TaxTMI 
TaxTMI 
2022 (2) TMI 67
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....e, 2016 (hereinafter referred to as the 'Code') claiming an outstanding dues of Rs. 11,60,610/- to Starconn Mobility Pvt. Ltd., the Corporate Debtor. (ii) On 13th August, 2019, Adjudicating Authority issued notice on Section 9 Application filed by Respondent No.1. The Company Petition was taken up on 13th August, 2019 and thereafter on 23rd August, 2019 and the matter was adjourned to 29th August, 2019. On 29th August, 2019, the Corporate Debtor - Starconn Mobility Private Limited appeared and accepted the liability as well as default. The Adjudicating Authority reserved the order on 29th August, 2019 on Section 9 Application. By an order dated 17th September, 2019, Adjudicating Authority admitted the Application under Section 9 of the Code. The Adjudicating Authority in its order has noted that learned Counsel appearing on behalf of the Corporate Debtor admits the liability and default and hence there is no objection for admission of the petition by the Corporate Debtor. One Shri Ashish Vyas was appointed as Interim Resolution Professional (IRP) by the said order. (iii) On 28th September, 2019, the IRP made a public announcement regarding start of the Corporate I....
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....RP. On 12th December, 2019, the Appellant wrote an email to Mr. Uday Sakrikar, RP requesting him to provide Financial Statements for last three years. RP was also requested to provide update on status of the Appellant's claim and list of members of the CoC. RP for the first time on 16th December, 2019 wrote to the Appellant "I am sorry for the delay, I will revert back by EOD" (vii) On 17th December, 2019, Valay Group, who had filed the Application under Section 9 filed their claim as Financial Creditor, which was admitted and list of creditors was drawn on 21st December, 2019 including Valay Group as Financial Creditor. (viii) On 18th December, 2019, the Application filed by RP for liquidation was taken up by the Adjudicating Authority. The Adjudicating Authority took the view that there is no specific resolution to liquidate the Corporate Debtor. The RP was directed to call a meeting of CoC and pass proper resolution and produce the same. (ix) The RP called a meeting of CoC on 28th December, 2019. (x) The RP after sending email on 16th December, 2019 to the Appellant, did not sent any communication including communication regarding order of the....
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....f the debt of the Company. List of Creditors, Version 3.0 was also communicated, in which the Appellant was also included as one of the Operational Creditor. In the email, RP also wrote that the List of Creditors will be filed with NCLT Mumbai. On 7th March, 2020, the Resolution Professional provided the copy of 2nd CoC meeting dated 28th December, 2019. (xvii) On 11th August, 2020, the Adjudicating Authority passed the impugned order of Liquidation under Section 33. Aggrieved by the order dated 11th August, 2020, this Appeal has been filed by the Appellant (Operational Creditor). 3. We have heard Shri Jitender Chaudhary, learned Counsel for the Appellant, Shri CS Omkar Deosthale, learned Counsel for Respondent No.2 and Shri Harshavardhan Bhende, learned Counsel for Respondent Nos.3 and 4. No one appeared for Respondent Nos.1 and 5. 4. Shri Jitender Chaudhary, learned Counsel for the Appellant, challenging the Liquidation order, submits that the impugned order is vitiated by material irregularity and fraud committed by RP in connivance and collusion with Corporate Debtor, Respondent Nos, 1, 3, 4 and 5. Both IRP and RP have not discharged their duties as entrusted to ....
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....early indicates that there was collusion between the Corporate Debtor, Financial Creditor and the RP. The Application filed by Financial Creditor under Section 9 was not objected by the Corporate Debtor and dues were readily admitted. The RP as per Section 25 of the Code, did not protect the assets of the Corporate Debtor, including the continued business operations of the Corporate Debtor and also did not prepare the Information Memorandum as per Section 29 of the Code. The present was a clear case of material irregularities and fraud committed to deny the legitimate dues of the Appellant. The whole IBC process was pre-planned and proceeded on scripted line, which is apparent from sequence of events clearly exhibited by taking a decision in the very first CoC meeting to liquidate the Corporate Debtor. It is submitted by learned Counsel for the Appellant that the Appellant had already informed the RP and the RP was obliged to initiate transaction audit and have to form an opinion as per Section 43, 44, 45, 46, 47, 48, 49, 50 and 51 of the Code. In order to circumvent the liabilities amounting to more than Rs. 21 crores to the Appellant, the Corporate Debtor and Respondent Nos.3, 4 ....
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....led on grounds of material irregularity or fraud committed in relation to such a liquidation order." 11. As per the above provision, the Appeal against order under Section 33 can be entertained only on the grounds of material irregularity or fraud committed in relation to such a liquidation order. The learned Counsel for the Appellant has pressed this Appeal on both the grounds that is ground of material irregularity and fraud. The submission is that entire CIRP was result of collusion between the Corporate Debtor, Financial Creditor as well as IRP/RP. We first proceed to examine the allegation of material irregularity as contended by the Appellant. 12. We may first notice the statutory provisions regarding duties of RP. Section 25 of the Code, which deals with 'Duties of resolution professional', is as follows "25. Duties of resolution professional. - (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely: -....
