TaxTMI 
TaxTMI 
2022 (2) TMI 250
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.....A. No. 1628/2021 filed by the Appellant in CP/(IB) 2640/2019. Brief facts necessary for deciding this Appeal are:- The Appellant No.1 entered into Record Management Agreement with Corporate Debtor on 15.01.2007 under which Agreement 'M/s. Writer Information Management Services', a division of P.N. Writer & Co. Pvt. Ltd. agreed to provide record management services to 'Cox & Kings' for its record. The Agreement contained details of pricing etc. In terms of the payment procedure under the terms of Agreement, the Corporate Debtor was required to pay to the Appellant No.1 charges for the said services within 15 days from the date of receipt of monthly invoices raised by the Appellant. On 22.10.2019, Adjudicating Authority passed an order initiating Corporate Insolvency Resolution Process ("CIRP" for short) against Corporate Debtor- 'Cox & Kings'. A Moratorium under Section 14 of the Code was also declared. After public announcement on 26.10.2019, the Appellant filed its claim in Form-B raising a claim of Rs. 24,60,525/- against the Corporate Debtor. The Respondent- Mr. Ashutosh Agrawala was appointed as Resolution Professional on 10.01.2020. In 4th Committee of Creditors meeting he....
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....It was stated that the payment has been made only till 31.01.2020. Details of invoices raised from 01.02.2020 to 30.06.2020 were also mentioned in the Reply. Another Application I.A. No. 484 of 2021 was preferred by the Resolution Professional praying for a declaration that the Respondent is not entitled to any payments in terms of the Agreement towards record management services and record retrieval services after commencement of CIRP of the Corporate Debtor from 22.10.2019. Direction was also sought for refunding the money received by the Appellant from the Corporate Debtor. An amount of Rs. 6.22 Crores was also claimed towards losses suffered by the Corporate Debtor on account of the refusal of the Respondent to provide uninterrupted critical services. The Appellant No.1 has also filed I.A No. 1628/2021 where the Appellant sought a declaration that the Applicant is entitled for payment of services and also payment for storage charges in advance for the next three years or till such further period if the Respondent wishes to continue the storage of records. Declaration was also sought that in event the Corporate Debtor fails to make payment then the Applicant will be entitled ....
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....236 on a complaint filed by Central Government or by the Board. Adjudicating Authority has no jurisdiction to impose punishment or fine of Rs. 20 Lakh on the Appellant. It is submitted that for imposing punishment which is an offence it is only Special Court as referred to in Section 236 who can award any punishment including punishment of fine. Section 235A is not a provision for imposing cost as has been referred to in paragraph 13 of the judgment. It is submitted that even after CIRP proceeding, the Appellants were provided record management services although after February 2020 no payment has been made to the Appellants. It is submitted that advance payment which was asked by Appellants was with regard to after services i.e. service of packing and others which was not part of the earlier Agreement. Appellant had never asked for advance payment for providing record management services as for which agreement was entered with Corporate Debtor. It is submitted that part of payment which was received by the Appellant was in response to the invoices and there was no justification for directing refund of said payment. Insofar as direction (A) in para 15 in order is concerned, the Appe....
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....UESTION No.1 7. Section 235A which falls for consideration in this Appeal has been inserted in the Code by Act 8 of 2018 w.e.f. 23.11.2017. Section 235A was inserted in the Code vide Ordinance by Insolvency Bankruptcy Code Ordinance, 2017 (No. 7/2017). On the date when Ordinance was issued i.e. 27.11.2017 Press Information Bureau, Government of India, Ministry of Corporate Affairs issued orders highlighting on aims of the Ordinance. The press release outline the object of amendment which is to the following effect:- "The Government of India promulgated today the Ordinance to amend the Insolvency and Bankruptcy Code, 2016 (the Code). Earlier the President of India had given his assent to the Ordinance to amend the Code. The Ordinance aims at putting in place safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of the Code. The amendments aim to keep-out such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company. In addition to putting in place restrictions for such perso....
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.... rupees or more; or (b) fraudulently removed any part of the property of the corporate debtor of the value of ten thousand rupees or more; or (c) wilfully concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the property of the corporate debtor or its affairs, or (d) wilfully made any false entry in any book or paper affecting or relating to the property of the corporate debtor or its affairs, or (e) fraudulently parted with, altered or made any omission in any document affecting or relating to the property of the corporate debtor or its affairs, or (f) wilfully created any security interest over, transferred or disposed of any property of the corporate debtor which has been obtained on credit and has not been paid for unless such creation, transfer or disposal was in the ordinary course of the business of the corporate debtor, or (g) wilfully concealed the knowledge of the doing by others of any of the acts mentioned in clauses (c), (d) or clause (e); or (ii) at any time after the insolvency commencement date, committed any of the acts mentioned in sub-clause (a) to (f) of clause (i) ....
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....uthority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees. [(3) If any person initiates the pre-packaged insolvency resolution process- (a) fraudulently or with malicious intent for any purpose other than for the resolution of insolvency; or (b) with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.]" 12. Section 236 deals with 'Trial of offences by Special Court'. Section 236 is as follows:- "236. Trial of offences by Special Court. - (1) Notwithstanding anything in the Code of Criminal Procedure, 1973(2 of 1974), offences under of this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013 (18 of 2013). (2) No Court shall take cognizance of any offence punishable under this Act, save on a complaint made by the Board or the Central Government or any person authorised by the Central Government in this behalf. (3) The provisions of the Code of Criminal Procedure, 1973 shall apply to th....
