TaxTMI 
TaxTMI 
2022 (12) TMI 1151
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..../2016 & 06.01.2021 in IA No. 2444 of 2020 in CP(IB) 01/NCLT/MB/2016. 2. The Appellant has sought the following reliefs: * Set aside the impugned order dated 29.10.2020 and impugned order dated 06.01.2021 passed by the Adjudicating Authority in MA No. 253 of 2018 and IA No. 2444 of 2020 in CP(IB) 01/NCLT/MB/2016; * In the alternative, modify the order dated 07.11.2020 so as to protect and recognize the pledge created in favour of the Applicant under Share Pledge Agreement dated 10.06.2014; * Pass such appropriate directions to the Liquidator to not treat the pledge in favour of the Appellant as a preferential transaction during the pendency of the Appeal etc. 3. The Ld. Counsel for the Appellant has submitted that the Appellant company is a listed company and majority owned and controlled by the Promoter of the Corporate Debtor (CD), Mr. Chandu Chavan (Respondent No.3 herein) and his relative. The Appellant has involved in activities auxiliary to financial intermediation, except insurance and pension fund. The Corporate Debtor, represented by the Liquidator is a company which is involved in the multiple sectors such as composite tubes, precision tube....
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....ge agreement dated 25.11.2016 was executed wherein the CD gave additionally 15% of the its share held in R2 making 100% shares of R2 in favour of the Appellant for securing a loan/advance of Rs. 12,14,86,020/- from the Appellant. Apart from the shares of R2, Corporate Debtor also pledged shares held by it in Aim Filtertech Pvt. Ltd., GeneOmbio Technologies Pvt. Ltd. & Opal Luxury Time Products Ltd. under the same agreement. 7. It is also submitted that the said pledge agreement gives right to the Appellant as a pledge to undertake the sale of shares as per clause 10 upon event of default having occurred. It is submitted that both the share pledge agreements of 2014 and 2016 are identical and part of one transaction, rather than different and/or unconnected transactions/transfer. On 17.01.2017 the Adjudicating Authority has admitted the petition and appointed IRP and on 08.12.2017 the Adjudicating Authority has admitted to liquidation. As per Section 25(2) (j) and Regulation 39(2) of IBBI (Corporate Insolvency Resolution Process) Regulation 2016, RP have a duty to report such transactions to the CoC and to file applications to set them aside during CIRP period and suddenly now it....
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....ould not bring on record that earlier pledge agreement dated 10.06.2014 with the Form D since all the records of the CD were under the control of the Liquidator. On 22.03.2018, the Liquidator preferred an application under Section 43 and 44 R/w Section 60(5) of the Code being MA No. 353 of 2018 in CP(IB) 01/NCLT/MB/2016 seeking to declare the share pledge agreement dated 25.11.2016 as preferential transaction and thereby to release the impugned pledge. The Appellant filed its Reply on 20.08.2018 bringing on record the earlier pledge agreement dated 10.04.2016. The Liquidator filed his Rejoinder to the Appellant's reply on 10.09.2018 before the Adjudicating Authority. The Appellant filed detailed written submissions before the Adjudicating Authority on 18.02.2020. The Appellant has subsequently filed an interim application no. 2444/2020 in CP(IB) No. 01/NCLT/MB/2016 seeking recall of the impugned order dated 29.10.2020 before Adjudicating Authority That subsequently, the company appeal (AT) (Ins.) No. 1132-1133 filed by the Appellant before this Appellate Tribunal against the impugned order dated 29.10.2020 was listed and heard on 04.01.2021 vide which this Appellate Tribunal di....
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....two separate but concurring orders, the Adjudicating Authority arrived at the conclusion that the impugned pledge is a preference transaction covered under Section 43 of the Code. The Adjudicating Authority examined the submission made by the parties and gave detailed reasons as to why, in their view, the impugned pledge is a preference transaction hit by the provisions of Section 43 of the Code. Having separate arrived at the same conclusion, the Adjudicating Authority directed to the Appellant to release the impugned pledge created over IAI shares and handover the share certificates to the Liquidator. It is submitted that the preference application was filed in March 2018 and was initially reserved for order on 16.11.2018 and then on 06.03.2019, 19.09.2019 and eventually on 17.02.2020, after full and proper hearing. Written submission was also duly filed by parties before the Adjudicating Authority. Eventually, the Preference Application was allowed on 29.10.2020 by two separate but concurring orders in which contentions of Appellant have been duly noted and considered. This being so, it is incorrect and unfair for Appellant to contend in its appeal that it was not heard or th....
