TaxTMI 
TaxTMI 
2022 (6) TMI 493
X X X X Extracts X X X X
X X X X Extracts X X X X
....een filed by the Applicant Shri Kuldeep Verma (Resolution Professional) under section 60(5) and section 25(2)(j) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the National Company Law Tribunal Rule, 2016, seeking the following reliefs from this Adjudicating Authority: a. "For the combined and cumulative effect of all aforesaid and to protect the assets of the Corporate Debtor from being parted with by the holding company, this Adjudicating Authority may graciously be pleased to impose the vicarious liability of respondents and to pierce the corporate veil by disregarding the false description of corporate debtor created by the holding company. Respondents be held liable to discharge liabilities of the subsidiary/corporate debtor along with assets of all be held as merged or consolidated or intricately intertwined. b. pleased to declare all the aforesaid vulnerable transactions including illegal inter-se sale of shares of the corporate debtor among respondents by the holding company as preferential, undervalued, fraudulent, non-est and void and ab intio. c. Directions be passed for forensic audit of the holding and subsidiary company so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in from exposing the patent illegality. It is submitted that the liability of the guarantor and borrower is co-extensive and consolidated liability. It is submitted that Respondent No. 4 and 5 by collusive letter dated 7th February, 2020, clearly refused to disclose anything or to cooperate with the RP. The total claim received from creditors is Rs.10.70 Crore i.e Financial Creditor consisting of Indian Bank Rs.0.74 Crore and Operational Creditors totalling Rs.9.96 Crore consisting of Star India Pvt. Ltd. i.e. Rs.5.21 crore, Soni Pictures Networks India Private Limited is Rs.4.65 Crore, ESIC Rs.0.09 Crore. It is submitted that assets of the Corporate Debtor for the period 01/04/2016 to 31/03/2017 as per MCA Records is Rs.10.01 crores. 6. According to the applicant, Section 25 of the Code casts a duty upon the RP to file avoidance application in accordance with chapter III of the Code. Section 66 of the Code casts a duty to file an application in case he finds a fraudulent and wrongful transaction and Section 20 (1) of the Code mandates and requires the RP to make every endeavour to protect and preserve the value of the property of the Corporate Debtor. 7. On this application ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....As per Regulation 24 of Insolvency and Bankruptcy Board of India ( Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Resolution Professional shall act as the Chairperson of the meeting of the Committee of Creditors. Accordingly, Mr. Kuldeep Verma, being the RP chaired the Meeting by welcoming all present. Item No.3 (a)...... (b) Hon'ble NCLT, Kolkata Bench order dated 24.02.2020 With the permission of creditors present in the meeting, RP read the Hon'ble NCLT, Kolkata Bench order dated 24.02.2020 which reproduces as below: " Ld. Counsel for the RP appears. Third Progress Report is filed. It is taken on record. Heard Ld. Counsel for the RP. Issue notice to the directors of the Corporate Debtor for appearance before this Bench. Our order has NOT been complied with by them. So issue notice under Section 425 of the Companies Act for non-compliance of directions of this Tribunal. RP to serve notice and file affidavit of service. Matter to come up next on 17.04.2020". Actions /Steps taken by the RP vide Hon'ble NCLT order dated 24.02.2020 Pursuance to directions of Hon'ble NCLT vide order dated 24.02....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntial transactions/undervalued transactions/ Fraudulent trading transactions under IBC 2016 even during the twilight period wherein the intention to cause prejudice to the creditors is embedded and thus also prima facie attracts section 49 of the IBC. XI. Sale of shares of corporate debtor was done by holding company at a distress value without making a public offer to overcome impediment of IBC and that too of the shares of corporate debtor having a non- disposal undertaking with the lender Allahabad Bank. XII. Mr.Dhatt also opined that complaint can be made to ED for violation of terms and conditions of sanction letter of AB based on Share Purchaser Agreement dated 29.03.2019. XIII. SPNIPL is of the opinion that transfer of Promoters shares without the consent of Allahabad Bank is a clear cut violation of terms and conditions of AB loan sanction letter. XIV. The COC and all creditors present were of unanimous view that the share purchase agreement dated 29.03.2019 executed between Induslnd Media & Communication Limited and Mr. Rajendra Prabhakar Padte is void ab initio as it does not have prior consent of Allahabad Bank. XV. In view of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e details of the mail sent by Company Secretary IMCL is as per trail mail. Kindly confirm whether Allahabad Bank has given prior consent for transfer of Promoters shares to Induslnd Media & Communications Limited (IMCL and if yes, kindly share the consent to undersigned. In case Allahabad Bank has not given prior consent for transfer of shares in AMBCL, then what action Allahabad Bank has taken so far. You are requested to revert by end of day 20.02.2020. Kind regards, Kuldeep Verma Resolution Professional" 13. The applicant has further placed on record a letter dated 28th December, 2018 written by IMCL to Registrar of Companies, Kolkata as under:- Sub: Annual General Meeting of Advanced Multisystem Broadband Communications Ltd. CIN No. U64202WB2000PLC091088 Dear Sir, This is to bring to your kind notice that we, Induslnd Media & Communications Limited (IMCL) through a Shareholders Agreement dated May 18,2012 had invested in a Company Advanced Multisystem Broadband Communications Limited (AMBC), a company having its registered office at Chinsurah, West Bengal and engaged in the business of providing Cable TV....