TaxTMI 
TaxTMI 
2021 (12) TMI 1325
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....2016 seeking relief as follows; a. Direct the Respondents to transfer the shares, subject matter of this application, to the benefit of the Corporate Debtor. b. Alternatively, if the shares have been disposed of by the Respondents, then the proceeds of the same be directed to be credited to the account of the Corporate Debtor. c. Pass such other orders as this Court deems fit. 2. MA/769/2019 is an Application filed by SNJ Distilleries Private Limited before this Tribunal on 30.07.2019, who is the successful Resolution Applicant under Rule 11 of NCLT Rules, 2016 seeking thereof to implead the Applicant as party Respondent in MA/731/2019. 3. IA/04(CHE)/2021 is an Application again filed by SNJ Distilleries Private Limited, who is the successful Resolution Applicant under Section 60(5) of IBC, 2016 seeking relief as follows; a. That this Hon'ble Tribunal may be pleased to pass an order of interim injunction restraining he 2nd to 15th Respondent, from creating any encumbrances on any of the assets and licenses of the 3rd Respondent, pending disposal of MA/731/2019. b. That this Hon'ble Tribunal may be pleased to pass an order o....
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....order in the said Application. 7. It is stated that due to non-availability of access to the SAP accounting system, the Audit firm appointed by the Applicant could not proceed with their auditing of preferential and other transactions audit envisaged under the provisions of IBC, 2016. Since the promoters/directors of the Corporate Debtor were not co-operating to restore the SAP access, a detailed application under Section 43 of IBC, 2016 could not be filed and hence it is averred that the RP had come to a conclusion based on the information available with him and that there appeared to be a preferential transaction evident on the face of it. Case of the Applicant 8. Brief facts of the case, shorn of unnecessary details are as follows; a. The Corporate Debtor had approached the 1st Respondent herein for obtaining a loan to the tune of Rs. 20 Crore and accordingly an Agreement was entered into between the Corporate Debtor and the 1st Respondent. Based upon an Inter-corporate Loan Agreement dated 02.12.2016, the 1st Respondent, who is a related party in respect of the Corporate Debtor had transferred a sum of Rs. 19.5 Crore in two tranches comprising of Rs. 12.5 Cror....
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....ate Debtor had executed a Loan Agreement with the 1st Respondent and the shares of the 2nd Respondent were pledged to the 1st Respondent to secure the said loan vide Share pledge agreement dated 26.02.2016. The 1st tranche of the loan being Rs. 12.50 Crore was disbursed on 02.03.2016 and the 2nd tranche of Rs. 7 Crore was disbursed on 09.12.2016. It was submitted that the 1st Respondent had borrowed monies from HDFC Bank to provide loans to the Corporate Debtor and the 1st Respondent was discharging EMI payments to HDFC Bank. 11. It was further submitted that from the year of 2016 to 2018, the Corporate Debtor had been servicing the interest component to the 1st Respondent, however due to various reasons, the interest payable from April 2018 was outstanding. Hence, it was submitted that the 1st Respondent has issued several demands and reminders to the Corporate Debtor dated 16.08.2018 and 05.09.2018, after which invocation of pledge was issued on 01.10.2018 to invoke the pledge of the shares and transfer the shares to its name. Subsequently, it is stated that the said shares were sold to M/s. Goodyield Investments Private Limited vide share purchase agreement dated 25.10.2018, ....
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....ons. It was also alleged in the rejoinder that the Corporate Debtor has not produced any bank statements evidencing disbursement of Rs. 19.5 Crore by the 1st Respondent and it is also stated that the Corporate Debtor has not reported about the invocation of pledge of shares of the 2nd Respondent by the 1st Respondent Company to the Stock Exchange where the shares of the Company are listed under Regulation 30 of the SEBI (LODR), 2015 as a result of invocation the 2nd Respondent would no longer be the subsidiary of the Corporate Debtor. 15. Further, it is stated in the rejoinder that on reading of the financials of the Corporate Debtor and the 1st Respondent it is seen that at the relevant point of time i.e. 2015-2016 and 2016-2017, the 1st Respondent did not have the requisite credit to extend a loan. Although, it was averred that the 1st Respondent had borrowed loan from HDFC Bank, no sanction letter or disbursement statements have been provided so as to prove the same. 16. It is stated in the rejoinder that the Application under Section 7 of IBC, 2016 was filed by a Financial Creditor viz. Union Bank of India on 08.02.2018 and during the same time the demand notices were sen....