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....d of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which contain details of Regulation for carrying out insolvency resolution process. Regulation 13 deals with 'Verification of claims'. Regulation 13(1) is as follows: "13. Verification of claims. (1) The interim resolution professional or the resolution professional, as the case may be, shall verify every claim, as on the insolvency commencement date, within seven days from the last date of the receipt of the claims, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims, and update it." 15. Regulation 27, requires RP to within seven days of his appointment to appoint two registered valuers to determine the fair value and the liquidation value of the Corporate Debtor. Regulation 35A of CIRP Regulations, 2016 oblige the RP to conduct transaction audit as per timelines prescribed in regulations. The RP is required to form an opinion whether Corporate Debtor has been subjected to any transaction covered under Sections 43, 45, 50 o....
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....al statements of the Corporate Debtor, which the RP communicated on 16th December, 2019 by stating "I am sorry for the delay, I will revert back by EOD". There has been no communication from RP after 16th December, 2019 till 25th January, 2021. The Appellant's claim was submitted on 22nd November, 2019, which was received by the RP on 5th December, 2019. The Appellant was required to be shared the relevant details like filing of an Application for Liquidation. After 5th December, 2019, the RP convened a Meeting of CoC on 28th December, 2019, but did not share the said information with the Appellant nor Appellant was given any information or the notice of the meeting. The Appellant's due being more than 10% of the aggregate debt of the Company, Appellant was entitled to participate in the CoC, which fact has been subsequently admitted by RP himself in his communication dated 17th December, 2019. 17. As noted above, under the Insolvency Professional, Regulation, 2016, by virtue of Regulation 7(2)(h), which oblige the RP to abide by the Code of Conduct specified in the First Schedule of the Regulations. Regulation 7, sub-clause (2)(h) is as follows: "7(2) (h) abide by the Code o....
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....y Regulation 36, which was necessary for the Meeting dated 28th December, 2019. The Financial Creditor, who was the sole Member of the CoC was also not made aware that there is a claim by the Appellant of an amount of Rs. 21 crores. The above are clear instances of material irregularity committed by RP in conducting CIRP. 21. The learned Counsel for the Appellant has also rightly highlighted the fact that on 27th August, 2019, that is, after initiation of CIRP, the Corporate Debtor has made a payment of Rs. 14.14 crores to the State Bank of India, who certified that charge, which was created on 4th August, 2015 for the immovable properties of the Corporate Debtor, by payment of the above amount was satisfied. The payment was made after filing of the Section 9 Application of the Code and State Bank of India released the properties of the Corporate Debtor, which were mortgaged. The CIRP was initiated by Financial Creditor for an amount of Rs. 11 lakhs and shortly after filing of the Application by Financial Creditor, the Corporate Debtor paid an amount of Rs. 14.14 crores to the State Bank of India. 22. The conduct of Financial Creditor in the very first Meeting of the CoC, res....
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....ions entered into the month of September 2019 by the Corporate Debtor, which required a thorough investigation. In this context, we may refer to communication of the Appellant dated 8th February, 2020 to the RP, which communication was sent after personal meeting with the RP by the Appellant on 5th February, 2020. In the email, following was stated: - "Time and again through telecommunications, vide our various communications, letter dated 23-Jan-2020 and also during this personal visit, we raised our concern with respect to books of accounts and business dealings of Starconn. We expressed our suspicion about the way IB filed by Valay Group and the entire process being handled by Prachay Advisors. As mentioned by you the total non-cooperation by Prachay Advisors in the matter also indicates the shady aspect in dealing of IBC Process. During the meeting we brought to your attention that: 1. In the year Fy 2017-18 Starconn recorded loss of INR. 21.87 Crores filed with MCA during Jan'20. However, as per MCA record during Fy 2018-19, Starconn discharged all the obligation towards credit facility availed from SBI. Therefore, the source of borrowing or deployme....
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....21,41,74,456/- on 12th February, 2020 pursuant to admission of claim, we shall provide serve the notice of such CoC meeting to you henceforth. Further, we shall place your letter revealing the possibility of mala fide intention of promoters and directors of the Company and considering the conducting of a Forensic Audit before the CoC in the forthcoming meeting the details of which shall be provided to you shortly. Furthermore, please find attached herewith the List of Creditors (Version 3.0) as will be filed with Hon'ble NCLT, Mumbai Bench for your reference." 26. On pointed query with the Counsel for RP whether information of admitting the claim of the Appellant was communicated to the Adjudicating Authority, learned Counsel for the RP said that no such information was placed before Adjudicating Authority. When RP himself on 17.02.2021 stated that he will file the List of Creditors before NCLT, Mumbai bench, it was his duty to file the said List of Creditors (Version 3.0), which was relevant and material for the process. Admittedly, NCLT reserved the order on 1st January, 2020 and the same was pronounced only on 11th August, 2020. There was sufficient time wit....