregularity:The Tribunal noted that no Resolution Plan was approved, and the Committee of Creditors resolved to authorize the Resolution Professional to file an application for liquidation. The Adjudicating Authority ordered the liquidation of the Corporate Debtor. The Tribunal found no material irregularity in the liquidation order and upheld the decision.4. Whether the Tribunal should expunge certain events alluded in the order dated 07.01.2022:The Applicant sought the expunging of certain events mentioned in the order dated 07.01.2022. The Tribunal reviewed the facts and events as recorded in the judgment and found no error. Consequently, I.A No. 190 of 2022 was dismissed.5. Whether the Tribunal should maintain status quo pending adjudication of I.A Nos. 190, 191 & 192 of 2022:The Applicant requested an order of status quo pending the adjudication of I.A Nos. 190, 191 & 192 of 2022. The Tribunal found no merit in the applications and dismissed I.A Nos. 191 and 337 of 2022.6. Whether to initiate contempt proceedings against the Respondents:The Applicant filed a Contempt Case (AT) No. 06 of 2022, alleging fraud and misrepresentation by Respondent No.1 and seeking initiation of contempt proceedings. The Tribunal found no grounds for initiating contempt proceedings and dismissed the Contempt Application. Additionally, the Tribunal ordered the deletion of Respondent Nos. 16 to 21, who were Advocates for Respondent No.1, from the array of parties in the Contempt Application, terming their impleadment as reckless and inappropriate.Conclusion:The Tribunal dismissed I.A Nos. 190, 191, 192, and 337 of 2022, as well as Contempt Application (AT) No. 06 of 2022, finding no merit in the allegations of fraud, misrepresentation, or material irregularity in the liquidation order. The Tribunal upheld the judgment dated 07.01.2022 and the orders of the Adjudicating Authority.