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....managed by the 3rd Respondent. The 3rd Respondent is the Director of the 1st and 2nd Respondent and the 4th, 5th and 6th Respondents are the wife, son and daughter of the 3rd Respondents, who are also directors in either one or all of the entities of the group company. It was submitted that the business affairs of all the companies including the Corporate Debtor were known to all of them. Without elaborating much into the facts of the case, it was submitted by the Learned Senior Counsel for the Applicant that as per the Redemption clause provided in the share pledge agreement 3 months period was available for the Corporate Debtor to make good the defaults and redeem the pledged shares, however, without any regard to the contractual terms between the parties, the 1st Respondent has unilaterally transferred the shares to itself and allegedly thereafter, sold the same to one M/s. Goodyield Investments Private Limited on 25.10.2018 without notice to the Corporate Debtor. It was submitted that as per the Agreement, the Corporate Debtor has time till 31.12.2018 to redeem the shares and since the Corporate Debtor was admitted into CIRP on 01.11.2018, moratorium under Section 14 of IBC, 20....
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....g Authority approving the Resolution Plan. Aggrieved by the same, it is seen that an SLP was filed by the Hon'ble Supreme Court and the said SLP also came to be dismissed thereby upholding the Resolution Plan. 22. Thus, it was contended by the Learned Senior Counsel that the impugned transactions in the present case, would squarely fall within the purview of 'avoidance transaction' under Section 43 of IBC, 2016 and hence sought to reverse the impugned transaction. Submissions made by the Respondent 23. The Learned Senior Counsel Mr. Gopal Shankaranarayanan appearing on behalf of the 2nd Respondent advanced his argument on the maintainability of the present Application. It was submitted by the Learned Senior Counsel for the Respondent that since the Resolution Plan in respect of the Corporate Debtor was approved by this Adjudicating Authority, no application under Section 43, 45 and 49 of IBC, 2016 can be heard and disposed of by this Adjudicating Authority in terms of the Judgment rendered by the Hon'ble High Court of Delhi in Venus Recruiters Private Limited -Vs- Union of India and Others; It was submitted that after the approval of the Resolution Plan, th....
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....ce, it was submitted that, neither is the RP empowered by any of the terms of the Resolution Plan to continue the avoidance application nor is the continuance of the same contemplated in the Plan. It was submitted that there is no express clause in the Application so as to proceed with the avoidance Application. 27. The Learned Senior Counsel for the 2nd Respondent submitted that only the creditors of the Corporate Debtor can benefit from the avoidance application and not the successful Resolution Applicant as already been laid down in the judgement of Venus (supra). It was submitted that argument of the RP that 100% dues of the financial creditors have been paid cannot hold any water for the fact that there are operational creditors and statutory authorities that have been paid only marginal amounts under the plan and could have benefited from avoidance Applications. The entire process of attempting to benefit the successful Resolution Applicant is nothing but a calculated scam being carried out by the RP and successful Resolution Applicant in connivance with each other and is wholly illegal and therefore impermissible. 28. Finally it was contended by the Learned Senior Coun....
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....t has accumulated losses of Rs. 2.80 Crore. Further, it was submitted that the alleged first tranche of Rs. 12.5 Crore had taken place on 27.02.2016 i.e. in the Financial Year 2015-2016, whereas the Balance sheet of the 2nd Respondent Company does not indicate any such loan having been advanced to any person whatsoever. 31. The Learned Senior Counsel further submitted that in the Annexure to the Independent Auditor's Report, it has been reported that the Company has outstanding interest free loans amounting to Rs. 7.17 Crore granted to its related parties without stipulation as to repayment of principal and according to information and explanations given, there are no such cases of loans, investments, guarantees and securities as mentioned in Section 185 and 186 of the Companies Act, 2013. 32. The Learned Senior Counsel would further submit that the loan agreement allegedly made in 2016, made provisions for interest, there was never any repayment made and no details of any interest and corresponding TDS having been paid by the Corporate Debtor to the 2nd Respondent. It was submitted that the said transaction appears to be a mere paper transaction on which, neither parties....