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.... present respondents but on the given set of facts, we have not an iota of doubt that the impugned transactions do not fall within the ordinary course of business of the corporate debtor JIL. As noticed, the corporate debtor has been promoted as a special purpose vehicle by JAL for construction and operation of Yamuna Expressway and for development of the parcels of land along with the expressway for residential, commercial and other use. It is difficult to even surmise that the business of JIL, of ensuring execution of the works assigned to its holding company and for execution of housing/building projects, in its ordinary course, had inflated itself to the extent of routinely mortgaging its assets and/or inventories to secure the debts of its holding company. It had also not been the ordinary course of financial affairs of JIL that it would create encumbrances over its properties to secure the debts of its holding company. In other words, we are clearly of the view that the ordinary course of business or financial affairs of the corporate debtor JIL cannot be taken to be that of providing mortgages to secure the loans and facilities obtained by its holding company; and that too a....
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....ive, as an ordinary part of their dealings. The reliance passed by the Appellant on MoA or the CD to justify that the impugned pledge was created in ordinary course of business is misplaced and liable to rejected. It is submitted that the impugned pledge was created only to secure the Appellant for an antecedent (past) liability and does not fall within the exceptions under section 43 (3) of the Code as the same was neither in the ordinary course of the business or financial affairs of the CD and Appellant nor was it given to secure any new value. 16. It is also stated by Ld. Counsel for the Respondent that the entire case of the Appellant rests on contention that prior to the impugned 2016 Pledge Agreement, there was another pledge agreement dated 10.06.2014 under which it is claimed that 85% of the share held by the CD in IAI/Respondent No.2 were pledged in favour of Appellant in 2014 itself and that, subsequently, vide the impugned 2016 Pledge Agreement, the CD pledged the remaining 15% shares. It has also been contended by Appellant that the Alleged 2015 Pledge Agreement could not be produced by it initially due to "genuine difficulty and inadvertence". It is further contend....
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....ged 2014 Pledge Agreement to Central Bank of India. f. While IVL/ Appellant took adjournments from the Adjudicating Authority for filing reply to the Preference Application saying that it is trying to locate the Alleged 2014 Pledge Agreement, Mr. Chandu Chavan sent a scanned copy of the Alleged 2014 Pledge Agreement to Central Bank of India and only when this was specifically pointed out by the Liquidator, IVL/ Appellant filed its reply, bringing forth for the first time, the Alleged 2014 Pledge Agreement. g. Till date the original of Alleged 2014 Pledge Agreement has not been produced. Other than the copy of the Alleged 2014 Pledge Agreement provided by IVL/Appellant itself, there are no surrounding circumstances and/ or documents which support the existence of such agreement. IVL/ Appellant has not produced or shown any other documents/ surrounding circumstances, such as financial statements, creditors' approval, RBI approval, any relevant communications etc., which may show that any such agreement was indeed executed by the CD. No record of this agreement is available. h. When questioned by the Liquidator on RBI approval for the Impugned Pledge, Re....
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....it is claimed that 85% of IAI Shares were pledged in favour of IVL/ Appellant, the said alleged agreement would stand substituted/ subsumed/ superseded by the Impugned 2016 Pledge Agreement by which the CD pledged its entire (100%) equity stake in IAI/ Respondent No. 2 in favour of IVL/Appellant. Further, as rightly held by the Adjudicating Authority, since IVL/Appellant did not make any reference to the Alleged 2014 Pledge Agreement either in the pledge invocation letter or in its Claim Dorm and only relied upon the Impugned 2016 Pledge Agreement, IVL/ Appellant is estopped by conduct from making any claims based on the Alleged 2014 Pledge Agreement. 18. It is stated by ld. Counsel for the Respondent that the Appellant has also submitted in its Appeal that there is "no element of dishonesty or unfairness in the present transaction". As held by Anuj Jain case, the question of intention is not relevant for the purpose of determining whether a transaction is a preferential transaction under Section 43 of the Code. Section 43 of the Code is in stark contrast to Section 531 of the Companies Act 1956 which contained provisions regarding 'fraudulent preference'. Section 53(1) ....
