TaxTMI 
TaxTMI 
2021 (5) TMI 185
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....es attached vide notice dated 16.04.2018 and to restore possession thereof to the Respondent No. 1 (Liquidator). 2. Brief facts of this Appeal are that M/s Bengal Polypete, an Operational Creditor (Respondent No. 2) filed an Application under Section 9 of the IBC against M/s Pincon Spirits Ltd. Corporate Debtor (Respondent No. 3). It was registered as CP(IB) No. 93/KB/2018 and vide order dated 19.07.2018, the Application was admitted and Interim Resolution Professional (IRP) was appointed. Subsequently, Binay Kumar Singhania (Respondent No. 1) was appointed as Resolution Professional (RP) and vide order dated 30.09.2019, he was appointed as Liquidator. 3. There are many complaints against the group companies of Pincon, alleging fraudulent transactions by receiving deposits from the public at large. Therefore, First Information Report (FIR) was registered against the Directors and other officials of the Pincon Group of Companies at Police Station Khejuri Case No. 47/07 dated 19.02.2017 under Sections 406 and 420 of IPC and Section 3 of the West Bengal Protection of Interest of Depositories in Financi al Establishment Act, 2013 (WBPIDFE Act). In connection with this offence, DE....
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.... against the Corporate Debtor, was dismissed, the DEO is preparing to file an Appeal before the Hon'ble Supreme Court. Thus, the order of admission has not attained finality. Secondly, the Corporate Debtor is under the control of Pincon Group and the Pincon Group Companies collected deposits from the public fraudulently and such amount was transferred to the Corporate Debtor and the attached properties were purchased by such amount. Thus, the attached properties claimed by the liquidator are not Assets of the Corporate Debtor. Therefore, such Assets are out of the purview of Section 14 (1) (a) of the IBC. The declaration of moratorium under Section 14 of the IBC is not applicable to the proceedings initiated under Section 3 of the WBPIDFEAct,2013 and the legal proceeding initiated by the DEO are not at all a bar under Section 33 (5) of IBC. 6.(a). Ld. Adjudicating Authority observed that earlier the DEO has filed an application CA(IB) 577/KB/2019 challenging the initiation of CIRP as against the Corporate Debtor that Corporate Debtor company being a Financial Service provider and a chit fund company fraudulently accepting the deposits therefore, proceedingsinitiated againstthe C....
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....tention towards the Annexure A -2 to A-5 which contain the name of Company and the description of the properties (see Affidavit of Rathindra Nath Boxi and documents Diary No. 25314 Pg. 240 to 265) 11. Ld. Counsel for the Appellant also submitted that there was no direction to the DEO, WB by Hon'ble High Court of Calcutta to de-attach the properties of the Corporate Debtor (see reply affidavit and documents filed by respondents Diary No 2408 Pg. 30 to 35). However, Ld. Adjudicating Authority erroneously observed in the impugned order that: "The Assets of the Corporate Debtor have been excluded by the Hon'ble High Court vide order dated 23.04.2019 holding that Assets and Properties of Pincon Spirits Ltd., the Corporate Debtor herein should be kept outside purview of such sale" 12. Ld. Counsel for the Appellant also submitted that the IBC and WBPIDFE Act are legislated on two different fields and with two different aims and, therefore, they should be read harmoniously. The public interest is in a non-negotiable factor. The interest of depositors had to be protected as there would be no means to compensating them from the wrongs done to them. 13. Legislation inserted ....
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....ire CIRP of Corporate Debtor. 16. Ld. Counsel for the Respondent No 1 and 3 submitted that Ld. Adjudicating Authority rightly held that IBC is a complete Code and the provisions of the WBPIDFE Act are inconsistent with Sections 14 and 33(5) of the IBC. Therefore, such provisions shall have overriding effect on the provisions of the WBPIDFE Act. 17. It is also submitted that the Hon'ble Supreme Court in the case of Manish Kr. (supra) has upheld the constitutional validity of Section 32-A of the IBC and also held that taking actions against the property of the Corporate Debtor after the Corporate Debtor goes into liquidation would be contrary to the interest of value of maximization of the Corporate Debtor's Assets and as such, the same ought to be protected from enforcement action. For this purpose, he drew our attention towards Para 250 (17.9 to 17.11) of the Manish Kumar's case (supra). 18. Ld. Counsel for the Respondents submitted that a perusal of the Judgment dated 03.10.2020 passed by the Designated Court of Economic Offence makes it abundantly clear that Corporate Debtor i.e. M/s Pincon Spirits Ltd. was not a party to the said proceedings and thus, the said Judgment ....
