TaxTMI 
TaxTMI 
2021 (11) TMI 838
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.... 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 case. 2. Learned counsel for the applicant submits as below : (a) The resolution plan could not be implemen....
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.... 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 towards additional cost of land and Rs. 6,69,080 towards other expenses) for transferring the said property in the name of the corporate debtor. (j) Respondent No. 2 entered into a memorandum of understandi....
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....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 applicant does not have any locus standi to object to the approval of the new resolution plan submitted by respondent No. 4. (B) The applicant even failed to disclose under which clause of section 29A of the Code, respondent No. 4 is disqualified. The ap....
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....e 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 bearing I. A. No. 561 of 2021 seeking directions against the applicant to pay for the liabilities incurred during the period when the applicant was in management and control of the corporate debtor. The Bank of Baroda (respondent No. 1) has also filed an application seeking payment of compensation for losses to the....
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....and 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 corporate debtor shows the amount received by it from BRFL as "deposit under other long-term liabilities". While the land was given to BRFL, the sale was not concluded and the title deeds of the land were not handed over to BRFL. The land has not been under the possession of the corporate debtor since 2010 and BRFL has con structed a commercial building on the said land.....
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....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 land with BRFL was discussed in various CoC meetings. Eventually, the CoC requested DLH to include a clause in its plan that any gain arising out of the KIADB land transfer to BRFL shall be passed on to the financial creditors of the corporate debtor. The resolution plan of DLH provides that any amounts realized pursuant to the sale of the KIADB land of the corporate debtor, until the "discharge d....
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....ndents 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 taken on face value, the same do not stand the test of section 29A(g) of the Code because of the following : (i) Neither respondent No. 21 nor respondent No. 22 had under gone CIRP ; (ii) The impugned transfer has not been subject of proceedings under Chapter-III of the Code ; (iii) In any event and without prejudice, no order was passed by any Adjudicating Authority declaring the impugned transfer as preferential, undervalued, extortionate or fraudulent ; (iv) Even otherwise, ....
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.... 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 additional cost of land. The applicant has not placed any material in support of the contention that the property was worth about Rs. 25 crores in 2010 which would show that it was proposed to be sold at a far lesser value (Rs. 2.25 crores). (b) We have also noticed that clause 17 of the lease-cum-sale agreement dated June 23, 2008 provides as below : "The lessor may at his discretion consider the request of the lessee for the transfer of lease hold rights of scheduled property in favour of a new entrepreneur as identified by the lessee during ....
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....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 accepted, for the limited purpose of this application. (h) Whether the impugned transaction is covered under other pro visions of the Code may now be examined. (i) Section 43 of the Code deals with preferential transactions and relevant time. The same is extracted below : "43. Preferential transactions and relevant time.-(1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub- section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Author....
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....y 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 the Code. Further this transaction has taken place in the year 2010 much beyond the relevant period provided under sub-section (4). (iii) As already indicated the transaction has been found to be not an undervalued transaction and executed far beyond the relevant period. Hence section 45 or 46 of the Code shall have no application thereto. In addition there is no material to indicate that the transaction has been deliberately entered into with a view to keep the property out of the reach of any person who could stake a claim against the corporate debtor or that the transaction had been entered into to defraud any of the creditors. Thus sections 49 and 66 of the Code would not be attracted. (iv) Section 66 of the Code provides as below : "66. Fraudulent....