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2022 (10) TMI 523

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....Tribunal', Division Bench - II, Chennai). 2. The 'Adjudicating Authority' (`National Company Law Tribunal', Division Bench - II, Chennai), while passing the 'impugned order' dated 01.07.2022 in IA(IBC)/591(CHE)/2021 in IBA/1424/2019 at Paragraphs 34 to 36, had observed the following: 34. ``The Applicant in the present case has miserably failed to prove the dishonest intention of the Respondents to defraud the creditors. It was submitted that 2.03.36 hectares of land in the registration District of Morbi in Gujarat State was purchased with RISPL funds of Rs.58,25,050/- for RPPL and the said amount has been transferred from the RISPL's current account in favour of the seller farmer. It is required to be noted that a transfer of assets within the group companies per se would not constitute 'fraudulent trading' as stipulated under Section 66(1) of IBC, 2016. In the present case, the reason given by the Respondent in respect to transfer of assets among its group companies appears to be plausible and cannot be brought under Section 66 (1) of IBC, 2016. Only allegations have been made by the Applicants and no documentary proof has been filed in support of the same, to show that the bus....

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.... the Corporate Debtor; d) Sale Deed; and e) 'Record of Rights' in the Application, bearing in IA(IBC)/591(CHE)/2021 in IBA/1424/2019. 5. The crystalline stand of the 'Appellant' is that the 'Adjudicating Authority' (`National Company Law Tribunal', Division Bench - II, Chennai) had not considered the 'Relevant Documents' (as mentioned supra), notwithstanding the 'Forensic' and 'Transactions Audit Report'. 6. The 'prime plea' of the 'Appellant' is that the 'Adjudicating Authority' (`National Company Law Tribunal', Division Bench - II, Chennai) should have seen that the 'Sale Consideration' for the purchase of the 'Land' was paid by the 'Appellant' / 'Applicant' / `RISPL', but the 'Land' was registered in the name of the Rs. 1st Respondent / M/s. Regen Powertech Private Limited', and further that the 'Respondents' had indulged in a 'Fraudulent Transactions' with an intent to 'Defraud' the 'Creditors' of the 'Corporate Debtor'. 7. The other submission of the Learned Counsel for the 'Appellant' is that the 'Adjudicating Authority' (`National Company Law Tribunal', Division Bench - II, Chennai) had failed to appreciate that the 'Documents' submitted by the 'Appellant' / 'Applicant' e....

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....esolution Professional', including submission of particulars (a) RISPL Assets on CIRP commencement Date with a copy of 'Fixed Assets Register' (FAR), (b) 'Original Land Documents' of RISPL and its 'wholly owned subsidiaries' with 'Index of Land Description', including 'Leased Land', 'Survey Number', 'Registered Document Number', name in which registered, Name / Address and 'Related Document' of the 'Power of Attorney', if the 'Land' is not yet registered in Companies Name, Book Value, Details of 'Right to Way' with documents and (c) RISPL Lands in Inventory and Manual. 13. It is the stand of the 'Appellant' / 'Applicant' that 'pending determination' of the 'aforesaid Application' and procurement of the 'Fixed Assets Register', the 'Appellant' / 'Applicant' had perused the 'Financial Statements' of the 'Corporate Debtor' including the 'Balance Sheet' as on 31.03.2020 and the 'Balance Sheet' reflects the details of the 'Land Assets' of the `Corporate Debtor', as under: ``(a) Land in Fixed Assets Category at Rs.7,71,98,398/- (b) Land in Inventory and Manual Category at Rs.44,11,76,094/-'' and that the break-up for the 'Lands' in 'inventory' and 'manual', reveal that various la....

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....said 'Transactions' was pointing out that the 'Books of Accounts' are not reliable and that no 'supporting Documents' were found, in respect of the entries in SAP, recommending 'legal action' against the second and third Respondents. Later, in the `Seventh' and the `Eighth Committee of Creditors Meetings', that took place on 26.04.2021 and 06.05.2021, respectively, the matter was deliberated upon and based on the advice of the 'Committee of Creditors', the 'Appellant' / 'Applicant' was instructed to file 'Petitions', in recovering the said 'Land', etc. 17. It is the version of the 'Appellant' that earlier she had filed IA/487(CHE)/2021, in terms of the ingredients of Section 66 of the Insolvency & Bankruptcy Code, 2016 against `M/s. Lakshmiranga Perumal Renewable Energy (P) Ltd.' (`Related Party') in its name, Land measuring 21.35 Acres, in the Morbi Registration District, Gujarat State, were transferred in an illegal manner, with the knowledge and consent of the second / third Respondents and further that `RISPL' Books, reflected this aspect in 'Inventory & Manual Caption'. 18. The forceful stand of the 'Appellant' is that the hurdle in identifying `RISPL Assets', among the unpr....