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....he Hon'ble High Court at Calcutta. That being so we cannot pass any order in the pending application at the issue arises for consideration in the said Applications is left open to the parties for taking appropriate legal courses." 22. As aforesaid, the Ld. Adjudicating Authority disposed of the Application of RP (now liquidator) showing inability to pass an order for de-attachment of the property of the Corporate Debtor with the liberty to take appropriate legal courses. Thereafter, the liquidator has filed the application with the same prayer for de-attaching the property of the Corporate Debtor. Surprisingly, Ld. Adjudicating Authority by the impugned order allowed the Application i.e. I.A No. 1741/KB/2018 of Liquidator and directed to de- attach all the properties attached by the DEO, WB and to restore possession thereof to the liquidator (Respondent No 1). 23. The following issues arise for our consideration: - (i) Whether the property of Corporate Debtor who is not a financial establishment as defined under Section 2(e) WBPIDFE Act can be attached? (ii) Whether High Court of Calcutta in WP No. 24110(W)of 2016 vide order dated 23.04.2019 directed that th....
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....ith and for consideration, it may, in order to protect the interest of the depositors of such financial establishment, by an order to be published in the Official Gazette and after recording reasons in writing, attach the money or other property acquired either in the name of such financial establishment or in the name of any other person on behalf of such financial establishment: Provided that if it is found that such money or other property as referred to above is not available for attachment or is not sufficient for repayment of the deposits, the State Government may attach- (a) firstly, such other property believed to have been acquired with the money collected by way of deposits by such financial establishment; and (b) secondly, the personal assets of the promoter, partner, director, manager, member. employee or any other person responsible for the management of the said financial establishment; and (c) thirdly, the personal property of a person who has borrowed money from such financial establishment to the extent of his default. (2) ------ --------------------------------- (3) ----------------------------------- ....
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....elonging to a financial establishment or any person mentioned in the order under Sub-Section (1) situated within the territorial jurisdiction of the Designated Court may be, for passing appropriate orders to give effect to the provisions. Section 14 of the WBPIDFE Act reads as under:- 14.(1) Upon receipt of an application under sub-section (4) of section 5, the Designated Court shall issue to the financial establishment or to the person, whose property has been attached and vested in the Competent Authority under section 5, a notice accompanied by a copy of the application and affidavit together with an extract of evidence recorded, if any, calling upon such financial establishment and person to show cause as to why the order of attachment should not be made absolute and the property so attached be 1 [sold in public auction and such notice shall also be published in two daily newspapers having wide circulation, one in English language and anotherin vernacular language]. (2) The Designated Court, while issuing a notice under sub-section (1), shall also issue notice to all other persons having or being likely to claim any interest or title in the property of the ....
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....roperty unless it is also satisfied that there will remain under attachment an amount or property of value not less than the value that is required for repayment to the depositors of such financial establishment. (8) Subject to the provisions of this Act, the Designated Court shall follow the summary procedure as contemplated under the Code of Civil Procedure,1908 and exercise all the powers of a court in hearing a suit under the said Code. (9) Where an application is made by any person duly authorisedorconstituted or specified by any other State Government under similar enactment empowering him to exercise control over 1 [any money or the property or the property or assets attached] by that Government, the Designated Court shall exercise all its powers as if application is made under this Act and pass appropriate orders 2 [or direction on such application, so as to give effect to the provision of such enactment]. 29. Section 14 of the WBPIDFE Act provides the powers of Designated Court regarding attachment. Section 14 (1) provides that upon receipt of an application under sub-section 4 of Section 5, the Designated Court shall issue to the Financial establishme....
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....argument of Ld. counsel for the respondent that the findings of the designated court are not binding on the Corporate Debtor. 32. In this regard it is useful to refer to the findings of the Designated Court of Economic Offences. Conclusion with reason by this court: - (There is no paragraph Numbers in the judgment therefore we are mentioning the page numbers of the appeal paperbook.) Page 194 "Monoranjan Roy is one educated, economist industrialist wants to do for the society, provider of service of 4000+ employees, ambitious". ---------------------------------------------------------------------------- ------ ---------------------------------------- He is the chairman and managing director of Pincon Spirits Ltd(PSL).Having 48000 shareholders throughout the world in this business he has 7.6% foreign direct investment. At the time of arrest, he had 1800 crores turnover in this company". Page 195 "He has purchased the Police Stations and DEO. He has challenged the courts because he knew that the investigating authority will never help the public prosecutors and they will not help to the courts rather they will....
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....any. All money was syphoned to this company which has connection with foreign countries. Monorajan Roy is successful to protect his heart by suppressing the actual fact." 33. With the aforesaid findings of designated court we hold that the properties of the corporate debtor can be attached. Issue No. (ii) 34. Para 17 of the impugned order reads as under: - "Hon'ble High Court of Calcutta issued direction to DEO, WB to cooperate with the RP and to assist him to discharge his statutory duty and function in term of IBC. The Assets of the Corporate Debtor have been excluded by the Hon'ble high Court vide order dated 23.04.2019 holding that assets and properties of Pincon Spirits Ltd, the Corporate Debtor herein, should be kept outside purview of such sale" 35. Hon'ble High Court of Calcutta vide order dated 23.04.2019 directed as under: - "Director of Economic Offences shall submit affidavit disclosing particularsof all assets attached by them except those of M/s Pincon Spirits Ltd. and M/s Greenage Food Products Ltd. and valuation thereof on the next date of hearing." 36. A bare reading of this order makes it apparent that Hon'ble High Court while pass....