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....valued nature of transaction. Hence, it was submitted that the successful resolution applicant has filed an impleading Application MA/769/2019 to bring on record those facts before this Tribunal. Under such circumstances, the Learned Senior Counsel for the successful Resolution Applicant sought to set aside the impugned transaction carried out by the Corporate Debtor. Findings of this Adjudicating Authority 36. We have heard the submissions made by the Learned Senior Counsel for all the parties. From the submissions made, it is seen that the MA/731/2019 is filed by the Resolution Professional before this Tribunal prior to the approval of the Resolution Plan by the CoC. Further, in relation to the issue of maintainability of the present Application as raised by the Learned Senior Counsel for the Respondents in the matter of Venus Recruiters, after careful consideration of the said judgment, we find that the ratio decidendi of the same cannot be made applicable in the light of the facts of the present case owing to the reasons that in the matter of Venus Recruiters the Application for avoidance of transaction was filed after application seeking approval of the resolution plan w....
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.... (i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest, and was used by corporate debtor to acquire such property; and (ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property: Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor. Explanation.--For the purpose of sub-section (3) of this section, "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 re....
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....that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. (2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit, if- (a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor; and (b) such director or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor. ....
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....ch undervaluation was to defraud the creditors. On the other hand, the provisions of Section 66 related to fraudulent trading and wrongful trading entail the liabilities on the persons responsible therefore. We are not elaborating on all these aspects for being not necessary as the transactions in question are already held preferential and hence, the order for their avoidance is required to be approved; but it appears expedient to observe that the arena and scope of the requisite enquiries, to find if the transaction is undervalued or is intended to defraud the creditors or had been of wrongful/fraudulent trading are entirely different. Specific material facts are required to be pleaded if a transaction is sought to be brought under the mischief sought to be remedied by Sections 45/46/47 or Section 66 of the Code. As noticed, the scope of enquiry in relation to the questions as to whether a transaction is of giving preference at a relevant time, is entirely different. Hence, it would be expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority. 39. As to the present case, it is seen that the RP has moved the MA/....
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....ed to in Section 44. If twin conditions specified in sub-section (2) of Section 43 are satisfied, the transaction would be deemed to be of preference. As per clause (a) of sub-section (2) of Section 43, the transaction, of transfer of property or an interest thereof of the corporate debtor, ought to be for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and as per clause (b) thereof, such transfer ought to be of the effect of putting such creditor or surety or guarantor in beneficial position than it would have been in the event of distribution of assets under Section 53 18.2. However, merely giving of the preference and putting the beneficiary in a better position is not enough. For a preference to become an offending one for the purpose of Section 43 of the Code, another essential and rather prime requirement is to be satisfied that such event, of giving preference, ought to have happened within and during the specified time, referred to as "relevant time". The relevant time is reckoned, as per sub-section (4) of Section 43 of the Code, in two way....
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....ority is required to examine as to whether the scope of enquiry of giving preference, has happened within and during the specified time, referred to as "relevant time". 41. From the chequered history of the present case, as adumbrated supra it is seen that the transaction which is sought to be questioned/impugned by the Resolution Professional pertains to the invocation of the share pledge agreement by the 1st Respondent which allegedly took place during the 1st week of October 2018. The impugned transaction does not pertain to the Corporate Debtor giving any preference to its creditors, however on the contrary, the impugned transaction pertains to a secured creditor, the 1st Respondent herein invoking the pledge of shares on account of the default committed by the Corporate Debtor. 42. As a corollary, let us examine the case of a Financial Creditor (A) who has lent loan to the Corporate Debtor and in order to secure the said loan the Corporate Debtor has created mortgage of certain immovable properties. In the meantime, another Financial Creditor (B) has filed an application under Section 7 of IBC, 2016 against the Corporate Debtor and during the pendency of the proceedings ....