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers base have illegally shifted their business and abandoned the Company. However, we are committed to comply with the statutory filings and therefore we are filing the Financial Statement (Form AOC-4_XBRL) and Annual return (Form MGT-7) without holding AGM in view of the above circumstances. Kindly acknowledge receipt of the same. Yours faithfuly For IndusInd Media & Communications Limited Bijay Kumar Authorised Signatory". 14. The main thrust of the applicant in his arguments is that the respondents have not provided any documents and have not cooperated with the RP, and they have entered into vulnerable transactions like inter-se sale of shares of the CD amongst respondents, as preferential, undervalued and fraudulent, and that forensic audit of the so called holding company and subsidiary company be directed to be held. The applicant, however, has stated that there is no other asset of the CD, except the shares which have been transferred by respondent no.1. 15. In reply to the arguments of the RP, it is submitted by the respondents that the application is not maintainable. It is submitted that the RP has complained ab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es were not mortgaged with any Bank or Financial Institutions and were free from any encumbrance. 18.It is further submitted by Respondent No.1, in one of the Board meetings held on 1st February, 2019 (page 77 of the reply), the illegal act, mismanagement and fraudulent act caused by promoters and directors of the corporate debtor has been stated. It is stated that such mismanagement and fraudulent act had caused huge financial losses to the corporate debtor as well as depleted and eroded the investment made by R-1 in the corporate debtor due to the same, respondent no.1 was constrained to sell its shares held in the Corporate Debtor. Respondent No.1 has also filed a complaint before the RoC inter alia stating the illegalities committed by promoters and directors of the Corporate Debtor and the nominee directors in the corporate debtor have also resigned on February 19, 2019. It is submitted that the petition is not maintainable as against Respondent Nos. 1,2,3 and 6 as there has been no illegal or fraudulent transaction done by the said respondent. 19.During the course of arguments, Ld. Counsel for the applicant /RP submitted that IA No. 841/2020 and I.A. No. 1288/2020 are i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uity shares held by Respondent No.1 in the Corporate Debtor to the Respondent No.7 is a preferential and undervalued transaction. The Ld. Counsel for the Respondent No.1,2,3 and 6 to 11 in IA No. 1288/2020. 26. In reply to the arguments of the applicant, it is submitted by the respondents that the application is not maintainable. The order dated 13th January, 2020, in respect of which, it has been alleged that the same has not been complied with does not indicate in what manner and how the answering respondents would have to comply with the orders. There are no particular directions given in the said order dated 13th January, 2020.It is further argued that the Respondents were not directors of the Corporate Debtor on 13th January, 2020. Thus, there can be no violation or disobedience of the said order. 27. It is submitted that no application under section 60(5) of the IBC is maintainable. It is submitted that the answering respondents have the highest regard for the order of this Adjudicating Authority and tender their unconditional apology if there has been any inadvertent violation of the order. 28. It is submitted that from the annual returns as well as Subscription ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with certain requirements. Some of the local cable operators (LCOs) in the Hoogly district had joined hands to form a multi System Operator (MSO)/CD. 34. It is submitted that prior to implementation of the Digital Addressable System (DAS) there was an analogue system of cable operation. But with the introduction of DAS, the supply of set top boxes was mandatory. The implementation of the said DAS was divided in 4 phases. However, the LCOs did not have the fund to supply set top boxes to their subscriber base of 3.5 lakh (approx.) In the meantime, respondent No.1 Company (IMCL) expressed its desire to jointly carry on the business in Hoogly with the LCOs. A shareholders cum Operators agreement was executed on 29.03.2012. By virtue of the said agreement, IMCL became majority shareholder with 51% shareholding for implementation of the DAS, the IMCL and the LCOs jointly managed to supply 1.3 lakh boxes only whereas the requirement was 3.5. lakhs boxes to retain their subscribers. 