TaxTMI 
TaxTMI 
2023 (1) TMI 254
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....cate JUDGMENT ASHOK BHUSHAN, J. This Appeal by a Corporate Debtor - Wave Megacity Centre Private Limited ("Wave Megacity") has been filed challenging the order dated 06.06.2022 passed by National Company Law Tribunal, New Delhi, Principal Bench allowing IA No.2026 of 2021 and IA No.2378 of 2021 filed under Section 65 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code") and dismissing Company Petition No. (IB) No.197(PB)/2021 filed by Appellant under Section 10 of the Code. 2. Brief facts of the case necessary to be noted for deciding this Appeal are: (i) A Lease Deed dated 02.09.2011 was signed between Noida Authority and Wave Megacity Ltd. in respect of Plot No.CC-001, admeasuring 618,952.75 sq. mtrs. situated at Sector 25A and Sector 32, NOIDA for a period of 90 years. Wave Megacity paid payment of 10% of the total consideration, i.e., Rs.662.29 Crores. Wave Megacity was to pay the balance premium of 90% in staggered manner as indicated in the Lease Deed. Wave Megacity could not complete the construction of the Project and failed to repay the remaining 90% of the premium amount. (ii) After the allotment, the Appellant launched multiple Resid....
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....d an order dated 17.11.2020 directing the Noida Authority to take a decision regarding its dues. Pursuant to the letter dated 17.11.2020, fresh demand notice dated 24.12.2020 was issued, demanding an amount of Rs.2519,33,47,546/-. The demand made by Noida Authority was also challenged by means of writ petition before Allahabad High Court by Wave Megacity Centre Homebuyers Association, which petition is claimed to be still pending. (vii) The Corporate Debtor filed an Application under Section 10 of the Code dated 25.03.2021 praying for initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor on the ground of default on the part of the Corporate Debtor. (viii) On 05.04.2021, the Adjudicating Authority passed following order: "Mr. Chaudhary, Ld. Sr. Counsel undertakes to serve the copy to the financial creditor, the association of the home buyers and other creditors and also to ROC and Income Tax Department. List on 03.05.2021." (ix) In the CP (IB) No.197(PB)/2021 filed by the Corporate Debtor, several Intervention Applications were filed including the Homebuyers and the Noida Authority, raising objection to the main Company Petition. The A....
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....f the Corporate Debtor in paying the dues of Noida Authority and the pre-conditions as mentioned in Section 10 of the Code, having been fulfilled, Section 10 Application ought to have been admitted. It is submitted that debts of the Noida Authority have been reflected in the Books of account of the Appellant and is also proved by the demand notices dated 26.02.2022 and notices issued thereafter. The Adjudicating Authority has nowhere examined the very existence of debt and default in the impugned order. The pendency of any criminal investigation against the Corporate Debtor has no bearing on Section 10 petition. Further, pendency of litigations against the Corporate Debtor in different Forums do not have any adverse effect on maintainability of Section 10 Application. The very purpose of Code is to protect and preserve the valuation/ assets of the Corporate Debtor. Only few handful of the allottees had filed objections opposing the Application, whereas majority of the Homebuyers would have benefited from the initiation of the CIRP. Even if, any dispute is pending with regard to quantum of debt, the same is not bar for filing Section 10 Application. Under Section 10, the Adjudicatin....
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....nt and final demand notice was issued on 24.12.2020. The final demand notice being dated 24.12.2020, which is during the prohibited period as per Section 10A, no Application under Section 10 could have been filed by the Appellant. The proceedings under Section 10 being proceeding in rem, both Financial Creditor and Operational Creditor can object to the very admission of the Application. The Noida Authority has filed detailed objection before the Adjudicating Authority, opposing admission of Section 10 Application. Section 10 Application was filed by the Appellant prematurely since the Appellant had not exhausted the remedy available to it under Section 41 of the Uttar Pradesh Urban Planning and Development Act, 1973 and Section 12 of the Uttar Pradesh Industrial Development Act, 1976. Default alleged by the Wave Megacity was not genuine and the same is motivated by fraud. Noida Authority is proper and necessary party to the proceeding. Noida Authority vide IA No.4270 of 2021 has raised objection to the maintainability of the Section 10 Application. Noida Authority has also filed its written submissions stating that default leading to filing of Section 10 Application, occurred duri....
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.... responsibilities, liabilities and prosecution. The Adjudicating Authority has rightly allowed the Applications filed under Section 65 of the Code by the Homebuyers and rejected the Section 10 Application, which does not warrant any interference by this Appellate Tribunal. 7. We have considered the submission of the Learned Counsel for the parties and have perused the records. 8. The challenge in the present Appeal is the order passed by the Adjudicating Authority allowing Applications filed under Section 65 and consequently rejecting Section 10 Application. The subject matter of the Appeal is thus, challenge to order allowing Section 65 Applications. We, thus, need to consider as to whether there were sufficient ground for allowing Section 65 Applications by the Adjudicating Authority. 9. As noted above, two Section 65 Applications were filed by the Homebuyers. First by Rakesh Taneja and Ors. and second by Anshu Saran and Ors. Before we come to the respective submission of the Counsel for the parties raised in this Appeal, we need to notice the pleadings made in the Applications, which have been filed under Section 65 by the Homebuyers. Pleadings in both the IAs being 2026 of 2....
