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2023 (3) TMI 592
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....e 'Adjudicating Authority', ('National Company Law Tribunal'), Division Bench - II, Chennai. Comp. App (AT) (CH) (INS.) No. 189 of 2022 : 2. The 'Appellant / Petitioner' ('Liquidator' of 'M/s. Senthil Papers and Boards Private Limited'), has preferred in the instant Comp. App (AT) (CH) (INS.) No. 189 of 2022, on being dissatisfied with the 'impugned order' dated 29.03.2022 in MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, passed by the 'Adjudicating Authority', ('National Company Law Tribunal'), Division Bench - II, Chennai. 3. Earlier, the 'Adjudicating Authority' ('National Company Law Tribunal', Division Bench - II, Chennai), while passing the 'impugned order' dated 29.03.2022 in MA/1372/2019 & MA/1373/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017 (Filed under Section 60 (5), read with Rule 11 of NCLT Rules, 2016), at Paragraphs 16 to 19, had observed the following: 16. "Heard the Counsels for both the Parties, and perused the documents on record including the judgements, memos and written statements. The Corporate Debtor was ordered for Liquidation vide Order dated 14.02.2019 by this Adjudicating Authority. It is seen from the Orders of the Respondents tha....
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....(CH) (INS.) Nos. 188 and 189 of 2022 : 4. The Learned Counsel for the Appellant submits that the 'Adjudicating Authority' ('Tribunal'), had failed to consider the intent of the 'Appellant / Liquidator', in filing the 'Petitions', as part of his duty and to protect and preserve the 'Assets' of the 'Corporate Debtor'. 5. The Learned Counsel for the Appellant contends that the 'Adjudicating Authority', had erred in appreciating that the ingredients of Section 60 (5) of the I & B Code, 2016, enjoins the 'Tribunal', to 'entertain' and 'dispose of', any 'question of priorities' or 'any question of Law or Facts', arising out of or in relation to the 'Insolvency Resolution' or 'Liquidation Proceedings' of the 'Corporate Debtor', under the I & B Code, 2016. 6. The Learned Counsel for the Appellant points out that the 'Adjudicating Authority' ('Tribunal'), should have seen that the 'Books of the Corporate Debtor' and 'Income Tax Returns', evidence 'Nil cash inflows', into the 'Corporate Debtor', during the period of demonetization and thereby, the 'Corporate Debtor's Assets', shall not be covered under , 'The Prohibition of Benami Property Transactions Act, 1988'. 7. According to....
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....involved, the 'Directors' of the 'Corporate Debtor'. 12. The Learned Counsel for the Appellant comes out with a plea that the 'Adjudicating Authority', should have exercise the power vested in it, under the provisions of the I & B Code, 2016, notwithstanding anything contained in any other Law, for the time being inforce, especially by virtue of Section 238 of the I & B Code, 2016. 13. The Learned Counsel for the Appellant points out that the 'Moratorium' of the 'Corporate Debtor', had commenced on 14.11.2017, by means of the 'Corporate Insolvency Resolution Process Order', and the same is continuing, pursuant to the 'Order of Liquidation', passed on 14.02.2019, as per Section 33 (5) of the I & B Code, 2016. But, in violation to the 'Moratorium', the 'Respondent' / 'Department', had issued a 'Show Cause Notice' and a 'Provisional Attachment Order', both dated 01.11.2019, against the 'Assets' of the 'Corporate Debtor'. 14. The Learned Counsel for the Appellant, refers to the 'Reply' of the 'Liquidator, dated 20.11.2019 (vide Annexure 5, page 50 of the Appeal Paper Book in Comp. App (AT) (CH) (INS.) No. 188 of 2022, whereby, it was informed categorically (by the Liquidator),....
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....ing 'Liquidation'. Hence, the 'Instant Appeals', are perfectly maintainable in 'Law'. 17. The Learned Counsel for the Appellant comes out with a Plea that the 'Appellant / Liquidator', has assailed the 'Assessment Order', dated 31.12.2019, before the 'Commissioner of Income Tax' ('Appeal'), and the same was 'allowed', by the 'Commissioner of Income Tax' ('Appeal'), on 31.03.2022, observing that there was no need to add sum of Rs.400/- Crores protectively in the hands on the 'Corporate Debtor', over and above, the Addition, in the hands of 'Directors' of the 'Corporate Debtor', and the 'Respondent', had filed an 'Appeal', against the said Order, wherein 'no Stay', was granted, by the 'Appellate Tribunal'. 18. The Learned Counsel for the Appellant points out the responsibility of paying back the alleged Sum of Rs.400/- Crores, is not vested in the hands of the 'Ex-Directors' of the Corporate Debtor', not the 'Corporate Debtor', and hence, question of the 'Attachments of the Properties' of the 'Corporate Debtor', does not arise. 19. The Learned Counsel for the Appellant points out that the 'Properties', attached by the 'Respondent', are already charged with the 'Registrar of ....