35. It is further submitted that the said boxes were required to be supplied at a subsidised rate of Rs.500/- per boxes to the Corporate Debtor as against the cost of Rs.1650/- . At the same time the cha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom 4th August, 2018. The respondent no.4 and 5 have tendered their resignation letters upon all other directors, IMCL did not file the Form No. DIR-12 with RoC the Respondent No.4 and 5 themselves filed the Form No. DIR- 11 on dated 7th August, 2018 to record their resignation from the Board of the Corporate Debtor. As such the respondent no.4 and 5 are no more directors of the said Corporate Debtor and are not part of the suspended board of directors as they have resigned much prior to admission of the petition under section 9 IBC. 37. Since almost all the broadcasters have switched off the signals, the business of the Corporate Debtor almost closed down. Since the business of the Corporate Debtor has almost closed down, the staff etc.who were working have left the company. The said staff could not be paid salaries since there was a huge deficit of funds in the company. After resignation, the respondent no.4 and 5 did not enter into the registered office or any other office of the Corporate Debtor and they have intimated the IMCL as well as their representative directors to take possession of the assets, records etc. of the Corporate Debtor. 38. In view of the above, respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as not sought the aid of any expert professional if it was required for ascertaining the transaction being avoidable. And for arriving at a complete satisfaction about the transaction to be avoidable, the RP could not have directly approached this Adjudicating Authority for the relief sought by him. 43. The Hon'ble Supreme Court in the case Anuj Jain Vs Axis Bank Limited and others in Civil Appeal Nos. 8512-8527, 6777-6797 of 2019 and Civil Appeal Nos. 9357-77 of 2019 (Arising out of Diary No. 32881 of 2019 in paras 29 and 29.1 held as under:- "Having found that the transactions in question cannot be countenanced, for being of preference during a relevant time to a related party; and having approved the order passed by NCLT in that regard, we do not consider it necessary to deal with the other length of arguments advanced by the learned counsel for parties on the questions as to whether the transactions are undervalued and/or fraudulent too. In the totality of circumstances, we would prefer leaving the said questions at that only, while also leaving all the related questions of law open, to be examined in an appropriate case. However, we are impelled to make on....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... see from the contents of present application filed by RP, there are no specific material facts as 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. We also note that there was no enquiry conducted by RP in the present case, as required by Hon'ble Apex court, in relation to the questions as to whether a transaction is avoidable, fraudulent or avoidable. It has been clearly observed by Hon'ble Supreme Court in the above referred case, it would be expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority. 45. Seen in the background of law laid down by Hon'ble Supreme Court of India, 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, we find RP has grossly erred in not considering these aspects while filing this application. And instead has resorted to blame game making allegations against the suspended board of Directors of the Corporate Debtor/respondents and oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs.5,16,07,381/- for allotment of 51% shares and thereafter when the Corporate Debtor required more financial investment, Respondent No.1 had paid a further sum of Rs.5,15,07,381/- and additional 274070 number of equity shares were allotted to Respondent No.1 thereby increasing the shareholding in CD of Respondent No.1 to 59.61%. Even thereafter, Respondent No.1 had advanced a loan of Rs.90 lacs to the Corporate Debtor and in lieu of the same, 47835 number of equity shares were pledged in favour of Respondent No.1. Respondent No.1 has further stated that Respondent No.1 was never in control of the working of the Corporate Debtor or in control of the Board of Corporate Debtor. Respondent No.1 was never a promoter of the Corporate Debtor and the same would be evident from the aforesaid Agreement dated 18th May, 2012 and the annual returns filed by the Corporate Debtor. Therefore, the shares held by Respondent No.1 in the Corporate Debtor could have never been subject to the terms and conditions laid down in the sanction letter dated 16th November, 2017 (page 35 of the application). Therefore, transfer of equity shares held by Respondent No.1 in the Corporate Debtor to Respondent N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....53. It is submitted by learned counsel for the respondents that the applicant has filed this application under section 60(5) read with section 25(2)(j) of the Code, 2016. Since Respondent No.1 has transferred its own holding in the Corporate Debtor to Respondent No.7, the same cannot be said to be an asset of the Corporate Debtor and therefore cannot be challenged under the provisions of IBC, 2016. This act of sale has been performed by Respondent No.1 pursuant to a Board meeting of the Respondent No.1 held on 1st February, 2019 ( page 77 of the reply). It is further submitted that there is no order of any Court stopping Respondent no.1 from selling or transferring its own shares. Moreover, as regards alleged contempt, not a single order says or stops respondent no.1 from selling its share, which was done much prior to the order of CIRP. It is submitted that shareholding was its personal property and not the property of the Corporate Debtor. It is settled law that shares are separate and distinct from the assets of the company, and transfer of shares cannot be construed as transfer of assets of the company. No application under Section 60 or any other provisions of the Code, 2013 w....