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....ecorded regarding provisions of mens rea on the part of the offender, against which the Appeal was filed. We may first notice the provisions of Section 23(1)(a) which provisions came for consideration before the Hon'ble Supreme Court. The relevant provisions has been quoted in paragraph 4 of the judgment which is to the following effect:- "4. With a view to answer these questions, it would be appropriate to first notice the relevant provisions of Section 10 and 23 of FERA, 1947, as they stood at the Material time, (prior to the amendment of the FERA in 1964 and 1973). Those provisions read thus,: xxx xxx xxx Section 23. Penalty and procedure.- (1) If any person contravenes the provisions of Section 4, Section 5, Section 9, Section 10, Sub-section (2) of Section 12, Section 17, Section 18A or Section 18B or of any rule, direction or order made thereunder, he shall (a) be liable to such penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place, or five thousand rupees, whichever is more, as may be adjudged by the Directorate of Enforcement in the manner hereinafter provided, or ....
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....ty of the contravenor for the breach of his "obligations" imposed under the Act. They impose "penalty' for the breach of the "civil obligations' laid down under the Act and not impose any "sentence" for the commission of an offence. The expression "penalty' is a word of wide significance. Sometime, it means recovery of an amount as a penal measure even in civil proceedings. An exaction which is not compensatory in character is also termed as a "penalty'. When penalty is imposed by an adjudicating officer, it is done so in "adjudicator proceedings' and not by way of fine as a result of "prosecution" of an "accused' for commission of an "offence" in a criminal Court. Therefore, merely because "penalty' clause exists in Section 23(1)(a), the nature of the proceedings under that Section is not changed from "adjudicator' to "criminal' prosecution. An order made by an adjudicating authority under the Act is not that of conviction but of determination of the breach of the civil obligation by the offender." 17. The Hon'ble Supreme Court in the above case laid down that penalty is imposed by the Adjudicating Authority in adjudicatory proceedings and no....
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....e understood in the context in which it is used in a given statute. A penalty may be the subject-matter of a breach of statutory duty or it may be the subject-matter of a complaint. In ordinary parlance, the proceedings may cover penalties for avoidance of civil liabilities which do not constitute offences against the State. This distinction is responsible for any enactment intended to protect public revenue. Thus, all penalties do not flow from an offence as is commonly understood but all offences lead to a penalty. Whereas the former is a penalty which flows from a disregard of statutory provisions, the latter is entailed where there is mens rea and is made the subject-matter of adjudication. In our view, penalty under section 10(3) of the Act is compensatory. It is levied for breach of a statutory duty for non-payment of tax under the Act. Section 10(3) is enacted to protect public revenue. It is enacted as a deterrent for tax evasion. If the statutory dues of the State are paid, there is no question of imposition of heavy penalty. Everything which is incidental to the main purpose of a power is contained within the power itself. The power to impose penalty is for the p....
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....ntractual one in which in order to attract the right to call themselves chartered accountants' members enter into a contract with the institute to obey its rules and, amongst other things, to submit themselves to the hearing and verdict of disciplinary tribunals instituted by the institute itself. It is accepted by Mr. Marcus that one of the penalties which a disciplinary tribunal of the Institute of Chartered Accountants is able to impose is a financial penalty." 22. The above authority also supports our view that punishment of fine is a fine which is imposed on a delinquent for an offence. 23. The Code has used both the expressions punishment and fine. The use of expressions 'punishment' and 'fine' has been in reference to the provisions which provision in Chapter VII of Part-II and Chapter VII of Part-III in reference to offence which are enumerated in Code. A question will be asked as to why Section 235A has not been inserted in Chapter VII of Part-II or Chapter VII of Part-III. The answer is obvious i.e. since Section 235A encompasses contravention of any of the provisions of the Code, Rules and Regulations, it was placed in Part-V i.e. Miscellaneous. Placing of Section ....
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....ate Debtor in terms of the Agreement towards Record Management Services and Record Retrieval Services (as defined hereinafter); d. Pass an order directing the Respondent to pay an amount Rs. 6,22,25,415 (Rupees Six Crore Twenty Two Lakhs Twenty Five Thousand Four Hundred and Fifteen), as specified in Exhibit 'S', to the Corporate Debtor towards the losses suffered by the Corporate Debtor on account of the refusal of the Respondent to provide uninterrupted critical services in terms of the Agreement." 26. Section 74 of the Code which is part of Chapter VII of Part-II specifically provide for 'punishment for contravention of Moratorium or Resolution Plan'. Section 74 is as follows:- "74. Punishment for contravention of moratorium or the resolution plan. - (1) Where the corporate debtor or any of its officer violates the provisions of section 14, any such officer who knowingly or wilfully committed or authorised or permitted such contravention shall be punishable with imprisonment for a term which shall not be less than three years, but may extend to five years or with fine which shall not be less than one lakh rupees, but may extend to three lakh rupees, or with ....