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....bsidiaries' / 'Entities', which comprise the 'Regen Group'. 23. The stand of the second and third Respondents, before the 'Adjudicating Authority' (`National Company Law Tribunal', Division Bench - II, Chennai), as evident from their 'Replies', indicate that depending upon the 'Business Requirements' and various 'Rules and Regulations' prevailing at that point of time, in numerous stages, the 'Lands' were required either by the 'Appellant Company' / 'Subsidiary Company', because each 'State' had different 'Rules'. As a matter of fact, the Rs. 1st Respondent / M/s. Regen Powertech Private Limited / Holding Company' of all Companies, it was the 'Prime Holding Company', many times for the 'most Long Term Assets'. 24. On behalf of the second and third Respondents, a plea is taken, before the `Adjudicating Authority' (in its `Reply' to IA/591/IB/2021 in IBA/1424/2019) is that in the `State of Gujarat', a mandatory condition was that, the 'Land' ought to be 'owned' / 'Leased' by an individual, making an 'Applicant' for 'Eviction Approval'. According to the second and third Respondents of all 'Transactions' between the 'Companies' as well as the 'Assets' details were all maintained in a....

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....24/2019, before the 'Adjudicating Authority' (`National Company Law Tribunal', Division Bench - II, Chennai) under Section 25 of the Insolvency & Bankruptcy Code, 2016 and 66 of the Insolvency & Bankruptcy Code, 2016, in respect of 'Fraudulent Trading' / 'Wrongful Trading'. Indeed, Section 23 of the I & B Code, 2016, provides for the `Resolution Professional', to conduct `Corporate Insolvency Resolution Process'. Section 25 of the Insolvency & Bankruptcy Code, 2016, speaks of a 'Resolution Professional', to conduct `Corporate Insolvency Resolution Process', in `managing the affairs of the `Corporate Debtor', during the 'Resolution Process' period and not at a subsequent point of time. 30. It must be borne in mind that whenever a 'Fraud' on a 'Corporate Debtor' is committed, in the course of carrying 'business', it does not necessarily mean that the 'business' is being carried on with an intent to 'defraud' the 'Creditors'. In this connection, this 'Tribunal' pertinently, points out that if the 'Directors' of a 'Company' had acted on a bona-fide belief that the 'Company' will recover from its 'Financial Set Back' / 'Difficulties' / 'Problems', then, it will not be liable for the 'A....

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.... case, the effect of it is to hold that the company was unable to pay its debts at the time the petition was presented, and that the directors should be presumed to know even at that time that there was no reasonable prospect of repayment. A proposition so wide has not received judicial recognition so far. A company may actually be insolvent at a given time; but its directors may bona fide hold a different view. Even in a case where they are aware of the true position, they may still think that all was not lost and that they would be able to stem the rot by further borrowings and improving the business. In re F.L.E. Holdings Ltd. [1967] 1 WLR 1409 ; [1968] 38 Comp Cas 214 (Ch D) is a case in point. Mr. Brown who was in de facto control of the company had borrowed some amounts from a bank in July, 1965, by deposit of title deeds. But the mortgage was not registered. By September, 1965, two other creditors had obtained decrees against the company and it was fairly clear that it had become insolvent. Thereafter, he gave a legal mortgage to the bank by registering the charge and this transaction was attacked as a fraudulent preference. Pennycuick J. held that there was no fraud at all ....

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.... time, in different States, 'Lands' were acquired either by the 'Appellant Company' or the 'Subsidiary Company', at each State had different 'Rules' and it was a mandatory condition of the `State of Gujarat' that the 'Lands' should be 'Owned' or 'Leased' by the person making such an 'Application' for 'Evacuation Approvals' and in fact, the 'Lands' were acquired either by the 'Appellant Company' or the 'Subsidiary Company', but `primarily', for the benefit of 'Regen Group' and added further, all 'Transactions' between the 'Companies' and the 'Asset' details were maintained in a 'Transparent Manner' of `SAP System' (including the `Fixed Asset Register') and therefore, there was no 'Fraudulent Transaction'. 38. Also that, it is the plea of the 'Respondents' that they had not derived any gain in a personal manner, from any such transactions and any benefit derived that was always received and retained within the `Regen Group'. Therefore, in the light of the definite stand taken by the `Respondents' as mentioned in the preceding paragraph, this `Tribunal, is of the earnest opinion that a 'Transfer of Asset' among / within the 'Group Companies', will not partake the character of a 'Frau....