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.... B Code, 2016, and further, restrained the Respondent ED from taking any further action, coercive or otherwise against the 'Liquidation Estate', of the 'Corporate Debtor'. 24. The Learned Counsel for the Appellant points out that the Manoj Kumar Judgment, delivered by the 'Appellate Tribunal', had explained the applicability of Section 32A on the attachments made by 'PMLA', on the 'Properties' of 'Corporate Debtor', and further held that if a property is attached, under 'PMLA', which is belonging to the 'Corporate Debtor', if 'Corporate Insolvency Resolution Process', is initiated, the property should become available to full objects of I & B Code, 2016, till a 'Sale' of 'Liquidation Asset' occurs. 25. The Learned Counsel for the Appellant, relies on the Judgment of this 'Tribunal', dated 17.02.2020 in JSW Steel Ltd. v. Mahendar Kumar Khandelwal & Ors., uphold the 'Order', passed by the 'National Company Law Tribunal', on applying retrospective effect of the Ordinance, 2019, to the attachments made prior to the 'Ordinance' and accordingly, declared that the attachments are illegal and without jurisdiction. 26. The Learned Counsel for the Appellant points out that the Hon'b....
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....ot be considered as an 'Asset' of the 'Judgment Debtor', and cannot be vested with him. 31. On behalf of the Respondent, it is projected that the 'Liquidator', does not have the power to deal with the properties mentioned in the 'Order' dated 28.01.2020, passed by the Initiating Officer U/s. 24(4) of PBPT Act in Order No. 39/DCIT(PB)/2019-20 and 'Order', passed by the 'PBPT Adjudicating Authority', U/s. 26(3) in his order dated 03.11.2021 in Order F. No. OCA/MDS/124/2021, under IBC Code, 2016. 32. According to the Respondent, the 'Adjudicating Authority', after providing an 'Opportunity of Hearing', had determined under Section 26(3) of the 'Prohibition of Benami Property Transactions Act, 1988', that if the 'Assets' of a 'Person' or 'Benami Assets', then, under Section 27 of the said Act, the 'Adjudicating Authority, shall make an 'Order', confiscating the property, held to be 'Benami Property'. Furthermore, if an 'Appeal', is filed before the 'Appellate Tribunal', the 'Confiscation of Property', shall be made, subject to the 'Order' of the 'Appellate Tribunal', under Section 46 of the 'Prohibition of Benami Property Transactions Act, 1988'. 33. The contention of the Resp....
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....is connection, the Learned Counsel for the Respondent adverts to the decision of the Hon'ble Supreme Court of India in M/s. Embassy Property Developers Private Limited V. State of Karnataka & Other, reported in [2020 (1) MLJ 65 = CDJ 2019 SC 1351], wherein, at Paragraph 40, it is observed as under: 40. "Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right." 37. On the side of the Respondent, a reliance is placed upon the Judgment of this 'Tribunal' dated 18.08.2022, in C. Ramasubramaniam, Liquidator of Padmaadevi Sugars Ltd. Vs. DCIT (Benami Prohibition), in Company Appeal (AT) (CH) (Ins) No. 292 / 2022, wherein, it is observed as under: "It must be borne in mind that in the act / transaction of 'Money Laundering', there is 'Washing the Money'. In case of a 'Benami Transaction', to evade or avoid 'Tax' or ....
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...., wherein the implication of Section 32A of the I & B Code, 2016, was examined, where an 'Attachment' of the 'Corporate Debtor's Asset', was made under the 'Prevention of Money Laundering Act, 2002'. In fact, this 'Tribunal', at Paragraph 110 of the Judgment in Kiran Shah, RP of KSL and Industries Limited V. Enforcement Directorate, Kolkatta, had observed as under: 110. "As far as the present case is concerned, the 'Appellant/Resolution Professional' even though has filed Company Appeal (AT) (Ins) No. 817 of 2021 being dissatisfied with the order dated 31.12.2020 in IA 81 of 2020 in CP(IB) No. 397/NCLT/AHM/2018 [filed by the Applicant / IRP for KSL Industries Ltd./Corporate Debtor under Sections 14, 18, 25 & 60(5) of Code] seeking to set aside the 'Attachment of the Property of the 'Corporate Debtor' by the Respondent/Enforcement Directorate vide order dated 24.10.2019 passed by the 'Adjudicating Authority' PMLA etc., this 'Tribunal' makes it candidly clear that filing of Application under Section 60(5) of the I & B Code is not an 'all pervasive' one, thereby conferring 'Jurisdiction' to an 'Adjudicating Authority' (N....
