TaxTMI 
TaxTMI 
2021 (11) TMI 838
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....his application is before us seeking the following reliefs : Interim prayer : (a) Pending the hearing and final disposal of this application, restrain the resolution professional and committee of creditors of GB Global Ltd. (erstwhile Mandhana Industries Ltd.) from handing over the management of the corporate debtor to the new resolution applicant. (b) Pending the hearing and final disposal of this application, this Tribunal be pleased not to pass any orders with regards to approval of the resolution plan of the new resolution applicant. Prayer : (a) Declare the new resolution applicant as ineligible as prescribed under the provisions of the Code ; (b) Reject I. A. No. 19 of 2021 filed by the resolution professional for approval of resolution plan submitted by the new resolution applicant ; (c) Direct the resolution professional to take appropriate actions and file appropriate applications before this hon'ble Tribunal with regards to the transaction mentioned hereinabove ; (d) For costs ; (e) Such other and further reliefs as this hon'ble Tribunal may deem fit in the facts and circumstances of the ca....
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....td. (BAPL/respondent No. 22). BAPL is the related party to both new resolution applicant and BRFL. That BAPL's current address is located in the same property sold by respondent No. 2 to BRFL. Hence the new resolution applicant, especially its managing director, Mr. Vijay Thakordas Thakkar is the related party to BRFL, who had participated in the above fraudulent transaction. (i) It is submitted that the corporate debtor got a free hold land situated at SW-49 and SW-50 in the Apparel Park Industrial area comprised in parts of Plot Nos. 71, 72 and 76 within village limits of Arehalligudda dahalli, Hobli Kasaba, Taluka Doddaballapura, Bangalore admeasuring 20,267 sq.mtr., for 10 years from the Karnataka Industrial Area Development Board (KIADB) under a lease-cum-sale agreement dated June 23, 2008. The lease-cum-sale agreement made it clear that respondent No. 2 could sell the land to anyone else only on completion of 10 years. In this regard the applicant relied on letter dated May 14, 2019 issued by the KIADB to respondent No. 2, requiring respondent No. 2 to deposit sum of Rs. 76.63 lakhs towards cost difference of land and other outstanding dues (Rs. 69.93 lakhs towar....
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....ent or control of the corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place, such person is not eligible to submit a resolution plan under section 29A of the Code. Respondent No. 3 is responsible to conduct section 29A due diligence and merely submitting an affidavit stating that he/she is eligible under section 29A to submit a resolution plan would not suffice. The CoC should review the due diligence report submitted by RP at the time of approving/dis approving the resolution plan. Hence it is submitted that there is no effective 29A due diligence. (o) Hence the applicant states that it is a fit case for this Tribunal to exercise its power and jurisdiction under section 60(5) read with rule 11 of the National Company Law Tribunal Rules, 2016 (NCLT Rules) to allow the reliefs as prayed for. 3. Reply of respondent No. 3 (RP) : (A) The applicant who failed to implement its resolution plan, thereby derailing the CIRP of the corporate debtor, filed this application to further jeopardise the process. The averments/allegations made in this application are denied. The ap....
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....de to submit the resolution plan and the con tents of the affidavit were found to be in order. Respondent No. 3 arrived at the opinion that respondent No. 4 is not disqualified under section 29A of the Code. (G) During the hearing of I. A. No. 19 of 2021, the applicant tried to intervene and sought copy of respondent No. 4's resolution plan. However, this Adjudicating Authority declined to hear the applicant on the ground that he does not have any locus standi to intervene. (H) The corporate debtor has already suffered enormously because of the negligence of the applicant in implementing its resolution plan. The Insolvency and Bankruptcy Board of India (IBBI) has initiated investigation against the applicant for such failure. (I) The applicant after taking over the corporate debtor on approval of its resolution plan, completely mismanaged the affairs of the corporate debtor and incurred losses, created liabilities, funded the losses from the working capital pool inherited at the time of handover. The applicant abandoned the corporate debtor with impunity and left it saddled with huge liabilities/losses. Respondent No. 3 has filed an application bearin....
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....o suspect the transaction and to take action under sections 43, 45, 49 and 66 of the Code. The allegation of mala fides is stoutly denied. (O) It is submitted in respect of the issue relating to KIADB land as follows : (i) The corporate debtor entered into a lease-cum-sale agreement with KIADB in 2008 (June 23, 2008) for allotment of the land for a con sideration of Rs. 2.01 crores. As per the terms the corporate debtor was required to setup a factory on the said land within five years of allotment. However, the corporate debtor was not in a position to set up the facility or otherwise. Copy of the lease-cum-sale agreement dated June 23, 2008 between KIADB and the corporate debtor is annexed and marked as annexure-1. (ii) Subsequently, a memorandum of understanding was entered into between the corporate debtor (as transferor) and BRFL (as transferee) on January 25, 2010. Under the memorandum of understanding, BRFL agreed to purchase and acquire the land from the corporate debtor for a consideration of Rs. 2.25 crores. However, the said memorandum of understanding was not in accordance with the terms of the KIADB agreement. The balance-sheet of the corpora....