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....f the aggrieved homebuyers besides trying to evade/delay criminal prosecution. That one of the said erstwhile founding Directors being Manpreet Singh Chadha (DIN 00032276) since 7.6.11 has been transposed as Financial Creditor in the present petition. That the applicants most respectfully submit that the said changes in the board of the Company have been made just before the filing of the captioned petition on 11Jan21 with malafide intention in so far as all the other stakeholders are concerned including the homebuyers. Furthermore, this is a fact which has been conveniently concealed by the petitioner from this Hon'ble Tribunal and warrants immediate and urgent attention as this would reflect to the malicious intent of the petitioner. x) That the most mischievous and fraudulent action on the part the Company is an attempt at transposition of the said founding director of the Company Manpreet Singh Chadha (DIN 00032276) since 7.6.2011 (the day the Company was incorporated), as a Financial Creditor to whom the Company allegedly owes over Rs.530 crores, after fraudulently and with malicious intent removing himself as a Director on 11Jan2021 just before the filing of the applica....
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....t annexed herewith as 'Annexure 22'. 11. It is also relevant to note that Harmandeep Singh Kandhari, who was also Director since 07.06.2011 is also shown as Financial Creditor. The financial debt of Manpreet Singh Chaddha has also been shown in Section 10 Application. The resignation of Directors few months before filing of Section 10 Application especially Manpreet Singh Chaddha, who was Director from day 1 and claiming dues as Financial Creditor in Section 10 Application fully proves the malicious intention of the Corporate Debtor. There is no doubt that 90% amount from the Homebuyers were received, which is claimed to be Rs.1400 crores and the Appellant has left most of the Project unfinished, depriving possession thereof to Homebuyers speaks for itself. The allegations made by the Homebuyers that amount has been siphoned by the Appellant finds credence by the sequence of events, which took place in the present case. In the impugned order, the Adjudicating Authority itself has noted in paragraph 26 that there are total 285 cases pending against the Corporate Debtor, involving an amount of more than Rs.253 crores. Paragraph 26 of the impugned order is as follows: "26. ....
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....raudulent intent. The term malicious has not been defined anywhere under IBC, 2016. Therefore, at this juncture we refer to the Judgment of Hon'ble Supreme Court, passed in the matter of West Bengal State Electricity Board Vs Dilip Kumar Ray, Civil Appeal 5188 of 2006 dated 24.11.2006, wherein the term 'malicious' has been discussed. The extracts of the Judgment are reproduced below:- "Malice means in law wrongful intention. It includes any intent which the law deems wrongful, and which therefore serves as a ground of liability. Any act done with such an intent is, in the language of the law, malicious and this legal usage has etymology in its favour. The Lain militia means badness, physical or moral - wickedness in disposition or in conduct - not specifically or exclusively ill-will or malevolence; hence the malice of English law, including all forms of evil purpose, design, intent, or motive. But intent is of two kinds, being either immediate or ulterior, the ulterior intent being commonly distinguished as the motive. The term malice is applied in law to both these forms of intent, and the result is a somewhat puzzling ambiguity which requires careful notice. When we say that a....
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....ds as prescribed under Section 10 and the informations as required to be submitted in Form 6 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 subject to ineligibility prescribed under Section 11. If all informations are provided by an applicant as required under Section 10 and Form 6 and if the Corporate Applicant is otherwise not ineligible under Section 11, the Adjudicating Authority is bound to admit the application and cannot reject the application on any other ground. 23. Any fact unrelated or beyond the requirement under I & B Code or Forms prescribed under Adjudicating Authority Rules (Form 6 in the present case) are not required to be stated or pleaded. Non-disclosure of any fact, unrelated to Section 10 and Form 6 cannot be termed to be suppression of facts or to hold that the Corporate Applicant has not come with clean hand except the application where the 'Corporate Applicant' has not disclosed disqualification, if any, under Section 11. Non-disclosure of facts, such as that the 'Corporate Debtor' is undergoing a corporate insolvency resolution process; or that the 'Corporate Debtor' has completed corporate insolvency resolution ....
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....obligatorily admitted. The present is a case where it has been held that Application under Section 10 has been maliciously and fraudulently initiated for the purpose other than for the resolution of insolvency. The Hon'ble Supreme Court in (2010) 14 SCC 38 - Ramjas Foundation and Anr. vs. Union of India and Ors. has held that a person is not entitled to any relief, if he has not come to the Court with clean hand, which principle is also applicable to the cases instituted in other Courts and judicial Forums. In paragraph 21, following has been laid down: "21. The principle that a person who does not come to the court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such person is not entitled to any relief is applicable not only to the petitions filed under Articles 32, 226 and 136 of the Constitution but also to the cases instituted in others courts and judicial forums. The object underlying the principle is that every court is not only entitled but is duty bound to protect itself from unscrupulous litigants who do not have any respect for truth and who try to pollute the stream of justice by resorting to falsehood or by making misstat....