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.... to uphold the 'impugned order' dated 29.03.2022 in MA/1373/2019 and MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, passed by the 'Adjudicating Authority' ('Tribunal'). Glimpse of The Prohibition of Benami Property Transactions Act, 1988: Benamidar: 43. Section 2 (10) of The Prohibition of Benami Property Transactions Act, 1988, defines 'Benamidar' meaning, 'a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name'. Attachment: 44. Section 2 (5) of the Act 1988, defines 'Attachment' meaning, 'the prohibition of transfer, conversion, disposition or movement of property, by an order issued under this Act'. Benami Property: 45. Section 2 (8) of the Act 1988, defines 'Benami Property' meaning, 'any property which is the subject matter of a 'Benami Transaction' and also includes the proceeds for such property'. Benami Transaction: 46. Section 2 (9) of the Act 1988, defines 'Benami Transaction' meaning, (A) a transaction or an arrangement__ (a) where a property is transferred to, or is held by, a person, and the consideration for such property h....
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....who has granted possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid; and (iii) the contract has been registered." Person : 47. Section 2(24) of the The Prohibition of Benami Property Transactions Act, 1988 (Act 45 of 1988), defines 'Person', intend to include; (i) "an individual; (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an association of persons or a body of individuals, whether incorporated or not; (vi) every artificial juridical person, not falling under sub-clauses (i) to (v);" Property : 48. Section 2(26) of the Act, 1988, defines 'Property' meaning assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property. Classification of Benami Transactions: 49. The Hon'ble Supreme Court of India ....
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....roperty for the benefit of the person who has contributed the purchase money, in the latter case, there is no operative transfer at all and the title rests with the transferor notwithstanding the execution of the conveyance. One common feature, however, in both these cases is that the real title is divorced from the ostensible title and they are vested in different persons. The question whether a transaction is a benami transaction or not mainly depends upon the intention of the person who has contributed the purchase money in the former case and upon the intention of the person who has executed the conveyance in the latter case. The principle underlying the former case is also statutorily recognized in Section 82 of the Indian Trusts Act, 1882 which provides that where property is transferred to one person for a consideration paid or provided by another person and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transferee, the transferee must hold the property for the benefit of the person paying or providing the consideration. This view is in accord with the following observations made by this Court in Meenakshi Mills, ....
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....rlying 'two enactments', and 'language', used in them. 59. A 'Non-obstante Clause', may be used as a 'Legislative Device', to 'Modify', the 'ambit' of 'provision' or 'Law', mentioned in 'Non-obstante Clause'. 60. Ordinarily, there is a 'Close Approximity', between the 'Non-obstante Clause', and 'enacting part' of the 'Section', and 'Non-obstante Clause', may throw some light, as to the 'Scope' and 'Ambit' of 'enacting part', in case of its 'ambiguity' (vide Aswini Kumar Ghose v. Arabinda Bose & Anr., reported in AIR 1952 SC Page 369, Page 390), but, when 'enacting part', is cleared its 'Scope', cannot be cut down or 'enlarged', by 'resort' to 'Non-obstante Clause'. 61. A 'Conflict', between the 'two Special Acts', which both contain 'not-withstanding clauses', can also be 'resolved', by looking, which is more 'special', than the 'other', in addition to the consideration that the 'Conflict', arose because of a 'provision' added later in the 'act', which is more 'special'. Principle of Election : 62. Where there is 'no repugnancy' or 'inconsistency', between the 'two remedies', 'Principle of Election', will not 'Apply', in the considered opinion of this 'Tribunal'. ....
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....n of the 'Resolution Plans' submitted, the 'CoC', had rejected the 'Resolutions Plans', and consciously had resolved to prefer an 'Application' for 'Liquidation' of the 'Corporate Debtor', before the 'Adjudicating Authority'. In MA/604/2018, filed by the 'Appellant / Liquidator /Petitioner', under Section 33 (2) of the I & B Code, 2016, for 'Liquidation' of the 'Corporate Debtor', a 'Liquidation Order', was passed on 14.02.2019. 70. It is brought to the fore, that the Liquidation of the Corporate Debtor, was commenced on 14.02.2019. The Ex-Director / Shareholder of the Corporate Debtor, had preferred an 'Appeal', i.e., Comp. App (AT) (INS.) No. 432 of 2019, before the 'Appellate Tribunal', and the 'Appellate Tribunal', was pleased to 'Disposed of', the 'Appeal', on 03.05.2019, by making the following observations: "In view of the observations aforesaid, we hold that the Liquidator is required to act in terms of the aforesaid directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members of the Corporate Debtor or the Creditors or a class of creditors like 'Financial Creditor' or 'Operational Creditor' approach the Company thro....