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....or. The RP, in her communication, also requested next steps to be followed to complete the registration of transfer of land. Copy of the letter dated June 11, 2020 sent by the RP to KIADB is annexed and marked as annexure 8. (vi) As on date, no response has been received from KIADB. Hence, the corporate debtor has not accounted for the various amounts demanded by KIADB as per their letter dated May 14, 2019 due to the uncertainty relating to the action that FTL may have taken regarding the KIADB demand notice referred above. As the said amount is not paid from the bank accounts of the corporate debtor and as there is uncertainty relating to the payment till the time response is received from KIADB, the corporate debtor has not accounted for the said payment in the books and the effect will be given based on the response received from KIADB. Pending clarity around the status of payment of the amounts demanded by KIADB, the corporate debtor has disclosed the same as a contingent liability in its books. The corporate debtor continues to disclose the said property in the financial statement as free hold land. (vii) The matter pertaining to the registration of the said....
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....n the present application. This application is a mala fide attempt to delay the approval of the resolution plan submitted by respondent No. 4. (D) The applicant alleged that respondent No. 4 suffers a bar under section 29A of the Code on the following basis- (i) Transfer of lease hold right entered between the corporate debtor and respondent No. 21 in the year 2010 was undervalued. (ii) Respondent No. 4 is related party to respondents Nos. 21 and 22. Mr. Vijay Thakkar is the common director of respondent No. 4 and respondent No. 22. (iii) Thus the impugned transfer would fall within the category of preferential as well as fraudulent transaction under Chapter-III of the Code ; and (iv) Respondent No. 4 being a promoter company involved in fraudulent and preferential transaction would be barred under section 29A of the Code. (E) It is submitted that assuming but without admitting the contentions of the applicant as correct, respondent No. 4 would not suffer the bar under section 29A of the Code as ingredients necessary to attract such bar are missing. (F) Even if it is assumed that the allegations of the applicant are tak....
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....t sufficient and that the party alleging fraud must provide material particulars thereof. (J) Respondent No. 22 was incorporated only in the year 2012, i. e., two years after the impugned transfer. Since the applicant has sought to link respondent No. 4 with respondent No. 21 through respondent No. 22, the entire basis of the applicant's allegation against respondent No. 4 col lapses as respondent No. 22 did not even exist when the impugned transfer took place. 5. On appraisal of the materials on record, rival pleadings and the sub- missions from either side the following are the observations of this Bench : (a) The corporate debtor entered into a lease-cum-sale agreement with KIADB on June 23, 2008 for a consideration of Rs. 2.01 crores. The memorandum of understanding to sell the land was entered into between the corporate debtor and respondent No. 21 for Rs. 2.25 crores and the possession of the land was handed over to respondent No. 21 pending execution of the sale deed. Thus it is clear that the land was proposed to be sold for a higher value than the purchase price. It is noted that on May 14, 2019 the KIADB claimed a sum of Rs. 69.93 lakhs towards ad....
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....n as it existed before such transactions and reversing the effects thereof in the manner as laid down in section 45 and section 48 ; (b) requiring the Board to initiate disciplinary proceedings against the liquidator or the resolution professional as the case may be." (emphasis supplied) (f) The mandate is very clear that only a "creditor, member or a partner" of the corporate debtor can make an application to the Adjudicating Authority to declare such transactions as void and reverse their effect. The applicant not being a creditor or partner of the corporate debtor is not competent to raise the issue nor can seek a direction to respondent No. 3 concerning the matter. As per respondent No. 3 a forensic auditor was appointed to look into the transactions of the corporate debtor and certain transactions of the corporate debtor were found to be questionable and the same are pending consideration before this Tribunal. (g) The CoC is aware of the proposed sale of the land for Rs. 2.25 crores in the year 2010. No member of the CoC has questioned the propriety of the consideration. In the absence of any material the allegation of undervaluation cannot be accept....
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....n, 'new value' means money or its worth in goods, services, or new credit, or release by the transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the liquidator or the resolution professional under this Code, including proceeds of such property, but does not include a financial debt or operational debt substituted for existing financial debt or operational debt. (4) A preference shall be deemed to be given at a relevant time, if- (a) it is given to a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date ; or (b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date." (ii) The land in question has not been transferred by the corporate debtor on account of any antecedent financial or operational debt and the transfer does not have the effect of putting such creditor or surety or guarantor in a beneficial position that would have been in the event of distribution of assets being made in accordance with section 53 of....