Tribunal Upholds Adjudicator's Decision Dismissing Appeal

The Tribunal upheld the Adjudicating Authority's direction, dismissing the appeal. The Tribunal emphasized that the appellant failed to provide sufficient evidence to counter the allegations of fraudulent trading and that the outstanding amount of Rs. 8.95 crores was validly due to the Corporate Debtor.

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Issues Involved:
1. Validity of the direction to the appellant to pay Rs. 8.95 crores to the Corporate Debtor (CD).
2. Allegation of fraudulent trading by the appellant under Section 66 of the Insolvency & Bankruptcy Code, 2016 (IBC).

Issue-wise Detailed Analysis:

1. Validity of the direction to the appellant to pay Rs. 8.95 crores to the Corporate Debtor (CD):
The appellant contested the Adjudicating Authority's direction to pay Rs. 8.95 crores, arguing that the amount was forfeited under a mutual agreement and that the Resolution Professional (RP) attempted to unlawfully recover money not due. The appellant provided a detailed list of dates and events to substantiate their claim, emphasizing that mere ledger entries cannot determine outstanding liabilities. The appellant further argued that the RP failed to provide material evidence of fraud.

The appellant's timeline included:
- Initial engagement with Kirti Cooperative Housing Society Ltd (Kirti CHSL) for redevelopment in 2010.
- Formation of a special purpose vehicle, Tridhaatu Kirti Developers LLP, in 2011.
- Loan facility extended by the CD in 2017 for the redevelopment project.
- Partial repayments in 2018 and a mutual agreement to convert the remaining loan into an investment, with forfeiture clauses for non-compliance.

The appellant argued that the CD failed to fulfill its investment obligations, leading to the forfeiture of the outstanding loan amount. The appellant cited several judgments, including Sevenska Handels Bunken Vs Indian Charge Chrome and Ors, Ratan Singh and Ors Vs Nirmal Gill and Ors, and Anil Rishi Vs Gurbaksh Singh, to emphasize the necessity of proving fraud with material evidence.

2. Allegation of fraudulent trading by the appellant under Section 66 of the Insolvency & Bankruptcy Code, 2016 (IBC):
The respondent argued that the appellant engaged in fraudulent transactions to evade dues. The respondent highlighted that:
- The appellant claimed an understanding to repay Rs. 45 lakhs and convert the remaining dues into an investment.
- The appellant alleged forfeiture of the loan amount due to the CD's failure to invest further.

The respondent pointed out the absence of any executed documents or agreements supporting the appellant's claims. The respondent also noted the lack of a development agreement for the purported housing project.

The Tribunal observed that:
- The appellant and the CD were not related parties.
- An amount of Rs. 8.95 crores was due and outstanding as per both parties' balance sheets.
- Fraud does not require the same standard of proof as a criminal trial and can be established by a single act of deception.

The Tribunal referenced various judgments, including S.P. Chengalvaraya Naidu Vs Jagannath and Col. M.R. Bhakshi Vs Fintra Systems Ltd, to support the principle that fraud unravels all acts and does not require exhaustive proof of every instance.

The Tribunal also cited Section 66 of the IBC, which empowers the Adjudicating Authority to order recovery from parties engaged in fraudulent business practices. The Tribunal referred to the Supreme Court's judgment in Phoenix A.R.C. Vs. Spade Financial Services, which identified avoidable transactions under the IBC.

Conclusion:
The Tribunal upheld the Adjudicating Authority's direction, dismissing the appeal. The Tribunal emphasized that the appellant failed to provide sufficient evidence to counter the allegations of fraudulent trading and that the outstanding amount of Rs. 8.95 crores was validly due to the CD.

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