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....irecting IVL/ Appellant to release the Impugned Pledge and hand over IAI Shares certificates to the Liquidator, despite repeated requests, IVL/ Appellant filed Recall Application on 5 December 2020 as a dilatory tactic and in an evident attempt to save limitation for filing appeal before this Appellate Tribunal. Further, after filing of the Recall Application, on 21 December 2020, Company Appeal (AT) (Insolvency) No. 1132-33 of 2020 was filed by IVL/Appellant challenging the Impugned Order dated 29 October 2020. This appeal was dismissed as withdrawn with liberty to assail the Impugned Order dated 29 October 2020 in the Preference Application along with the order passed in the Recall Application, if adverse to IVL/ Appellant. Subsequently, the Adjudicating Authority dismissed the Recall Application by the Impugned Order dated 6 January 2021. All this while, IVL/ Appellant did not handover the share certificates to the Liquidator, which was clearly in non-compliance of the Impugned Order dated 29 October 2020 and, as a result, the Contempt Application was filed by the Liquidator. However, in view of the stay order dated 17 February 2021 passed in the Appeal, the Contempt Application....
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....e are having the following observations: A. The history of the case reveals followings: i. The Appellant is a listed company. ii. The CD availed certain working capital facilities from SBI as also from RBL in 2013. A pledge agreement was created for the Appellants share held in two companies with SBI and RBL. iii. SBI and RBL invoked the Pledge in 2014. iv. The available records reveals that the Appellant has filed a claim of Principal amount of Rs.32,14,86,020/- alongwith interest and reference made of Pledge Agreements. v. The Appellant is aggrieved that while they have filed the claim in October, 2018 appearing at page No.7 of the Appeal Paper Book for a principal amount of Rs. 32,14,86,020 and Rs. 48,71,938/- as interest appearing at page 201 of the Appeal Paper book, thereafter, the Liquidator has filed M.A No. 253 of 2018 under Section 43 and 44 for avoidance under the category of preferential transactions. These transactions relate to the release of pledge on the shares of Innoventive America Inc. - Respondent No.2 which is a wholly owned subsidiary of the CD. The Appellant invoked the Pledge Agreement and notified to the same ....
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....f 2016 but he chooses to file Section 43 application after a delay of one year. This reflects, no doubt, that filing of petition under Section 43 of the Code alleging that Share Pledge Agreement dated November 2016 is at belated stage by the R1 to deny the Appellant of their status or rights as financial creditor. This tribunal has noted vide its order dated 13.05.2022 based on IA No.804 of 2022, 805 of 2022 & 806 of 2022 in CA(AT) (Ins) No. 102-104 of 2021 that a new Liquidator has been appointed in place of erstwhile Liquidator - Mr. Dhinal Shah. The name of new Liquidator is Mr. Trupal.J.Patel who was appointed as Liquidator in terms of order dated 24.12.2021 passed by the Adjudicating Authority. At page 13 of the relevant I.As reflect that the Liquidator desired to start his practice and therefore, was interested in surrendering his registration as an IP and practice as only an Advocate and he has also surrendered on 01.07.2021 his certificate of practice to the ICAI. H. Now coming to the main issue, it is apparently very much clear that all the companies (Innoventive Ventures Limited, Innoventive Industries Limited and Innoventive America Inc.) involved in this case are rel....