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....cluding any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. (3) The provisions of sub-section (1) shall not apply to- (a) such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (b) a surety in a contract of guarantee to a corporate debtor.] (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date ofs....
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....rs, of a financial establishment who has committed a default in repayment of deposit fraudulently within the meaning of sub-section (1),shall, on conviction, be punishable with imprisonment for life or imprisonment for either description for a term which may extend to ten years and such financial establishment shall also be liable to a fine which may extend to an amount equivalent to five lakh rupees, or where such deposit is quantifiable in terms of money, twice the money involved in such default, whichever is higher; Provided that in the absence of special and adequate reasons recorded in the judgement of the Court, the imprisonment shall not be less than for three years and the fine shall not be less than twenty thousand rupees as against each individual and not less than one lakh rupees against such financial establishment. 43. From the aforesaid provisions, it is clear that the WBPIDFE Act, 2013 relates to fraudulent deposits accepted by the Company and fails to make repayment of deposit along with interest, bonus, profit or in any other form after the specified period i.e. on maturity or otherwise. As per Section 3(2) of the WBPIDFE Act, as a person including the ....
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....WBPIDFE Act. 46. Hon'ble Supreme Court in the case of Manish Kr. (supra) upheld the validity of this provision inserted as Section 32-A of the IBC. Hon'ble Supreme Court in this case clarified the liability of a Corporate Debtor for an offence committed prior to commencement of CIRP. It is useful to refer to the relevant paragraphs of this judgment (para 252 to 255) as under: - 252. Section 32A has been divided into three parts consisting of sub-Sections(1) to (3). Under sub-Section (1), notwithstanding anything contained, either in the Code or in any other law, liability of a corporate debtor, for an offence committed prior to the commencement of the CIRP, shall cease. Further, the corporate debtor shall not be liable to be prosecuted for such an offence. Both, these immunities are subject to the following conditions: i. A Resolution Plan, in regard to the corporate debtor, must be approved by the Adjudicating Authority under Section 31 of the Code; ii. The Resolution Plan, so approved, must result in the change in the management or control of the corporate debtor; iii. The change in the management or control, under the approved Resolution Pl....
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.... CIRP and during its pendency, will stand discharged against the corporate debtor. Under the second proviso to sub- Section (1), however, the designated partner in respect of the liability partnership or the Officer in default, as defined under Section 2(60) of the Companies Act, 2013, or every person, who was, in any manner, in-charge or responsible to the corporate debtor for the conduct of its business, will continue to be liable to be prosecuted and punished for the offence committed by the corporate debtor. This is despite the extinguishment of the criminal liability of the corporate debtor under sub-Section (1). Still further, every person, who was associated with the corporate debtor in any manner, and, who was directly or indirectly involved in the commission of such offence, in terms of the Report submitted and Report filed by the Investigating Authority, will continue to be liable to be prosecuted and punished for the offence committed by the corporate debtor. Thus, the combined reading of the various limbs of sub-Section (1)would show that while, on the one hand, the corporate debtor is freed from the liability for any offence committed before the commencement of the CIR....
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....cable to the corporate debtor. Since the word "include" is used under sub- clause (i) of the Explanation, the word "action" against the property of the corporate debtor is intended to have the widest possible amplitude. There is a clear nexus with the object of the Code. The other part of the clarification, under the Explanation, is found in the second sub-clause of the Explanation (ii). Under the second limb of the Explanation, the Law Giver has clearly articulated the point that as far as the property of any person, other than the corporate debtor or any person who had acquired the property of the corporate debtor through the CIRP or liquidation process under the Code and who otherwise fulfil the requirement under Section 32A, action can be taken against the property ofsuch other person. Thus, reading sub-Section (1) and sub-Section (2) together, two results emerge - (i) subject to the requirements embedded in sub- Section (1),the liability of the corporate, debtor for the offence committed under the CIRP, will cease; (ii) The property of the corporate debtor is protected from any legal action again subject to the safeguards, which we have indicated. The bar against action agains....
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....resolution plan. 50. No resolution plan was approved which resulted in the change in control of the Corporate Debtor, therefore, there is no bar to take action against the property of the Corporate Debtor in connection with the offence. The explanation to sub-section (2)has clarified that the words and actions against the Corporate Debtor in relation to an offence would include the attachment, seizure, retention or confiscation ofsuchproperty under the law applicable to the Corporate Debtor. Since the word 'include' isused under sub-clause 1 of the explanation, the word 'action' against the property of the Corporate Debtor is intended to have the widest possible amplitude. There is a clear nexus with the object of the IBC. The other part of the clarification under the explanation is found in the second sub-clause of the explanation. 51. Reading sub-sections (1) and (2) together, two results emerge :- (i) subject to the requirements embedded in sub-section (1), the liability of the Corporate Debtor for the offence committed under CIRP will cease; and (ii) the property of the Corporate Debtor is protected from any legal action subject to the safeguards which indicated. The bar ....