TaxTMI 
TaxTMI 
2022 (1) TMI 461
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.... to as the 'Code'). By the Impugned Order, the Learned Adjudicating Authority has dismissed the Application preferred by the Appellants on the following grounds: (a) That the 'Financial Creditor' never authorized the Director to initiate CIRP against 'Corporate Debtor' and the CIRP was initiated without proper authorisation. (b) The Loan Agreement is dated 02.12.2015, but the disbursement took place on 07.11.2015, which puts a question mark on the genuineness of the purported transaction. (c) In paras 5 and 6 of the Memorandum of Understanding dated 23.03.2018, it is recorded that the amounts, if any, to be paid to M/s. Rushabh Civil Contractors Private Limited/the Appellant herein would be paid only after receipt of the full amounts by SRBL from all the Creditors; that the Appellant has confirmed that an amount of Rs. 2 Crore was given to Mr. J. Vamshidhar Rao and Rs. 5 Crore to Mrs. Shailima Kalvakuntla respectively during the 'Satra Group Management of SRBL' and is likely to be not recoverable from these two parties. If this amount of Rs. 7 Crores is not recovered, it shall be debited by SRBL to the account and thus shall not be payable by SRBL to Rushabh. (d) The Petiti....
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.... on Demand. TDS Certificate dated 10.05.2018 wherein the new management paid the TDS. Share Purchase Agreement dated 23.02.2018, wherein the Respondent Company was transferred to the new management. * It is argued that the Members of the new management i.e., the MJ Shah Group were very well aware of the existing liabilities of the 'Corporate Debtor' even before they took the entire management and the Company on 09.04.2018 since they were already Directors and Shareholders of the Respondent Company much before 09.04.2018. It is submitted that the MJ Shah Group was 49% Shareholder in the erstwhile Company and was well aware of the business dealings of the Respondent Company and hence Mr. Jignesh Shah who is currently the Director in the Respondent Company and the signatory to the Balance Sheet of FY 2017-18 has also signed on the Applications and Affidavit and therefore a change in management cannot be said to be having any effect whatsoever in the existing liabilities. * Learned Counsel relied on the following Judgements in support of his case that at the time of deciding an Application under Section 7, the Adjudicating Authority has to merely ascertain that there was 'exist....
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....oan Agreement dated 02.12.2015 was an independent transaction with no relation to the other transactions of the Appellant Company. 3. Submissions of the Learned Counsel appearing on behalf of the Respondent: * It is contended that the Loan Agreement dated 02.12.2015 is a fabricated document and that the purported date of disbursement of the loan to the 'Corporate Debtor' is 07.11.2015, which is much prior to the alleged loan document. * The Appellant Company is under the control and management of 'Satra Group of Companies' and the Appellant has filed the Original Company Petition and the present Appeal on behest of the 'Satra Group'. * The Bank Statements/Balance Sheet relied upon by the Appellant show maximum no. of transactions between the Appellant Company and the 'Satra Group' without any documentation backing such transactions and hence, the Appellant Company is nothing but an adjustment Company of the 'Satra Group'. The 'Corporate Debtor Company' previously known as 'Satra Realty and Builders Limited' was under the control and management of the 'Satra Group' prior to 09.04.2018. Presently, the 'Corporate Debtor Company' is taken over by the MJ Shah Group, pursuant to t....
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....4.2017 to 30.01.2018 and 01.02.2018 (exhibit F) from the Appellant to 'Satra Realty and Builders Limited' shows that an amount of Rs. 10,86,65,265/- is confirmed. It is the main case of the Appellant that since the confirmation of accounts establishes these amounts, the ratio of 'M/s. Innoventive Industries' (Supra), has to be applied i.e., the Adjudicating Authority has only to see whether there is a 'date of default' and not go into the other aspects of the transactions. Learned Counsel strenuously argued that the terms of the MOU are inconsequential, if it is conditional, that it is a Section 7 Application and therefore any disputes or conditions laid down are insignificant and that the Adjudicating Authority has erred in not applying the ratio laid down by the Hon'ble Supreme Court in 'M/s. Innoventive Industries' (Supra). 7. As against this argument, Learned Counsel for the Respondent drew our attention to the Statement of Accounts wherein there are circular transactions made between the parties on the same day and all the amounts transferred from the Appellant Company to 'Satra Realty and Builders Limited' are basically from 'Satra Realty' to 'Satra Properties'. It is the ca....
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.... account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 10. Placing reliance on the transactions shown in the table in aforenoted para 7, it is the main case of the Respondent/'Corporate Debtor' that the transaction in question is collusive. The Hon'ble Supreme Court in the case of 'Phoenix ARC Pvt. Ltd.' Vs. 'Spade Financial Services Ltd.' (2021) 3 SCC 475, in paras 48, 55, 56, 106.1 & 106.2 has dealt with this issue and observed as follows: "G.3.3. Collusive transactions 48. The above discussion shows that money advanced as debt should be in the receipt of the borrower. The borrower is obligated to return the money or its equivalent along with the consideration for a time value of money, which is the compensation or price payable for the period of time for which the money is lent. A transaction which is sham or collusive would only create an illusion that money has been disbursed to a borro....
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....25-10-2012 shows that the intent of the parties was to continue to co-develop the land. Clause 3 of the side letter provides: "3. It is agreed that ALPL shall share the cost of the Project in the same ratio as the share of respective development in the Property i.e. Villas-50% and other developments (group housing, etc.) 36.33%]. The cost of the Project shall include: (a) Land Cost (b) Licence and approval costs (c) Construction cost (d) Direct project management costs (people at the site) (e) Marketing & sales promotion cost (f) Liaison cost (g) Maintenance cost for unsold inventory (h) Government levies and charges including EDS & IDC and any enhancement thereof. It appears that the parties converted the development agreement into an agreement to sell executed along with a side letter to circumvent the legal prohibition on splitting a development licence in two parts. The transaction between AAA and the corporate debtor was collusive in nature. 56. Since the commercial arrangements between Spade and AAA, and the corporate debtor were collusive in nature, they would not constitute a "financial debt". Hence, Spade and AAA are not financial creditors of the cor....
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....ties Mr. J. Vamshidhar Rao and Mrs. Shailima Kalvakuntla. The said transaction was written off in the books of accounts of the Respondent Company on 31.12.2017. A perusal of the Rejoinder filed by the Appellant shows that there is no specific denial with respect to these amounts, though it was categorically pleaded by the Respondent. It is the case of the Respondent that the amount transferred to these parties is not recoverable as the same was executed in relation to satisfying some other transaction entered into with 'Satra Group'. Garnishee Notices were issued by the Income Tax Department under Section 226(3) of the Income Tax Act, 1961, against M/s. Satra Realty and Builders Limited, one of the entities of the 'Satra Group'. It is strenuously contended that as no amount was payable to the Appellant Company, the 'Corporate Debtor Company' did not pay any amount to the Income Tax Department and have informed the same to the Appellant. 13. The Respondent Counsel relies on paras 5 & 6 of the MOU dated 23.03.2018 filed before the Adjudicating Authority. It is the case of the Respondent that the MOU expressly mentions that the Appellant shall not be entitled for interest at all. The....