TaxTMI 
TaxTMI 
2023 (4) TMI 926
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.... Tribunal, New Delhi Bench, Court-II, New Delhi) in I.A. No. 1026/2023, I.A. No. 951/2023, M.A. No. 05/2022 and I.A. No. 224/2023 in C.P (IB) No. 35(ND)/17, four separate appeals have been filed by the Appellant under Section 61 of the Insolvency and Bankruptcy Code ('IBC' in short). 2. The Appellant in the present case is Shri T.S. Murali, promoter and ex-Director of M/s Helpline Hospitality Pvt. Ltd. (hereinafter referred to as the 'Corporate Debtor'). Since these appeals have arisen from more or less the same facts and circumstances, all these appeals have been heard together and are being decided by this common judgment. 3. In Company Appeal (AT) (Insolvency) No. 344 of 2023, the impugned order dated 22.02.2023 of the Adjudicating Authority passed in M.A. No.05/2022 has been challenged. The Adjudicating Authority while disposing of the M.A. No.05/2022 had vacated the interim stay granted by the Adjudicating Authority on the sale of Plot No. C-158, Sector 41, Noida, Uttar Pradesh (hereinafter referred to as the 'subject property') and directed the liquidator to proceed with open auction with the minimum reserve/upset price of Rs.1.75 crore. 4. In Company Appeal (AT) (In....
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....t Report was brought on record on 10.11.2018 which was followed by the Final Forensic Audit report on 02.01.2019. The Interim Forensic Audit Report had noticed that the Corporate Debtor had taken a loan of Rs.36,59,250/- from ICICI vide agreement dated 30.04.2004 for a tenure of 104 months which period ended on 22.07.2013. The loan was for acquiring asset located at Plot No. C-158, Sector 41, Noida, Uttar Pradesh. It was also noted that the subject property was bought through a joint loan taken by the Appellant and the Corporate Debtor in 2004. The said asset was however registered in the name of present Appellant though he was only a co-applicant of the loan. The audit report held that amount for repayment of loan was withdrawn from the Corporate Debtor's account in respect of the subject property which amounted to wilful attempt by the Appellant for diversion of funds from the company account for personal benefits and creation of personal wealth. The total amount diverted in view of loan statement from ICICI dated 30.08.2018 was held in the report to be Rs.65,29,836.56/- only. The final audit report estimated the value of subject property at Rs. 4 crore....
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....r on 23.01.2023. An undertaking from the Appellant recording that keys would be handed over was also taken. Subsequently, the Writ Petition No. 17431/2022 filed before the Hon'ble Delhi High Court which was transferred to the Adjudicating Authority as M.A. No.05/2022 was dismissed on 22.02.2023. The Adjudicating Authority rejected the application filed by the Appellant challenging the auction process and passed orders vacating the stay on the sale of subject property. The liquidator was directed to proceed with open auction of subject property with minimum reserve price of Rs.1.75 crore. The same impugned order also dealt with the three other IAs and aggrieved by this impugned order, the Appellant has preferred this clutch of appeals. 8. It will be useful at this stage to note the prayers made and relief sought in the above-mentioned appeals. 344/2023 a) Pass an order setting aside the Impugned Order dated 22.02.2023 passed by the Hon'ble Adjudicating Authority in M.A. No. 05(ND)/2022 filed by the Appellant in CP(IB) No.35(ND)/2017; b) Pass an order to Set aside the e-auction notice which had been published by the Respondent in four daily newspapers....
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....ntil the Auction is undertaken; e) Pass any other such further orders as deemed fit in the facts and circumstances of the present case. 277/2023 a. Pass an order setting aside the Impugned Order dated 22.02.2023 passed by the Hon'ble Adjudicating Authority in I.A. No.1026(ND)/2023 filed in CP(IB) No.35(ND)/2017; b. Pass an order directing the Liquidator of the Corporate Debtor to place on record the documents sought in the IA No.1026/2023 by the Appellant herein and; c. Grant ad-interim stay on e-auction of the attached property of the Appellant, i.e, G-158, Sector-41, Noida, UP; d. Pass any other such further orders as deemed fit in the facts and circumstances of the present case. 9. The Learned Counsel for the Appellant making his submissions admitted that both the Corporate Debtor and the Appellant were co-applicants for a loan of Rs.36,59,250/- for a tenure of 8 years availed from ICICI for purchasing the subject property of which the Appellant had already repaid the entire amount of Rs.65,29,836/- which included both the principal amount and interest component. It was further stated that the Appellant had brought to the notice....