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....red to as the "Pledgor" or "IL"(which expression shall, unless repugnant to the meaning or context thereof, include their successors, administrators, and permitted assigns or as the case may be, the heirs, executors and administrators of the Pledgor) through Mr. Chandu Chavan, Chairman & Managing Director("CMD") of the First Part. IN FAVOUR OF (2) Innoventive Venture Limited, a company incorporated under the provisions of the companies act, 1956 and having its registered office at Office No- 604, 6 floor Nucleus Mall, Church Road, Camp Pune 411001 in Maharashtra, India, hereinafter referred to as the "Pledgee" or "IVL" (which expression shall, unless repugnant to the context thereof, mean and include its successors, administrators, and permitted assigns of the Pledgee) through Ms. Pournima Gadiya, Director of the Second Part. CONFIRMING PARTY (3) Innoventive Americas, Inc., a corporation organised and existing under the laws of Delaware State of the United States of America (USA), and having its principal place of Business in USA office at 1000 North West Street - Suite 1200 Wilmington, DE 19801, hereinafter referred to as the 'the Co....
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.... Crores Fourteen Lacs Eighty six thousand Twenty only) along with pledged holdings of Membrane Filters (India) Pvt. Ltd, Aim Filtertech Pvt. Ltd. and Opal Luxury Time Products Limited (as per details mentioned in point no.2 above), as may be agreed between the Parties, from time to time: (4) The Pledgor has agreed to pledge his entire equity stake held in the Company in favour of the Pledgee till the repayment of entire loan amount and the value of the other entity shares pledged (as mentioned in point rio. 2 & 3 of the recitals) by the Pledgor to Pledge. Clar!.. Innoventive Industries Limited through its CMD Mr. Chandu Chavan Innoventive Venture Limited through its Director Ms. Pournima Gadiya Innoventive Americas, Inc through its Director Mr. Sunjay Phade Document 4 160 The parties have agreed to record the creation of such security by the pledge of shares on terms and conditions as hereinafter set forth. NOW THEREFORE THESE PRESENTS WITNESSETH THAT: 1. DEFINITIONS For the purposes of this Share Pledge Agreement, in addition to the terms defined elsewhere in this Agreement, the following capitalised terms, wh....
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....12,14,86,020/- (Rupees Twelve Crores Fourteen Lacs Eighty six thousand Twenty only) and value of shares pledged by IVL for the loan of IL of other following entities: Membrane Filters (1) Pvt. Ltd. Aim Filtertech Pvt.Ltd. Opal Luxury Time Products Limited (Details are as per point No.2 & 3) Hereby, as beneficial owners of the Pledged Shares, charges by way of pledge in favour of the Pledgee all the rights, title and interest of the Pledgor both present and future, in respect of the Pledged Shares. 3. PLEDGOR'S COVENANTS The Pledgor hereby agrees that, they shall repay entire amount advanced by the Pledgee and to facilitate the revocation of the pledge on the other entities pledged Shares. 4. REPRESENTATIONS AND WARRANTIES The Pledgor represents and warrants to the Pledgee that: a) The Pledgor is a sole, legal and beneficial owner of the Pledged Shares and encumbrance or charge (present or future) whatsoever exists upon the Pledged Shares at any time shall only be in favour of the Pledgee: Class Innoventive Industries Limited through its CMD Mr. Chandu Chavan. Innoventive Venture Limited through its Director ....
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....or indemnity pledger may have. (whether vis-a vis any other guarantors, Pledgors or otherwise) as a result of the enforcement of the pledge by the Pledgee under this Agreement. Innoventive Industries Limited through its CMD Mr. Chandu Chavan innoventive Venture Lirnited through its Director Ms. Pournima Gadiya Innoventive Americas, Inc through its Director Mr. Sanjay Bhade NOTARY Document 7 163 [7] 6. FURTHER ASSURANCE AND REMEDIES In furtherance of the grant of the Pledge and the security interest, the Pledgor hereby agrees as follows: a) The Pledgor shall: (i) permit representatives of the Pledgee to inspect and make abstracts from the Company's books and records pertaining to the Pledged Shares and permit representatives of the Pledges to be present at the Pledgor's place of business to receive copies of all communications and remittances related to the Pledged Shares, all in such manner as the Pledgee may require; (II) Further promises to execute and deliver all financial statements and other documents related to the Company as and when required by the Pledgee in order to maintain a first perfected sec....