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....District, belonging to Smt. Sasikala, through her Intermediaries, etc. 75. The crystalline stand of the Appellant / Liquidator is that, there was no Cash Inflows into the Company, either in the form of Cash or Cheque, from the Promoters of the Company or others, and the same is evidenced from the Disclosure on 'Specified Bank Notes', given by the 'Statutory Auditor', in his 'Report' for the Financial year 2016-17, filed with the 'Ministry of Corporate Affairs'. To support the fact that there was no Cash Flows into the Corporate Debtor, the 'Appellant' / 'Petitioner', had enclosed the Copy of the Audited Balance Sheets for the Financial Years 2016-17, 2017-18 and 2018-19, Income Tax Returns for the Years 2016-17, 2017-18 and 2018-19 and the Bank Statements from October 2016 to March 2017 of the Corporate Debtor. 76. The prime plea of the Appellant / Petitioner / Liquidator is that, when the Charge on the Assets was subsisting, it is not known, as to how, such transactions could have been made and any transaction sought to be made, during the subsistence of Charge by the 'Suspended Director', 'Promoters' and 'Boards', is void. Further, the 'Assets' sought to be attached, contin....
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....wards the Sale of the above Company. 81. In the instant case, it is quite evident that the Respondent / Department had attached the 'Property' of the 'Corporate Debtor', as per the ingredients of the Provisions of 'The Prohibition of Benami Property Transactions Act, 1988'. Therefore, an 'Attachment' effected, under 'The Prohibition of Benami Property Transactions Act, 1988', is to be assailed under the relevant provisions of the said Act, 1988, and in fact, the 'I & B Code, 2016', only pertains to questions concerning the 'Insolvency Resolution' or 'Liquidation Proceedings' of the 'Corporate Debtor'. Viewed in that perspective, the 'Attachment', made as per Section 24(3) of 'The Prohibition of Benami Property Transactions Act, 1988', cannot be a 'subject matter' of 'proceedings', under Section 60(5) of the I & B Code, 2016, in the considered opinion of this 'Tribunal'. To put it differently, the 'Adjudicating Authority' ('National Company Law Tribunal'), is not the proper 'FORA', to determine the controversies, revolving around the 'Attachment' of the 'Property', under 'The Prohibition of Benami Property Transactions Act, 1988', as held by this 'Tribunal'. As such, it is held b....
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....der', issued under the Income Tax Act, 1961, and the 'Notice of Demand', dated 31.12.2019, issued under the Income Tax Act, 1961, the said Act, enjoins an 'Appeal', being preferred against an 'Assessment Order', under the relevant provision of the Income Tax Act, 1961. 88. It is to be remembered that a 'Moratorium', under Section 14 of the I & B Code, 2016, does not affect the 'Provisional Attachment Order', passed under 'The Prohibition of Benami Property Transactions Act, 1988'. The object of the 'Act 1988', is to 'Prohibit the Benami Transactions', and the 'right' to 'redeem' / 'recover', the 'Property', held 'Benami', for matters connected therewith or incidental thereto. 89. However, the preface to the I & B Code, 2016, shows that it is meant to consolidate and amend the 'Laws', relating to 'Reorganisation and Insolvency Resolution of Corporate Persons, Partnership Firms and Individuals', in a time bound method, ofcourse, for 'Maximisation of Values', etc. 90. A closure scrutiny of 'The Prohibition of Benami Property Transactions Act, 1988', and the 'I & B Code, 2016', clearly exhibit that they do operate in their own field and without any simmering doubt, this 'Tribu....
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....iled by the Appellant (M/s. Senthil Papers and Boards Private Limited, Coimbatore - 18), Represented by the 'Liquidator', on 31.03.2022, an 'Order', was passed, wherein, at Paragraph 6.4, 6.5 and 7, it is observed as under: 6.4. "As the entire addition of Rs.400 Crore, were confirmed in the hands of the Directors of the appellant company in proportionate to their shareholding pattern it is considered and opined that there is no need to make any decision in respect of the same amount in the hands of the appellant company which was added protectively. 6.5. In this background, by considering the fact about the confirmation of addition in the hands of the Directors, the grounds raised by the appellant company upon the issue of addition of Rs.400 Crore in the hands of the company protectively are allowed. 7. In the result, the appeal is treated as allowed." 97. It is brought to the notice of this 'Tribunal', on behalf of the 'Respondent / Department' that, as against the said 'Order', dated 31.03.2022, passed in CIT (A), the Income Tax Department, had filed an 'Appeal', before the 'Income Tax Appellate Tribunal', bearing No. 503/Chny/2022, and the same is pending....