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....sire to settle with the fourth creditor i.e., the GST Department, he has been unable to do so since the liquidator rejected their request to share the relevant documents required for the purpose of settlement. It was vehemently argued that the action of the liquidator was violative of the intent of the IBC which is to resolve the companies from their distressed financial conditions and not to drive them into liquidation. 13. Submitting further that the Appellant being the promoter, shareholder, founder and ex-director of the Corporate Debtor and having been involved in the day-to-day management of the Corporate Debtor till 2017, the Adjudicating Authority erred in holding the Appellant as a third party. It is the Appellant who had handed over the assets, financial records etc. to the liquidator upon initiation of liquidation proceedings. Moreover, at a time when the Adjudicating Authority ordered the attaching of the subject property which is the sole residential property of the Appellant, the questioning of locus-standi of the Appellant at the same time is riddled with contradictions. Hence the Adjudicating Authority by dismissing the applications filed by treating the Appellan....
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....he same in his own name. 17. It is the contention of the liquidator that funds were withdrawn from the company account which has been treated as siphoning of money and cheating, fraud, and mis-representation of company's financial position in the forensic audit report. It has also been observed in the said audit report that the total amount diverted is Rs.65,29,836.56 and therefore liable to be recovered with 18% interest from the erstwhile Director of the Corporate Debtor. The report also noted that the Corporate Debtor evaded Service Tax of Rs.3,91,04,886/- for which the GST Department levied a penalty of Rs.4,13,29,014/- aggregating Rs.8.04 crore. 18. Pointing out that the claim of the statutory creditor's percentage-wise dues was EPFO (0.07%), Income Tax Department (1.25%), ESIC (2.45%) and CGST (96.223%), it was asserted that the major statutory creditor is CGST with whom no settlement has been achieved so far and the total outstanding Service Tax due including penalty is Rs. 8.04 crore. Further, it was contended that the Appellant's claim of settlement with EPFO and Income Tax Department is incorrect as these stakeholders had neither withdrawn their claim nor provided a....
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.... Rs.36,59,250/- from ICICI on 30.04.2004 for acquiring the subject property and that the said asset is registered in the name of present Appellant though he was only a co-applicant of the loan. It is also a factual statement that the forensic audit report while estimating the value of subject property at Rs. 4 crore had also observed that the subject property should be transferred to the Corporate Debtor so that Service Tax due could be recovered from sale of the subject property to safeguard the interests of stakeholders particularly the Service Tax Department, Government of India. 24. We further notice that the final forensic audit report dated 02.01.2019 has confirmed diversion of fund from Corporate Debtor to the personal estate of the Appellant. It is the case of the liquidator that the forensic audit report having noted that the total amount diverted along with interest is Rs.65,29,836.56 and that the Corporate Debtor had evaded Service Tax of Rs.3,91,04,886/- for which the GST Department levied a penalty of Rs.4,13,29,014/- aggregating Rs.8.04 crore. That being so, the Learned counsel for the liquidator contended that it was only reasonable that the subject property shoul....
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....ars to have been settled and therefore can be considered to have been more or less extinguished. The sole surviving statutory creditor is the Department of GST which undisputedly happens to be the creditor with majority share. 27. Keeping in view that the reserve price for auction of the subject property has been kept at Rs.1.75 crore by the liquidator, while the claim of the GST department is Rs.8.04 crore, prima- facie, it appears that even after liquidation, there is a likely possibility that the dues of this statutory creditor may remain unmet. We are also inclined to accept the contention of the Appellant that there is no material on record to show that visible steps have been taken by the liquidator with the GST department to reduce the interest component on Service Tax/penalty liability of the Corporate Debtor. While we note that that in the SCC meeting which was held on 02.09.2022 for the first time after five years since the initiation of liquidation proceedings, the stakeholders had preferred to go through the auction mode, yet we find that subsequent thereto three of the creditors had chosen to settle their dues with the Appellant. Thus, the Appellant having successfu....
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.... Adjudicating Authority instead of penalizing the Appellant by allowing attachment of the subject property where he was residing, ought to have given an opportunity to the Appellant to settle with the fourth statutory creditor rather than straightway allowing the auction of the subject property. 32. Given that the Appellant has all along been making genuine efforts to settle the claims of the statutory creditors, we see no harm in giving a chance to the Appellant to arrive at a settlement with the statutory creditor but we hasten to add that this settlement has to complete within a limited and stringent time frame. This would be a step in the direction which would balance the interests of all the stakeholders. In any case, if the Appellant fails in his endeavours, the liquidation proceedings will commence. 33. For the foregoing reasons, the impugned order dated 22.02.2023 is set aside. The e-auction notice published by the liquidator in the newspapers and warrant of attachment of subject property is stayed. In the interim, the Appellant is allowed to settle all dues of the statutory creditors by complying to the following directions: (i) The Appellant will submit a f....