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....om the record of proceedings that no direction was given by this Adjudicating Authority to pay any amount to the Financial Creditor. The Corporate Debtor, during the pendency of Section 7 Application has paid a sum of Rs. 1 Crore to the Financial Creditor and if we apply the definition of Section 43 of IBC, 2016 only the said transaction made by the Corporate Debtor would attract 'preferential transaction'. However, it is seen that the RP has not moved any Application seeking to bring the said amount paid to the Financial Creditor during the pendency of Section 7 Application to the tune of Rs. 1 Crore as 'preferential transaction'. 47. At this juncture, it is required to be noted that the RP ought to have moved before any other appropriate forum as soon as he has knowledge of the said transaction in order to nullify the notice invoking the share pledge agreement issued by the 1st Respondent. However, the RP has impugned the said transaction before this Adjudicating Authority under Section 43 of IBC, 2016. Section 43 of IBC, 2016 as already alluded supra pertains to transactions over which the Corporate Debtor has given preference at a relevant time, however by to....
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....h an assurance can be given when the matter is sub-judice before a forum and without knowing its final outcome. We have perused the Information Memorandum issued by the Resolution Professional and the RP in the Information Memorandum has made the following disclosure about the shares of the Corporate Debtor in Apollo Distilleries and Breweries Private Limited: The Board of Directors during FY 2015-16 passed necessary resolution for accepting Inter Corporate Loans aggregating to Rs. 100 Crores from one or more corporate entities, in one or more tranches from each of such corporate entities. Subsequent to the above, the Company had received a total of Rs. 19.50 Crores from M/s. South (India) Hotels Private Limited, as and by way of inter corporate loan, in two tranches comprising of Rs. 12.50 Crores during March 2016 and Rs. 7 Crores during December 2016. The Company in accordance with the resolutions passed had executed a primary loan agreement, two separate Loan Agreement and a share Pledge Agreement whereby equity shares held by the company in its subsidiary M/s. Apollo Distilleries and Breweries Private Limited, to the extent of 4,00,00,000 shares of Rs. 10/- ea....
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....pplicant. The relevant clauses as found in the Resolution Plan are reproduced hereunder; Clause 3.1 (iv) The Resolution Applicant, in the manner specified supra, shall take control over the entire assets of the Corporate Debtor including licenses, permits, all types of investments, permissions, brands, intangible assets, sundry debtors, vehicles, stock, finished goods, semi finished goods, spares and parts and other sanctions accorded by any appropriate authority in law, to carry out its activities of business as a going concern. Clause 3.1 (v) The takeover of all assets of the Corporate Debtor, including its licenses, investments, permissions, sanctions, etc shall be handed over on an unencumbered or free from all lien/attachment basis to the Resolution Applicant. Clause 3.1 (vi) All assets, tangible, intangible, land, building, investment, plant & equipments, machineries, vehicles, inventories, stock, etc of the Corporate Debtor, whether disclosed or undisclosed in the Information Memorandum, emails, books of the Corporate Debtor or in any other document, shall upon approval of the Resolution Plan vest absolutely free from all....
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....n. Clause 3.1 (xxxvi) The Resolution Applicant states that the amount offered in this Plan is comprehensive and is consideration for all the clauses/benefits mentioned in this Resolution Plan. For the sake of clarity, it is mentioned that each and every term of this Resolution Plan wherein benefits are accruing to the Resolution Applicant shall be considered as mandatory and non-negotiable terms of this contract. Clause 3.2 (6) Investments made by the Corporate Debtor, including in its subsidiaries shall be handed over to the new management of the Corporate Debtor. All litigants in connection with these investments, if any, shall be handled in coordination with the Resolution Applicant. 53. We have perused the clauses relied upon by the Learned Senior Counsel for the successful Resolution Applicant in the Resolution Plan. The Clauses in the Resolution Plan provide proceeds of the avoidance transactions to go into the coffers of the Resolution Applicant. None of these clauses give a right to the successful Resolution Applicant to prosecute MA/731/2019 after the approval of the Resolution Plan and that savings in the Resolution Plan has been mad....